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APER 4.1 Statement of Principle 1

APER 4.1.1 G

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APER 4.1.1A G

5The Statement of Principle 1 (see APER 2.1A.3R3) is in the following terms: "An approved person must act with integrity in carrying out his accountable functions."

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APER 4.1.2 G

4In the opinion of the FCA3, conduct of the type described in APER 4.1.3G, APER 4.1.5G, APER 4.1.6G, APER 4.1.8G, APER 4.1.10G, APER 4.1.12G, APER 4.1.13G, APER 4.1.14G or APER 4.1.15G3 does not comply with Statement of Principle 1.

APER 4.1.3 G

3Deliberately 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;

falls within APER 4.1.2G.

APER 4.1.4 G

3Behaviour of the type referred to in APER 4.1.3G 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);

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  11. (11)

    providing false or inaccurate information to the FCA or the PRA;5

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  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 PRA.

  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.

APER 4.1.5 G

3Deliberately recommending an investment to a customer, or carrying out a discretionary transaction for a customer where the approved person knows that they are unable to justify its suitability for that customer, falls within APER 4.1.2G.

APER 4.1.6 G

3Deliberately 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

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  3. (3)

    the FCA or the PRA;5

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

APER 4.1.7 G

3Behaviour of the type referred to in APER 4.1.6G 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.

APER 4.1.8 G

3Deliberately preparing inaccurate or inappropriate records or returns in connection with an accountable function, falls within APER 4.1.2 G.4

APER 4.1.9 G

3Behaviour of the type referred to in APER 4.1.8G 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.

APER 4.1.10 G

3Deliberately misusing the assets or confidential information of a client or of their firm falls within APER 4.1.2 G.

APER 4.1.11 G

3Behaviour of the type referred to in APER 4.1.10 G 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.

APER 4.1.12 G

3Deliberately designing transactions to disguise breaches of requirements and standards of the regulatory system falls within APER 4.1.2 G.

APER 4.1.13 G

3Deliberately failing to disclose the existence of a conflict of interest in connection with dealings with a client falls within APER 4.1.2 G.

APER 4.1.14 G

3 2Deliberately not paying due regard to the interests of a customer falls within APER 4.1.2 G.

APER 4.1.15 G

3 2Deliberate acts, omissions or business practices that could be reasonably expected to cause consumer detriment fall within APER 4.1.2 G.

APER 4.2 Statement of Principle 2

APER 4.2.1 G

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APER 4.2.1A G

4The Statement of Principle 2 (see APER 2.1A.3 R3) is in the following terms: "An approved person must act with due skill, care and diligence in carrying out his accountable functions."

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APER 4.2.2 G

3In the opinion of the FCA, conduct of the type described in APER 4.2.3G, APER 4.2.5G, APER 4.2.6G, APER 4.2.8G, APER 4.2.10G, APER 4.2.11G or APER 4.2.14G does not comply with Statement of Principle 2.

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APER 4.2.2A G

3 4In the opinion of the FCA, conduct of the type described in described in APER 4.2.13 G does not comply with Statement of Principle 2.

APER 4.2.3 G

3Failing 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);

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

APER 4.2.4 G

3Behaviour of the type referred to in APER 4.2.3 G 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.

APER 4.2.5 G

3Recommending an investment to a customer, or carrying out a discretionary transaction for a customer, where the approved person does not have reasonable grounds to believe that it is suitable for that customer, falls within APER 4.2.2 G.

APER 4.2.6 G

3Undertaking, 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 G.

APER 4.2.7 G

3 Behaviour of the type referred to in APER 4.2.6 G 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.

APER 4.2.8 G

3Undertaking transactions without a reasonable understanding of the risk exposure of the transaction to the firm falls within APER 4.2.2 G.

APER 4.2.9 G

3 Behaviour of the type referred to in APER 4.2.8 G 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.

APER 4.2.10 G

3Failing 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 G.

APER 4.2.11 G

3Failing to provide adequate control over a client's assets falls within APER 4.2.2 G.

APER 4.2.12 G

3 Behaviour of the type referred to in APER 4.2.11 G 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.

APER 4.2.13 G

3Continuing 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 4.2.2AG.

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APER 4.2.14 G

3 2Failing to pay due regard to the interests of a customer, without good reason, falls within APER 4.2.2 G.

APER 4.3 Statement of Principle 3

APER 4.3.1 G

The Statement of Principle 3 (see APER 2.1A.3 R2) is in the following terms: "An approved person must observe proper standards of market conduct in carrying out his accountable functions."4

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APER 4.3.2 G

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APER 4.3.3 G

2A factor to be taken into account in determining whether or not an approved person's conduct complies with this Statement of Principle )4 is whether he, or his firm, has complied with the Market Abuse Regulation3 or relevant market codes and exchange rules.

