Related provisions for SYSC 22.5.17
[deleted] 5
Outsourcing arrangements [deleted]5
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 firm is a PRA-authorised person.6 |
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 is a PRA-authorised person.6 |
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 is a PRA-authorised person.6 |
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 firm is a PRA-authorised person.6 |
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 is a PRA-authorised person.6 |
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 is a PRA-authorised person.6 |
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. |
7(16) An FCA-approved SMF manager goes on or returns from a temporary absence of longer than 12 weeks. |
The firm must submit: (a) Form D (SUP 10C Annex 6R); (b) Form J (SUP 10C Annex 9D); and (c) an updated statement of responsibilities document (SUP 10C Annex 10D). |
Note:5 The single statement of responsibilities document means the single document described in SUP 10C.11.13D.5 |
Schedule to the Recognition Requirements Regulations, paragraphs 3 – 3H4
Paragraph 3 – Systems and controls4 |
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(1) |
The [UK RIE] must ensure that the systems and controls, including procedures and arrangements,4 used in the performance of its functions and the functions of the trading venues it operates are adequate, effective4 and appropriate for the scale and nature of its business. |
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(2) |
Sub-paragraph (1) applies in particular to systems and controls concerning - |
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(a) |
the transmission of information; |
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(b) |
the assessment, mitigation and management of risks to the performance of the [UK RIE'srelevant functions]; |
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(c) |
the effecting and monitoring of transactions on the [UK RIE]; |
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(ca) |
the technical operation of the [UK RIE], including contingency arrangements for disruption to its facilities; |
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(d) |
the operation of the arrangements mentioned in paragraph 4(2)(d); and |
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(e) |
(where relevant) the safeguarding and administration of assets belonging to users of the [UK RIE's] facilities. |
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4(f) |
the resilience of its trading systems; |
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4[Note:MiFID RTS 7 contains requirements on the resilience of trading systems operated by trading venues that enable algorithmic trading] |
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4(g) |
the ability to have sufficient capacity to deal with peak order and message volumes; |
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4[Note:MiFID RTS 7 contains requirements on the adequacy of capacity of trading systems operated by trading venues that enable algorithmic trading] |
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4(h) |
the ability to ensure orderly trading under conditions of severe market stress; |
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4(i) |
the effectiveness of business continuity arrangements to ensure the continuity of the [UK RIE’s] services if there is any failure of its trading systems including the testing of the [UK RIE’s] systems and controls; |
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4(j) |
the ability to reject orders that exceed predetermined volume or price thresholds or which are clearly erroneous; |
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4(k) |
the ability to ensure algorithmic trading systems cannot create or contribute to disorderly trading conditions on trading venues operated by the [UK RIE]; |
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4(l) |
the ability to ensure disorderly trading conditions which arise from the use of algorithmic trading systems, including systems to limit the ratio of unexecuted orders to transactions that may be entered into the [UK RIE’s] trading system by a member or participant are capable of being managed; |
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[Note:MiFID RTS 9 contains requirements on the ratio of unexecuted orders to transactions to be taken into account by a trading venue that operates electronic continuous auction order book, quote-driven or hybrid trading systems] |
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4(m) |
the ability to ensure the flow of orders is able to be slowed down if there is a risk of system capacity being reached; |
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4(n) |
the ability to limit and enforce the minimum tick size which may be executed on its trading venues; and |
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4(o) |
the requirement for members and participants to carry out appropriate testing of algorithms. |
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4[Note:MiFID RTS 7 contains requirements on the appropriate testing of algorithms to ensure that trading systems, when they enable algorithmic trading, cannot create or contribute to disorderly trading conditions] |
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4(3) |
For the purposes of sub-paragraph 2(c), the [UK RIE] must - |
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4(a) |
establish and maintain effective arrangements and procedures including the necessary resource for the regular monitoring of the compliance by members or participants with its rules; and |
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4(b) |
