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Status: You are viewing the version of the handbook as on 2005-06-30.

SIFA 3.1 The parts of the Handbook that apply to IFAs

SIFA 3.1.1G

This is an Overview for IFAs to highlight which parts of the Handbook will be of most immediate practical significance to them. There will be some variation, as not all IFAs undertake identical business or hold the same permission.

Abbreviations

SIFA 3.1.2G

A list of abbreviations commonly used to refer to parts of the Handbook and other publications is set out below:

SIFA 3.1.3G

Publication / sourcebook

Publication / sourcebook

APER

Statements of Principle and Code of Practice for Approved Persons

FIT

Fit and Proper test for Approved Persons

AUTH

Authorisation manual

FS

Feedback Statement

COAF

Complaints against the FSA

GEN

General provisions

COB

Conduct of Business

IPRU (INV)

Interim Prudential sourcebook for investment businesses

COMP

Compensation

MAR

Market conduct

COND

Threshold conditions

ML

Money Laundering

CP

Consultation paper

PRIN

Principles for Businesses

DEC

Decision making manual (gives guidance on the FSA's decision making and other procedures for giving statutory notices)

PS

Policy statement

DISP

Dispute resolution: complaints

SUP

Supervision manual

DP

Discussion paper

SYSC

Senior management arrangements, Systems and Controls

ENF

Enforcement manual

TC

Training and Competence

The transition from PIA to FSA

SIFA 3.1.4G

Although many of the PIA rules with which firms were familiar have been carried forward with little or no change into the FSA Handbook, all firms must now understand and follow our rules as currently drafted. If transitional provisions have expired, compliance with the former SRO rules is no longer a defence to a breach of FSA rules. Firms should review their existing procedures to ensure that they have been fully revised to comply with the FSA Handbook.

SIFA 3.1.5G

Section 2.1.3(2) of this Overview explains how to access the Tables of Derivations and Destinations so you can check whether previous rules have been carried across to the FSA.

Contents of the Handbook

SIFA 3.1.6G

The Handbook is divided into Blocks that contain sourcebooks and manuals. Sourcebooks provide the source of the FSA's rules and guidance. Manuals contain processes to be followed by firms and by the FSA.

High Level Standards (Block 1):

SIFA 3.1.7G

Block 1 deals with the high-level requirements for all firms and so is very relevant to you.

SIFA 3.1.8G

Section

Contents

PRIN

Sets out the overarching standards we expect of firms and will generally be familiar to you. It includes the Principles.

SYSC

Outlines our management requirements. While this is important to all IFAs, management control and accountability should clearly be simpler in a small firm.

FIT

Sets out our standards applied when giving approved person status and so is relevant when a firm submits an application for an employee to become an approved person. It is also relevant for the purposes of assessing the continuing fitness and propriety of approved persons.

APER

Is of continuing relevance as it sets out the standards of behaviour that we expect of approved persons.

COND

Sets out the minimum standards that firms must satisfy to retain authorisation (the 'Threshold Conditions').

GEN

Sets out some of the underlying legal framework and GEN 1.2 is likely to be one of the most relevant parts: a firm must not refer to approval of its affairs by the FSA unless required to do so under the regulatory system. GEN 4.3 on statutory status disclosure is discussed at section 9.11 of this Overview.

Business Standards (Block 2):

SIFA 3.1.9G

Block 2 sets out most of the detailed requirements that will affect firms day-to-day.

SIFA 3.1.10G

COB will be of immediate practical relevance to you. It will also be familiar in many cases because it carries forward many of the requirements of the former regulators. COB has wide and varied application and so it is particularly important for you to read the application provisions at the beginning of each chapter.

