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SYSC 4.1 General requirements

[Note: ESMA has also issued guidelines under article 16(3) of the ESMA Regulation covering certain aspects of the MiFID compliance function requirements. See http://www.esma.europa.eu/content/Guidelines-certain-aspects-MiFID-compliance-function-requirements.]
SYSC 4.1.1 R
3
  1. (1)

    A firm must have robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, and internal control mechanisms, including sound administrative and accounting procedures and effective control and safeguard arrangements for information processing systems.8

  2. (2)

    [deleted]

    1313

[Note: article 74 (1) of CRD, article 13(5) second paragraph of MiFID,12 article 12(1)(a) of the UCITS Directive, and article 18(1) of AIFMD12]10

12
SYSC 4.1.1A R

[Note: article 13(1) of AIFMD]

SYSC 4.1.1B R

14A full-scope UK AIFM must, in particular:

  1. (1)

    have rules for personal transactions by its employees or for the holding or management of investments it invests on its own account;

  2. (2)

    ensure that each transaction involving the AIFs may be reconstructed according to its origin, the parties to it, its nature, and the time and place at which it was effected; and

  3. (3)

    ensure that the assets of the AIFs managed by the AIFM are invested in accordance with the instrument constituting the fund and the legal provisions in force.

[Note: article 18(1) second paragraph of AIFMD]

SYSC 4.1.1C R
SYSC 4.1.1D R

19A UK UCITS management company must comply with the UCITS Remuneration Code if it:

  1. (1)

    manages a UCITS scheme; or

  2. (2)

    manages an EEA UCITS scheme.

[Note: article 14a(1) of the UCITS Directive]

SYSC 4.1.1E R

19A UK UCITS management company must have appropriate procedures for its employees to report potential or actual breaches of national provisions transposing the UCITS Directive internally through a specific, independent and autonomous channel.

[Note: article 99d(5) of the UCITS Directive]

SYSC 4.1.1F G

19 SYSC 18 (Guidance on Public Interest Disclosure Act: Whistleblowing) contains further guidance on the effect of the Public Interest Disclosure Act 1998 in the context of the relationship between firms and the FCA.

SYSC 4.1.2 R

For a common platform firm, the 3 arrangements, processes and mechanisms referred to in SYSC 4.1.1 R must be comprehensive and proportionate to the nature, scale and complexity of the risks inherent in the business model and of13SYSC 4.1.7 R, SYSC 5.1.7 R ,8SYSC 7 and whichever of the following as applicable:

3 17 13 13 12 8 17
  1. (1)

    (for a firm to which SYSC 19A applies) SYSC 19A (IFPRU Remuneration Code);

  2. (2)

    (for a full-scope UK AIFM) SYSC 19B (AIFM Remuneration Code);

  3. (3)

    (for a firm to which SYSC 19C applies) SYSC 19C (BIPRU Remuneration Code);

  4. (4)

    (for a firm to which SYSC 19D applies) SYSC 19D (Dual-regulated firms Remuneration Code); or

  5. (5)

    (for a firm to which the remuneration part of the PRA Rulebook applies) the remuneration part of the PRA Rulebook.17

[Note: article 74 (2) of CRD13]

13
SYSC 4.1.2A G

3Other firms should take account of the comprehensiveness and proportionality rule (SYSC 4.1.2 R) as if it were guidance (and as if "should" appeared in that rule instead of "must") as explained in SYSC 1 Annex 1.3.3 G5.9

SYSC 4.1.2AA R

Where SYSC 4.1.2 R applies to a BIPRU firm, it must take into account the specific technical criteria described in SYSC 19C.

SYSC 4.1.2B R

10For a management company or a full-scope UK AIFM14, the arrangements, processes and mechanisms referred to in SYSC 4.1.1 R and SYSC 4.1.1A R14 must also take account of the UCITS schemes and EEA UCITS schemes managed by the management company or the AIFs managed by the full-scope UK AIFM14.

[Note: article 12(1) second paragraph of the UCITS Directiveand article 18(1) second paragraph of AIFMD14]

Resources for management companies and AIFMs14

SYSC 4.1.2C R

10A management company, a full-scope UK AIFM and an incoming EEA AIFMbranch14 must have, and employ effectively, the resources and procedures that are necessary for the proper performance of its business activities.

[Note: articles 12(1)(a) and 14(1)(c) of the UCITS Directive and article 12(1)(c) of AIFMD14]

SYSC 4.1.2D R

14A full-scope UK AIFM must use, at all times, adequate and appropriate human and technical resources that are necessary for the proper management of AIFs.

[Note: article 18(1) first paragraph of AIFMD]

Subordinate measures relating to provisions implementing article 12(1) of AIFMD

SYSC 4.1.2E G

14Articles 16 to 29 of the AIFMD level 2 regulation provide detailed rules supplementing the provisions of article 12(1) of AIFMD, articles 57 to 66 of the AIFMD level 2 regulation provide detailed rules supplementing articles 12 and 18 of AIFMD.

13 13Mechanisms and procedures for a firm

SYSC 4.1.4 R

A firm (with the exception of a sole trader who does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements))3 must, taking into account the nature, scale and complexity of the business of the firm, and the nature and range of the financial services and activities 3undertaken in the course of that business:

3 10
  1. (1)

    (if it is a common platform firm or a management company)10 establish, implement and maintain decision-making procedures and an organisational structure which clearly and in a documented manner specifies reporting lines and allocates functions and responsibilities;

    3
  2. (2)

    establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the firm;

    10
  3. (3)

    (if it is a common platform firm) 3establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the firm; and10

  4. (4)

    10(if it is a management company) establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the management company as well as effective information flows with any third party involved.

