Related provisions for PERG 4.5.7A

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SYSC 19D.1.2RRP
Under Part 2 of SYSC 1 Annex 1 in relation to SYSC 4.1.1R (General requirements), and subject2 to the provisions on group risk systems and controls requirements in SYSC 12 (Group risk systems and controls requirements), the dual-regulated firms Remuneration Code:(1) applies in relation to regulated activities, activities that constitute dealing in investments as principal (disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc)),
TC App 1.1.1RRP

1Activity

Products/Sectors

Is there an appropriate qualification4requirement?

4

Designated investment business carried on for a retail client

Providing basic advice

1.

Stakeholder products excluding a deposit-based stakeholder product

No

Advising or giving personal recommendations (as relevant)13

2.

Giving personal recommendations on securities13 which are not stakeholder pension schemes, personal pension schemes7 or broker funds

Yes

3.

Giving personal recommendations on derivatives13

Yes2

4.

Giving personal recommendations on retail investment products13 which are not broker funds

66

Yes2

5.

Giving personal recommendations on13Friendly Societylife policies where the employee is not reasonably expected to receive a remuneration of greater than £1000 a year in respect of such sales

No2

6.

Giving personal recommendations on13Friendly Society tax-exempt policies (other than Holloway sickness policies where the Holloway policy special application conditions are met)5

Yes2

7.

Giving personal recommendations on long-term care insurance contracts13

Yes2

8.

Giving personal recommendations on investments13 in the course of corporate finance business

Yes2

9.

Advising on syndicate participation at Lloyd's

Yes2

129A.

Advising on P2P agreements

Yes

Undertaking the activity in column 2

10.

Broker fund adviser

Yes

11.

Pension transfer specialist

Yes2

Giving personal recommendations13 and dealing

12.

Giving personal recommendations on and dealing in securities13 which are not stakeholder pension schemes, personal pension schemes7 or broker funds

Yes

13.

Giving personal recommendations on and dealing in derivatives13

Yes2

4Dealing

13A.8

Securities which are not stakeholder pension schemes, personal pension schemes7 or broker funds

No

413B.8

Derivatives

No

15MiFID business bidding

13C15

emissions auction products15

No15

8 14

Managing

14.

Investments

Yes

Overseeing on a day-to-day basis

15.

Operating a collective investment scheme or undertaking the activities of a trustee or depositary of a collective investment scheme

Yes

16.

Safeguarding and administering investments or holding client money

Yes2

17.

Administrative functions in relation to managing investments

Yes2

18.

Administrative functions in relation to effecting or carrying out contracts of insurance which are life policies

Yes2

19.

Administrative functions in relation to the operation of stakeholder pension schemes

Yes2

Mortgage Activity10 and reversion activity carried on for a customer

10

910Advising; arranging (bringing about) an execution-only sale, excluding variations to an existing home finance transaction except where the effect is to change all or part of the home finance transaction from one interest rate to another.

See Note 3, which for the avoidance of doubt forms part of this rule.

20

Regulated mortgage contracts for a non-business purpose

Yes

20A

Regulated mortgage contracts for a business purpose

No

21

Equity release transactions

Yes

9Designing scripted questions for execution-only sales

21A

Regulated mortgage contracts for a non-business purpose

Yes

21B

Regulated mortgage contracts for a business purpose

No

22

Equity release transactions

Yes

Overseeing execution-only sales on a day-to-day basis9

9

23.

Equity release transactions

Yes

11MCD credit agreement activities carried on for consumers

11manufacturing

23A

an MCD credit agreement

No

11entering into a regulated mortgage contract or entering into a regulated credit agreement as lender

23B

an MCD credit agreement

No

11arranging (bringing about) regulated mortgage contracts or acting as an MCD credit broker

23C

an MCD credit agreement

No

11advising on a regulated mortgage contract or advising on a regulated credit agreement for the acquisition of land

23D

an MCD credit agreement

No

11directly managing or supervising employees who carry on any of the MCD credit agreement activities 23A to 23D

23E

an MCD credit agreement

No

[Note: article 9(1) of the MCD]11

Non-investment insurance business carried on for a consumer

Giving personal recommendations13

24.

Giving personal recommendations on non-investment insurance contracts13

No

3Regulated sale and rent back activity carried on for a customer

Advising

25.

Regulated sale and rent back agreements

No

Overseeing an execution-only sale10 on a day-to-day basis

10

26.

