In the opinion of the appropriate regulator,6 conduct of the type described in APER 4.1.3 E, APER 4.1.5 E, APER 4.1.6 E, APER 4.1.8 E, APER 4.1.10 E, APER 4.1.12 E,22APER 4.1.13 E, APER 4.1.14 E or APER 4.1.15 E2 does not comply with Statement of Principle 1.

Deliberately misleading (or attempting to mislead) by act or omission:

1. (1)

   a client; or

2. (2)

   his firm (or its auditors or an actuary appointed by his firm under SUP 4 (Actuaries)1); or

   1
3. (3)

   the FCA or the PRA;6

   6

falls within APER 4.1.2 E.

Behaviour of the type referred to in APER 4.1.3 E includes, but is not limited to, deliberately:

1. (1)

   falsifying documents;

2. (2)

   misleading a client about the risks of an investment;

3. (3)

   misleading a client about the charges or surrender penalties of investment products;

4. (4)

   misleading a client about the likely performance of investment products by providing inappropriate projections of future investment returns;

5. (5)

   misleading a client by informing him that products require only a single payment when that is not the case;

6. (6)

   mismarking the value of investments or trading positions;

7. (7)

   procuring the unjustified alteration of prices on illiquid or off-exchange contracts, or both;

8. (8)

   misleading others within the firm about the credit worthiness of a borrower;

9. (9)

   providing false or inaccurate documentation or information, including details of training, qualifications, past employment record or experience;

10. (10)

    providing false or inaccurate information to the firm (or to the firm's auditors or an actuary appointed by the firm under SUP 4 (Actuaries)1);

    1
11. (11)

    providing false or inaccurate information to the FCA or the PRA;6

    6
12. (12)

    destroying, or causing the destruction of, documents (including false documentation), or tapes or their contents, relevant to misleading (or attempting to mislead) a client, his firm, or the FCA or the PRA;6

    6
13. (13)

    failing to disclose dealings where disclosure is required by the firm's personal account dealing rules;

14. (14)

    misleading others in the firm about the nature of risks being accepted.

Deliberately recommending an investment to a customer, or carrying out a discretionary transaction for a customer where the approved person knows that he is unable to justify its suitability for that customer, falls within APER 4.1.2 E.

Deliberately failing to inform, without reasonable cause:

1. (1)

   a customer; or

2. (2)

   his firm (or its auditors or an actuary appointed by his firm under SUP 4 (Actuaries)1); or

   1
3. (3)

   the FCA or the PRA;6

   6

of the fact that their understanding of a material issue is incorrect, despite being aware of their misunderstanding, falls within APER 4.1.2 E.

Behaviour of the type referred to in APER 4.1.6 E includes, but is not limited to, deliberately:

1. (1)

   failing to disclose the existence of falsified documents;

2. (2)

   failing to rectify mismarked positions immediately.

Deliberately preparing inaccurate or inappropriate records or returns in connection with an accountable function,6 falls within APER 4.1.2 E.

Behaviour of the type referred to in APER 4.1.8 E includes, but is not limited to, deliberately:

1. (1)

   preparing performance reports for transmission to customers which are inaccurate or inappropriate (for example, by relying on past performance without appropriate warnings);

2. (2)

   preparing inaccurate training records or inaccurate details of qualifications, past employment record or experience;

3. (3)

   preparing inaccurate trading confirmations, contract notes or other records of transactions or holdings of securities for a customer, whether or not the customer is aware of these inaccuracies or has requested such records.

Deliberately misusing the assets or confidential information of a client or of his firm falls within APER 4.1.2 E.

Behaviour of the type referred to in APER 4.1.10 E includes, but is not limited to, deliberately:

1. (1)

   front running client orders;

2. (2)

   carrying out unjustified trading on client accounts to generate a benefit (whether direct or indirect) to the approved person (that is, churning);

3. (3)

   misappropriating a client's assets, including wrongly transferring to personal accounts cash or securities belonging to clients;

4. (4)

   wrongly using one client's funds to settle margin calls or to cover trading losses on another client's account or on firm accounts;

5. (5)

   using a client's funds for purposes other than those for which they were provided;

6. (6)

   retaining a client's funds wrongly;

7. (7)

   pledging the assets of a client as security or margin in circumstances where the firm is not permitted to do so.

Deliberately designing transactions so as to disguise breaches of requirements and standards of the regulatory system falls within APER 4.1.2 E.

Deliberately failing to disclose the existence of a conflict of interest in connection with dealings with a client falls within APER 4.1.2 E.