SIFA 3.1.11G

However, for typical IFAs, here is a broad indicator of those parts that are likely to be most immediately relevant to you depending on the nature of your business:

COB Sourcebook

Chapter

Subject

Mostof the following chapters will have practical relevance:

4

Accepting customers and customer classification

5

Advising and selling

6

Product disclosure, rights to cancel and withdraw

Partsof the following chapters will have practical relevance:

2

Rules which apply when conducting designated investment business

3

Financial promotion

7

Dealing and managing

8

Reporting to customers

Relevant if holding client money/ assets:

9

Client Assets

NotRelevant in most cases:

1

General application: the various limitations of application are unlikely to be relevant to small firms doing UK business

10

Collective investment schemes

11

Trustee and depositary activities

12

Lloyd's

SIFA 3.1.12G

The rest of Block 2 contains:

  1. (1)

    IPRU: Chapters 1 and 13 of IPRU (INV) largely carry forward prudential requirements of the previous regulator, and are likely to be relevant to IFAs previously regulated by PIA. The other interim Prudential sourcebooks will not be immediately relevant in most cases. The Prudential sourcebooks explain the financial resources requirements for firms. The existing rules are interim rules that will be replaced in 2007.

  2. (2)

    Money Laundering (ML) has immediate relevance to IFAs, and builds on existing money laundering requirements.

  3. (3)

    Training & Competence (TC) has immediate relevance to IFAs.

  4. (4)

    Market Conduct (MAR) is unlikely to be relevant but MAR 1: The Code of Market Conduct provides guidance to all persons as to whether or not behaviour amounts to market abuse.

Regulatory processes (Block 3):

SIFA 3.1.13G

Block 3 sets out our regulatory processes and procedures and contains the Authorisation (AUTH), Supervision (SUP), Enforcement (ENF), and Decision making (DEC) manuals. Most of this may be of interest but will not be of immediate importance unless you are applying to vary your permission, or facing enforcement action.

SIFA 3.1.14G

Parts of SUP do have more immediate relevance to IFAs. These are Chapters 8 - 10, 11 (if the IFA firm is incorporated), 12, 15, parts of 16, and 20. They cover topics such as individual guidance, approved persons, notifications, financial reporting, and fee rules.

Redress (Block 4):

SIFA 3.1.15G

Block 4 contains the Dispute resolution (DISP), Compensation (COMP) and Complaints against the FSA (COAF) sourcebooks. Chapter 1 of DISP sets out requirements for a firm's complaints procedures.

Specialist Sourcebooks (Block 5) & Special Guides (Block 6):

SIFA 3.1.16G

Block 5 contains specialist sourcebooks, which show how the Handbook applies to certain sectors, such as collective investment schemes and credit unions. These are unlikely to be relevant to most IFAs, but the sourcebook for Professional firms (PROF) may be of interest.

SIFA 3.1.17G

Block 6 contains special guides. Special guides contain guidance aimed at helping a class or type of firm to meet their regulatory responsibilities.

Fees

SIFA 3.1.18G

Various parts of SUP, DISP and COMP will be relevant to the fees payable by IFAs. However, you will receive the necessary information about this with your invoices. Chapter 18 of this Overview includes more information on fees.

Interpreting the Handbook

SIFA 3.1.19G

Every provision in the Handbook must be interpreted with its purpose in mind (GEN 2.2). The purpose of any provision in the Handbook is to be gathered first and foremost from the text of the provision in question and its context amongst other relevant provisions.

Rules and guidance

SIFA 3.1.20G

We have prepared a Reader's Guide to help firms navigate the Handbook and it can be accessed via the CD-ROM (by clicking on 'Handbook') and on our website (by clicking on 'FSA Handbook' and scrolling down the page).

SIFA 3.1.21G

As explained more fully in the Reader's Guide the provisions in the Handbook do not all have the same status. The difference between Rules and Guidance is important. The Rules in the Handbook (marked with an 'R') create binding obligations on firms. If a firm breaches such a rule, it may be subject to enforcement action and in some circumstances to an action for damages.

SIFA 3.1.22G

Guidance in the Handbook (marked with a 'G') is general Guidance given to more than one firm or individual. Guidance is not binding on a firm. So long as a firm follows Guidance that indicates possible means of compliance with a rule or recommends a course of action or arrangement, we intend to proceed on the basis that the firm has complied with the relevant Handbook rule. A small firm may find that Guidance is a helpful indication of how compliance with a Rule may be achieved without devising its own approach to that Rule.

SIFA 3.1.23G

There are also Evidential Provisions. These are rules but they are not binding in their own right - they are marked with a status letter 'E' in the margin or header. You can find a more detailed explanation in the Reader's Guide.