Regulated sale and rent back agreements

No

16Regulated funeral plan activity carried on for a customer

16Dealing in investments as agent

27

Funeral plan contracts

No

16Arranging (bringing about) deals in investments

28

Funeral plan contracts

No

16Making arrangements with a view to transactions in investments

29

Funeral plan contracts

No

16Managing investments

30

Funeral plan contracts

No

16Safeguarding and administering investments

31

Funeral plan contracts

No

16Sending dematerialised instructions

32

Funeral plan contracts

No

16Causing dematerialised instructions to be sent

33

Funeral plan contracts

No

16Advising on investments

34

Funeral plan contracts

No

16Entering as provider into a funeral plan contract

35

Funeral plan contracts

No

16Carrying out a funeral plan contract as provider

36

Funeral plan contracts

No

16Agreeing to carry on a regulated activity

37

Funeral plan contracts

No

Notes:

1.

In the Appendix the heading and types of business specified in the headings are to be read in conjunction with the paragraphs appearing beneath them.

2.

Thus, for example, paragraph 24,13 consistent with the heading above it, refers only to personal recommendations given in relation to13non-investment insurance contracts given to a consumer.10

33

122A.

In relation to activity number 9A, see TC 2.1.5HR and TC 2.1.6R(2). There is no qualification for this activity in the list of qualifications set out in TC Appendix 4E. However, the effect of TC 2.1.5HR is that an employeeadvising on P2P agreements must be qualified to the same standard as if that employee were providing investment advice to retail clients on retail investment products.

103.

For the purpose of product numbers 20, 20A and 21 the activity of arranging (bringing about) referred to in the activity column:

(a) includes activity which would be arranging (bringing about) but for the exclusion in article 28A of the Regulated Activities Order; and

(b) does not include activities which taken on their own would not fall within the definition of that activity. For these purposes no account should be taken of the fact that for an activity to be a regulated activity it must be carried on by way of business (see PERG 4.3).

4.

In this Appendix, paragraphs 23A, 23B, 23C, 23D and 23E relate to the implementation of article 9(1) of the MCD. The specified activities do not, in and of themselves, attract a qualification requirement. However, where those activities overlap with those specified under the heading "mortgage activity and reversion activity carried on for a customer", qualification requirements may apply.

DISP 2.8.10GRP
713Where a complaint meets the requirements of DISP 2.8.9R(2)(d), those parts of the complaint that relate to the grounds of rejection of the claim are not subject to the restriction in DISP 2.8.9R(1) on an Ombudsman considering the complaint.
MCOB 14.1.7RRP
The following provisions do not apply to an MCD article 3(1)(b) creditor or MCD article 3(1)(b) credit intermediary where the conditions in CONC 1.2.10R(2)4 are fulfilled: MCOB 7.5 (mortgages: statements) and MCOB 13 (arrears, payment shortfalls and repossessions) (except for MCOB 13.3.1AR to MCOB 13.3.1BG, MCOB 13.3.2AR to MCOB 13.3.8G, and MCOB 13.6.1R to MCOB 13.6.2G, which apply even where those conditions are fulfilled).4
SUP 3.1.2RRP

Applicable sections (see SUP 3.1.1 R)

This table and the provisions in SUP 3 should be read in conjunction with GEN 2.2.23 R to GEN 2.2.25 G. In particular, the PRA does not apply any of the provisions in SUP 3 in respect of FCA-authorised persons. SUP 3.10 and SUP 3.11 are applied by the FCA only.41

(1) Category of firm

(2) Sections applicable to the firm

(3) Sections applicable to its auditor

(1)

Authorised professional firm which is required by IPRU(INV) 2.1.2R to comply with chapters 3, 519 or 13 of IPRU(INV) and which has an auditor appointed under or as a result of a statutory provision other than in the Act9 (Notes 1 and 6)23

23192323

SUP 3.1 - SUP 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8,19SUP 3.10

19

(2)

Authorised professional firm not within (1) to which the custody chapter or client money chapter applies22

172223

SUP 3.1 - SUP 3.7, SUP 3.11

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.10

(3)

Authorised professional firm not within (1) or (2) which has an auditor appointed under or as a result of a statutory provision other than in the Act

SUP 3.1, SUP 3.2, SUP 3.7

SUP 3.1, SUP 3.2, SUP 3.8

(4)

Bank, building society or dormant asset fund operator40 which in each case carries on designated investment business21(Notes 2A and 6)23

2123

SUP 3.1-SUP 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.10

(5)

Bank, building society or a dormant asset fund operator40 which in each case does not carry on designated investment business21 (Note 2A)

21

SUP 3.1 - SUP 3.7

SUP 3.1, SUP 3.2, SUP 3.8

(5A)