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APER 4.3.4 G

2In the opinion of the FCA, compliance with the code or rules described in APER 4.3.3G will tend to show compliance with this Statement of Principle.

APER 4.4 Statement of Principle 4

APER 4.4.1 G

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APER 4.4.1A G

2The Statement of Principle 4 (see APER 2.1A.3 R1) is in the following terms: "An approved person must deal with the FCA, the PRA and other regulators in an open and cooperative way and must disclose appropriately any information of which the FCA or the PRA would reasonably expect notice."

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APER 4.4.2 G

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APER 4.4.2A G

2For the purpose of this Statement of Principle, regulators in addition to the FCA and the PRA are those which have recognised jurisdiction in relation to regulated activities and a power to call for information from the approved person in connection with their 1accountable function or (in the case of an individual performing an accountable higher management function)1 in connection with the business for which they are1 responsible. This may include an exchange or an overseas regulator.

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APER 4.4.3 G

1In the opinion of the FCA, conduct of the type described in APER 4.4.4G, APER 4.4.7G or APER 4.4.9G does not comply with Statement of Principle 4.

APER 4.4.4 G

1Failing to report promptly in accordance with his firm's internal procedures (or if none exist direct to the regulator concerned), information which it would be reasonable to assume would be of material significance to the regulator concerned), whether in response to questions or otherwise, falls within APER 4.4.3 G. The regulator concerned is:

  1. (1)

    the FCA if it would be reasonable to assume that it would be of material significance to it;2

  2. (2)

    the PRA if it would be reasonable to assume that it would be of material significance to it;2

  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.2

APER 4.4.5 G

There is no duty on an approved person to report such information directly to the regulator concerned2 unless he is one of the approved persons responsible within the firm for reporting matters to the regulator concerned.2However, if an approved person takes steps to influence the decision so as not to report to the regulator concerned or acts in a way that is intended to obstruct the reporting of the information to the regulator concerned, then the FCA1 will, in respect of that information, view that individual1 as being one of those within the firm who has taken on responsibility for deciding whether to report that matter to the regulator concerned.

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APER 4.4.6 G

1In determining whether or not an approved person's conduct under APER 4.4.4 G complies with Statement of Principle 4, the following are factors which, in the opinion of the FCA, are to be taken into account:

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  1. (1)

    the likely significance to the regulator concerned (as defined in APER 4.4.4 G1) of the information which it was reasonable for the individual to assume;

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  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.

APER 4.4.7 G

1Where 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 4.4.4G), failing promptly to inform the regulator concerned of information of which they are aware and which it would be reasonable to assume would be of material significance to the regulator concerned, whether in response to questions or otherwise, falls within APER 4.4.3G.

APER 4.4.8 G

1In determining whether or not an approved person's conduct under APER 4.4.7G complies with Statement of Principle 4, the following are factors which, in the opinion of the FCA, are to be taken into account:

  1. (1)

    the likely significance of the information to the regulator concerned (as defined in APER 4.4.4G) 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 4.4.4G) was taken after reasonable enquiry and analysis of the situation.

APER 4.4.9 G

1Failing 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 G.

APER 4.5 Statement of Principle 5

APER 4.5.1 G

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APER 4.5.1A G

The Statement of Principle 5 (see APER 2.1A.3R3) is in the following terms: "An approved person performing an accountable higher management function3 must take reasonable steps to ensure that the business of the firm for which they are3 responsible in their3accountable function is organised so that it can be controlled effectively." 3

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APER 4.5.2 G

3In the opinion of the FCA, conduct of the type described in APER 4.5.3G, APER 4.5.4G, APER 4.5.6G or APER 4.5.8G does not comply with Statement of Principle 5.

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APER 4.5.3 G

3Failing to take reasonable steps to apportion responsibilities for all areas of the business under the approved person’s control falls within APER 4.5.2G (see APER 4.5.11 G).

APER 4.5.4 G

3Failing to take reasonable steps to apportion responsibilities clearly among5 those to whom responsibilities have been delegated falls within APER 4.5.2G (see APER 4.5.11 G).

APER 4.5.5 G

3Behaviour of the type referred to in APER 4.5.4 G 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).

APER 4.5.6 G

3In the case of an approved person who is responsible under SYSC 2.1.3 R (1) or SYSC 4.4.5 R (1) for dealing with the appointment of responsibilities under SYSC 2.1.1 R or SYSC 4.4.3 R, 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 4.5.2G.