monitor orders sent including cancellations and the transactions undertaken by its members or participants under its systems in order to identify infringements of those rules, disorderly trading conditions or conduct that may indicate behavior that is prohibited under the market abuse regulation or system disruptions in relation to a financial instrument. |
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4(4) |
For the purpose of sub-paragraph (2)(o) the [UK RIE] must provide environments to facilitate such testing. |
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4(5) |
The [UK RIE] must be adequately equipped to manage the risks to which it is exposed, to implement appropriate arrangements and systems to identify all significant risks to its operation, and to put in place effective measures to mitigate those risks. |
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4Paragraph 3A – Market making arrangements |
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4(1) |
The [UK RIE] must - |
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4(a) |
have written agreements with all investment firms pursuing a market making strategy on trading venues operated by it (“market making agreements”); |
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4(b) |
have schemes, appropriate to the nature and scale of a trading venue, to ensure that a sufficient number of investment firms enter into such agreements which require them to post firm quotes at competitive prices with the result of providing liquidity to the market on a regular and predictable basis; |
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4(c) |
monitor and enforce compliance with the market making agreements; |
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4(d) |
inform the FCA of the content of its market making agreements; and |
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4(e) |
provide the FCA with any information it requests which is necessary for the FCA to satisfy itself that the market making agreements comply with paragraphs (c) and (d) of this sub-paragraph and sub-paragraph 2. |
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4(2) |
A market making agreement must specify- |
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4(a) |
the obligations of the investment firm in relation to the provision of liquidity; |
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4(b) |
where applicable, any obligations arising from the participation in a scheme mentioned in sub-paragraph (1)(b); |
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4(c) |
any incentives in terms of rebates or otherwise offered by the [UK RIE] to the investment firm in order for it to provide liquidity to the market on a regular and predictable basis; and |
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4(d) |
where applicable, any other rights accruing to the investment firm as a result of participation in the scheme referred to in sub-paragraph (1)(b). |
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4(3) |
For the purposes of this paragraph, an investment firm pursues a market making strategy if - |
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4(a) |
the firm is a member or participant of one or more trading venues; |
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4(b) |
the firm’s strategy, when dealing on own account, involves posting firm, simultaneous two-way quotes of comparable size at competitive prices relating to one or more financial instruments on a single trading venue, across different trading venues; and |
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4(c) |
the result is providing liquidity on a regular and frequent basis to the overall market. |
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4Paragraph 3B – Halting trading |
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4(1) |
The [UK RIE] must be able to - |
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4(a) |
temporarily halt or constrain trading on any trading venue operated by it if there is a significant price movement in a financial instrument on such a trading venue or a related trading venue during a short period; and |
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4(b) |
in exceptional cases be able to cancel, vary, or correct any transaction. |
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4(2) |
For the purposes of sub-paragraph (1), the [UK RIE] must ensure that the parameters for halting trading are appropriately calibrated in a way which takes into account - |
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4(a) |
the liquidity of different asset classes and subclasses; |
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4(b) |
the nature of the trading venue market model; and |
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4(c) |
the types of users, |
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4to ensure the parameters are sufficient to avoid significant disruptions to the orderliness of trading. |
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4(3) |
The [UK RIE] must report the parameters mentioned in sub-paragraph (2) and any material changes to those parameters to the FCA in a format to be specified by the FCA. |
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4(4) |
If a trading venue operated by the [UK RIE] is material in terms of liquidity of the trading of a financial instrument and it halts trading in the United Kingdom6 in that instrument it must have systems and procedures in place to ensure that it notifies the FCA. |
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4[Note:MiFID RTS 12 contains requirements for when a regulated market is material in terms of liquidity in a financial instrument for purposes of trading halt notifications] |
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4Paragraph 3C – Direct electronic access |
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4Where the [UK RIE] permits direct electronic access to a trading venue it operates, it must - |
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4(1) |