Credit union

SUP 3.1 - SUP 3.7

SUP 3.1, SUP 3.2, SUP 3.824

27(5B)30

CASS debt management firm unless subject to a requirement imposed under section 55L of the Act stating that it must not hold client money or such a requirement to the same effect30

SUP 3.1

SUP 3.10

SUP 3.11

SUP 3.1

SUP 3.10

33(5C)

CASS 7 loan-based crowdfunding firm

SUP 3.1-3.7, SUP 3.11

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.10

36(5D)

A CASS 13 claims management firm

SUP 3.1- 3.7, 3.11

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.10

(6)

Insurer, the Society of Lloyd's, underwriting agent or members' adviser, UK ISPV11 (Note 5)7

SUP 3.1 - SUP 3.7

SUP 3.1, SUP 3.2, SUP 3.8

(7)

Investment management firm,39personal investment firm (other than a small personal investment firm)39, 15securities and futures firm or collective portfolio management firm that is an external AIFM28 which, in each case, has an auditor appointed under or as a result of a statutory provision other than in the Act9(Notes 3 and 623)17

16239282820151723

SUP 3.1 - SUP 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8,19SUP 3.10

19

9(7A)

Investment management firm39, personal investment firm (other than a small personal investment firm39),28securities and futures firm39 or collective portfolio management firm that is an external AIFM28 not within (7) to which the custody chapter or client money chapter applies22

2015232815201722

SUP 3.1 - SUP 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.1025

32

25

9(7B)

Collective portfolio management firm that is a 28UCITS firm13or an internally managed AIF28 (Note 6)23

13

SUP 3.1 - SUP 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8,19SUP 3.10

19

13(7C)

MiFID investment firm38, which has an auditor appointed under or as a result of a statutory provision other than in the Act (Notes 3B and 6)2320

2023

SUP 3.1 - 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.1014

17(7D)

Sole trader or partnership that is a MiFID investment firm3839(Notes 3C and 6)2320

202023

SUP 3.1 - SUP 3.7, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.10

(8)

Small personal investment firm or service company which, in either case, has an auditor appointed under or as a result of a statutory provision other than in the Act

SUP 3.1, SUP 3.2, SUP 3.7

SUP 3.1, SUP 3.2, SUP 3.8

(9)8

Home finance provider10 which has an auditor appointed under or as a result of a statutory provision other than in the Act9

10

SUP 3.1 - SUP 3.78

SUP 3.1, SUP 3.2, SUP 3.88

(10)8

Insurance intermediary (other than an exempt insurance intermediary) to which the insurance client money chapter17 (except for CASS 5.2 (Holding money as agent)) applies (see Note 4)8

17

SUP 3.1 - SUP 3.78, SUP 3.1123

SUP 3.1, SUP 3.2, SUP 3.8, SUP 3.108

(11)8

Exempt insurance intermediary and insurance intermediary not subject to SUP 3.1.2 R(10) which has an auditor appointed under or as a result of a statutory provision other than in the Act

SUP 3.1, SUP 3.2, SUP 3.78

SUP 3.1, SUP 3.2, SUP 3.88

(12)8

Home finance intermediary10 or home finance administrator10 which has an auditor appointed under or as a result of a statutory provision other than in the Act.

1010

SUP 3.1, SUP 3.2, SUP 3.78

SUP 3.1, SUP 3.2, SUP 3.88

Note 1 = This chapter applies to an authorised professional firm in row (1) (and its auditor) as if the firm were of the relevant type in the right-hand column of IPRU(INV) 2.1.4R.

Note 2 [deleted]23

171723

Note 2A = For this purpose, designated investment business does not include either or both:

(a) dealing which falls within the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc) (or agreeing to do so); and

(b) dealing in investments as principal (or agreeing to do so):

(i) by a firm whose permission to deal in investments as principal is subject to a limitation to the effect that the firm, in carrying on this regulated activity, is limited to entering into transactions in a manner which, if the firm was an unauthorised person, would come within article 16 of the Regulated Activities Order (Dealing in contractually based investments); and

(ii) in a manner which comes within that limitation;

having regard to article 4(4) of the Regulated Activities Order (Specified activities: general23).

18

Note 3 = This note applies in relation to an oil market participant to which IPRU(INV) 3 does not apply and in relation to an energy market participant to which IPRU(INV) 3 does not apply. In SUP 3:

(a) only SUP 3.1, SUP 3.2 and SUP 3.7 are applicable to such a firm; and

(b) only SUP 3.1, SUP 3.2 and SUP 3.8 are applicable to its auditor;

and, in each case, only if it has an auditor appointed under or as a result of a statutory provision other than in the Act.

