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M2G 2.4 MiFID II implementation and SYSC

M2G 2.4.1 G

1The combination of senior management and systems and controls requirements for firms in a directive and regulation means that FCA rules are still required in order to implement the provisions in the directive. As such, the approach to implementation of MiFID II retains the familiar approach of the common platform but adapts the existing structure of SYSC in the following principal ways:

  1. ● updates the application of common platform requirements in SYSC 1 Annex 1 Part 3 and creates a new Table B for MiFID optional exemption firms;

  2. ● creates a new rule which has the effect, amongst other things, of extending the application of certain parts of the MiFID Org Regulation to all of a UK MiFID investment firm’s designated investment business, MiFID or otherwise (SYSC 1 Annex 1 2.8AR);

  3. ● creates a new rule which extends the application of the MiFID Org Regulation in relation to general organisational requirements, compliance, risk management, internal audit, responsibility of senior management, remuneration policies and practices and outsourcing to all of a MiFID optional exemption firm’s designated investment business, by way of rule or guidance depending on the individual provision (SYSC 1 Annex 1 3.2CR discussed further in M2G 2.5);

  4. ● uses signposting references in the application provisions to individual SYSC chapters to identify the relevant articles of the MiFID Org Regulation which supplement the rules implementing the MiFID requirements. These are also listed in the new Table C in SYSC 1 Annex 1;

  5. ● creates a new chapter (SYSC 10A) on recording telephone conversations and electronic communications to implement new obligations imposed by MiFID II, supplemented by the MiFID Org Regulation;

  6. ● creates a new section (SYSC 18.6) on the whistleblowing obligations imposed upon MiFID investment firms and includes a signposting mechanism pointing firms to similar obligations in other single market legislation;

  7. ● creates a new section (SYSC 19F) to implement a new obligation in respect of remuneration and performance management of sales staff.