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SYSC 4.8 Senior management responsibilities for third-country relevant authorised persons: allocation of responsibilities1

SYSC 4.8.1R
SYSC 4.8.2R

This section relates to the activities of a third-country relevant authorised person’s branch in the United Kingdom.

SYSC 4.8.3R

There is no territorial limitation on the application of SYSC 4.8, save as set out in SYSC 4.8.2R.

SYSC 4.8.4R

SYSC 4.8 is not limited to regulated activities or other specific types of activities.

Purpose

SYSC 4.8.5G

The purpose of this section is to ensure, together with the equivalent PRA requirements, that an SMF manager is responsible and accountable for every area of a branch’s activities.

Allocation of FCA-prescribed senior management responsibilities for third-country relevant authorised persons

SYSC 4.8.6R
  1. (1)

    A firm must allocate each of the FCA-prescribed senior management responsibilities in rows (1) to (7) in the table in SYSC 4.8.9R to one or more SMF managers of the branch.

  2. (2)

    If the FCA-prescribed senior management responsibility in row (8) of the table in SYSC 4.8.9R (functions in relation to CASS) applies to a firm, the firm must allocate that FCA-prescribed senior management responsibility to one or more SMF managers of the branch.

  3. (3)

    A firm may not allocate an FCA-prescribed senior management responsibility to an SMF manager who is only approved to perform the other local responsibility function for that firm, subject to (4).

  4. (4)

    A firm may allocate the FCA-prescribed senior management responsibility in row (8) of the table in SYSC 4.8.9R (functions in relation to CASS) to an SMF manager who is only approved to perform the other local responsibility function.

  5. (5)

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

SYSC 4.8.7R
SYSC 4.8.9R

Table: FCA-prescribed senior management responsibilities for third-country relevant authorised persons.

FCA-prescribed senior management responsibility in relation to the branch

Explanation

Equivalent PRA-prescribed UK branch senior management responsibility

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

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

(3) compliance by the firm with its obligations under section 60A of the Act (Vetting of candidates by relevant authorised persons); and3

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

PRA-prescribed UK branch senior management responsibility 6.2(1)

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

The employee certification 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 those sections, including:3

3(1) SYSC 5.2 (Certification Regime);

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

3(3) the corresponding PRA requirements.

PRA-prescribed UK branch senior management responsibility 6.2(2)

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

This responsibility does not include allocating responsibilities recorded in it.

PRA-prescribed UK branch senior management responsibility 6.2(3)

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

PRA-prescribed UK branch senior management responsibility 6.2(4)

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

PRA-prescribed UK branch senior management responsibility 6.2(5)

(6) Responsibility for the escalation of correspondence from the PRA, FCA and other regulators4 in respect of the firm to the governing body and/or the management body of the firm or, where appropriate, of the parent undertaking or holding company 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.

PRA-prescribed UK branch senior management responsibility 6.2(6)

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

(A) This includes the function in SYSC 6.3.8R (a firm must allocate overall responsibility to a director or senior manager within the firm for the establishment and maintenance of effective anti-money laundering systems and controls), if that rule applies to the firm.

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

(C) 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) Local responsibility is defined in SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions).

None

(8) Local responsibility for the firm’s compliance with CASS

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

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

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

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

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

(4) CASS 11.3.4R (certain CASS compliance functions for a CASS large debt management firm); but it does not have to.

(C) If the firm does not include the functions in (B) in this FCA-prescribed senior management responsibility, this FCA-prescribed senior management responsibility includes responsibility for supervision of the person performing the functions in (B) that apply to the firm.

(D) Local responsibility is defined in SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions).

None

Local responsibility for a branch’s activities, business areas and management functions

SYSC 4.8.10R
  1. (1)

    A firm must ensure that, at all times, one or more of its SMF managers has overall responsibility (subject to the branch’s governing body) for each of the activities, business areas and management functions of the branch that are under the management of the branch’s governing body.

  2. (2)

    A firm must ensure that, at all times, one or more of its SMF managers has responsibility for each of the activities, business areas and management functions of the branch not covered by (1).

  3. (3)

    An SMF manager in (2) must be directly involved in the management of the activity, business area or management function for which they have responsibility under (2).

  4. (4)

    An SMF manager who has responsibility for an activity, business area or management function under (1) or (2) has “local responsibility” for that activity, business area or management function.

  5. (5)

    This rule does not require a firm to ensure that SMF managers have local responsibility for any activity, business area or management function that is:

    1. (a)

      included in an FCA-prescribed senior management responsibility; or

    2. (b)

      included in an PRA-prescribed UK branch senior management responsibility; or

    3. (c)

      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. (i)

        the Chief Finance function;

      2. (ii)

        the Chief Risk function;

      3. (iii)

        the Head of Internal Audit function; or

      4. (iv)

        the Group Entity Senior Manager function.