2Deliberately not paying due regard to the interests of a customer falls within APER 4.1.2 E.

2Deliberate acts, omissions or business practices that could be reasonably expected to cause consumer detriment fall within APER 4.1.2 E.

In the opinion of the appropriate regulator,5 conduct of the type described in APER 4.2.3 E, APER 4.2.5 E, APER 4.2.6 E, APER 4.2.8 E, APER 4.2.10 E, APER 4.2.11 E or APER 4.2.14 E2 does not comply with Statement of Principle 2.

5In the opinion of the FCA, conduct of the type described in APER 4.2.13 E does not comply with Statement of Principle 2.

Failing to inform:

1. (1)

   a customer; or

2. (2)

   his firm (or its auditors or an actuary appointed by his firm under SUP 4 Actuaries)1);

   1

of material information in circumstances where he was aware, or ought to have been aware, of such information, and of the fact that he should provide it, falls within APER 4.2.2 E.

Behaviour of the type referred to in APER 4.2.3 E includes, but is not limited to:

1. (1)

   failing to explain the risks of an investment to a customer;

2. (2)

   failing to disclose to a customer details of the charges or surrender penalties of investment products;

3. (3)

   mismarking trading positions;

4. (4)

   providing inaccurate or inadequate information to a firm, its auditors or an actuary appointed by his firm under SUP 4 (Actuaries)1;

   1
5. (5)

   failing to disclose dealings where disclosure is required by the firm's personal account dealingrules.

Recommending an investment to a customer, or carrying out a discretionary transaction for a customer, where he does not have reasonable grounds to believe that it is suitable for that customer, falls within APER 4.2.2 E.

Undertaking, recommending or providing advice on transactions without a reasonable understanding of the risk exposure of the transaction to a customer falls within APER 4.2.2 E.

Behaviour of the type referred to in APER 4.2.6 E includes, but is not limited to, recommending transactions in investments to a customer without a reasonable understanding of the liability (either potential or actual) of that transaction.

Undertaking transactions without a reasonable understanding of the risk exposure of the transaction to the firm falls within APER 4.2.2 E.

Behaviour of the type referred to in APER 4.2.8 E includes, but is not limited to, trading on the firm's own account without a reasonable understanding of the liability (either potential or actual) of the transaction.

Failing without good reason to disclose the existence of a conflict of interest in connection with dealings with a client falls within APER 4.2.2 E.

Failing to provide adequate control over a client's assets falls within APER 4.2.2 E.

Behaviour of the type referred to in APER 4.2.11 E includes, but is not limited to:

1. (1)

   failing to segregate a client's assets;

2. (2)

   failing to process a client's payments in a timely manner.

Continuing to perform a controlled function despite having failed to meet the standards of knowledge and skill set out in the Training and Competence sourcebook (TC) for that controlled function falls within APER 4.2.2A E.5

2Failing to pay due regard to the interests of a customer, without good reason, falls within APER 4.2.2 E.

A factor to be taken into account in determining whether or not an approved person's conduct complies with this Statement of Principle )5 is whether he, or his firm, has complied with the Code of Market Conduct (MAR 1) or relevant market codes and exchange rules.

Compliance with the code or rules described in APER 4.3.3 E will tend to show compliance with this Statement of Principle .5

In the opinion of the appropriate regulator,3 conduct of the type described in APER 4.4.4 E, APER 4.4.7 E, or APER 4.4.9 E does not comply with Statement of Principle 4 .3

Failing to report promptly in accordance with his firm's internal procedures (or if none exist direct to the regulator concerned),3 information which it would be reasonable to assume would be of material significance to theregulator concerned,3 whether in response to questions or otherwise, falls within APER 4.4.3 E. The regulator concerned is:

1. (1)

   the FCA if it would be reasonable to assume that it would be of material significance to it;3

2. (2)

   the PRA if it would be reasonable to assume that it would be of material significance to it;3

3. (3)

   both the FCA and the PRA if it would be reasonable to assume that it would be of material significance to both of them.3

In determining whether or not an approved person's conduct under APER 4.4.4 E complies with Statement of Principle 4, the following are factors which, in the opinion of the appropriate regulator,3 are to be taken into account:

1. (1)

   the likely significance to the regulator concerned (as defined in APER 4.4.4 E)3 of the information which it was reasonable for the individual to assume;

   3
2. (2)

   whether the information related to the individual himself or to his firm;

3. (3)

   whether any decision not to report the matter internally was taken after reasonable enquiry and analysis of the situation.

