SYSC 24.1 Application

Main application rules

SYSC 24.1.1 R

1This chapter applies to an SMCR firm, except to the extent that this chapter applies a narrower scope to a particular provision. However, this chapter does not apply to an EEA SMCR firm.

SYSC 24.1.2 R

1This chapter is not limited to regulated activities or other specific types of activities.

Territorial scope

SYSC 24.1.3 R

1There is no territorial limitation on the application of this chapter, subject to SYSC 24.1.4R.

SYSC 24.1.4 R

1When this chapter applies to an overseas SMCR firm, it applies in relation to the activities of the firm’s branch in the United Kingdom.

SYSC 24.2 Allocation of FCA-prescribed senior management responsibilities: Main allocation rules

Allocation of FCA-prescribed senior management responsibilities

SYSC 24.2.1 R

1A firm must allocate each of the FCA-prescribed senior management responsibilities in the table in SYSC 24.2.6R that apply to it to one or more SMF managers of the firm.

SYSC 24.2.2 G
  1. (1)

    1Subject to (2),SYSC 24 Annex 1 (Which prescribed responsibilities apply to which kind of firm) sets out which FCA-prescribed senior management responsibilities apply to which kind of SMCR firm.

  2. (2)

    In some cases, an FCA-prescribed senior management responsibility is subject to further restrictions on the types of firm and circumstances to which it applies, as set out in the table in SYSC 24.2.6R (Table: FCA-prescribed senior management responsibilities).

SYSC 24.2.3 R
  1. (1)

    1A firm may not allocate an FCA-prescribed senior management responsibility to an SMF manager who is only approved to perform the other overall responsibility function or the other local responsibility function for that firm, subject to (2).

  2. (2)

    A firm may allocate FCA-prescribed senior management responsibility (z) in the table in SYSC 24.2.6R (functions in relation to CASS) to an SMF manager who is only approved to perform the other overall responsibility function or the other local responsibility function.

SYSC 24.2.4 R

1A firm must make the allocations of FCA-prescribed senior management responsibilities in this chapter in such a way that it is clear who has which of those responsibilities.

What the FCA-prescribed senior management responsibilities are

SYSC 24.2.5 R
SYSC 24.2.6 R

1Table: FCA-prescribed senior management responsibilities

FCA-prescribed senior management responsibility

Explanation

Reference letter

(1) Responsibility for the firm’s performance of its obligations under the senior managers regime

The senior managers regime means the requirements of the regulatory system applying to SMCR firms insofar as they relate to SMF managers performing designated senior management functions, including SUP 10C (FCA senior managers regime for approved persons).

This responsibility includes:

(1) compliance with conditions and time limits on approval;

(2) compliance with the requirements about the statements of responsibilities (but not the allocation of responsibilities recorded in them);

(3) compliance by the firm with its obligations under section 60A of the Act (Vetting of candidates by authorised persons); and

(4) compliance by the firm with the requirements in SYSC 22 (Regulatory references) (and the corresponding PRA requirements)3 so far as they relate to the senior managers regime, including the giving of references to another firm about an SMF manager or former SMF manager.

(a)

(2) Responsibility for the firm’s performance of its obligations under the 3certification regime

The 3certification regime means the requirements of sections 63E and 63F of the Act (Certification of employees) and all other requirements of the regulatory system about the matters dealt with in or relating to2 those sections, including:

(1) SYSC 27 (Senior managers and certification regime: Certification Regime);

(2) the requirements in SYSC 22 (Regulatory references) so far as they relate to the 3certification regime, including the giving of references to another firm about a certification employee or former certification employee; 2

(3) the corresponding PRA requirements; and2

2(4) the requirements in SUP 16.26 (Reporting of information about Directory persons), which require a firm to report information to the FCA about its Directory persons.

(b)

(3) Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime

(1) This includes:

(a) responsibility for the firm’s policies and procedures in relation to the matters in SYSC 3.2.6R (Systems and controls in relation to compliance, financial crime and money laundering);

(b) the functions in SYSC 3.2.6HR or SYSC 6.3.8R (firm must allocate to a director or senior manager overall responsibility within the firm for the establishment and maintenance of effective anti-money laundering systems and controls);

if any of those rules apply to the firm.

(2) The firm may allocate this FCA-prescribed senior management responsibility to the MLRO but does not have to.

