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Status: You are viewing the version of the handbook as on 2019-10-23.

SYSC 26.4 Exclusions

Exclusions where other requirements apply

SYSC 26.4.1R

1SYSC 26.3 (Main rules) does not require a firm to ensure that SMF managers have local or overall responsibility for any activity, business area or management function that is included in an FCA-prescribed senior management responsibility that applies to the firm.

SYSC 26.4.2R

1SYSC 26.3 (Main rules) does not require a firm to ensure that SMF managers have local or overall responsibility for any activity, business area or management function that is:

  1. (1)

    included in a PRA-prescribed senior management responsibility that applies to the firm; or

  2. (2)

    managed (as part of the PRA-designated senior management function concerned) by any of the firm’s SMF managers approved to perform any of the following PRA-designated senior management functions for the firm:

    1. (a)

      the Chief Finance function;

    2. (b)

      the Chief Risk function;

    3. (c)

      the Head of Internal Audit function;

    4. (d)

      the Head of Key Business Area function;

    5. (e)

      the Chief Operations function; or

    6. (f)

      the Group Entity Senior Manager function or the Group Entity Senior Insurance Manager function.

Exclusion of the governing body and non-executive directors

SYSC 26.4.3R

1SYSC 26.3 (Main rules) does not require a firm to allocate overall or local responsibility for the running of the firm’s governing body.

SYSC 26.4.4G

1SYSC 26.4.3R means that a person does not have overall or local responsibility for a function under this chapter just by being a member of a firm’s governing body or equivalent.

SYSC 26.4.5G
  1. (1)

    1A person who just provides oversight of a function does not have overall or local responsibility for that function under this chapter.

  2. (2)

    Paragraph (1) and SYSC 26.4.4G mean that a non-executive director acting as such does not have overall or local responsibility for a function under SYSC 26.3 or perform the other overall responsibility function or the other local responsibility function.

  3. (3)

    Paragraph (1) and SYSC 26.4.4G mean that a non-executive director:

    1. (a)

      providing oversight of a function; or

    2. (b)

      being responsible for the independence of a function;

    does not have overall or local responsibility for that function under this chapter or perform the other overall responsibility function or the other local responsibility function.

Exclusion where the 12-week rule applies

SYSC 26.4.6R
  1. (1)

    1This rule applies where:

    1. (a)

      a firm appoints someone to perform a function in order to provide cover as described in SUP 10C.3.13R(1) (The 12-week rule) or the PRA equivalent; and

    2. (b)

      the firm has allocated any responsibilities (the “Responsibilities”) under SYSC 26.3 (Main rules) to the SMF manager (the absent manager) who is absent as described in SUP 10C.3.13R(2) or the PRA equivalent.

  2. (2)

    While the disapplication of the designated senior management function provided for in SUP 10C.3.13R or the PRA equivalent is still in force the firm may allocate the Responsibilities to an employee who is not an SMF manager.

  3. (3)

    For the purposes of this rule, the PRA equivalent of:

    1. (a)

      SUP 10C.3.13R is the following parts of the PRA Rulebook:

      1. (i)

        rule 2.3 in “Senior Management Functions”;

      2. (ii)

        rule 2.4 in “Insurance - Senior Management Functions”; and

      3. (iii)

        rule 2.4 in “Large Non-Solvency II Firms – Senior Management Functions”.

    2. (b)

      SUP 10C.3.13R(1) and (2) is the following parts of the PRA Rulebook:

      1. (i)

        rules 2.3(1) and (2) in “Senior Management Functions”;

      2. (ii)

        rules 2.4(1) and (2) in “Insurance - Senior Management Functions”; and

      3. (iii)

        rules 2.4(1) and (2) in “Large Non-Solvency II Firms – Senior Management Functions”.

SYSC 26.4.7G

1A firm need not allocate the Responsibilities referred to in SYSC 26.4.6R(1)(b) to the person who is providing cover for the absent SMF manager.

