Content Options

Content Options

View Options

CRED 3.1 Application and purpose

CRED 3.1.1 G

This chapter applies to all credit unions.

CRED 3.1.2 G

The Principles for Businesses (PRIN) sets out, in a small number of high-level requirements, the basic obligations of all regulated firms. They provide a general statement of regulatory requirements, and the FSA considers that the Principles are appropriate expressions of the standards of conduct to be expected of all financial firms including credit unions. The purpose of this chapter is to provide additional guidance on the provisions of PRIN as they relate to credit unions.

CRED 3.1.3 G

PRIN 2.1.1 R applies to all credit unions. Additional guidance on this rule is given in CRED 3.2.

CRED 3.1.4 G

In applying the Principles to credit unions, the FSA will be mindful of proportionality. In practice, the implications are likely to vary according to the size of the credit union.

CRED 3.2 The Principles

CRED 3.2.1 G

The table in PRIN 2.1.1 R sets out the full text of the Principles. These are repeated below for ease of reference.

  1. (1)

    Integrity. A firm must conduct its business with integrity.

  2. (2)

    Skill, care and diligence. A firm must conduct its business with due skill, care and diligence.

  3. (3)

    Management and control. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

  4. (4)

    Financial prudence. A firm must maintain adequate financial resources.

  5. (5)

    Market conduct. A firm must observe proper standards of market conduct.

  6. (6)

    Customers' interests. A firm must pay due regard to the interests of its customers and treat them fairly.

  7. (7)

    Communications with clients. A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.

  8. (8)

    Conflicts of interest. A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

  9. (9)

    Customers: relationships of trust. A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.

  10. (10)

    Clients' assets. A firm must arrange adequate protection for clients' assets when it is responsible for them.

  11. (11)

    Relations with regulators. A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.

CRED 3.3 Consequences of breaching the Principles

CRED 3.3.1 G

The Principles are expressed in general terms. They are designed to be sensitive to individual circumstances and to be proportionate. Their practical implications for firms' conduct, organisation and resources will depend on the size of the firm and the business it undertakes. The Principles do not require small firms to act or be treated as if they were large.

CRED 3.3.2 G

However, being ready, willing and organised to abide by the Principles is a critical factor in applications for authorisation and whether a credit union is continuing to be fit and proper. Therefore, breaching a Principle makes a credit union liable to the FSA's disciplinary sanctions. The full provisions of how the FSA will use its powers in support of its enforcement functions under the Act are set out in 1EG1. The FSA will be proportionate in the use of its powers.