[Note: articles 5(1) final paragraph, 5(1)(a), 5(1)(c) and 5(1)(e) of the MiFID implementing Directive and articles 4(1) final paragraph, 4(1)(a), 4(1)(c) and 4(1)(d) of the UCITS implementing Directive]10

SYSC 4.1.4A G

3A firm that is not a common platform firm or a management company10 should take into account the decision-making procedures and effective internal reporting rules (SYSC 4.1.4R (1),10(3) and (4))10 as if they were guidance (and as if "should" appeared in those rules instead of "must") as explained in SYSC 1 Annex 1.3.3 G5.

SYSC 4.1.5 R

A MiFID investment firm and a management company10 must establish, implement and maintain systems and procedures that are adequate to safeguard the security, integrity and confidentiality of information, taking into account the nature of the information in question.

[Note:

article 5(2) of the MiFID implementing Directive and article 4(2) of the UCITS implementing Directive]10

Business continuity

SYSC 4.1.6 R

A common platform firm must take reasonable steps to ensure continuity and regularity in the performance of its regulated activities. To this end the common platform firm3 must employ appropriate and proportionate systems, resources and procedures.

[Note: article

13(4) of MiFID]

SYSC 4.1.7 R

A common platform firm and a management company10 must establish, implement and maintain an adequate business continuity policy aimed at ensuring, in the case of an interruption to its systems and procedures, that any losses are limited, the preservation of essential data and functions, and the maintenance of its regulated activities, or, in the case of a management company, its collective portfolio management activities,10 or, where that is not possible, the timely recovery of such data and functions and the timely resumption of those activities.10

[Note:

article 5(3) of the MiFID implementing Directive,10 annex V paragraph 13 of the Banking Consolidation Directive, article 4(3) of the UCITS implementing Directive and article 85(2) of the CRD11]10

10 10
SYSC 4.1.7A G

3Other firms should take account of the business continuity rules (SYSC 4.1.6 R and 4.1.7 R) as if they were guidance (and as if "should" appeared in those rules instead of "must") as explained in SYSC 1 Annex 1.3.3 G5.

SYSC 4.1.8 G

The matters dealt with in a business continuity policy should include:

  1. (1)

    resource requirements such as people, systems and other assets, and arrangements for obtaining these resources;

  2. (2)

    the recovery priorities for the firm's operations;

  3. (3)

    communication arrangements for internal and external concerned parties (including the appropriate regulator, clients and the press);

  4. (4)

    escalation and invocation plans that outline the processes for implementing the business continuity plans, together with relevant contact information;

  5. (5)

    processes to validate the integrity of information affected by the disruption; and

  6. (6)

    regular testing of the business continuity policy in an appropriate and proportionate manner in accordance with SYSC 4.1.10 R.

16Operators of electronic systems in relation to lending: arrangements to administer loans in the event of platform failure

SYSC 4.1.8A R

16An operator of an electronic system in relation to lending must take reasonable steps to ensure that arrangements are in place to ensure that P2P agreements facilitated by it will continue to be managed and administered, in accordance with the contract terms, if at any time it ceases to carry on the activity of operating an electronic system in relation to lending.

SYSC 4.1.8B R

16Any arrangements made under SYSC 4.1.8A R must be notified to lenders under P2P agreements:

  1. (1)

    when such arrangements are made; or

  2. (2)

    if later, when the lender first becomes a lender under a P2P agreement with that operator; or

  3. (3)

    if the arrangements are changed, when that change is made; and

  4. (4)

    if the arrangement involves another firm taking over the management and administration of P2P agreements if the operator ceases to operate the electronic system in relation to lending, the notification to lenders must inform lenders of the identity of the firm with which the arrangements have been made and how that firm will hold the lenders' money.

SYSC 4.1.8C G

16Arrangements to ensure P2P agreements facilitated by the firm continue to be managed and administered may include:

  1. (1)

    entering into an arrangement with anotherfirm to take over the management and administration of P2P agreements if the operator ceases to operate the electronic system in relation to lending; or

  2. (2)

    holding sufficient collateral in a segregated account to cover the cost of management and administration while the loan book is wound down; or

  3. (3)

    entering into an arrangement for another firm to act as guarantor for the P2P agreements which includes a legally enforceable arrangement to meet the costs of the guarantee in full; or

  4. (4)

    managing the loan book in a way that ensures that income from P2P agreements facilitated by the firm is sufficient to cover the costs of managing and administering those agreements during the winding down process, taking into account the reduction of the loan pool and fee income from it.

SYSC 4.1.8D G

16When designing its arrangements, a firm should take into account insolvency law to ensure that the insolvency of the firm does not prejudice the operation of arrangements that the firm has put in place.

Operators of electronic systems in relation to lending: title transfer

SYSC 4.1.8E R
16
  1. (1)

    An operator of an electronic system in relation to lending must not accept, take, or receive the transfer of full ownership of money relating to P2P agreements.18

  2. (2)

    If an operator of an electronic system in relation to lending has made a client money election under CASS 7.10.7AR, when it is operating an electronic system in relation to non-P2P agreements it must also not accept, take, or receive the transfer of full ownership of money relating to non-P2P agreements.18

Accounting policies

SYSC 4.1.9 R

A common platform firm and a management company10 must establish, implement and maintain accounting policies and procedures that enable it, at the request of the FCA20, to deliver in a timely manner to the FCA20 financial reports which reflect a true and fair view of its financial position and which comply with all applicable accounting standards and rules.

