Related provisions for MCOB 11.6.21
Table: Examples5 of how the requirements for submitting statements of responsibilities work
1Example |
Comments |
(1) A firm applies for approval for A to perform the executive director function5 and the money laundering reporting function5. |
There should be a single statement of responsibilities document that covers the two functions. The combined document should be included with the application for approval. |
(2) Firm X applies for approval for A to perform the executive director function5. Firm Y applies for approval for A to perform the money laundering reporting function. Both firms are SMCR firms5. |
There should be separate statements of responsibilities for each firm. This is the case even if Firm X and Firm Y are in the same group. |
(3) A firm applies for approval for A to perform an FCA-designated senior management function and a PRA-designated senior management function. The arrangements in SUP 10C.9 for FCA functions to be absorbed into PRA ones do not apply and so there are separate applications to the FCA and PRA. |
The single statement of responsibilities document should cover both the FCA and the PRA functions. |
(4) A has approval to perform the executive director function5. Later, A is to be appointed to perform the money laundering reporting function5 for the same firm. This will also result in substantial changes to A’s duties as an executive director. |
The firm should not use Form J to notify the changes to A’s duties as an executive director. The firm should submit a revised single statement of responsibilities document along with the application to perform the money laundering reporting function5. The single statement of responsibilities document should cover both functions. The part relating to A’s duties as an executive director should be updated. |
(5) A has approval to perform the executive director function5. Later, A is to be appointed to perform the PRA's chief risk officer designated senior management function for the same firm. This will also result in substantial changes to A’s duties as an executive director. |
The firm should not use Form J to notify the changes to A’s duties as an executive director. The firm should submit a revised single statement of responsibilities document along with the application to perform the PRA function. The firm should not submit the revised single statement of responsibilities document separately to the FCA. Instead, it should include it as part of the application to the PRA. The single statement of responsibilities document should cover both the FCA and the PRA functions. The part relating to A’s duties as an executive director should be updated. |
(6) A has approval to perform the money laundering reporting function5. The approval to perform the money laundering reporting function5 is subject to a condition. The firm is applying to vary that condition. |
The firm should include a revised statement of responsibilities with the application. The firm should not use Form J. It should submit a revised statement of responsibilities along with the application to vary the approval. |
(7) A has approval to perform the executive director function5 and the money laundering reporting function5 for the same firm. The approval to perform the money laundering reporting function5 is subject to a condition. The firm is applying to vary that condition. As part of the same arrangements, there are to be substantial changes to A’s job as an executive director. |
The firm should not use Form J to notify the changes to A’s duties as an executive director. The firm should submit a revised single statement of responsibilities document along with the application to vary the approval for the money laundering reporting function5. The single statement of responsibilities document should be updated and should cover both functions. |
(8) A has approval to perform the executive director function5 and the PRA's chief risk officer designated senior management function for the same firm. The arrangements in SUP 10C.9 for FCA functions to be absorbed into PRA ones do not apply and so there are separate FCA and PRA approvals. The approval to perform the PRA's chief risk officer designated senior management function is subject to a condition. The firm is applying to vary that condition. As part of the same arrangements, there are to be substantial changes to A’s job as an executive director. |
The firm should not use Form J to notify the changes to A’s duties as an executive director. The firm should submit a revised single statement of responsibilities document along with the application to vary the PRA function. The firm should not submit the revised document separately to the FCA. Instead it should include it as part of the application to the PRA. The single statement of responsibilities document should cover both the FCA and the PRA functions and should be updated. |
(9) A has approval to perform the executive director function5 and the money laundering reporting function5 for the same firm. Sometime later, A is to give up the money laundering reporting function5 and take up the PRA's chief risk officer designated senior management function. This will involve major changes to A’s role as executive director. |
The answer to example (5) applies. The application to the PRA to perform the PRA function should be accompanied by a single document that: (1) contains the statement of responsibilities for the new function; (2) contains the revised statement of responsibilities for the executive director function5; and (3) reflects the fact that A is no longer performing the money laundering reporting function5. |
(10) A firm has approval for A to perform the executive director function5 and the money laundering reporting function5. A then ceases to perform the money laundering reporting function5 but continues to perform the executive director function.5 |
The firm must submit: (a) Form C for the money laundering reporting function5; (b) Form J; and (c) a single updated statement of responsibilities document that covers the executive director function and reflects the fact that A is no longer performing the money laundering reporting function5. |
(11) A has approval to perform the executive director function5 and the PRA's chief risk officer designated senior management function for the same firm. Later, A gives up his role as chief risk officer. |
