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Status: You are viewing the version of the handbook as on 2011-04-29.

SYSC 19A Annex 1 Detailed provisions on voiding and recovery

Rendering contravening provisions of agreements void

1

R

1Any provision of an agreement that contravenes a prohibition on persons being remunerated in a way specified in a rule to which this annex applies (a "contravening provision") is void.

2

R

A contravening provision that, at the time a rule to which this annex applies was made, is contained in an agreement made before that time is not rendered void by 1R unless it is subsequently amended so as to contravene such a rule.

3

G

The effect of 2R, in accordance with section 139A(11) of the Act, is to prevent contravening provisions being rendered void retrospectively. Contravening provisions may however be rendered void if they are contained in an agreement made after the rule containing the prohibition is made by the FSA but before the rule comes into effect.

4

R

For the purposes of this chapter it is immaterial whether the law which (apart from this annex) governs a contravening provision is the law of the United Kingdom, or of a part of the United Kingdom.

Recovery of payments made or property transferred pursuant to a void contravening provision

5

R

In relation to any payment made or other property transferred in pursuance of a contravening provision, a firm must take reasonable steps to:

(1)

recover any such payment made or other property transferred by the firm; and

(2)

ensure that any other person ("P") recovers any such payment made or other property transferred by that person.

6

G

The rule in 5R(2) would, for example, apply in the context of a secondment. Where a group member seconds an individual to a firm and continues to be responsible for the individuals remuneration in respect of services provided to the firm, the firm would need to take reasonable steps to ensure that the group member recovers from the secondee any remuneration paid in pursuance of a contravening provision.

Replacing payments recovered or property transferred

7

R

(1)

A firm must not award, pay or provide variable remuneration to a person whose remuneration has caused the firm to breach a contravening provision (the "contravening remuneration") unless the firm has obtained a legal opinion stating that the award, payment or provision of the remuneration complies with the Remuneration Code.

(2)

This rule applies only to variable remuneration relating to a performance year to which the contravening remuneration related.

(3)

The legal opinion in (1) must be properly reasoned and be provided by an appropriately qualified independent individual.

Notification to the FSA

8

G

The FSA considers any breach of a rule to which this annex applies to be a significant breach which should be notified to the FSA in accordance with SUP 15.3.11 R (Breaches of rules and other requirements in or under the Act). Such a notification should include information on the steps which a firm or other person has taken or intends to take to recover payments or property in accordance with 5R.