[Note:

article 5(4) of the MiFID implementing Directive and article 4(4) of the UCITS implementing Directive]10

Regular monitoring

SYSC 4.1.10 R

A common platform firm and a management company10 must monitor and, on a regular basis, evaluate the adequacy and effectiveness of its systems, internal control mechanisms and arrangements established in accordance with SYSC 4.1.4 R to SYSC 4.1.9 R and take appropriate measures to address any deficiencies.

[Note:

article 5(5) of the MiFID implementing Directive and article 4(5) of the UCITS implementing Directive]10

SYSC 4.1.10A G

3Other firms should take account of the regular monitoring rule (SYSC 4.1.10 R) as if it were guidance (and as if "should" appeared in that rule instead of "must") as explained in SYSC 1 Annex 1.3.3 G5, but ignoring the cross-reference to SYSC 4.1.5 R and 4.1.9 R.

Audit committee

SYSC 4.1.11 G

Depending on the nature, scale and complexity of its business, it may be appropriate for a firm to form an audit committee. An audit committee could typically examine management's process for ensuring the appropriateness and effectiveness of systems and controls, examine the arrangements made by management to ensure compliance with requirements and standards under the regulatory system, oversee the functioning of the internal audit function (if applicable) and provide an interface between management and external auditors. It should have an appropriate number of non-executive directors and it should have formal terms of reference.

SYSC 4.1.12 G

[deleted]8

8
6

Risk control: additional guidance

SYSC 4.1.13 G

7 Firms should also consider the additional guidance on risk-centric governance arrangements for effective risk management contained in SYSC 21.

Apportionment of responsibilities: the role of the non-executive director

SYSC 4.1.14 G

7The role undertaken by a non-executive director will vary from one firm to another. Where a non-executive director is an approved person, for example where the firm is a body corporate, his responsibility and therefore liability will be limited by the role that he undertakes.

SYSC 4.2 Persons who effectively direct the business

SYSC 4.2.1 R

The senior personnel of a common platform firm, a management company3a full-scope UK AIFM,5 or of the UK branch of a non-EEA bank1must be of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the firm.

[Note: article 9

(1) of MiFID, article 7(1)(b) of the UCITS Directive3 article 8(1)(c) of AIFMD5, article 11(1) second paragraph of the Banking Consolidation Directive and article 13(1) of the CRD4]

SYSC 4.2.1A G

1Other firms should take account of the senior personnel rule (SYSC 4.2.1 R) as if it were guidance (and as if "should" appeared in that rule instead of "must") as explained in SYSC 1 Annex 1.3.3 G2.

Responsibility of senior personnel of an AIFM

SYSC 4.2.1B R

7For a full-scope UK AIFM, the senior personnel must, in complying with SYSC 4.2.1 R, be sufficiently experienced in relation to the investment strategies pursued by the AIFs it manages.

[Note: article 8(1)(c) of AIFMD]

SYSC 4.2.2 R

A common platform firm, a management company, a full-scope UK AIFM53 and the UK branch of a non-EEA bank1must ensure that its management is undertaken by at least two persons meeting the requirements laid down in SYSC 4.2.1 R and

, for a full-scope UK AIFM, SYSC 4.2.7 R5.

[Note: article 9(4) first paragraph of MiFID, article 7(1)(b) of the UCITS Directive3, article 8(1)(c) of AIFMD5and article 13(1) of CRD]

6
6
SYSC 4.2.3 G

In the case of a body corporate, the persons referred to in SYSC 4.2.2 R should either be executive directors or persons granted executive powers by, and reporting immediately to, the governing body. In the case of a partnership, they should be active partners.

SYSC 4.2.4 G

At least two independent minds should be applied to the formulation and implementation of the policies of a common platform firm, a management company3, a full-scope UK AIFM5 and the UK branch of a non-EEA bank1. Where a firm1 nominates just two individuals to direct its business, the appropriate regulator will not regard them as both effectively directing the business where one of them makes some, albeit significant, decisions relating to only a few aspects of the business. Each should play a part in the decision-making process on all significant decisions. Both should demonstrate the qualities and application to influence strategy, day-to-day policy and its implementation. This does not require their day-to-day involvement in the execution and implementation of policy. It does, however, require involvement in strategy and general direction, as well as knowledge of, and influence on, the way in which strategy is being implemented through day-to-day policy.

5 1 1 5
SYSC 4.2.5 G

Where there are more than two individuals directing the business of a common platform firm, a management company3, a full-scope UK AIFM5 or the UK branch of a non-EEA bank,1 the appropriate regulator does not regard it as necessary for all of these individuals to be involved in all decisions relating to the determination of strategy and general direction. However, at least two individuals should be involved in all such decisions. Both individuals' judgement should be engaged so that major errors leading to difficulties for the firm are less likely to occur. Similarly, each individual should have sufficient experience and knowledge of the business and the necessary personal qualities and skills to detect and resist any imprudence, dishonesty or other irregularities by the other individual. Where a single individual, whether a chief executive, managing director or otherwise, is particularly dominant in such 1a firm this will raise doubts about whether SYSC 4.2.2 R is met.