  6. (6)

    This rule does not require a firm to allocate local responsibility for the running of the branch’s governing body.

  7. (7)

    A firm must make the allocations of responsibilities in this rule in such a way that it is clear who has which of those responsibilities.

SYSC 4.8.11G
  1. (1)

    The purpose of SYSC 4.8.10R is to avoid gaps. It is to ensure that an SMF manager has responsibility for every part of a branch’s activities, business areas and management functions not otherwise covered by other parts of this section or by the equivalent PRA requirements.

  2. (2)

    SYSC 4.8.10R(1) refers to the activities, business areas and management functions of the branch that are under the management of the branch’s governing body. However, the FCA recognises that for some branches, some activities, business areas and functions of the branches may not be under the management of the branch’s governing body. This may be the case where the branch does not have its own governing body or where it is organised in such a way that certain functions are under the management of a person or body outside the branch’s management structure. In those circumstances, it would not be appropriate to require the firm to allocate overall responsibility for that matter to a person who is part of the management structure of the branch.

  3. (3)

    The requirements to allocate responsibility for activities, business areas and functions of a branch under SYSC 4.8.10R(1) and (2) respectively are intended to allow for the difference described in (2). In particular:

    1. (a)

      SYSC 4.8.10R(1) is intended to cater for the situation where a particular activity, business area or function of the branch is under the management of the branch’s governing body. In that situation, the firm should allocate overall responsibility for that matter under SYSC 4.8.10R(1);

    2. (b)

      SYSC 4.8.10R(2) is intended to cater for the situation where a particular activity, business area or function of the branch is not under the management of branch’s governing body. In that situation, the firm should allocate responsibility for that matter under SYSC 4.8.10R(2).

  4. (4)

    A person who is allocated responsibility for a matter under SYSC 4.8.10R(1) or (2) will have local responsibility for that matter and will be performing the other local responsibility function unless that person has been approved to perform another designated senior management function (see SYSC 4.8.10R(4) and SYSC 4.8.33G for more information on this).

  5. (5)

    The provisions listed below provide further guidance and explanations about local responsibility:

    1. (a)

      SYSC 4.8.12G to SYSC 4.8.14G provides guidance on the meaning of local responsibility in general;

    2. (b)

      SYSC 4.8.15G to SYSC 4.8.19G provide guidance on the meaning of overall responsibility under SYSC 4.8.10R(1);

    3. (c)

      SYSC 4.8.20G provides further guidance about local responsibility under SYSC 4.8.10R(2).

  6. (6)

    As explained in SYSC 4.8.14G, SYSC 4.8.10R does not apply to non-executive functions.

Meaning of local responsibility: general

SYSC 4.8.12G

SYSC 4.8.10R(4) states that a person who has responsibility for an activity, business area or management function under SYSC 4.8.10R(1) or (2) will have local responsibility for that matter. Having local responsibility for a matter does not mean:

  1. (1)

    having ultimate authority over it; or

  2. (2)

    having day-to-day management control of that function.

SYSC 4.8.13G
  1. (1)

    SYSC 4.8.10R does not mean that the firm has to allocate local responsibility for the running of the branch’s governing body or equivalent itself.

  2. (2)

    This means that a person does not have local responsibility for a function under SYSC 4.8.10R just by being a member of a branch’s governing body or equivalent.

SYSC 4.8.14G
  1. (1)

    A person who just provides oversight of a function does not have local responsibility for that function under SYSC 4.8.10R.

  2. (2)

    Paragraph (1) and SYSC 4.8.13G mean that a non-executive director acting as such does not have local responsibility for a function under SYSC 4.8.10R or perform the other local responsibility function.

  3. (3)

    Paragraph (1) and SYSC 4.8.13G 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 local responsibility for that function under SYSC 4.8.10R and does not perform the other local responsibility function.

Meaning of local responsibility in SYSC 4.8.10R(1): overall responsibility

SYSC 4.8.15G
  1. (1)

    SYSC 4.8.10R(1) relates to the allocation of overall responsibility for activities, business areas or functions of the branch which are under the management of the branch’s governing body.

  2. (2)

    SYSC 4.8.10R(1) refers to overall responsibility.

  3. (3)

    As explained in SYSC 4.8.10R(4), a person who has overall responsibility for a function under SYSC 4.8.10R(1) will have local responsibility for that function.

  4. (4)

    Overall responsibility means the same as it does in SYSC 4.7.8R (Allocation of overall responsibility for a UK firm’s activities, business areas and management functions) except that:

    1. (a)

      it applies to the branch rather than the firm as a whole; and

    2. (b)

      it refers to responsibility under the governing body of the branch rather than of the firm as a whole.