SYSC 26.4.8G

1SYSC 26.4.6R and SUP 10C.3.13R apply to a person performing the other overall responsibility function or the other local responsibility function as well as to a person performing one of the other designated senior management functions.

Exclusion of the legal function

SYSC 26.4.9R
  1. (1)

    2SYSC 26.3 (Main rules) applies to the SMCR legal function as modified by (2).

  2. (2)

    A firm may allocate local or overall responsibility for the SMCR legal function to someone who is not an SMF manager.

SYSC 26.4.10R
  1. (1)

    2The SMCR legal function of a firm means an activity of the firm that consists of one or more of the following:

    1. (a)

      the provision of legal advice or assistance to the firm or any member of its group in connection with the application of the law or with any form of resolution of legal disputes;

    2. (b)

      the provision of representation for the firm or any member of its group in connection with any matter concerning the application of the law or any form of resolution of legal disputes;

    3. (c)

      a reserved legal activity as defined in section 12 of the Legal Services Act 2007 (Meaning of “reserved legal activity” and “legal activity”) when carried out for the firm or any member of its group; or

    4. (d)

      any of the activities set out in section 32(1) of the Solicitors (Scotland) Act 1980 (Offence for unqualified persons to prepare certain documents) when carried out for the firm or any member of its group.

  2. (2)

    For the purposes of the definition of the SMCR legal function, legal dispute includes a dispute as to any matter of fact the resolution of which is relevant to determining the nature of any person's legal rights or liabilities.

SYSC 26.4.11R
  1. (1)

    2If a firm allocates the functions in (2) to the same person as the one to whom it allocates responsibility for activities in SYSC 26.4.10R, the functions in (2) also form part of the SMCR legal function. As a result the exclusion in SYSC 26.4.9R(2) also applies.

  2. (2)

    A function is covered by this rule to the extent that it directly supports the activities in SYSC 26.4.10R.

SYSC 26.4.12G
  1. (1)

    2The purpose of SYSC 26.4.11R is to treat support services for the legal function as part of the legal function where responsibility for the support services is allocated to the person with overall responsibility for the legal function.

  2. (2)

    A support service is one that is directly related, but subordinate, to the legal services described in SYSC 26.4.10R. It should be necessary for the successful or better functioning of the main legal services and be an integral part of them.

  3. (3)

    One example of a support service is human resources services for the legal staff. This includes recruitment, training, continuing professional development, appraisal and discipline.

  4. (4)

    The effect of SYSC 26.4.11R is that if the person with overall responsibility for the legal function also has overall responsibility for human resources services for the staff of the legal function, those services are covered by the exclusion in SYSC 26.4.9R(2). However, they are not excluded if those services are provided by a separate human resources department.

SYSC 26.4.13G
  1. (1)

    2A firm may divide its legal function into different parts and appoint a different person to have overall responsibility for each.

  2. (2)

    If it does, SYSC 26.4.9R and SYSC 26.4.11R still apply.

  3. (3)

    So for example, if the firm has two legal departments, one headed by A (for which A has overall responsibility) and one headed by B (for which B has overall responsibility):

    1. (a)

      neither A nor B need be an SMF manager; and

    2. (b)

      the firm may allocate overall responsibility for the human resources function for A’s department to A and overall responsibility for the human resources function for B’s department to B even though neither A nor B is an SMF manager.

SYSC 26.4.14G

2SUP 10C.7.1R and SUP 10C.8.1R exclude the person with overall responsibility for the legal function from the other overall responsibility function (SMF18) and the other local responsibility function (SMF22).

SYSC 26.4.15G

2The exclusions in SYSC 26.4.9R(2), SYSC 26.4.11R and SYSC 26.4.14G do not affect the scope of the following or the obligation to appoint an SMF manager to carry them out:

  1. (1)

    any FCA-designated senior management function other than the ones in SYSC 26.4.14G; or

  2. (2)

    any of the FCA-prescribed responsibilities.