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SYSC 19D Annex 1 Detailed provisions on voiding and recovery (SYSC 19D.3.66R and SYSC 19D.3.67R)

Rendering contravening provisions of agreements void

1

R

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

2

R

A contravening provision does not cease to be void because:

(1)

the firm concerned ceases to satisfy any of the conditions set out in SYSC 19D.3.67R(3) to (4); or

(2)

the member of dual-regulated firms Remuneration Code staff concerned starts to satisfy both of the conditions set out in SYSC 19D.3.67R(7)(a) and (b).

3

R

3 A contravening provision that, at the time a rule to which this rule applies was first made (including any previous rules in the FCA Handbook), is contained in an agreement made before that time is not rendered void by SYSC 19D Annex 1.1R, unless it is subsequently amended so as to contravene such a rule.

4

G

The effect of SYSC 19D Annex 1.3R, in accordance with sections 137H and 137I of the Act, is to prevent contravening provisions being rendered void retrospectively. However, contravening provisions may be rendered void if they are contained in an agreement made after the rule containing the prohibition is made by the FCA but before the rule comes into effect.

5

R

(1)

A pre-existing provision is not rendered void by SYSC 19D Annex 1.1R.

(2)

In this Annex, a pre-existing provision is any provision of an agreement that would (but for this rule) be rendered void by SYSC 19D Annex 1.1R that was agreed at a time when either:

(a)

the firm concerned did not satisfy any of the conditions set out in SYSC 19D.3.67R(3) to (4); or

(b)

the member of dual-regulated firms Remuneration Code staff concerned satisfied both of the conditions set out in SYSC 19D.3.67R(7)(a) and (b).

(3)

But an amendment to, or in relation to, a pre-existing provision is not to be treated as a pre-existing provision where the amendment is agreed at a time when both:

(a)

the firm concerned satisfies at least one of the conditions set out in SYSC 19D.3.67R(3) to (4); and

(b)

the member of dual-regulated firms Remuneration Code staff concerned does not satisfy both of the conditions set out in SYSC 19D.3.67R(7)(a) and (b).

6

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

7

R

In relation to any payment made or other property transferred in pursuance of a contravening provision other than a pre-existing 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.

8

R

SYSC 19D Annex 1.7R continues to apply in one or both of the following cases:

(1)

the firm concerned ceases to satisfy any of the conditions set out in SYSC 19D.3.67R(3) to (4);

(2)

the member of dual-regulated firms Remuneration Code staff concerned starts to satisfy both of the conditions set out in SYSC 19D.3.67R(7)(a) and (b).

9

G

The rule in SYSC 19D Annex 1.7(2)R 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 individual’s 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

10

R

(1)

A firm must not award, pay or provide variable remuneration to a person who has received remuneration in pursuance of a contravening provision other than a pre-existing 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 dual-regulated firms 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.

(4)

Paragraph (1) continues to apply in one or both of the following cases:

(a)

the firm concerned ceases to satisfy any of the conditions set out in SYSC 19D.3.67R(3) to (4);

(b)

the member of dual-regulated firms Remuneration Code staff concerned starts to satisfy both of the conditions set out in SYSC 19D.3.67R(7)(a) and (b).

Notification to the FCA

11

G

The FCA considers any breach of a rule to which this annex applies to be a significant breach which should be notified to the FCA in accordance with SUP 15.3.11R (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 SYSC 19D Annex 1.7R.