(3) If the firm does not allocate this FCA-prescribed senior management responsibility to the MLRO, this FCA-prescribed senior management responsibility includes responsibility for supervision of the MLRO.

(d)

(4) Responsibility for the firm’s obligations for:

(a) conduct rules training; and

(b) conduct rules reporting.

(1) The firm’s obligations for conduct rules training means its obligations under section 64B of the Act (Rules of conduct: responsibilities of authorised persons).

(2) The firm’s obligations for conduct rules reporting means its obligations under section 64C of the Act (Requirement for authorised persons to notify regulator of disciplinary action).

(b-1)

(5) Responsibility for:

(a) leading the development of; and

(b) monitoring the effective implementation of;

policies and procedures for the induction, training and professional development of all members of the firm’s governing body.

(f)

(6) Responsibility for monitoring the effective implementation of policies and procedures for the induction, training and professional development of all the firm’s:

(a) SMF managers; and

(b) key function holders;

other than members of the firm’s governing body.

(1) Key function holder has the same meaning as it does in the Glossary Part of the PRA Rulebook.

(2) Paragraph (b) of column (1) of this row (6) only applies to a firm if and to the extent that the PRA’s requirements about key function holders apply to it.

(g)

(7) Responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the internal audit function, in accordance with the internal audit requirements for SMCR firms and the PRA requirements referred to in column (2) of this row

(1) This responsibility includes responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

a person approved to perform the Head of Internal Audit function for the firm if that function applies to the firm.

(2) This responsibility only applies if and to the extent that:

(a) the internal audit requirements for SMCR firms; or

(b) any requirements of the PRA about the matters in paragraph (1) of this column of this row (7);

apply to the firm.

(3) Independence means independence to the extent it is required by the requirements referred to in paragraph (2) of this column of this row (7).

(4) The Head of Internal Audit function means the PRA’s Head of Internal Audit designated senior management function.

(j)

(8) Responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the compliance function in accordance with the compliance requirements for SMCR firms.

(1) This responsibility includes responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the person performing the compliance oversight function for the firm.

(2) This responsibility only applies if and to the extent that the compliance requirements for SMCR firms apply to the firm.

(3) “Independence” means independence to the extent it is required by the compliance requirements for SMCR firms.

(k)

(9) Responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the risk function, in accordance with the risk control requirements for SMCR firms and the PRA requirements referred to in column (2) of this row (9).

(1) This responsibility includes responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

a person approved to perform the Chief Risk function for the firm if that function applies to the firm.

(2) This responsibility only applies if and to the extent that:

(a) the risk control requirements for SMCR firms; or

(b) any requirements of the PRA about the matters in paragraph (1) of this column of this row (9);

apply to the firm.

(3) “Independence” means independence to the extent it is required by the requirements referred to in paragraph (2) of this column of this row (9).

(4) The Chief Risk function means the PRA’s Chief Risk designated senior management function.

(l)

(10) Responsibility for overseeing the development of and implementation of the firm's remuneration policies and practices in accordance with SYSC 19D (Remuneration Code)

This responsibility does not apply to a firm to which SYSC 19D does not apply.

(m)

(11) Responsibility for the firm’s compliance with CASS

(1) This responsibility only applies to a firm to which CASS applies.

(2) A firm may include in this FCA-prescribed senior management responsibility whichever of the following functions apply to the firm:

(a) CASS 1A.3.1R (certain CASS compliance functions for a CASS small firm);

(b) CASS 1A.3.1AR (certain CASS compliance functions for a CASS medium firm or a CASS large firm);

(c) CASS 11.3.1R (certain CASS compliance functions for certain CASS small debt management firms); or

(d) CASS 11.3.4R (certain CASS compliance functions for a CASS large debt management firm);

but it does not have to.

(3) If the firm does not include the functions in paragraph (2) of this column of this row (11) in this FCA-prescribed senior management responsibility, this FCA-prescribed senior management responsibility includes responsibility for supervision of the person performing the functions in paragraph (2) of this column of this row (11) that apply to the firm.

(z)

(12) Responsibility for compliance with the requirements of the regulatory system about the management responsibilities map

(1) This responsibility does not include allocating responsibilities recorded in the management responsibilities map.

(2) This responsibility does not apply to a firm to which the requirements about management responsibilities maps in SYSC 25 (Senior managers and certification regime: Management responsibilities maps and handover procedures and material) do not apply.

