Related provisions for TC 2.2A.2

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MCOB 13.3.10GRP
The record referred to in MCOB 13.3.9 R should contain, or provide reference to, matters such as:(1) the date of first communication with the customer after the account was identified as having a payment shortfall;44(2) in relation to correspondence issued to a customer with a payment shortfall4, the name and contact number of the employee dealing with that correspondence, where known;4(3) the basis for issuing tailored information in accordance with MCOB 13.7.1 R in relation
MAR 1.2.23GRP
The following are examples of behaviour5 that might fall within the scope of article 14(b) of the Market Abuse Regulation5:(1) a director of a company, while in possession of inside information, instructs an employee of that company to sell a financial instrument5 in respect of which the information is inside information;(2) a person recommends or advises a friend to engage in behaviour5 which, if he himself engaged in it, would amount to market abuse.
SUP 10A.6.8RRP
(1) If a firm is a body corporate (other than a limited liability partnership), the director function is also the function of acting in the capacity of a person:(a) who is a director, partner, officer, member (if the parent undertaking or holding company is a limited liability partnership), senior manager, or employee of a parent undertaking or holding company of the firm; and(b) whose decisions or actions are regularly taken into account by the governing body of the firm.(2)
SYSC 6.1.1RRP
1A firm must establish, implement and maintain adequate policies and procedures sufficient to ensure compliance of the firm including its managers, employees and appointed representatives (or where applicable, tied agents)3 with its obligations under the regulatory system and for countering the risk that the firm might be used to further financial crime.2[Note: article 1616(2) of MiFID and article 12(1)(a) of the UCITS Directive]8242
SYSC 19A.1.5RRP
(1) This rule applies to a firm that is unable to comply with the Remuneration Code because of an obligation it owes to a Remuneration Code staffmember under a provision of an agreement made on or before 29 July 2010 (the "provision").(2) A firm must take reasonable steps to amend or terminate the provision referred to in (1) in a way that enables it to comply with the Remuneration Code at the earliest opportunity.(3) Until the provision referred to in (1) ceases to prevent the
EG 6.2.8RP
3If, after consulting the persons to whom the notice is given or copied, the FCA still considers it is appropriate to publish information about a warning notice, it will publish this information in a statement (a warning notice statement). This will ordinarily include a brief summary of the facts which gave rise to the warning notice to enable consumers, firms and market users to understand the nature of the FCA’s concerns. Where the FCA considers it appropriate to identify the
SUP 15.2.6GRP
3SUP 15.12 (Ongoing alerts for retail adviser complaints) sets out rules and guidance on a firm’s obligation to notify the FCA of complaints against an employee acting as a retail investment adviser.
DTR 4.1.9RRP
The review required by DTR 4.1.8 R must:(1) be a balanced and comprehensive analysis of:(a) the development and performance of the issuer's business during the financial year; and(b) the position of the issuer's business at the end of that year,consistent with the size and complexity of the business;(2) include, to the extent necessary for an understanding of the development, performance or position of the issuer's business:(a) analysis using financial key performance indicators;
EG 9.2.2RP
1The FCA has the power to make a range of prohibition orders depending on the circumstances of each case and the range of regulated activities to which the individual's lack of fitness and propriety is relevant. Depending on the circumstances of each case, the FCA may seek to prohibit individuals from performing any class of function in relation to any class of regulated activity, or it may limit the prohibition order to specific functions in relation to specific regulated activities.
FIT 1.2.1CGRP
7The key general rules relating to the criteria listed in FIT 1.2.1BG10 include:(1) in the case of very senior employees, SYSC 4.2 (persons who effectively direct the business) and SYSC 4.3A.3R (management body);(2) for employees of firms generally,10 the competent employees rule10; and(3) in relation to retail activities, TC 2.1.12R (employees' competence).
SYSC 4.4.6GRP

Frequently asked questions about allocation of functions in SYSC 4.4.5 R

Question

Answer

1

Does an individual to whom a function is allocated under SYSC 4.4.5 R need to be an approved person or a certification employee8?

An individual to whom a function is allocated under SYSC 4.4.5 R will be performing the apportionment and oversight function (CF 8, see SUP 10A.7.1 R17) and an application must be made under section 59 of the Act for approval of the individual before the function is performed. There are exceptions from this in SUP 10A.117 (Approved persons - Application).

The apportionment and oversight function does not apply to a relevant authorised person. However, a person performing the role in SYSC 4.4.5R will fall into the certification regime in SYSC 5.2 (Certification Regime), unless the person performing it is an approved person. A person performing the role in SYSC 4.4.5R may be an approved person because of another role that they perform (such as being an executive director).8

1717

2

If the allocation is to more than one individual, can they perform the functions, or aspects of the functions, separately?