  5. (5)

    SYSC 4.7.11G to SYSC 4.7.18G provide guidance on the meaning of overall responsibility in SYSC 4.7.8R.

SYSC 4.8.16G

In accordance with SYSC 4.8.15G(4), when SYSC 4.8.10R(1) refers to a person having overall responsibility for a function, it means a person who has:

  1. (1)

    ultimate responsibility (under the governing body of the branch) for managing or supervising that function; and

  2. (2)

    primary and direct responsibility for:

    1. (a)

      briefing and reporting about that function to the branch’s governing body or equivalent; and

    2. (b)

      putting matters for decision about that function to the branch’s governing body or equivalent.

SYSC 4.8.17G

In general, the FCA expects that a person to whom overall responsibility for a function is allocated under SYSC 4.8.10R(1) will be the most senior employee or officer responsible for managing or supervising that function under the management of the branch’s governing body.

SYSC 4.8.18G

A person may have overall responsibility for a function under SYSC 4.8.10R(1) even though that person also reports to a person outside the branch.

SYSC 4.8.19G

SYSC 4.7.13G and SYSC 4.7.14G (meaning of overall responsibility for UK relevant authorised persons) apply to the meaning of overall responsibility in this section but as if:

  1. (1)

    references to the firm were to the branch; and

  2. (2)

    references to the chief executive were to the branch manager or the person performing the PRA’s Head of Overseas Branch designated senior management function.

Meaning of local responsibility in SYSC 4.8.10R(2)

SYSC 4.8.20G
  1. (1)

    SYSC 4.8.10R(2) relates to the allocation of local responsibility for any activities, business areas and functions of the branch which are not under the management of the branch’s governing body.

  2. (2)

    SYSC 4.8.10R(3) states that a person who has local responsibility under SYSC 4.8.10R(2) must be directly involved in the management of the activity, business area or management function for which they have responsibility under (2).

  3. (3)

    A person having local responsibility for a function under SYSC 4.8.10R(2) does not need to be part of the management structure of the branch in order to have local responsibility for the function.

  4. (4)

    SYSC 4.8.25G and SYSC 4.8.27G provide further guidance on the allocation of local responsibility under SYSC 4.8.10R(2).

Who functions should be allocated to

SYSC 4.8.21G

The FCA expects a firm to allocate all the functions in SYSC 4.8.6R (FCA-prescribed senior management responsibilities) and SYSC 4.8.10R (Local responsibility for each of the activities, business areas and management functions of the branch) to an individual and not to a legal person.

SYSC 4.8.22G
  1. (1)

    The FCA would not consider it unusual if a person who has local responsibility for a particular function was not a member of the branch’s governing body or equivalent.

  2. (2)

    For example, in some branches, the head of compliance may report directly to the branch’s governing body even though the head of compliance is not a member of the governing body.

SYSC 4.8.23G

The FCA expects that anyone who has local responsibility for a matter:

  1. (1)

    will be sufficiently senior and credible; and

  2. (2)

    will have sufficient resources and authority;

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

SYSC 4.8.24G

SYSC 4.8.23G also applies to someone who has responsibility for an FCA-prescribed senior management responsibility.

SYSC 4.8.25G
  1. (1)

    The FCA expects that a firm appointing someone to have local responsibility for a function under SYSC 4.8.10R(2) (responsibility for a branch’s activities, business areas and management functions not under the management of a branch’s governing body) will appoint the most senior employee or officer of the firm with responsibility for that activity, business area or management function.

  2. (2)

    However, as explained in SYSC 4.8.27G (Setting overall strategy for a branch), the firm should not appoint someone under SYSC 4.8.10R(2) whose responsibilities are just strategic.

  3. (3)

    SYSC 4.8.17G deals with the seniority of someone appointed by the firm to have local responsibility for a function under SYSC 4.8.10R(1) (responsibility for a branch’s activities, business areas and management functions under the management of a branch’s governing body).

SYSC 4.8.26G
  1. (1)

    In some cases, a person who has local responsibility for a particular function may be very senior within the firm as a whole.

  2. (2)

    For instance, in some branches, an individual with local responsibility for a function may also be the head of the firm’s Europe and Middle East division for a business line and may be more senior within the firm as a whole than the person performing the PRA’s Head of Overseas Branch designated senior management function.

Setting overall strategy for a branch

SYSC 4.8.27G
  1. (1)

    Generally, where a firm allocates responsibility under SYSC 4.8.10R to one of the firm’s SMF managers who is not based in the branch the FCA would expect:

    1. (a)

      that the responsibility would not be allocated to a manager whose responsibilities for the branch are limited to setting overall strategy for the branch; and

    2. (b)

      that, instead, the firm would allocate it to a manager who is the most senior person responsible for implementing the strategy for the branch.