17Note 3A [deleted]23

23

20Note 3B = MiFID investment firms38 include firms that are eligible to be MiFID optional exemption firms but have chosen not to exercise the article 3 exemption. However, such firms may still benefit from the audit exemption for small companies in the Companies Act legislation39.

31

17Note 3C20 = A sole trader or a partnership that is a MiFID investment firm38 to which the custody chapter22 or client money chapter applies2220 must have its annual accounts audited.

2020202222

Note 4 = The client money audit requirement in SUP 3.1.2 R(10) therefore applies to all insurance intermediaries except:8

• those which do not hold client money or other client assets in relation to insurance distribution activities34; or 8

• those which only hold up to, but not exceeding, £30,000 of client money under a statutory trust arising under CASS 5.3.8

Insurance intermediaries which, in relation to insurance distribution activities34, hold no more than that amount of client money only on a statutory trust are exempt insurance intermediaries.8

Note (5) = In row (6):7

(a)7

SUP 3.1 - SUP 3.7 applies to a managing agent in respect of its own business and in respect of the insurance business of each syndicate which it manages; and7

(b)7

SUP 3.1, SUP 3.2 and SUP 3.8 apply to the auditors of a managing agent and the auditors of the insurance business of each syndicate which the managing agent manages.1234567

23Note 6 = Where SUP 3.11 applies to a firm, and SUP 3.10 applies to the auditor of that firm, those sections apply whether or not that firm'spermission prevents it from holding client money or custody assets and whether or not it holds client money or custody assets.A collective portfolio management firm that is an internally managed AIF is required to appoint an auditor under FUND 3.3.6R (2) (Annual report of an AIF) because the AIFM is also an AIF.28

CONC App 1.1.4RRP
For the purposes of the Regulated Activities Order, the total charge for the credit which may be provided under an actual or prospective credit agreement shall be the total of the amounts determined as at the date of the making of the credit agreement of such of the charges specified in CONC App 1.1.5 R as apply in relation to the credit agreement but excluding the amount of the charges specified in CONC App 1.1.6 R.
MIPRU 2.2.2RRP
6545[deleted]7
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
PERG 8.13.4GRP
Intermediaries involved with arranging and advising on deposits may be unauthorised persons as such activities do not amount to regulated activities (other than where they involve giving basic advice on a stakeholder product (article 52A of the Regulated Activities Order (Giving basic advice on a stakeholder product))) and so do not require authorisation under section 19 of the Act. However, the combination of the exemptions in Part V together with certain of the exemptions in
MAR 5.3A.9RRP
A firm which permits direct electronic access to an MTF it operates must:(1) not permit members or participants of the MTF to provide such services unless they are: (a) MiFID investment firms3; or (b) CRD credit institutions; or(c) third country firms providing the direct electronic access in the course of exercising rights under article 46.1 of MiFIR; or(d) third country firms providing the direct electronic access in the course of exercising rights under article 47.3 of MiFIR;
SUP 10C.8.4RRP
[deleted] [Editor’s note: The text of this provision has been moved to SUP 10C.8A.2R]4
SYSC 10A.1.4RRP
This chapter does not apply to the carrying on of: (1) activities between operators and depositaries, of the same fund (when acting in that capacity); or(2) energy market activity and oil market activity which is not MiFID or equivalent third country business but which, if the firm carrying it on were not authorised, would not be a regulated activity because of article 16 of the Regulated Activities Order (Dealing in contractually based investments) or article 22 of the Regulated
CONC 3.10.3GRP
2Firms should note3 that:(1) section 49 of the CCA makes it a criminal offence to canvass borrower-lender agreements, for example cash loans, off trade premises (within the meaning of section 48 of the CCA); and(2) section 154 of the CCA makes it a criminal offence to canvass off trade premises credit broking of a kind specified by article 36A(1)(a) to (c) of the Regulated Activities Order, debt adjusting, debt counselling or providing credit information services (within the meaning
PERG 1.4.2GRP

Table: list of general guidance to be found in PERG.