SYSC 4.2.6 R

If a common platform firm, (other than a credit institution or AIFM investment firm5) or the UK branch of a non-EEA bank1, is:

1
  1. (1)

    a natural person; or

  2. (2)

    a legal person managed by a single natural person;

it must have alternative arrangements in place which ensure sound and prudent management of the firm.

[Note: article 9(4) second paragraph of MiFID]

SYSC 4.2.7 R

A full-scope UK AIFM must notify the FCA of the names of the senior personnel of the firm and of every person succeeding them in office.

[Note: article 8(1)(c) of AIFMD]

SYSC 4.2.8 G

Where the senior personnel of a full-scope UK AIFM will carry out a FCA8governing function and the firm has applied for the FCA's approval under section 59 of the Act, this will be considered sufficient to comply with SYSC 4.2.7 R.8

8

SYSC 4.3 Responsibility of senior personnel

SYSC 4.3.1 R

Afirm (with the exception of a sole trader who does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements)),2 when allocating functions internally, must ensure that senior personnel and, where appropriate, the supervisory function, are responsible for ensuring that the firm complies with its obligations under the regulatory system1. In particular, senior personnel and, where appropriate, the supervisory function must assess and periodically review the effectiveness of the policies, arrangements and procedures put in place to comply with the firm's obligations under the regulatory system1 and take appropriate measures to address any deficiencies.

[Note:

article 9(1) of the MiFID implementing Directive and articles 9(1) and 9(3) of the UCITS implementing Directive]4

1 2 1 1
SYSC 4.3.2 R

A common platform firm1(with the exception of a sole trader who does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements))2 and a management company,4 must ensure that:2

1
  1. (1)

    its senior personnel receive on a frequent basis, and at least annually, written reports on the matters covered by SYSC 6.1.2 R to SYSC 6.1.5 R, SYSC 6.2.1 R and SYSC 7.1.2 R, SYSC 7.1.3 R and SYSC 7.1.5 R to SYSC 7.1.7 R, indicating in particular whether the appropriate remedial measures have been taken in the event of any deficiencies; and

    2
  2. (2)

    the supervisory function, if any, receives 2on a regular basis written reports on the same matters.

    [Note:

    article 9(2) and article 9(3) of the MiFID implementing Directive and articles 9(4) and 9(6) of the UCITS implementing Directive]4

    2
SYSC 4.3.2A G

2Other firms should take account of the written reports rule (SYSC 4.3.2 R) as if it were guidance (and as if "should" appeared in that rule instead of "must") as explained in SYSC 1 Annex 1.3.3 G3.

SYSC 4.3.3 G

The supervisory function does not include a general meeting of the shareholders of a firm,2 or equivalent bodies, but could involve, for example, a separate supervisory board within a two-tier board structure or the establishment of a non-executive committee of a single-tier board structure.

SYSC 4.3.4 G

[deleted]1

1

SYSC 4.3A CRR firms

Management body

SYSC 4.3A.-1 R
SYSC 4.3A.1 R

1A CRR firm must ensure that the management body defines, oversees and is accountable for the implementation of governance arrangements that ensure effective and prudent management of the firm, including the segregation of duties in the organisation and the prevention of conflicts of interest. The firm must ensure that the management body:

  1. (1)

    has overall responsibility for the firm;

  2. (2)

    approves and oversees implementation of the firm's strategic objectives, risk strategy and internal governance;

  3. (3)

    ensures the integrity of the firm's accounting and financial reporting systems, including financial and operational controls and compliance with the regulatory system.

  4. (4)

    oversees the process of disclosure and communications;

  5. (5)

    has responsibility for providing effective oversight of senior management.

  6. (6)

    monitors and periodically assesses the effectiveness of the firm's governance arrangements and takes appropriate steps to address any deficiencies.

[Note: article 88(1) of

CRD]

SYSC 4.3A.2 R

A CRR firm must ensure that the chairman of the firm's management body does not exercise simultaneously the PRA’s Chief Executive function controlled function (SMF1) or 3chief executive function within the same firm, unless justified by the firm and authorised by the FCA3.

[Note: article 88(1)(e) of

CRD]

SYSC 4.3A.3 R

A CRR firm must ensure that the members of the management body of the firm:

  1. (1)

    are of sufficiently good repute;

  2. (2)

    possess sufficient knowledge, skills and experience to perform their duties;

  3. (3)

    possess adequate collective knowledge, skills and experience to understand the firm's activities, including the main risks;

  4. (4)

    reflect an adequately broad range of experiences;

  5. (5)

    commit sufficient time to perform their functions in the firm; and

  6. (6)

    act with honesty, integrity and independence of mind to effectively assess and challenge the decisions of senior management where necessary and to effectively oversee and monitor management decision-making.

[Note: article 91(1)-(2) and (7)-(8) of

CRD]

SYSC 4.3A.4 R

A CRR firm must devote adequate human and financial resources to the induction and training of members of the management body.

[Note: article 91

(3) of CRD]

SYSC 4.3A.5 R

A CRR firm must ensure that the members of the management body of the firm do not hold more directorships than is appropriate taking into account individual circumstances and the nature, scale and complexity of the firm's activities.

[Note: article 91(3) of

CRD]

SYSC 4.3A.6 R
2
  1. (1)

    A CRR firm that is significant must ensure that the members of the management body of the firm do not hold more than one of the following combinations of directorship in any organisation at the same time:

    1. (a)

      one executive directorship with two non-executive directorships; and

    2. (b)

      four non-executive directorships.