The firm must submit: (a) Form C for the PRA function; (b) Form J; and (c) a single updated statement of responsibilities document that covers the executive director function5. The firm should not submit the revised single statement of responsibilities document separately to the FCA. Instead, it should include it as part of the notification to the PRA. |
(12) A has approval to perform the executive director function5. Later, A is to be appointed to perform the money laundering reporting function5 for the same firm. The application is rejected. |
The single statement of responsibilities document submitted as part of the application will no longer be correct as it reflects the proposed new approval. If the only changes to the single document in the version sent with the application are ones5 clearly and exclusively tied to the new function, the firm will not need to amend the document as the changes will automatically fall away. In any other case (for instance if the application is approved conditionally), it is likely that the firm will need to update it using Form J. In any case, the FCA may contact the firm to agree a revised single statement of responsibilities document. |
(13) A has approval to perform the money laundering reporting function5. Later, A is to be appointed as an executive director5 for the same firm. This will not result in any significant5 changes to A’s duties in the money laundering reporting function5. However, there have been some insignificant changes to A’s role in the money laundering reporting function5 since the firm submitted the most recent single statement of responsibilities document. The changes are not connected to A’s appointment as executive director5. |
The answer for example (4) applies. The single statement of responsibilities document should be updated to cover the changes to A’s duties in the money laundering role as well as covering A’s appointment to perform the executive director function. It does not matter that the changes to A’s money laundering role5 are not significant. |
(14) A has approval to perform the executive director function5. Later, A’s business unit grows in size and so the firm needs to apply for A to be approved to perform the PRA's Head of Key Business Area designated senior management function. However, A’s responsibilities do not change. |
The firm should submit a revised single statement of responsibilities document along with the application to perform the PRA function. The firm should submit a single statement of responsibilities document that covers both the FCA and the PRA functions. It should not submit the revised single statement of responsibilities document separately to the FCA. Instead, it should include it as part of the application to the PRA. |
2(15) Firm X has a branch in the United Kingdom. Firm Y is a UK authorised subsidiary3 of firm X. Firm X is an overseas SMCR firm that is not an EEA SMCR firm5 and firm3 Y is a UK SMCR firm5. Both firms apply for approval for the same individual (P) to perform the executive director function5. 3 |
There should be separate statement of responsibilities for P for each firm. |
Note:5 The single statement of responsibilities document means the single document described in SUP 10C.11.13D.5 |
- (1)
The main provision within the definition of alternative debenture arrangements that seeks to ensure that only instruments that display the characteristics of a debt security can be alternative debentures is set out at PERG 2.6.11CG (5). It provides that the amount of additional payments under the arrangements must not exceed an amount which would, at the time the bond is issued, be a reasonable commercial return on a loan of capital. Where the return is not fixed at the outset, it is the maximum possible amount of the additional payments that must be considered in deciding this question. The following example demonstrates how this condition should be approached.
- additional payments under the arrangements would exceed a reasonable commercial return on a loan of the capital.
Further, where the return is not fixed at the outset, it is the maximum possible amount of the additional payments that must be considered. Here, the issue terms of the sukuk impose no upper limit on the amount of the periodic distributions: a sakk holder subscribing 1,000 may, in a year, get back 200 or 2,000 or nothing depending on the rental market. The maximum potential return is clearly in excess of a reasonable commercial return on a loan of 1,000; and
- the arrangements have not been admitted to an official list or admitted to trading on a regulated market or recognised investment exchange (see PERG 2.6.11CG (6)).
- (2)
If, in the above example, investors returns were capped at 500 per sakk per year, then this is the amount that must be considered in deciding whether the return exceeds a reasonable commercial return on a loan, even where the amounts actually received turn out to be far lower.
- (3)
In applying the reasonable commercial return test, the sakk should be compared to a hypothetical loan to the issuer on similar terms and carrying similar risks. For example, a conventional security convertible into shares will normally carry a lower rate of interest because the conversion right has a value. The return on an exchangeable or convertible sakk should be measured against the return on an equivalent exchangeable or convertible debt security.
- (4)
The risk to investors in sukuk may vary slightly from that of a conventional bond in some instances. This may be due to the fact that sukuk holders only have recourse to the bond assets or some other structural feature which results in the risk profile being higher. In such instances it may be justifiable for the rate of return to be slightly higher than that of a conventional loan.
- (5)
As with any financial instrument, the pricing of sukuk will depend on the issuers view of the market at the time of issue and reasonable commercial return may vary depending on the issuer and the economic circumstances prevalent at the time of issue.
Example ABC Ltd is a property development company. It wishes to increase its portfolio on a short-term basis. It issues 5-year sukuk to investors and uses the proceeds to buy the head lease of a commercial property. The rental income from the lease is distributed to investors in proportion to their holdings without a cap on the level of return. After 5 years, the head lease is sold on at a profit and the proceeds shared between investors. In this example, the investors participate directly in the success or failure of the underlying property business. The sakk is not really in the nature of a debt instrument. It is unlikely to be an alternative debenture as: |