Related provisions for SUP 16.3.11

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

(1) The FCA may require a firm to provide information about the position in the group of any undertaking excluded from the consolidation under rule 14.2.5. (2) An exclusion under rule 14.2.5(2) would normally be appropriate when an entity would be excluded from the scope of consolidation under the relevant UK generally accepted accounting principles.
MAR 5.10.7RRP
An MTF registered as an SME growth market may be deregistered by the FCA in the following cases:(1) the firm operating the market applies for its deregistration; or(2) the requirements in MAR 5.10.2R are (subject to MAR 5.10.3G(1)) no longer complied with.[Note: article 33(5) of MiFID and article 79 of the MiFID Org Regulation]
MAR 5.3A.7RRP
The firm must report the parameters mentioned in MAR 5.3A.6R to the FCA in writing, by electronic mail to an address for the usual supervisory contact of the firm at the FCA, and obtain an electronic confirmation of receipt.[Note: article 48(5) of MiFID]
SUP 10C.8.3GRP

Table: Examples of how the other local responsibility function applies

Example

Comments

(1) ‘A’ is allocated local responsibility for one of a branch’s main business lines. A is also appointed to perform a PRA-designated senior management function for the same branch. The firm is a PRA-authorised person5.

A only needs approval to perform the PRA-designated senior management function.

(2) ‘A’ is outside the branch’s management structure and A’s responsibilities for the branch are limited to setting overall strategy for the branch. A does not have responsibility for implementing that strategy.

A is not performing the other local responsibility function. The reason for this is explained in SYSC 26.8.3G4. SUP 10C.8.1R(2) is irrelevant to this example.

4

(3) A small branch undertakes two business lines (wholesale lending and corporate investments). ‘A’ is head of wholesale lending and is also an executive director of the branch. ‘B’ is head of corporate investments and does not sit on the branch management committee but reports to it on corporate investments. The branch allocates local responsibility for these functions to A and B. Neither A nor B performs any other FCA-designated senior management function or (if the firm is a PRA-authorised person)5PRA-designated senior management function.

4

A only needs approval to perform the executive director function4. B needs approval to perform the other local responsibility function.

3

(4) A branch does not have a Head of Internal Audit. ‘P’ is allocated local responsibility for internal audit in relation to that branch.

P needs approval to perform the other local responsibility function. However, if P has already been approved to perform another FCA-designated senior management function or (if the firm is a PRA-authorised person)5PRA-designated senior management function for that firm4, then P will not be performing the other local responsibility function.

(5) ‘A’ is appointed to perform the executive director function4. The same branch also allocates local responsibility for some branch functions to A.

3

A only needs approval to perform the executive director function4.

3

(6) ‘A’ is approved to perform the other local responsibility function. Later, A is appointed to perform the executive director function4 for the same firm.

3

A requires approval for the other local responsibility function when A is first appointed. When A is later approved to perform the executive director function4, A stops performing the other local responsibility function. The firm should use Form E to apply for approval for A to perform the executive director function and to notify the FCA that A is no longer performing the other local responsibility function.4

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(7) ‘A’ is appointed to perform:

(a) the compliance oversight function for one firm (Firm X) in a group (which may or may not be an SMCR firm to which the other local responsibility function applies4); and

(b) a function coming within the scope of the other local responsibility function for the United Kingdombranch of4 another firm (which is an overseas SMCR firm to which the other local responsibility function applies4) in the same group (Firm Y).

A needs approval to perform the compliance oversight function for Firm X and the other local responsibility function for Firm Y.

(8) ‘A’ is appointed to take on some functions that come within the other local responsibility function. Later, A is appointed as chief risk officer. A is a type of firm for which being chief risk officer is a PRA designated senior management function or an FCA-designated senior management function5.

4

On A’s first appointment, A will need to be approved to perform the other local responsibility function.

On being approved as chief risk officer, A stops performing the other local responsibility function4.

(9) ‘A’ is appointed as an executive director. A then resigns and takes up a job with the same firm coming within the other local responsibility function4.

On A’s first appointment, A will need to be approved to perform the executive director function4. A will need to get approval to perform the other local responsibility function before A takes up their new responsibilities4.