  2. (2)

    Paragraph (1) does not apply to members of the management body that represent the United Kingdom.

[Note: article 91(3) of

CRD]

SYSC 4.3A.7 R

For the purposes of SYSC 4.3A.5 R and SYSC 4.3A.6 R:

  1. (1)

    directorships in organisations which do not pursue predominantly commercial objectives shall not count; and

  2. (2)

    the following shall count as a single directorship:

    1. (a)

      executive or non-executive directorships held within the same group; or

    2. (b)

      executive or non-executive directorships held within:

      1. (i)

        firms that are members of the same institutional protection scheme provided that the conditions set out in article 113(7) of the EU 5CRR are fulfilled; or

      2. (ii)

        undertakings (including non-financial entities) in which the firm holds a qualifying holding.

[Note:

article 91(3) of CRD]

Nomination Committee

SYSC 4.3A.8 R

A CRR firm that is significant must:

  1. (1)

    establish a nomination committee composed of members of the management body who do not perform any executive function in the firm;

  2. (2)

    ensure that the nomination committee is able to use any forms of resources the nomination committee deems appropriate, including external advice; and

  3. (3)

    ensure that the nomination committee receives appropriate funding.

[Note: article 88(2) of

CRD]

SYSC 4.3A.9 R

A CRR firm that has a nomination committee must ensure that the nomination committee:

  1. (1)

    engage a broad set of qualities and competences when recruiting members to the management body and for that purpose puts in place a policy promoting diversity on the management body;

  2. (2)

    identifies and recommends for approval, by the management body or by general meeting, candidates to fill management body vacancies, having evaluated the balance of knowledge, skills, diversity and experience of the management body;

  3. (3)

    prepares a description of the roles and capabilities for a particular appointment, and assesses the time commitment required;

  4. (4)

    decides on a target for the representation of the underrepresented gender in the management body and prepares a policy on how to increase the number of the underrepresented gender in the management body in order to meet that target;

  5. (5)

    periodically, and at least annually, assesses the structure, size, composition and performance of the management body and makes recommendations to the management body with regard to any changes;

  6. (6)

    periodically, and at least annually, assesses the knowledge, skills and experience of individual members of the management body and of the management body collectively, and reports this to the management body;

  7. (7)

    periodically reviews the policy of the management body for selection and appointment of senior management and makes recommendations to the management body; and

  8. (8)

    in performing its duties, and to the extent possible, on an ongoing basis, takes account of the need to ensure that the management body's decision making is not dominated by any one individual or small group of individuals in a manner that is detrimental to the interest of the firm as a whole;

[Note: article 88(2) and article 91(10) of

CRD]

SYSC 4.3A.10 R

A CRR firm that does not have a nomination committee must engage a broad set of qualities and competences when recruiting members to the management body. For that purpose a CRR firm that does not have a nomination committee must put in place a policy promoting diversity on the management body.

[Note: article 91(10) of

CRD]

Website

SYSC 4.3A.11 R

A CRR firm that maintains a website must explain on the website how it complies with the requirements of SYSC 4.3A.1 R to SYSC 4.3A.3 R and SYSC 4.3A.4 R to SYSC 4.3A.11 R.

[Note: article 96 of CRD]

SYSC 4.4 Apportionment of responsibilities

Application

SYSC 4.4.1A R

7This section applies to:

  1. (1)

    an authorised professional firm in respect of its non-mainstream regulated activities unless the firm is also conducting other regulated activities and has appointed approved persons to perform the FCA governing functions8with equivalent responsibilities for the firm'snon-mainstream regulated activities and other regulated activities;

  2. (2)

    activities carried on by a firm whose principal purpose is to carry on activities other than regulated activities and which is:

    1. (a)

      an oil market participant; or

    2. (b)

      a service company; or

    3. (c)

      an energy market participant; or

    4. (d)

      a wholly-owned subsidiary of:

      1. (i)

        a local authority; or

      2. (ii)

        a registered social landlord; or

    5. (e)

      a firm with permission to carry on insurance mediation activity in relation to non-investment insurance contracts but no other regulated activity (except advising on P2P agreements); 10

  3. (3)

    a credit firm which holds only a limited permission (other than a not-for-profit debt advice body) with respect to the relevant credit activity (as defined in paragraph 2G of Schedule 6 to the Act) for which it has limited permission;

  4. (4)

    an incoming Treaty firm, an incoming EEA firm or a UCITS qualifier (but only SYSC 4.4.5R (2) applies for these firms); and

  5. (5)

    a sole trader, but only if he employs any person who is required to be approved under section 59 of the Act (Approval for particular arrangements).

SYSC 4.4.2 G

This section does not apply to a common platform firm.

Maintaining a clear and appropriate apportionment

SYSC 4.4.3 R

A firm must take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among its directors and senior managers in such a way that:

  1. (1)

    it is clear who has which of those responsibilities; and

  2. (2)

    the business and affairs of the firm can be adequately monitored and controlled by the directors, relevant senior managers and governing body of the firm.

SYSC 4.4.4 G

[deleted]4

4

Allocating functions of apportionment and oversight

SYSC 4.4.5 R

A firm must appropriately allocate to one or more individuals, in accordance with the following table, the functions of:

  1. (1)

    dealing with the apportionment of responsibilities under SYSC 4.4.3 R; and

  2. (2)

    overseeing the establishment and maintenance of systems and controls under SYSC 4.1.1 R.