If the functions are allocated to joint chief executives under SYSC 4.4.5 R, column 2, they are expected to act jointly. If the functions are allocated to an individual under SYSC 4.4.5 R, column 2, in addition to individuals under SYSC 4.4.5 R, column 3, the former may normally be expected to perform a leading role in relation to the functions that reflects his position. Otherwise, yes.

3

What is meant by "appropriately allocate" in this context?

The allocation of functions should be compatible with delivering compliance with Principle 3, SYSC 4.4.3 R and SYSC 4.1.1 R. The appropriate regulator considers that allocation to one or two individuals is likely to be appropriate for most firms.

4

If a committee of management governs a firm or group, can the functions be allocated to every member of that committee?

Yes, as long as the allocation remains appropriate (see Question 3). If the firm also has an individual as chief executive, then the functions must be allocated to that individual as well under SYSC 4.4.5 R, column 2 (see Question 7).

5

Does the definition of chief executive include the possessor of equivalent responsibilities with another title, such as a managing director or managing partner?

Yes.

6

Is it possible for a firm to have more than one individual as its chief executive?

Although unusual, some firms may wish the responsibility of a chief executive to be held jointly by more than one individual. In that case, each of them will be a chief executive and the functions must be allocated to all of them under SYSC 4.4.5 R, column 2 (see also Questions 2 and 7).

7

If a firm has an individual as chief executive, must the functions be allocated to that individual?

Normally, yes, under SYSC 4.4.5 R, column 2.

But if the firm is a body corporate and a member of a group, the functions may, instead of being allocated to the firm'schief executive, be allocated to a director or senior manager from the group responsible for the overall management of the group or of a relevant group division, so long as this is appropriate (see Question 3). Such individuals may nevertheless require approval under section 59 (see Question 1).

If the firm chooses to allocate the functions to a director or senior manager responsible for the overall management of a relevant group division, the FSA would expect that individual to be of a seniority equivalent to or greater than a chief executive of the firm for the allocation to be appropriate.

See also Question 14.

8

If a firm has a chief executive, can the functions be allocated to other individuals in addition to the chief executive?

Yes. SYSC 4.4.5 R, column 3, permits a firm to allocate the functions, additionally, to the firm's (or where applicable the group's) directors and senior managers as long as this is appropriate (see Question 3).

9

What if a firm does not have a chief executive?

Normally, the functions must be allocated to one or more individuals selected from the firm's (or where applicable the group's) directors and senior managers under SYSC 4.4.5 R, column 3.

But if the firm:

(1) is a body corporate and a member of a group; and

(2) the group has a director or senior manager responsible for the overall management of the group or of a relevant group division;

then the functions must be allocated to that individual (together, optionally, with individuals from column 3 if appropriate) under SYSC 4.4.5 R, column 2.

10

What do you mean by "group division within which some or all of the firm's regulated activities fall"?

A "division" in this context should be interpreted by reference to geographical operations, product lines or any other method by which the group's business is divided.

If the firm's regulated activities fall within more than one division and the firm does not wish to allocate the functions to its chief executive, the allocation must, under SYSC 4.4.5 R, be to:

(1) a director or senior manager responsible for the overall management of the group; or (2) a director or senior manager responsible for the overall management of one of those divisions;

together, optionally, with individuals from column 3 if appropriate. (See also Questions 7 and 9.)

11

How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an overseas firm which is not an incoming EEA firm, incoming Treaty firm or UCITS qualifier?

The firm must appropriately allocate those functions to one or more individuals, in accordance with SYSC 4.4.5 R, but:

(1) The responsibilities that must be apportioned and the systems and controls that must be overseen are those relating to activities carried on from a UK establishment with certain exceptions (see

SYSC 1 Annex 1.1.8R). Note that SYSC 1 Annex 1.1.10R does not extend the territorial scope of SYSC 4.4 for an overseas firm.

(2) The chief executive of an overseas firm is the person responsible for the conduct of the firm's business within the United Kingdom (see the definition of "chief executive"). This might, for example, be the manager of the firm'sUK establishment, or it might be the chief executive of the firm as a whole, if he has that responsibility.

The apportionment and oversight function applies to such a firm, unless it falls within a particular exception from the approved persons regime (see Question 1).

12

How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an incoming EEA firm or incoming Treaty firm?

SYSC 1 Annex 1.1.1R(2) and SYSC 1 Annex 1.1.8R restrict the application of SYSC 4.4.5 R for such a firm. Accordingly:

(1) Such a firm is not required to allocate the function of dealing with apportionment in SYSC 4.4.5R (1).