3

Note: Local responsibility is explained in SYSC 26 (Senior managers and certification regime: Overall and local responsibility).4

FIT 2.1.1GRP
In determining a person's honesty, integrity and reputation, the FCA5 will have regard to all relevant 3matters including, but not limited to, those set out in FIT 2.1.3 G which may have arisen either in the United Kingdom or elsewhere. The FCA5 should be informed of these matters (see SUP 10A.14.17 R and SUP 10C.14.18R5), but will consider the circumstances only where relevant to the requirements and standards of the regulatory system. For example, under FIT 2.1.3 G(1), conviction
MAR 5A.5.7RRP
The firm must report the parameters mentioned in MAR 5A.5.6R to the FCA in writing, by electronic mail to an address for the usual supervisory contact of the firm at the FCA, and obtain an electronic confirmation of receipt.[Note: article 48(5) of MiFID]
REC 2.7A.1UKRP

1Paragraph 7BA – Position management

(1)

A [UK RIE] operating a trading venue which trades commodity derivatives must apply position management controls on that venue, which must at least enable the [UK RIE] to -

(a)

monitor the open interest positions of persons;

(b)

access information, including all relevant documentation, from persons about-

(i)

the size and purpose of a position or exposure entered into;

(ii)

any beneficial or underlying owners;

(iii)

any concert arrangements; and

(iv)

any related assets or liabilities in the underlying market;

(c)

require a person to terminate or reduce a position on a temporary or permanent basis as the specific case may require and to unilaterally take appropriate action to ensure the termination or reduction if the person does not comply; and

(d)

where appropriate, require a person to provide liquidity back into the market at an agreed price and volume on a temporary basis with the express intent of mitigating the effects of a large or dominant position.

(2)

The position management controls must take account of the nature and composition of market participants and of the use they make of the contracts submitted to trading and must-

(a)

be transparent;

(b)

be non-discriminatory; and

(c)

specify how they apply to persons.

(3)

A [UK RIE] must inform the FCA of the details of the position management controls in relation to each trading venue it operates.

Paragraph 7BB – Position reporting

(1)

This paragraph applies to a [UK RIE] operating a trading venue which trades commodity derivatives, emission allowances, or emission allowance derivatives.

(2)

The [UK RIE] must -

(a)

where it meets the minimum threshold, as specified in article 83 (position reporting) of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive2, make public a weekly report with the aggregate positions held by the different categories of persons for the different commodity derivatives, emission allowances, or emission allowance derivatives traded on the trading venue specifying -

(i)

the number of long and short positions by such categories;

(ii)

changes of those positions since the previous report;

(iii)

the percentage of the total open interest represented by each category; and

(iv)

the number of persons holding a position in each category; and

(b)

provide the FCA with a complete breakdown of the positions held by all persons, including the members and participants and their clients, on the trading venue on a daily basis, or more frequently if that is required by the FCA.

(3)

For the weekly report mentioned in sub-paragraph (2)(a) the [UK RIE] must -

(a)

categorise persons in accordance with the classifications required under sub-paragraph (4); and

(b)

differentiate between positions identified as-

(i)

positions which in an objectively measurable way reduce risks directly relating to commercial activities; or

(ii)

other positions.

(4)

The [UK RIE] must classify persons holding positions in commodity derivatives, emission allowances, or emission allowance derivatives according to the nature of their main business, taking account of any applicable authorisation or registration, as -

(a)

an investment firm or qualifying2 credit institution;

(b)

an investment fund, either as an undertaking for collective investment in transferrable securities within the meaning of section 236A of the Act, an AIF or an AIFM within the meaning of regulations 3 and 4 respectively of the Alternative Investment Fund Managers Regulations 2013 (SI 2013/1773)2;

(c)

another financial institution, including an insurance undertaking within the meaning of section 417 of the Act, a reinsurance undertaking within the meaning of section 417 of the Act, and an occupational pension scheme within the meaning of section 1(1) of the Pension Schemes Act 1993;2

(d)

a commercial undertaking; or

(e)

in the case of emission allowances, or emission allowance derivatives, an operator with compliance obligations under Directive 2003/87/EC of the European Parliament and the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community.

[Note: 1993 c.48. Section 1 was amended by section 239 of the Pension Schemes Act 2004 (c. 35) and S.I. 2007/3014.]2

(5)

The [UK RIE] must communicate the weekly report mentioned in sub-paragraph (2)(a) to the FCA2.