Chapter:

Applicable to:

About:

PERG 2:

Authorisation and regulated activities

PERG 3A:8

Guidance on the scope of the Electronic Money Regulations8

88

a person who needs to know

PERG 4:

Regulated activities connected with mortgages

any person who needs to know whether the activities he conducts in relation to mortgages are subject to FCA regulation. This is likely to include:

  • lenders
  • administration service providers
  • mortgage brokers and advisers

the scope of relevant orders (in particular, the Regulated Activities Order) as respects activities concerned with mortgages

PERG 5:

Insurance distribution13

activities

any person who needs to know whether they carry on insurance distribution activities and are13,thereby, subject to FCA regulation. This is likely to include:

the scope of relevant orders (in particular, the Regulated Activities Order) as respects activities concerned with the sale or administration of insurance

PERG 6:

Identification of contracts of insurance

any person who needs to know whether a contract with which he is involved is a contract of insurance

the general principles and range of specific factors that the FCA regards as relevant in deciding whether any arrangement is a contract of insurance

PERG 7:

Periodical publications, news services and broadcasts: application for certification

any person who needs to know whether he will be regulated for providing advice about investments through the medium of a periodical publication, a broadcast or a news service

PERG 8:

Financial promotion and related activities

any person who needs to know

PERG 9:

Meaning of open-ended investment company

any person who needs to know whether a body corporate is an open-ended investment company as defined in section 236 of the Act (Open-ended investment companies) and is therefore a collective investment scheme.

the circumstances in which a body corporate will be an open-ended investment company

PERG 10:

Activities related to pension schemes

Any person who needs to know whether his activities in relation to pension schemes will amount to regulated activities or whether the restriction in section 21 of the Act will apply to any financial promotions he may make.1

1

  • the regulated activities that arise in connection with the establishment and operation of pension schemes and any exclusions that may be relevant
  • the circumstances in which financial promotions about pension schemes may be exempt from the restriction in section 21 of the Act1

4PERG 11:

Property investment clubs and land investment schemes

Any person who needs to know whether his activities in relation to property investment clubs and land investment schemes will amount to regulated activities or whether the restriction in section 21 of the Act will apply to any financial promotions he may make.

  • the regulated activities that may arise in connection with the establishment and operation of property investment clubs and land investment schemes and any exclusions that may be relevant
  • the extent to which the financial promotion restriction in section 21 of the Act applies

2PERG 12:

Running or advising on personal pension schemes

any person who needs to know whether his activities in relation to establishing, running, advising on or marketing personal pension schemes will amount to regulated activities

the regulated activities that arise in connection with establishing, running, advising on or marketing personal pension schemes and any exclusions that may be relevant

3PERG 13:

Guidance on the scope of the UK provisions which implemented14 MiFID 15

912125

Any UK person who needs to know whether MiFID applies to them15

914149145

the scope of the UK provisions which implemented14 MiFID15

9145

3PERG 14:

Home reversion,7 home finance and regulated sale and rent back 7activities

7

Any person who needs to know whether his activities in relation to home reversion plans,7home purchase plans or regulated sale and rent back agreements7will amount to regulated activities or whether the restriction in section 21 of the Act will apply to any financial promotions he may make.

7

6PERG 15: Guidance on the scope of the Payment Services Regulations 2009

Any person with an establishment in the UK who needs to know whether the Payment Services Directive, as transposed in UK legislation by the Payment Services Regulations 2009, applies to him.

Q46 applies specifically to persons providing payment services from an establishment outside the EEA to persons located in the UK.

the scope of the PSD Regulations 2009.11

11PERG 16: Scope of the Alternative Investment Fund Managers Directive

any person who needs to know whether a collective investment undertaking is an AIF.

the scope of the regulated activities of managing an AIF and acting as trustee or depositary of an AIF.10

10PERG 17: Consumer credit debt counselling

Any person who needs to know whether his activities in relation to debts will amount to debt counselling.

The scope of the regulated activities relating to consumer credit debt counselling.

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 person13?

8

Yes. They13 will be performing the limited scope function13.

However, the limited scope function does not apply to an EEA SMCR firm (except claims management and funeral plan 16firms) or an authorised professional firm that is a core SMCR firm.1313

171717178

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 FCA13 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 FCA13 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 SMCR firm13 which is not an EEA SMCR firm13?

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 2.15R13).

(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.

13(3) SYSC 4.4 does not apply to such a firm if it does not have a branch in the United Kingdom.

12

How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an EEA SMCR firm other than a claims management or funeral plan 16firm13?

(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). 15

(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) SYSC 4.4 does not apply to an EEA PTV firm if it does not have a branch in the United Kingdom15.

See also Question 1.15

1313

13

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

The FCA13 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

[deleted]15

13
COCON 1.1.11GRP
The FCA interprets the phrase ‘dealing with’ in COCON 1.1.10R as including having contact with customers and extending beyond ‘dealing’ as used in the phrase ‘dealing in investments’. ‘Dealing in’ is used in Schedule 2 to the Act to describe, in general terms, the regulated activities which are specified in Part II of the Regulated Activities Order.