(2) Such a firm is required to allocate the function of oversight in SYSC 4.4.5R (2). However, the systems and controls that must be overseen are those relating to matters which the appropriate regulator, as Host State regulator, is entitled to regulate (there is guidance on this in SUP 13A Annex 2). Those are primarily, but not exclusively, the systems and controls relating to the conduct of the firm's activities carried on from its UK branch.

(3) Such a firm need not allocate the function of oversight to its chief executive; it must allocate it to one or more directors and senior managers of the firm or the firm'sgroup under SYSC 4.4.5 R, row (2).

(4) An incoming EEA firm which has provision only for cross border services is not required to allocate either function if it does not carry on regulated activities in the United Kingdom; for example if they fall within the overseas persons exclusions in article 72 of the Regulated Activities Order.

See also Questions 1 and 15.

13

What about a firm that is a partnership or a limited liability partnership?

The appropriate regulator envisages that most if not all partners or members will be either directors or senior managers, but this will depend on the constitution of the partnership (particularly in the case of a limited partnership) or limited liability partnership. A partnership or limited liability partnership may also have a chief executive (see Question 5). A limited liability partnership is a body corporate and, if a member of a group, will fall within SYSC 4.4.5 R, row (1) or (2).

14

What if generally accepted principles of good corporate governance recommend that the chief executive should not be involved in an aspect of corporate governance?

The Note to SYSC 4.4.5 R provides that the chief executive or other executive director or senior manager need not be involved in such circumstances. For example, the UK Corporate Governance Code5 recommends that the board of a listed company should establish an audit committee of independent,9 non-executive directors to be responsible (among other things) for overseeing the effectiveness9 of the audit process and the objectivity and independence of the external auditor9. That aspect of the oversight function may therefore be allocated to the members of such a committee without involving the chief executive. Such individuals may require approval under section 59 in relation to that function (see Question 1).

5

15

What about incoming electronic commerce activities carried on from an establishment in another EEA State with or for a person in the United Kingdom?

SYSC does not apply to an incoming ECA provider acting as such.
SYSC 18.6.1RRP
(1) 1A UK MiFID investment firm (except a collective portfolio management investment firm) must have appropriate procedures in place for its employees to report a potential or actual breach of:(a) any rule implementing MiFID; or(b) a requirement imposed by MiFIR or any EU regulation adopted under MiFID or MiFIR.(2) The procedures in (1) must enable employees to report internally through a specific, independent and autonomous channel.(3) The channel referred to in (2) may be provided
PERG 2.11.3GRP
This exemption applies to a scheme under which an employer provides or makes available to their employees a cycle or cyclist's safety equipment up to the value of £1,000 (which is designed to allow employees to take advantage of section 244 of the Income Tax (Earnings and Pensions) Act 2003). An employer does not require authorisation for the regulated activities relating to regulated consumer hire agreements just because it operates such a scheme.
EG 4.7.2RP
Firms, approved persons and conduct rules staff1 have an obligation to be open and co-operative with the FCA (as a result of Principle 11 for Businesses,1 Statement of Principle 4 for Approved Persons and Rule 3 of COCON 2.11). The FCA will make it clear to the person concerned whether it requires them to produce information or answer questions under the Act or whether the provision of answers is purely voluntary. The fact that the person concerned may be a regulated person does
SYSC 13.7.7GRP
Failures in processing information (whether physical, electronic or known by employees but not recorded) or of the security of the systems that maintain it can lead to significant operational losses. A firm should establish and maintain appropriate systems and controls to manage its information security risks. In doing so, a firm should have regard to:(1) confidentiality: information should be accessible only to persons or systems with appropriate authority, which may require
MAR 1.3.20GRP
The following descriptions are intended to assist in understanding certain behaviours which may constitute insider dealing under the Market Abuse Regulation and5 concern the definition of inside information relating to financial instruments other than commodityderivatives or emissions allowances or auctioned products based thereon:5(1) X, a director at B PLC has lunch with a friend, Y. X tells Y that his company has received a takeover offer that is at a premium
SUP 10C.10.19GRP
If the candidate is employed by a contractor, the firm may ask the contractor to obtain the certificate.
CONC 7.1.3GRP
(1) In accordance with CONC 1.2.2 Rfirms must ensure that their employees and agents comply with CONC and must take reasonable steps to ensure that other persons acting on the firm's behalf act in accordance with CONC.(2) The rule in CONC 1.2.2 R is particularly important in relation to the requirements in CONC 7, for example, in dealing with an individual from whom the person referred to in the rule is seeking to collect a debt.(3) In this chapter the expression “arrears” includes