FEES 5.4.1RRP
(1) A firm must provide the FCA by the end of February each year (or, if the firm has become subject to the Financial Ombudsman Service part way through the financial year, by the date requested by the FCA) with a statement of:(a) the total amount of relevant business (measured in accordance with the appropriate tariff base(s)) which it conducted; or8(b) in the case of firms in industry blocks 2 and 4, the gross written premium for fees purposes as defined in FEES 4 Annex 1AR
MAR 5A.8.1RRP
1A firm must: (1) report to the FCA any:(a) significant breaches of the firm’s rules; (b) disorderly trading conditions; (c) conduct that may involve market abuse; and (d) system disruptions in relation to a financial instrument; (2) supply the information required under this rule without delay to the FCA and any other authority competent for the investigation and prosecution of market abuse; and (3) provide full assistance to the FCA, and any other authority competent for the
MAR 6.1.2RRP
The systematic internaliser reporting requirement in MAR 6.4.1 R applies to an investment firm which is authorised by the FCA .[Note: articles 15(1) and 18(4) of MiFIR]2
IPRU-INV 2.2.2GRP
Firms are reminded that: (1) requirements relating to the systems and controls which firms must establish and maintain for ensuring compliance with financial resources and other requirements are set out in SYSC. (2) the financial reports that a firm is required to make to the FCA are set out in SUP 16.
GEN 2.2.25GRP
An example of a rule20 being interpreted as cut back by GEN 2.2.23R is SYSC 6.1.1R, which requires a firm to maintain adequate policies and procedures to ensure compliance with its obligations under the regulatory system; SYSC 6.1.1R should be interpreted as applied by the FCA in respect of a PRA-authorised person’s compliance with regulatory obligations that are the responsibility of the FCA (for example, in respect of a bank maintaining policies and procedures to ensure compliance
COLL 11.4.4GRP
(1) When notifying the FCAof any irregularities in accordance with COLL 11.4.3R (1), the depositary of the master UCITS should also inform the depositary of the feeder UCITS how the master UCITS or its authorised fund manager has resolved or proposes to resolve the irregularity.(2) Where the depositary of a UCITS scheme that is a feeder UCITS is informed by the depositary of a master UCITS of an irregularity and is not satisfied that the resolution or proposed resolution is in
FEES 6.7.6RRP
If a firm ceases to be a participant firm or carry out activities within one or more classes54 part way through a financial year6 of the compensation scheme:44(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and41(2) the FSCS may make one or more levies4 upon it (which may be before or after the firm5 has ceased to be a participant firm or carry out activities within one or more classes5,4 but must be before it ceases to be an authorised
SUP 16.14.6RRP
3A CMAR must be submitted by electronic means made available by the FCA10.10
CREDS 10.1.3GRP

Module

Relevance to Credit Unions

The Principles for Businesses (PRIN)

The Principles for Businesses (PRIN) set out 3high-level requirements 3imposed by the FCA3. They provide a general statement of regulatory requirements. The Principles apply to all12credit unions. In applying the Principles to credit unions, the FCA3 will be mindful of proportionality. In practice, the implications are likely to vary according to the size and complexity 3of the credit union.

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Senior Management Arrangements, Systems and Controls (SYSC)

SYSC 1,3SYSC 4 to 10 and SYSC 213 apply to all credit unions in respect of the carrying on of their regulated activities and unregulated activities in a prudential context. SYSC 23 (Senior managers and certification regime: Introduction and classification), SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities), SYSC 25 (Senior managers and certification regime: Management responsibilities maps and handover procedures and material), SYSC 26 (Senior managers and certification regime: Overall and local responsibility), SYSC 27 (Senior managers and certification regime: Certification regime)7 and SYSC 18 apply to all credit unions in respect of both their regulated activities and their unregulated activities.

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3Code of Conduct (COCON)

This contains rules and guidance that are directly applicable to a credit union’sSMF managers, certification employees and (from 2017) other conduct rules staff. There is also guidance for credit unions on giving their staff training about COCON.

Threshold Conditions (COND)

In order to become authorised under the Act all firms must meet the threshold conditions. The threshold conditions must be met on a continuing basis by credit unions. Failure to meet one of the conditions is sufficient grounds for the exercise by the FCA3 of its powers.

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The Fit and Proper test for Employees and Senior Personnel7 (FIT)

The purpose of FIT is to set out and describe the criteria that a firm should3 consider when assessing the fitness and propriety of a person (1)3 in respect of whom an application is being made for approval to undertake a controlled function under the senior managers7 regime, (2)3 who has already been approved, (3) who is a certification employee or (4) whom a firm is considering appointing to be a certification employee3.

It also sets out and describes criteria that the FCA will consider when assessing the fitness and propriety of a candidate for a controlled function position and that it may consider when assessing the continuing fitness and propriety of approved persons.3

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General Provisions (GEN)

GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the FCA's3 logo and insurance against financial penalties.

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Fees manual (FEES)

This manual sets out the fees applying to credit unions.

3Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU)

MIPRU applies to any credit union carrying out insurance distribution activity5 or home finance mediation activity, or using these services. In particular, it sets out requirements for allocation of responsibility for the credit union’sinsurance distribution activity5 (MIPRU 2), for the use of home finance intermediaries (MIPRU 5) and for professional indemnity insurance (MIPRU 3).