(c)

(13) Acting as the firm’s whistleblowers’ champion

(1) The whistleblowers’ champion’s allocated responsibilities are set out in SYSC 18.4.4R.

(2) This responsibility does not apply to a firm that is not required to have a whistleblowers’ champion.

(n)

(14) Responsibility for:

(a) providing for an effective internal audit function in accordance with one of the sections of the PRA Rulebook listed in paragraph (2) of column (2) of this row (14); and

(b) overseeing the performance of the internal audit function.

(1) Only applies to a firm:

(a) that outsources its internal audit function to an external third party service provider; and

(b) to which one of the following internal audit PRA-prescribed senior management responsibilities applies:

(i) the responsibility in rule 3.3(1) in the Insurance – Allocation of Responsibilities Part of the PRA Rulebook; or

(ii) the responsibility in rule 3.2(1) in the Large Non-Solvency II Firms – Allocation of Responsibilities Part of the PRA Rulebook.

(2) The parts of the PRA Rulebook referred to in column (1) of this row (14) are:

(a) Solvency II firms - Conditions Governing Business 5; and

(b) Non-Solvency II Firms – Governance 9.2.

(3) Terms used in column (1) of this row (14) have the same meaning as they do for the corresponding PRA-prescribed senior management responsibility described in paragraph (1) of this column of this row (14).

(j-2)

(15) Responsibility for management of the firm’s risk management processes in the UK

(aa)

(16) Responsibility for the firm’s compliance with the UK regulatory system applicable to the firm

(ff)

(17) Responsibility for the escalation of correspondence from the PRA, FCA and other regulators in respect of the firm to each of the governing body or the management body of the firm and, as appropriate, of the firm’s parent undertaking and the ultimate parent undertaking of the firm’s group

This includes taking steps to ensure that the senior management of the firm and, where applicable, the group, are made aware of any views expressed by the regulatory bodies and any steps taken by them in relation to the branch, firm or group.

(ee)

SYSC 24.3 Who prescribed responsibilities should be allocated to

Seniority and authority

SYSC 24.3.1 G

1The FCA expects that a person who has responsibility for an FCA-prescribed senior management responsibility:

  1. (1)

    will generally (in the case of the FCA-prescribed senior management responsibilities in SYSC 24.3.3G) be the most senior employee or officer responsible for managing that area (or the most senior below the chief executive); and

  2. (2)

    will:

    1. (i)

      be sufficiently senior and credible; and

    2. (ii)

      have sufficient resources and authority;

    to be able to exercise their management and oversight responsibilities effectively.

Executive or non-executive

SYSC 24.3.2 G

1The FCA expects that normally a firm will allocate the FCA-prescribed senior management responsibility with the following FCA reference letters (see column three of the table in SYSC 24.2.6R) to an SMF manager who is a non-executive director of the firm (or, in the case of a partnership, a partner without management responsibilities):

  1. (1)

    (f) (development of members of governing body);

  2. (2)

    (j) (internal audit oversight);

  3. (3)

    (k) (compliance oversight);

  4. (4)

    (l) (risk control oversight);

  5. (5)

    (m) (remuneration code oversight); and

  6. (6)

    (n) (whistleblowers’ champion).

SYSC 24.3.3 G

1The FCA expects that normally a firm will allocate the other FCA-prescribed senior management responsibilities to an SMF manager who performs executive functions for the firm.

Exceptions for small non-complex firms

SYSC 24.3.4 G

1The FCA accepts that it may not be practical for a small non-complex firm to comply with the parts of SYSC 24.3.1G(1), SYSC 24.3.2G and SYSC 24.3.3G that would otherwise apply to it.

SYSC 24.3.5 G
  1. (1)

    1A UK SMCR banking firm is likely to be small for the purposes in SYSC 24.3.4G if it is:

    1. (a)

      a small CRR firm as defined in the part of the PRA Rulebook called “Allocation of responsibilities”; or

    2. (b)

      a credit union that meets the PRA’s size requirements for small CRR firms as defined.

  2. (2)

    A firm is likely to be non-complex for these purposes if:

    1. (a)

      it conducts a limited number of simple business lines;

    2. (b)

      it does not rely on group governance arrangements; and

    3. (c)

      (in the case of a branch) it does not rely on governance arrangements for other parts of the firm.