  2. (2)

    See SUP 10C.1.5AG for more about how the difference between strategic and implementing responsibilities affects the FCA senior management regime for approved persons in third-country relevant authorised persons.

Not giving too much responsibility to one individual

SYSC 4.8.28G
  1. (1)

    It will be common for a small non-complex branch to divide local responsibility for its activities under the management of the branch’s governing body between members of the branch governing body or equivalent and not to assign responsibility for any activity to someone who is not a member.

  2. (2)

    However, when deciding how to divide up responsibility for the activities of a branch, a firm should avoid assigning such a wide range of responsibilities to a single individual that they are unable to carry out those responsibilities effectively.

  3. (3)

    Therefore, in a branch of a large or complex firm, the FCA expects local responsibility for some functions to be assigned to persons in the layer of management below the branch’s governing body or equivalent. Anyone in that layer having local responsibility for an activity will be performing a designated senior management function.

  4. (4)

    Some of the activities, business areas and management functions of a branch may not be under the management of the branch’s governing body. In that case, a firm may allocate responsibility for the function to someone who is not a member of the branch’s governing body or in the management layer below it.

  5. (5)

    Paragraph (2) also applies to allocating responsibility for functions that are not under the management of the branch’s governing body.

Group arrangements and outsourcing

SYSC 4.8.29G
  1. (1)

    SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions) requires local responsibility for various aspects of a firm’s affairs to be allocated to an SMF manager.

  2. (2)

    This requirement does not prevent a firm from relying on an employee of a company in the same group to perform the function.

  3. (3)

    The group employee will need to be an SMF manager of the firm.

  4. (4)

    SUP 10C.3.9G explains the arrangements that should be put in place before the firm can apply for a group employee to be approved as an SMF manager for the firm.

  5. (5)

    Paragraphs (1) to (4) also apply to a firm that:

    1. (a)

      outsources functions to a third party and is relying on an individual from the outsourced services provider; or

    2. (b)

      is relying on an individual working for the wider firm from outside the branch;

    to carry out the functions in (1).

Allocation of responsibility for transactions

SYSC 4.8.30G
  1. (1)

    It is common for a branch to carry out only part of a transaction. For instance, a transaction may be booked in a branch but negotiated and arranged elsewhere or vice versa.

  2. (2)

    When allocating responsibility to an SMF manager for activities in relation to transactions under SYSC 4.8.10R, a firm should not exclude a transaction which is arranged, booked or negotiated in the branch merely because other elements of the transaction occur outside the United Kingdom.

Application of SYSC 4.7 to branches maintained by third-country relevant authorised persons

SYSC 4.8.31R
  1. (1)

    SYSC 4.7.25G to SYSC 4.7.29G (Dividing and sharing management functions between different people) apply for the purposes of the allocation of responsibilities under this section, subject to the modifications in (2).

  2. (2)

    Unless the context otherwise requires, any reference in the guidance above to:

    1. (a)

      SYSC 4.7.5R is a reference to SYSC 4.8.6R;

    2. (b)

      SYSC 4.7.8R is a reference to SYSC 4.8.10R;

    3. (c)

      SYSC 4.7.23G is a reference to SYSC 4.8.28G;

    4. (d)

      “overall responsibility” is a reference to “local responsibility”;

    5. (e)

      “the firm’s governing body” is a reference to “the branch’s governing body or equivalent”.

Link between the senior management regime and this section

SYSC 4.8.32G
  1. (1)

    A third-country relevant authorised person should allocate responsibility to its SMF managers for every area of the activities of its branch.

  2. (2)

    This is required by a mixture of:

    1. (a)

      SYSC 4.8.6R (FCA-prescribed senior management responsibility);

    2. (b)

      SYSC 4.8.10R (Local responsibility for a firm’s activities, business areas and management functions);

    3. (c)

      the requirements for FCA-designated senior management functions; and

    4. (d)

      the corresponding PRA requirements.

SYSC 4.8.33G
  1. (1)

    Having local responsibility for an activity, business area or management function of the branch under SYSC 4.8.10R requires approval under section 59 of the Act (Approval for particular arrangements) as an SMF manager. This is because a person who has local responsibility for an activity will be:

    1. (a)

      performing the other local responsibility function; or

    2. (b)

      approved to perform another designated senior management function.

  2. (2)

    The other local responsibility function applies because this is the effect of SUP 10C.8.1R (Definition of the other local responsibility function (SMF22)).

SYSC 4.8.34G

SUP 10C.8.1R(2) says that the other local responsibility function does not apply to a person who is approved to perform another designated senior management function in relation to the branch.

Link between SYSC 4 Annex 1G and this section

SYSC 4.8.35G

SYSC 4.7.37G to SYSC 4.7.38G provides guidance on the link between SYSC 4 Annex 1G and SYSC 4.7. That guidance is also relevant to this section.