Conduct of Business sourcebook (COBS)

A credit union which acts as a CTF provider or provides a cash-deposit ISA will need to be aware of the relevant requirements in COBS. COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply with respect to accepting deposits as set out in those provisions, COBS 4.1 and BCOBS. A credit union that communicates with clients, including in a financial promotion, in relation to the promotion of deferred shares and credit union subordinated debt will need to be aware of the requirements of COBS 4.2 (Fair, clear and not misleading communications) and COBS 4.5 (Communicating with retail clients).4

3Insurance: Conduct of Business sourcebook (ICOBS)

ICOBS applies to any credit union carrying on non-investment insurance distribution5 activities, such as arranging or advising on general insurance contracts to be taken out by members. But ICOBS does not apply to a credit union taking out an insurance policy5 for itself, such as a policy5 against default by members on their loans where the credit union is the beneficiary of the policy5, since in this circumstance the credit union would not be acting as an insurance intermediary, but would itself be the customer. Credit unions are reminded that they are subject to the requirements of the appropriate legislation, including the Credit Unions Act 1979, relating to activities a credit union may carry on.

3Mortgages and Home Finance: Conduct of Business sourcebook (MCOB)

MCOB applies to any credit union that engages in any home finance activity. MCOB rules cover advising and selling standards, responsible lending (including affordability assessment), charges, and the fair treatment of customers in payment difficulties.

Banking: Conduct of Business sourcebook (BCOBS)

BCOBS sets out rules and guidance for credit unions on how they should conduct their business with their customers. In particular there are rules and guidance relating to communications with banking customers3and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers3(BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6). 3The rules in BCOBS 3.1 that relate to distance contracts may apply 3to a credit union. This is because BCOBS 3 contains requirements which implemented9 the Distance Marketing Directive39where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)) of the Distance Marketing Directive)9, i.e. if the credit union routinely sells any of its services by post, telephone, fax or the internet3.

Supervision manual (SUP)

The following provisions of SUP are relevant to credit unions: 13SUP 1A13 (The FCA’s 3 approach to supervision), SUP 2 (Information gathering by the FCA or PRA 3 on its own initiative), SUP 3.1 to SUP 3.8 (Auditors), SUP 5 (Skilled persons), SUP 6 (Applications to vary or cancel Part 4A12permission), SUP 7 (Individual requirements), SUP 8 (Waiver and modification of rules), SUP 9 (Individual guidance), 13SUP 10C (FCA senior managers7 regime for approved persons in SMCR firms7), SUP 11 (Controllers and Close links), SUP 15 (Notifications to the FCA or PRA 3) and SUP 16 (Reporting Requirements).

Credit unions are reminded that they are subject to the requirements of the Act and SUP 11 on close links, and are bound to notify the FCA3 of changes. It may be unlikely, in practice, that credit unions will develop such relationships. It is possible, however, that a person may acquire close links with a 3credit union3 within the meaning of the Act by reason of holding the prescribed proportion of deferred shares in the credit union.

In relation to SUP 16, credit unions are exempted from the requirement to submit annual reports of 3close links.

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3Consumer Credit sourcebook (CONC)

CONC contains rules that apply to firms carrying on credit-related regulated activities. PERG 2.7.19IG provides guidance on relevant exemptions. Most credit union lending is therefore outside the scope of CONC. However, subject to the constraints in the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 (as relevant), credit unions may undertake credit-related regulated activities to which CONC does apply if the activity is carried out by way of business. This could include lending under a borrower-lender-supplier agreement, or debt adjusting or debt counselling where the credit union is not the lender. A credit union carrying on such activities should consider whether it requires permission to do so. Further information can be found on the FCA’s website.

Decision, Procedure and Penalties manual (DEPP)

DEPP is relevant to credit unions because it sets out:

(1) the FCA's12 decision-making procedure for giving statutory notices. These are warning notices, decision notices and supervisory notices (DEPP 1.2 to DEPP 5); and

(2) the FCA's12 policy with respect to the imposition and amount of penalties under the Act (see DEPP 6).

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Dispute Resolution: Complaints (DISP)

DISP sets out rules and guidance in relation to treating complainants fairly and the Financial Ombudsman Service.

Compensation (COMP)

COMP sets out rules relating to the scheme for compensating consumers when authorised firms are unable, or likely to be unable, to satisfy claims against them.12

6General guidance on Benchmark Administration, Contribution and Use (BENCH)

BENCH provides guidance about which parts of the Handbook are relevant to a firm when carrying out benchmark activities and when using a benchmark. It also provides guidance about the benchmarks regulation.

The Enforcement Guide (EG)

The Enforcement Guide (EG) describes the FCA's12 approach to exercising the main enforcement powers given to it by the Act and by other legislation.2

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Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG) and Financial Crime Thematic Reviews (FCTR)8

FCG and FCTR provide8guidance on steps that a firm can take to reduce the risk that it might be used to further financial crime.