  3. 1: Firm type

    2: Allocation of both functions must be to the following individual, if any (see Note):

    3: Allocation to one or more individuals selected from this column is compulsory if there is no allocation to an individual in column 2, but is otherwise optional and additional:

    (1) A firm which is a body corporate and is a member of a group, other than a firm in row (2)

    (1) the firm'schief executive (and all of them jointly, if more than one); or

    the firm's and its group's:

    (1) directors; and

    (2) senior managers

    (2) a director or senior manager responsible for the overall management of:

    (a) the group; or

    (b) a group division within which some or all of the firm'sregulated activities fall

    (2) An incoming EEA firm or incoming Treaty firm (note: only the functions in SYSC 4.4.5R (2) must be allocated)

    (not applicable)

    the firm's and its group's:

    (1) directors; and

    (2) senior managers

    (3) Any other firm

    the firm'schief executive (and all of them jointly, if more than one)

    the firm's and its group's:

    (1) directors; and

    (2) senior managers

    Note: Column 2 does not require the involvement of the chief executive or other executive director or senior manager in an aspect of corporate governance if that would be contrary to generally accepted principles of good corporate governance.

SYSC 4.4.6 G

Frequently asked questions about allocation of functions in SYSC 4.4.5 R

Question

Answer

1

Does an individual to whom a function is allocated under SYSC 4.4.5 R need to be an approved person or a certification employee8?

An individual to whom a function is allocated under SYSC 4.4.5 R will be performing the apportionment and oversight function (CF 8, see SUP 10A.7.1 R11) and an application must be made under section 59 of the Act for approval of the individual before the function is performed. There are exceptions from this in SUP 10A.111 (Approved persons - Application).

The apportionment and oversight function does not apply to a relevant authorised person. However, a person performing the role in SYSC 4.4.5R will fall into the certification regime in SYSC 5.2 (Certification Regime), unless the person performing it is an approved person. A person performing the role in SYSC 4.4.5R may be an approved person because of another role that they perform (such as being an executive director).8

11 11

2

If the allocation is to more than one individual, can they perform the functions, or aspects of the functions, separately?

If the functions are allocated to joint chief executives under SYSC 4.4.5 R, column 2, they are expected to act jointly. If the functions are allocated to an individual under SYSC 4.4.5 R, column 2, in addition to individuals under SYSC 4.4.5 R, column 3, the former may normally be expected to perform a leading role in relation to the functions that reflects his position. Otherwise, yes.

3

What is meant by "appropriately allocate" in this context?

The allocation of functions should be compatible with delivering compliance with Principle 3, SYSC 4.4.3 R and SYSC 4.1.1 R. The appropriate regulator considers that allocation to one or two individuals is likely to be appropriate for most firms.

4

If a committee of management governs a firm or group, can the functions be allocated to every member of that committee?

Yes, as long as the allocation remains appropriate (see Question 3). If the firm also has an individual as chief executive, then the functions must be allocated to that individual as well under SYSC 4.4.5 R, column 2 (see Question 7).

5

Does the definition of chief executive include the possessor of equivalent responsibilities with another title, such as a managing director or managing partner?

Yes.

6

Is it possible for a firm to have more than one individual as its chief executive?

Although unusual, some firms may wish the responsibility of a chief executive to be held jointly by more than one individual. In that case, each of them will be a chief executive and the functions must be allocated to all of them under SYSC 4.4.5 R, column 2 (see also Questions 2 and 7).

7

If a firm has an individual as chief executive, must the functions be allocated to that individual?

Normally, yes, under SYSC 4.4.5 R, column 2.

But if the firm is a body corporate and a member of a group, the functions may, instead of being allocated to the firm'schief executive, be allocated to a director or senior manager from the group responsible for the overall management of the group or of a relevant group division, so long as this is appropriate (see Question 3). Such individuals may nevertheless require approval under section 59 (see Question 1).

If the firm chooses to allocate the functions to a director or senior manager responsible for the overall management of a relevant group division, the FSA would expect that individual to be of a seniority equivalent to or greater than a chief executive of the firm for the allocation to be appropriate.

See also Question 14.

8

If a firm has a chief executive, can the functions be allocated to other individuals in addition to the chief executive?

Yes. SYSC 4.4.5 R, column 3, permits a firm to allocate the functions, additionally, to the firm's (or where applicable the group's) directors and senior managers as long as this is appropriate (see Question 3).

9

What if a firm does not have a chief executive?

Normally, the functions must be allocated to one or more individuals selected from the firm's (or where applicable the group's) directors and senior managers under SYSC 4.4.5 R, column 3.

But if the firm:

(1) is a body corporate and a member of a group; and

(2) the group has a director or senior manager responsible for the overall management of the group or of a relevant group division;

then the functions must be allocated to that individual (together, optionally, with individuals from column 3 if appropriate) under SYSC 4.4.5 R, column 2.

10

What do you mean by "group division within which some or all of the firm's regulated activities fall"?

A "division" in this context should be interpreted by reference to geographical operations, product lines or any other method by which the group's business is divided.

If the firm's regulated activities fall within more than one division and the firm does not wish to allocate the functions to its chief executive, the allocation must, under SYSC 4.4.5 R, be to:

(1) a director or senior manager responsible for the overall management of the group; or (2) a director or senior manager responsible for the overall management of one of those divisions;

together, optionally, with individuals from column 3 if appropriate. (See also Questions 7 and 9.)