APER 4.5.7 G

3Behaviour of the type referred to in APER 4.5.6G4 includes, but is not limited to:

  1. (1)

    failing to review regularly the significant responsibilities which the firm is required to apportion;6

  2. (2)

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

APER 4.5.8 G

3Failing to take reasonable steps to ensure that suitable individuals are responsible for those aspects of the business under the control of the individual performing an accountable higher management function falls within APER 4.5.2G (see APER 4.5.14 G).

APER 4.5.9 G

3Behaviour of the type referred to in APER 4.5.8 G4 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).

APER 4.5.10 G

Strategy and plans will often dictate the risk which the business is prepared to take on and high level controls will dictate how the business is to be run. If the strategy of the business is to enter high-risk areas, then the degree of control and strength of monitoring reasonably required within the business will be high. In organising the business for which they are 3responsible, the approved person performing an accountable higher management function3should bear this in mind.

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Apportionment of responsibilities

APER 4.5.11 G

To3 comply with the obligations of Statement of Principle 5 (having regard to APER 4.5.3G and APER 4.5.4G3), the approved person performing an accountable higher management function3 may find it helpful to review whether each area of the business for which they are3 responsible has been clearly assigned to a particular individual or individuals.

Reporting lines

APER 4.5.12 G

The organisation of the business and the responsibilities of those within it should be clearly defined (see APER 4.5.5 G (1)3). Reporting lines should be clear to staff. Where staff have dual reporting lines there is a greater need to ensure that the responsibility and accountability of each individual line manager is clearly set out and understood.

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Authorisation levels and job descriptions

APER 4.5.13 G

Where members of staff have particular levels of authorisation (see APER 4.5.5G(2) and APER 4.5.5G(3)3), these should be clearly set out and communicated to staff. It may be appropriate for each member of staff to have a job description of which he is aware.

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Suitability of individuals

APER 4.5.13A G

2The appropriate approved person performing an accountable higher management function3 should take reasonable steps to satisfy themselves3, on reasonable grounds, that each area of the business for which they are3 responsible has in place appropriate policies and procedures for reviewing the competence, knowledge, skills and performance of each individual member of staff.

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APER 4.5.14 G

If an individual's performance is unsatisfactory, then the appropriate approved person (if any) performing an accountable higher management function3 should review carefully whether to allow that individual to continue in position. In particular, if they are3 aware of concerns relating to the compliance with requirements and standards of the regulatory system (or internal controls) of the individual concerned, or of staff reporting to that individual, the approved person performing an accountable higher management function3 should take care not to give undue weight to the financial performance of the individual or group concerned when considering whether any action should be taken.

An adequate investigation of the concerns should be undertaken (including, where appropriate, adherence to internal controls). The approved person performing an accountable higher management function3 should satisfy themselves3, on reasonable grounds, that the investigation is appropriate, the results are accurate and that the concerns do not pose an unacceptable risk to compliance with the requirements and standards of the regulatory system (see in particular Statement of Principle 6, APER 4.5.8G, APER 4.5.9G(1) and APER 4.5.9G(2)3).

Temporary vacancies

APER 4.5.15 G

In organising the business, the approved person performing an accountable higher management function3 should pay attention to any temporary vacancies which exist (see APER 4.5.9G(3)3). They3 should take reasonable steps to ensure that suitable cover for responsibilities is arranged. This could include taking on temporary staff or external consultants. The approved person performing an accountable higher management function3 should assess the risk that is posed to compliance with the requirements and standards of the regulatory system as a result of the vacancy, and the higher the risk the greater the steps they3 should take to fill the vacancy. It may be appropriate to limit or suspend the activity if appropriate cover for responsibilities cannot be arranged. To the extent that those vacancies are in respect of one of the customer functions, they may only be filled by persons approved for that function.

APER 4.6 Statement of Principle 6

APER 4.6.1 G

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APER 4.6.1A G

The Statement of Principle 6 (see APER 2.1A.3R1) is in the following terms: "An approved person performing an accountable higher management function1 must exercise due skill, care and diligence in managing the business of the firm for which they are1 responsible in their2accountable function."1

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APER 4.6.2 G

1In the opinion of the FCA, conduct of the type described in APER 4.6.3G, APER 4.6.5G, APER 4.6.6G or APER 4.6.8G does not comply with Statement of Principle 6.

APER 4.6.3 G

1Failing to take reasonable steps to adequately inform themselves about the affairs of the business for which they are responsible falls within APER 4.6.2G.

APER 4.6.4 G

1Behaviour of the type referred to in APER 4.6.3 G 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).

APER 4.6.5 G

1Delegating 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 4.6.2G (see APER 4.6.13G).