(a) |
ensure that a member of, or participant in that trading venue is only permitted to provide direct electronic access to the venue if the member or participant - |
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4(i) |
an investment firm which has permission under Part 4A of the Act to carry on a regulated activity which is any of the investment services or activities;6 |
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4(ii) |
a qualifying credit institution that has Part 4A permission to carry on the regulated activity of accepting deposits;6 |
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4(iii) |
is a person who falls within regulation 30(1A) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 and has permission under Part 4A of the Act to carry on a regulated activity which is any of the investment services or activities;6 |
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4(iv) |
is a third country firm providing the direct electronic access in the course of exercising rights under Article 46.1 (general provisions) 6of the markets in financial instruments regulation; |
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4(v) |
is a third country firm and the provision of the direct electronic access by that firm is subject to the exclusion in Article 72 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; or |
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4(vi) |
is a third country firm which does not come within paragraph (iv) or (v) and is otherwise permitted to provide the direct electronic access under the Act; |
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4(b) |
ensure that appropriate criteria are set and applied for the suitability of persons to whom direct electronic access services may be provided; |
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4(c) |
ensure that a member of, or participant in, the trading venue retains responsibility for adherence to the requirements of any provisions of the law of the United Kingdom relied on by the United Kingdom before IP completion day to implement6 the markets in financial instruments directive in respect of orders and trades executed using the direct electronic access service, as those provisions have effect on IP completion day, in the case of rules made by the FCA under the Act, and as amended from time to time, in all other cases6; |
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4(d) |
set appropriate standards regarding risk controls and thresholds on trading through direct electronic access; |
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4(e) |
be able to distinguish and if necessary stop orders or trading on that trading venue by a person using direct electronic access separately from - |
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4(i) |
other orders; or |
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4(ii) |
trading by the member or participant providing the direct electronic access; and |
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4(f) |
have arrangements in place to suspend or terminate the provision to a client of direct electronic access to that trading venue by a member of, or participant in, the trading venue in the case of non-compliance with this paragraph. |
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4[Note:MiFID RTS 7 contains requirements on direct electronic access permitted through a trading venue’s systems] |
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4Paragraph 3D – Co-location services |
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4(1) |
The [UK RIE’s] rules on colocation services must be transparent, fair and nondiscriminatory. |
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4[Note:MiFID RTS 10 contains requirements to ensure co-location services are transparent, fair and non-discriminatory] |
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4Paragraph 3E – Fee structures |
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4(1) |
The [UK RIE’s] fee structure, for all fees it charges including execution fees and ancillary fees and rebates it grants, must - |
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4(a) |
be transparent, fair and non-discriminatory; |
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4[Note:MiFID RTS 10 contains requirements to ensure fee structures are transparent, fair and non-discriminatory] |
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4(b) |
not create incentives to place, modify or cancel orders, or execute transactions, in a way which contributes to disorderly trading conditions or market abuse; and |
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4[Note:MiFID RTS 10 contains requirements concerning prohibited fee structures] |
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4(c) |
impose market making obligations in individual shares or suitable baskets of shares for any rebates that are granted. |
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4(2) |
Nothing in sub-paragraph (1) prevents the [UK RIE] from - |
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4(a) |
adjusting its fees for cancelled orders according to the length of time for which the order was maintained; |
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4(b) |
calibrating its fees to each financial instrument to which they apply; |
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4(c) |
imposing a higher fee - |
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4(i) |
for placing an order which is cancelled than an order which is executed; |
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4(ii) |
on participants placing a high ratio of cancelled orders to executed orders; or |
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4(iii) |
on a person operating a high-frequency algorithmic trading technique, |