11

How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an overseas firm which is not an incoming EEA firm, incoming Treaty firm or UCITS qualifier?

The firm must appropriately allocate those functions to one or more individuals, in accordance with SYSC 4.4.5 R, but:

(1) The responsibilities that must be apportioned and the systems and controls that must be overseen are those relating to activities carried on from a UK establishment with certain exceptions (see SYSC 1 Annex 1.1.8R). Note that SYSC 1 Annex 1.1.10R does not extend the territorial scope of SYSC 4.4 for an overseas firm.

(2) The chief executive of an overseas firm is the person responsible for the conduct of the firm's business within the United Kingdom (see the definition of "chief executive"). This might, for example, be the manager of the firm'sUK establishment, or it might be the chief executive of the firm as a whole, if he has that responsibility.

The apportionment and oversight function applies to such a firm, unless it falls within a particular exception from the approved persons regime (see Question 1).

12

How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an incoming EEA firm or incoming Treaty firm?

SYSC 1 Annex 1.1.1R(2) and SYSC 1 Annex 1.1.8R restrict the application of SYSC 4.4.5 R for such a firm. Accordingly:

(1) Such a firm is not required to allocate the function of dealing with apportionment in SYSC 4.4.5R (1).

(2) Such a firm is required to allocate the function of oversight in SYSC 4.4.5R (2). However, the systems and controls that must be overseen are those relating to matters which the appropriate regulator, as Host State regulator, is entitled to regulate (there is guidance on this in SUP 13A Annex 2). Those are primarily, but not exclusively, the systems and controls relating to the conduct of the firm's activities carried on from its UK branch.

(3) Such a firm need not allocate the function of oversight to its chief executive; it must allocate it to one or more directors and senior managers of the firm or the firm'sgroup under SYSC 4.4.5 R, row (2).

(4) An incoming EEA firm which has provision only for cross border services is not required to allocate either function if it does not carry on regulated activities in the United Kingdom; for example if they fall within the overseas persons exclusions in article 72 of the Regulated Activities Order.

See also Questions 1 and 15.

13

What about a firm that is a partnership or a limited liability partnership?

The appropriate regulator envisages that most if not all partners or members will be either directors or senior managers, but this will depend on the constitution of the partnership (particularly in the case of a limited partnership) or limited liability partnership. A partnership or limited liability partnership may also have a chief executive (see Question 5). A limited liability partnership is a body corporate and, if a member of a group, will fall within SYSC 4.4.5 R, row (1) or (2).

14

What if generally accepted principles of good corporate governance recommend that the chief executive should not be involved in an aspect of corporate governance?

The Note to SYSC 4.4.5 R provides that the chief executive or other executive director or senior manager need not be involved in such circumstances. For example, the UK Corporate Governance Code5 recommends that the board of a listed company should establish an audit committee of independent,9 non-executive directors to be responsible (among other things) for overseeing the effectiveness9 of the audit process and the objectivity and independence of the external auditor9. That aspect of the oversight function may therefore be allocated to the members of such a committee without involving the chief executive. Such individuals may require approval under section 59 in relation to that function (see Question 1).

5

15

What about incoming electronic commerce activities carried on from an establishment in another EEA State with or for a person in the United Kingdom?

SYSC does not apply to an incoming ECA provider acting as such.

SYSC 4.5 Management responsibilities maps for UK relevant authorised persons1

Application

SYSC 4.5.1 R

This section applies to UK relevant authorised persons2.

SYSC 4.5.2 R

There is no territorial limitation on the application of this section.

SYSC 4.5.3 R

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

General rule

SYSC 4.5.4 R

A firm must, at all times, have a comprehensive and up-to-date document (the management responsibilities map) that describes its management and governance arrangements, including:

  1. (1)

    details of the reporting lines and the lines of responsibility; and

  2. (2)

    reasonable details about:

    1. (a)

      the persons who are part of those arrangements; and

    2. (b)

      their responsibilities.

  3. (See further requirements in SYSC 4.5.7R.)

SYSC 4.5.5 R

The firm'smanagement responsibilities map must show clearly how any responsibilities covered by a firm'smanagement responsibilities map are shared or divided between different persons.

SYSC 4.5.6 G
  1. (1)

    One purpose of the management responsibilities map is to help the firm and the FCA satisfy themselves that the firm has a clear organisational structure (as required by SYSC).

  2. (2)

    It also helps the FCA to identify who it needs to speak to about particular issues and who is accountable if something goes wrong.

Specific requirements

SYSC 4.5.7 R

A management responsibilities map must include:

  1. (1)
    1. (a)

      the names of all the firm's:

      1. (i)

        approved persons (including PRA approved persons);

      2. (ii)

        members of its governing body and (if different) management body who are not approved persons;

      3. (iii)

        senior management; and

      4. (iv)

        senior personnel; and

    2. (b)

      details of the responsibilities which they hold;

  2. (2)

    all responsibilities described in any current statement of responsibilities;

  3. (3)

    details of the management and governance arrangements relating to:

    1. (a)

      the FCA-prescribed senior management responsibilities; and

    2. (b)

      the PRA-prescribed senior management responsibilities;

      including the identity of the persons to whom those functions are allocated;

  4. (4)

    the reasons why (if it has done any of these things) the firm:

    1. (a)

      allocates responsibility for an FCA-prescribed senior management responsibility to more than one person jointly; or

    2. (b)

      divides responsibility for an FCA-prescribed senior management responsibility between different persons;