Not assigning too many responsibilities to one person

SYSC 24.3.6 G

1When deciding how to allocate FCA-prescribed senior management responsibilities, a firm should avoid assigning such a wide range of responsibilities to a particular SMF manager that they are not able to carry out those responsibilities effectively.

Dividing and sharing management functions between different people

SYSC 24.3.7 G

1The FCA expects that a firm will not normally split an FCA-prescribed senior management responsibility between several SMF managers, with each only having responsibility for part.

SYSC 24.3.8 G

1The FCA expects that a firm will not normally allocate responsibility for an FCA-prescribed senior management responsibility to two or more SMF managers jointly.

SYSC 24.3.9 G
  1. (1)

    1Although the norm should be for a firm to have a single individual performing each FCA-prescribed senior management responsibility, there may be circumstances in which responsibilities can be divided or shared (see (2)).

  2. (2)

    A firm should only divide or share a responsibility where this is appropriate and can be justified.

  3. (3)

    For example, it would be justified to share a responsibility if that is done:

    1. (a)

      as part of a job share; or

    2. (b)

      where departing and incoming senior managers work together temporarily as part of a handover.

  4. (4)

    A firm may have co-heads of a department or business unit if this can be justified under (1) to (3).

SYSC 24.3.10 G
  1. (1)

    1The FCA expects a firm to divide and allocate responsibilities under this chapter between its SMF managers so that responsibilities are grouped together appropriately.

  2. (2)

    The firm should make the judgement:

    1. (a)

      in (1); and

    2. (b)

      about whether and how responsibilities should be shared;

    under:

    1. (c)

      SYSC 4.1.1R (robust governance arrangements);

    2. (d)

      any other applicable Handbook requirements, including:

      1. (i)

        SYSC 2 (Apportionment of Responsibilities);

      2. (ii)

        SYSC 24.3.7G to SYSC 24.3.9G; and

    3. (e)

      article 21 of the MiFID Org Regulation (General organisational requirements) or other similar relevant and directly applicable EU legislation.

  3. (3)

    The firm should take into account the way it is organised, the business it carries out and the need not to allocate too many responsibilities to one individual (SYSC 24.3.6G).

  4. (4)

    The FCA expects a firm to allocate FCA-prescribed senior management responsibilities to the SMF managers they are most closely linked to.

SYSC 24.3.11 G

1 SUP 10C.11.31G to SUP 10C.11.33G (What statements of responsibilities should contain: dividing and splitting responsibilities) contains material about:

  1. (1)

    how to prepare statements of responsibilities where a responsibility is shared or divided between several SMF managers; and

  2. (2)

    dividing and sharing responsibilities.

SYSC 24.3.12 G
  1. (1)

    1A firm may allocate more than one FCA-prescribed senior management responsibility to the same SMF manager.

  2. (2)

    This is subject to:

    1. (a)

      SYSC 24.3.6G (should not give too many responsibilities to one person); and

    2. (b)

      SYSC 24.3.10G (what responsibilities should be grouped together).

Allocation of responsibilities and territorial scope.

SYSC 24.3.13 G
  1. (1)

    1As explained in SYSC 24.1.3R, there is no territorial limitation to the application of this chapter.

  2. (2)

    This means that a firm should allocate the FCA-prescribed senior management responsibilities so that they cover activities, transactions, business areas and management functions that are located or take place wholly or partly outside, as well as ones in, the United Kingdom.

SYSC 24.3.14 G

1In the case of an overseas SMCR firm, the FCA-prescribed senior management responsibilities relate to the activities of the firm’s branch in the United Kingdom (see SYSC 24.1.4R).

SYSC 24 Annex 1 Which FCA-prescribed senior management responsibilities apply to which kind of firm

Annex 1 G

1Introduction and exclusions

1.1

G

This annex sets out which FCA-prescribed senior management responsibilities apply to which type of SMCR firm.

1.2

R

In this annex:

(1)

a ✔ means that the FCA-prescribed senior management responsibility does apply;

(2)

a × means that the FCA-prescribed senior management responsibility does not apply; and

(3)

a reference letter refers to the reference letters in column (3) of the table in SYSC 24.2.6R (Table: FCA-prescribed senior management responsibilities).

1.3

G

If an FCA-prescribed senior management responsibility is not included in the table for a particular class of firm, that FCA-prescribed senior management responsibility does not apply to any firm in that class.