Where the approved person is, or is one of the approved persons who is, responsible within the firm for reporting matters to the regulator concerned (as defined in APER 4.4.4 E)3, failing promptly to inform the regulator concerned3 of information of which he is aware and which it would be reasonable to assume would be of material significance to the regulator concerned,3 whether in response to questions or otherwise, falls within APER 4.4.3 E.

In determining whether or not an approved person's conduct under APER 4.4.7 E complies with Statement of Principle 4,3 the following are factors which, in the opinion of the appropriate regulator,3 are to be taken into account:

1. (1)

   the likely significance of the information to the regulator concerned (as defined in APER 4.4.4 E)3 which it was reasonable for the approved person to assume;

2. (2)

   whether any decision not to inform the regulator concerned (as defined in APER 4.4.4 E)3 was taken after reasonable enquiry and analysis of the situation.

   3

Failing without good reason to:

1. (1)

   inform a regulator of information of which the approved person was aware in response to questions from that regulator;

2. (2)

   attend an interview or answer questions put by a regulator, despite a request or demand having been made;

3. (3)

   supply a regulator with appropriate documents or information when requested or required to do so and within the time limits attaching to that request or requirement;

falls within APER 4.4.3 E.

In the opinion of the appropriate regulator,9 conduct of the type described in APER 4.5.3 E, APER 4.5.4 E, APER 4.5.6 E or APER 4.5.8 E does not comply with Statement of Principle 5 .9

Failing to take reasonable steps to apportion responsibilities for all areas of the business under the approved person's control falls within APER 4.5.2 E (see APER 4.5.11 G).

Failing to take reasonable steps to apportion responsibilities clearly amongst those to whom responsibilities have been delegated falls within APER 4.5.2 E (see APER 4.5.11 G).

Behaviour of the type referred to in APER 4.5.4 E includes, but is not limited to:

1. (1)

   implementing confusing or uncertain reporting lines (see APER 4.5.12 G);

2. (2)

   implementing confusing or uncertain authorisation levels (see APER 4.5.13 G);

3. (3)

   implementing confusing or uncertain job descriptions and responsibilities (see APER 4.5.13 G).

In the case of an approved person who is responsible under SYSC 2.1.3 R (1) or SYSC 4.4.5 R (1)1 for dealing with the apportionment of responsibilities under SYSC 2.1.1 R or SYSC 4.4.3 R1, failing to take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among the firm'sdirectors and senior managers falls within APER 4.5.2 E.

Behaviour of the type referred to in APER 4.5.6 E includes, but is not limited to:

1. (1)

   failing to review regularly the significant responsibilities which the firm is required to apportion;9

2. (2)

   failing to act where that review shows that those significant responsibilities have not been clearly apportioned.

Failing to take reasonable steps to ensure that suitable individuals are responsible for those aspects of the business under the control of the individual performing a significant influence function falls within APER 4.5.2 E (see APER 4.5.14 G).

Behaviour of the type referred to in APER 4.5.8 E includes, but is not limited to:

1. (1)

   failing to review the competence, knowledge, skills and performance of staff to assess their suitability to fulfil their duties, despite evidence that their performance is unacceptable (see APER 4.5.14 G);

2. (2)

   giving undue weight to financial performance when considering the suitability or continuing suitability of an individual for a particular role (see APER 4.5.14 G);

3. (3)

   allowing managerial vacancies which put at risk compliance with the requirements and standards of the regulatory system to remain, without arranging suitable cover for the responsibilities (see APER 4.5.15 G).

In the opinion of the appropriate regulator,4 conduct of the type described in APER 4.6.3 E, APER 4.6.5 E, APER 4.6.6 E or APER 4.6.8 E does not comply with Statement of Principle 6.4

Failing to take reasonable steps to adequately inform himself about the affairs of the business for which he is responsible falls within APER 4.6.2 E.

Behaviour of the type referred to in APER 4.6.3 E includes, but is not limited to:

1. (1)

   permitting transactions without a sufficient understanding of the risks involved;

2. (2)

   permitting expansion of the business without reasonably assessing the potential risks of that expansion;

3. (3)

   inadequately monitoring highly profitable transactions or business practices or unusual transactions or business practices;

4. (4)

   accepting implausible or unsatisfactory explanations from subordinates without testing the veracity of those explanations;

5. (5)

   failing to obtain independent, expert opinion where appropriate; (see APER 4.6.12 G).