APER 4.6.6 G

1Failing to take reasonable step to maintain an appropriate level of understanding about an issue or part of the business that they have delegated to an individual or individuals (whether in-house or outside contractors) falls within APER 4.6.2G (see APER 4.6.14G).

APER 4.6.7 G

1Behaviour of the type referred to in APER 4.6.6 G 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.

APER 4.6.8 G

1Failing 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 4.6.2G.

APER 4.6.9 G

1Behaviour of the type referred to in APER 4.6.8 G 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.

APER 4.6.10 G

1In determining whether or not the conduct of an approved person performing an accountable higher management function under APER 4.6.5G, APER 4.6.6G and APER 4.6.8G complies with Statement of Principle 6, the following are factors which, in the opinion of the FCA, 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.

APER 4.6.11 G

An approved person performing an accountable higher management function1 will not always manage the business on a day-to-day basis1. The extent to which the approved person1 does so will depend on a number of factors, including the nature, scale and complexity of the business and their1 position within it. The larger and more complex the business, the greater the need for clear and effective delegation and reporting lines. The FCA1 will look to the approved person performing an accountable higher management function1 to take reasonable steps to ensure that systems are in place which result in issues being addressed at the appropriate level. When issues come to their1 attention, they1 should deal with them in an appropriate way.

Knowledge about the business

APER 4.6.12 G
  1. (1)

    It is important for the approved person performing an accountable higher management function1 to understand the business for which they are1 responsible (APER 4.6.4G1). An approved person performing an accountable higher management function1 is unlikely to be an expert in all aspects of a complex financial services business. However, they1 should understand and inform themselves1 about the business sufficiently to understand the risks of its trading, credit or other business activities.

  2. (2)

    It is important for an approved person performing an accountable higher management function1 to understand the risks of expanding the business into new areas and, before approving the expansion, they1 should investigate and satisfy themselves1, on reasonable grounds, about the risks, if any, to the business.

  3. (3)

    Where unusually profitable business is undertaken, or where the profits are particularly volatile or the business involves funding requirements on the firm beyond those reasonably anticipated, he should require explanations from those who report to him. Where those explanations are implausible or unsatisfactory, he should take steps to test the veracity of those explanations.

  4. (4)

    Where the approved person performing an accountable higher management function1 is not an expert in a business area, they1 should consider whether they1 or those with whom they work1 have the necessary expertise to provide1 an adequate explanation of issues within that business area. If not he should seek an independent opinion from elsewhere within or outside the firm.

Delegation

APER 4.6.13 G
  1. (1)

    An approved person performing a an accountable higher management function1may delegate the investigation, resolution or management of an issue or authority for dealing with a part of the business to individuals who report to them 1or to others.

  2. (2)

    The approved person performing an accountable higher management function1should have reasonable grounds for believing that the delegate has the competence, knowledge, skill and time to deal with the issue. For instance, if the compliance department only has sufficient resources to deal with day-to-day issues, it would be unreasonable to delegate to it the resolution of a complex or unusual issue without ensuring it had sufficient capacity to deal with the matter adequately.

  3. (3)

    If an issue raises questions of law or interpretation, the approved person performing an accountable higher management function1may need to take legal advice. If appropriate legal expertise is not available in-house, they 1may need to consider appointing an appropriate external adviser.

  4. (4)

    The FCA recognises1 that the approved person performing an accountable higher management function1 will have to exercise their1 own judgment in deciding how issues are dealt with, and that in some cases that judgment will, with the benefit of hindsight, be shown to have been wrong. The approved person1 will not be in breach of Statement of Principle 6 unless they fail1 to exercise due and reasonable consideration before they delegate1 the resolution of an issue or authority for dealing with a part of the business and fails to reach a reasonable conclusion. If the approved person1 is in doubt about how to deal with an issue or the seriousness of a particular compliance problem, then, although they1 cannot delegate to the FCA1 the responsibility for dealing with the problem or issue, they1 can speak to the FCA1 to discuss their1 approach (see APER 4.6.5G1).

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Continuing responsibilities where an issue has been delegated

APER 4.6.14 G

Although an approved person performing an accountable higher management function1 may delegate the resolution of an issue, or authority for dealing with a part of the business, they1 cannot delegate responsibility for it. It is their1 responsibility to ensure that they receive1 reports on progress and questions those reports where appropriate. For instance, if progress appears to be slow or if the issue is not being resolved satisfactorily, then the approved person performing an accountable higher management function1 may need to challenge the explanations they receive1 and take action1 to resolve the problem. This may include increasing the resource applied to it, reassigning the resolution internally or obtaining external advice or assistance. Where an issue raises significant concerns, an approved person performing an accountable higher management function1 should act clearly and decisively. If appropriate, this may be by suspending members of staff or relieving them of all or part of their responsibilities (see APER 4.6.5G1).