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4in order to reflect the additional burden on system capacity. |
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4Paragraph 3F – Algorithmic trading |
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4(1) |
The [UK RIE] must require members of and participants in trading venues operated by it to flag orders generated by algorithmic trading in order for it to be able to identify the - |
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4(a) |
the different algorithms used for the creation of orders; and |
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4(b) |
the persons initiating those orders. |
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4Paragraph 3G – Tick size regimes |
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4(1) |
Subject to paragraph 1A, the8 [UK RIE] must adopt tick size regimes in respect of trading venues operated by it in - |
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4(a) |
shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments traded on each trading venue; and |
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4[Note:MiFID RTS 11 contains requirements on the tick size regime for shares, depositary receipts, exchange traded funds and certificates5] |
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4(b) |
any financial instrument for which technical standards are adopted by FCA under paragraphs 24 and 25 of Part 2 of Schedule 3 to6 the markets in financial instruments regulation8 which is traded on that trading venue. |
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[Note:MiFID RTS 11] |
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8(1A) |
The application of tick sizes shall not prevent the [UK RIE] from matching orders that are large in scale (as determined in accordance with Article 4 of the markets in financial instruments regulation) at the mid-point within the current bid and offer prices. |
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[Note:MiFID RTS 11] |
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4 (2) |
The tick size regime must - |
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4(a) |
be calibrated to reflect the liquidity profile of the financial instrument in different markets and the average bid-ask spread taking into account desirability of enabling reasonably stable prices without unduly constraining further narrowing of spreads; and |
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4(b) |
adapt the tick size for each financial instrument appropriately. |
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4(3) |
The tick size regime must comply with Commission Delegated Regulation (EU) 2017/588 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the tick size regime for shares, depositary receipts and exchange-traded funds6. |
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4[Note:MiFID RTS 11] |
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4Paragraph 3H – Syncronisation of business clocks |
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4(1) |
The [UK RIE] must synchronise the business clocks it uses to record the date and time of any reportable event in accordance with Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks6. |
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4[Note:MiFID RTS 25] |
7Methods of notification
Method of delivery |
|
1. |
Post to the appropriate address in SUP 15.7.6A G |
2. |
Leaving the notification at the appropriate address in SUP 15.7.6A G and obtaining a time-stamped receipt |
3. |
Electronic mail to an address for the firm's usual supervisory contact at the FCA and obtaining an electronic confirmation of receipt |
4. |
Hand delivery to the firm's usual supervisory contact at the FCA |
5. |
Fax to a fax number for the firm's usual supervisory contact at the FCA and receiving a successful transmission report for all pages of the notification |
6. |
Online submission via the FCA's website at www.fca.org.uk. |
7The current published address of the FCA for postal submission or hand delivery of notifications is:
- (1)
The Financial Conduct Authority
12 Endeavour Square5
London, E20 1JN5
if the firm's usual supervisory contact at the FCA is based in London, or
- (2)
The Financial Conduct Authority
Quayside House 127
Fountainbridge
Edinburgh EH3 8DJ
if the firm's usual supervisory contact at the FCA is based in Edinburgh.7
Method of submission of reports (see SUP 16.3.8 R)
Method of delivery |
|
1. |
Post or hand deliver33 to the published address of the FCA49 for submission of reports. If hand delivering mark the report for the attention of ‘Central Reporting’ and obtain a dated receipt.33 49 |
2. |
[deleted]33 224949 |
3. |
Electronic mail to the published e-mail address 33of the FCA's49 Central Reporting team.22 2249 |
4.22 |
Online submission via the appropriate systems accessible from the22FCA28 website 4949822 |
8
- (1)
The 33published address of the FCA49 for postal submission of reports is:
49Central Reporting22
The Financial Conduct49 Authority
49PO BOX 35747
London E14 5WP
- (2)
The 33published address of the FCA49 for hand delivery of reports is:
49- (a)
Central Reporting22
The Financial Conduct Authority38
494912 Endeavour Square35
London, E20 1JN35
if the firm's usual supervisory contact at the FCA28 is based in London, or:
4949 - (b)
Central Reporting33
The Financial Conduct Authority38
4949Quayside House
127 Fountainbridge
Edinburgh EH3 8DJ
if the firm's usual supervisory contact at the FCA49 is based in Edinburgh.2
49
- (a)
- (3)
The current published email address 33for the FCA’s Central Reporting team is regulatory.reports@fca.org.uk. Please note that the 33Central Reporting team does not handle general correspondence between firms and the FCA, and will not respond to queries3338. Accordingly, firms should not make submissions to the Central Reporting team’s email address33 other than as directed in SUP 16.3.8R.
2233494949332833494933