Delegating the authority for dealing with an issue or a part of the business to an individual or individuals (whether in-house or outside contractors) without reasonable grounds for believing that the delegate had the necessary capacity, competence, knowledge, seniority or skill to deal with the issue or to take authority for dealing with part of the business, falls within APER 4.6.2 E (see APER 4.6.13 G).

Failing to take reasonable steps to maintain an appropriate level of understanding about an issue or part of the business that he has delegated to an individual or individuals (whether in-house or outside contractors) falls within APER 4.6.2 E (see APER 4.6.14 G).

Behaviour of the type referred to in APER 4.6.6 E includes but is not limited to:

1. (1)

   disregarding an issue or part of the business once it has been delegated;

2. (2)

   failing to require adequate reports once the resolution of an issue or management of part of the business has been delegated;

3. (3)

   accepting implausible or unsatisfactory explanations from delegates without testing their veracity.

Failing to supervise and monitor adequately the individual or individuals (whether in-house or outside contractors) to whom responsibility for dealing with an issue or authority for dealing with a part of the business has been delegated falls within APER 4.6.2 E.

Behaviour of the type referred to in APER 4.6.8 E includes, but is not limited to:

1. (1)

   failing to take personal action where progress is unreasonably slow, or where implausible or unsatisfactory explanations are provided;

2. (2)

   failing to review the performance of an outside contractor in connection with the delegated issue or business.

In determining whether or not the conduct of an approved person performing a significant influence function under APER 4.6.5 E, APER 4.6.6 E and APER 4.6.8 E complies with Statement of Principle 6,4 the following are factors which, in the opinion of the appropriate regulator,4 are to be taken into account:

1. (1)

   the competence, knowledge or seniority of the delegate; and

2. (2)

   the past performance and record of the delegate.

In the opinion of the appropriate regulator,12 conduct of the type described in APER 4.7.3 E, APER 4.7.4 E, APER 4.7.5 E or12APER 4.7.7 E does not comply with Statement of Principle 7 .12

12In the opinion of the FCA, conduct of the type described in APER 4.7.9 E, APER 4.7.10 E or APER 4.7.11A E does not comply with Statement of Principle 7.

Failing to take reasonable steps to implement (either personally or through a compliance department or other departments) adequate and appropriate systems of control to comply with the relevant requirements and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7)12 falls within APER 4.7.2 E. In the case of an approved person who is responsible, under SYSC 2.1.3 R (2) or SYSC 4.4.5 R (2)2, with overseeing the firm's obligation under SYSC 3.1.1 R or SYSC 4.1.1 R2, failing to take reasonable care to oversee the establishment and maintenance of appropriate systems and controls falls within APER 4.7.2 E.

Failing to take reasonable steps to monitor (either personally or through a compliance department or other departments) compliance with the relevant requirements and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7)12 falls within APER 4.7.2 E (see APER 4.7.12 G).

Failing to take reasonable steps adequately to inform himself about the reason why significant breaches (whether suspected or actual) of the relevant requirements and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7)12 may have arisen (taking account of the systems and procedures in place) falls within APER 4.7.2 E.

Behaviour of the type referred to in APER 4.7.5 E includes, but is not limited to, failing to investigate what systems or procedures may have failed including, where appropriate, failing to obtain expert opinion on the adequacy of the systems and procedures.

Failing to take reasonable steps to ensure that procedures and systems of control are reviewed and, if appropriate, improved, following the identification of significant breaches (whether suspected or actual) of the relevant requirements and standards of the regulatory system relating to the regulated activities of the firm in question (as referred to in Statement of Principle 7),12 falls within APER 4.7.2 E (see APER 4.7.13 G and APER 4.7.14 G).12

Behaviour of the type referred to in APER 4.7.7 E includes, but is not limited to:

1. (1)

   unreasonably failing to implement recommendations for improvements in systems and procedures;

2. (2)

   unreasonably failing to implement recommendations for improvements to systems and procedures in a timely manner.

In the case of the money laundering reporting officer, failing to discharge the responsibilities imposed on him by the firm1 in accordance with SYSC 3.2.6I R or SYSC 6.3.9 R21 falls within APER 4.7.2A E.12

In the case of an approved person performing a significant influence function responsible for compliance under SYSC 3.2.8 R, SYSC 6.1.4 R or SYSC 6.1.4A R2, failing to take reasonable steps to ensure that appropriate compliance systems and procedures are in place falls within APER 4.7.2A E (see APER 4.7.13 G and12APER 4.7.14 G).

3Where the approved person is a proprietary trader under SUP 10A.9.10 R,12 failing to maintain and comply with appropriate systems and controls in relation to that activity falls within APER 4.7.2A E.12