APER 4.7 Statement of Principle 7

APER 4.7.1 G

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APER 4.7.1A G

The Statement of Principle 7 (see APER 2.1A.3R5) is in the following terms: "An approved person performing an accountable higher management function5 must take reasonable steps to ensure that the business of the firm for which they are5 responsible in their5accountable function complies with the relevant requirements and standards of the regulatory system."5

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APER 4.7.2 G

6In the opinion of the FCA5, conduct of the type described in APER 4.7.3G, APER 4.7.4G, APER 4.7.5G, APER 4.7.7G, APER 4.7.9G, APER 4.7.10G or APER 4.7.11AG5 does not comply with Statement of Principle 7.

APER 4.7.2A E

[deleted]5

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APER 4.7.3 G

5Failing 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) falls within APER 4.7.2G. In the case of an approved person who is responsible, under SYSC 2.1.3R(2) or SYSC 4.4.5R(2), with overseeing the firm's obligation under SYSC 3.1.1R or SYSC 4.1.1R, failing to take reasonable care to oversee the establishment and maintenance of appropriate systems and controls falls within APER 4.7.2G.

APER 4.7.4 G

5Failing to take reasonable steps to monitor (either personally or through a compliance department or other departments) compliance with the relevant requirements7 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) falls within APER 4.7.2G.

APER 4.7.5 G

5Failing to take reasonable steps adequately to inform themselves about the reason why significant breaches (whether suspended 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) may have arisen (taking account of the systems and procedures in place) falls within APER 4.7.2G.

APER 4.7.6 G

5Behaviour of the type referred to in APER 4.7.5G 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.

APER 4.7.7 G

5Failing 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 suspended 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) falls within APER 4.7.2G (see APER 4.7.13G and APER 4.7.14G).

APER 4.7.8 G

5Behaviour of the type referred to in APER 4.7.7 G 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.

APER 4.7.9 G

5In the case of the money laundering reporting officer, failing to discharge the responsibilities imposed on them5 by the firm in accordance with SYSC 3.2.6IR or SYSC 6.3.9R falls within APER 4.7.2G.

APER 4.7.10 G

5In the case of an approved person performing an accountable higher management function responsible for compliance under SYSC 3.2.8R, SYSC 6.1.4R or SYSC 6.1.4AR, failing to take reasonable steps to ensure that appropriate compliance systems and procedures are in place falls within APER 4.7.2G.

APER 4.7.11 G

The FCA5 expects an approved person performing an accountable higher management function5 to take reasonable steps both to ensure their5firm's compliance with the relevant requirements and standards of the regulatory system and to ensure that all staff are aware of the need for compliance.

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APER 4.7.11A G

5Where the approved person is a proprietary trader under SUP 10A.9.10R, failing to maintain and comply with appropriate systems and controls in relation to that activity falls within APER 4.7.2G.

Systems of control

APER 4.7.12 G

An approved person performing an accountable higher management function5 need not themselves5 put in place the systems of control in their5 business (APER 4.7.4G5). Whether he does this depends on his role and responsibilities. He should, however, take reasonable steps to ensure that the business for which he is responsible has operating procedures and systems which include well-defined steps for complying with the detail of relevant requirements and standards of the regulatory system and for ensuring that the business is run prudently. The nature and extent of the systems of control that are required will depend upon the relevant requirements and standards of the regulatory system, and the nature, scale and complexity of the business.4

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Possible breaches of regulatory requirements

APER 4.7.13 G

Where the performing an accountable higher management function5 becomes aware of actual or suspected problems that involve possible breaches of relevant requirements and standards of the regulatory system falling within their5 area of responsibility, then they5 should take reasonable steps to ensure that they are dealt with in a timely and appropriate manner (APER 4.7.7G5). This may involve an adequate investigation to find out what systems or procedures may have failed and why. He may need to obtain expert opinion on the adequacy and efficacy of the systems and procedures.

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Review and improvement of systems and procedures

APER 4.7.14 G

Where independent reviews of systems and procedures have been undertaken and result in recommendations for improvement, the approved person performing an accountable higher management function5 should ensure that, unless there are good reasons not to, any reasonable recommendations are implemented in a timely manner (APER 4.7.10G5). What is reasonable will depend on the nature of the inadequacy and the cost of the improvement. It will be reasonable for the approved person performing an accountable higher management function5 to carry out a cost benefit analysis when assessing whether the recommendations are reasonable.