Banking sector firms

2.1

R

(1)

The table in SYSC 24 Annex 1 2.3R sets out which FCA-prescribed senior management responsibilities apply to which type of SMCR banking firm.

(2)

SMCR firms in (1) are divided into the following categories for the purposes in (1):

(a)

a UK SMCR banking firm (excluding firms in (b));

(b)

a small UK SMCR banking firm; and

(c)

a third-country SMCR banking firm.

2.2

R

A small UK SMCR banking firm means a UK SMCR banking firm that is:

(1)

a small CRR firm as defined in the part of the PRA Rulebook called “Allocation of responsibilities”; or

(2)

a credit union.

2.3

R

Table: FCA-prescribed senior management responsibilities applying to banking sector firms

Brief description of responsibility

Reference letter of responsibility

UK firm

Small UK firm

Third-country firm

Responsibility for the firm’s performance of its obligations under the senior managers regime

(a)

Responsibility for the firm’s performance of its obligations under the employee certification regime

(b)

Financial crime

(d)

COCON

(b-1)

Training governing body

(f)

×

×

Training of staff performing designated senior management responsibilities

See Note (2)

(g)

×

×

Management responsibilities maps

(c)

Whistleblowers’ champion

(n)

×

Internal audit oversight

(j)

×

×

Compliance oversight

(k)

×

×

Risk oversight

(l)

×

×

Remuneration

(m)

×

×

CASS

(z)

UK risk management

(aa)

×

×

Compliance with UK regulatory system

(ff)

×

×

Escalation of correspondence

(ee)

×

×

Note (1): the categories of firm in the column headings of this table are to be interpreted in accordance with the classification of firms in SYSC 24 Annex 1 2.1R. Therefore:

(a) column three (UK firm) refers to SYSC 24 Annex 1 2.1R(2)(a);

(b) column four (Small UK firm) refers to SYSC 24 Annex 1 2.1R(2)(b); and

(c) column five (Third-country firm) refers to SYSC 24 Annex 1 2.1R(2)(c).

Note (2): Paragraph (b) of this FCA-prescribed senior management responsibility (key function holder) does not apply to any firm in this table.

Insurance sector firms

3.1

R

(1)

The table in SYSC 24 Annex 1 3.2R sets out which FCA-prescribed senior management responsibilities apply to which type of SMCR insurance firm.

(2)

SMCR firms in (1) are divided into the following categories for the purposes in (1):

(a)

a Solvency II firm (excluding firms in any other paragraph);

(b)

a firm falling within paragraph (b) of the definition of Solvency II firm (third country branch);

(c)

a small non-directive insurer;

(d)

a firm in SYSC 23 Annex 1 5.2R (firms in run-off); and

(e)

an insurance special purpose vehicle.

(3)

An insurance special purpose vehicle only falls into paragraph (2)(e). Subject to that, a firm in (2)(d) does not fall into any other paragraph.

3.2

G

References to a Solvency II firm include a large non-directive insurer.

3.3

R

Table: FCA-prescribed senior management responsibility applying to insurance sector firms

Brief description of responsibility

Reference letter of responsibility

Solvency II firm

Third country branches

Other insurance sector

ISPV

Responsibility for the firm’s performance of its obligations under the senior managers regime

(a)

Responsibility for the firm’s performance of its obligations under the employee certification regime

(b)

Financial crime

(d)

COCON

(b-1)

Training governing body

(f)

×

×

×

Training of staff performing designated senior management responsibilities

(g)

×

×

×

Management responsibilities maps

(c)

×

×

Whistleblowers’ champion

(n)

×

×

×

CASS

(z)

×

Internal audit for non-significant insurers

(j-2)

×

×

×

Compliance with UK regulatory system

(ff)

×

×

×

Escalation of correspondence

(ee)

×

×

×

Note: The categories of firm in the column headings of this table are to be interpreted in accordance with the classification of firms in SYSC 24 Annex 1 3.1R. Therefore:

(1) Solvency II firm (column three) refers to SYSC 24 Annex 1 3.1R(2)(a);

(2) Third country branches (column four) refers to SYSC 24 Annex 1 3.1R(2)(b);

(3) Other insurance sector (column five) refers to SYSC 24 Annex 1 3.1R(2)(c) and (d); and

(4) ISPV (column six) refers to SYSC 24 Annex 1 3.1R(2)(e).