  5. (5)

    details about the functions allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm's activities, business areas and management functions), including:

    1. (a)

      what those activities, business areas and management functions are;

    2. (b)

      the management and governance arrangements relating to them;

    3. (c)

      details about whether and how they are shared or divided up;

    4. (d)

      the reasons why (if it has done this) the firm allocates responsibility for any such function to more than one person jointly; and

    5. (e)

      the identity of the persons to whom those functions are allocated;

  6. (6)

    matters reserved to the governing body (including the terms of reference of its committees) and, if different, the management body;

  7. (7)

    details of how the firm's management and governance arrangements fit together with:

    1. (a)

      its group; and

    2. (b)

      any other person in (8);

  8. (8)

    details of the extent to which the firm's management and governance arrangements are provided by, or shared with, other members of its group or others;

  9. (9)

    details of the reporting lines and the lines of responsibility (if any) between the firm and those who carry out functions in relation to them and:

    1. (a)

      other members of its group or other third parties;

    2. (b)

      persons acting as employees or officers of, or otherwise acting for, anyone in (a); or

    3. (c)

      committees or other bodies of anyone in (a);

  10. (10)

    reasonable information about the persons described or identified in the management responsibilities map, including:

    1. (a)

      whether they are employees of the firm and, if not, by whom they are employed;

    2. (b)

      if they are certification employees of the firm; and

    3. (c)

      the responsibilities they have in relation to other group members or any other person in (8); and

  11. (11)

    details of how (1) to (10) fit together and fit into the firm's management and governance arrangements as a whole.

SYSC 4.5.8 R

SYSC 4.5.7R(1) does not require the firm to include the names of approved persons under SUP 10A.1.16BR (Appointed representatives).

Guidance about what should be in a management responsibilities map

SYSC 4.5.9 G
  1. (1)

    The management responsibilities map should be consistent with the statements of responsibilities.

  2. (2)

    The statements of responsibilities and the management responsibilities map should all be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the firm.

SYSC 4.5.10 G

The management responsibilities map should include functions that are:

  1. (1)

    included in a PRA controlled function under SUP 10C.9 (Minimising overlap with the PRA approved persons regime); or

  2. (2)

    excluded from the other overall responsibility function under SUP 10C.7.1R(2) (Exclusion for approved person with approval to perform other designated senior management functions).

SYSC 4.5.11 G

A firm'smanagement responsibilities map should demonstrate that there are no gaps in the allocation of responsibilities among its management.

SYSC 4.5.12 G
  1. (1)

    This provision gives guidance on specific aspects of SYSC 4.5.5R and SYSC 4.5.7R.

  2. (2)

    A firm need only include summary details of the persons in SYSC 4.5.7R(1).

  3. (3)

    A firm'sSMF managers and members of its governing body may overlap with its senior management and senior personnel. If so, the firm does not have to give the same details twice.

  4. (4)

    A firm should include details of individuals in addition to those in SYSC 4.5.7R(1), (3) and (5) if they are needed to make the management responsibilities map clear. For example, it may be necessary to include these details if the same individual has responsibilities in a number of different areas of the firm.

  5. (5)

    A firm should only include summary details about statements of responsibilities under SYSC 4.5.7R(2). There is no need to duplicate the statements of responsibilities. The main aim of including material about statements of responsibilities in the management responsibilities map is to show how the material:

    1. (a)

      fits into the firm's overall governance structure; and

    2. (b)

      for each statement of responsibilities, fits with the others.

  6. (6)

    The executive director function and the other overall responsibility function are defined generally and generically and can be performed by several people. Therefore, there is no need to explain why several people perform one of the functions.

  7. (7)

    A management responsibilities map should include a checklist confirming that all FCA-prescribed senior management responsibilities have been allocated or, if some have not been allocated, the reason why.

  8. (8)

    If:

    1. (a)

      any designated senior management function is performed by; or

    2. (b)

      any FCA-prescribed senior management responsibility is allocated to;

  9. more than one person, a firm'smanagement responsibilities map should give details of how the performance or discharge of the responsibilities is to be carried out by those persons.

  10. (9)

    The material in SUP 10C.11.31G and SUP 10C.11.32G (recording sharing and splitting of responsibilities in statements of responsibilities) also applies to a management responsibilities map.

Small firms

SYSC 4.5.13 G
  1. (1)

    The FCA expects that the management responsibilities map of a small and non-complex firm is likely to be simple and short. It may be no more than a single sheet of paper.

  2. (2)

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

    1. (a)

      it is:

      1. (i)

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

      2. (ii)

        a credit union that meets the size requirements for small CRR firms under the PRA's requirements in (a)(i);

    2. (b)

      it conducts a limited number of simple business lines; and

    3. (c)

      it does not rely on group governance arrangements.

Single document

SYSC 4.5.14 R

A management responsibilities map must be a single document.

SYSC 4.5.15 G
  1. (1)

    The requirement for a management responsibilities map to be a single document does not mean that it has to be a single sheet of paper or must be capable of being reproduced as one.

  2. (2)

    A management responsibilities map may be made up of a folder with several files or items in it.

  3. (3)

    However, a firm that creates a management responsibilities map in this way should ensure that its approach is compatible with it being a single document. In particular:

    1. (a)

      there should be a single item that identifies every item making up the management responsibilities map and shows where each item can be found;

    2. (b)

      for example, this could be a contents list of the items making up the management responsibilities map with electronic links to each of them;

    3. (c)

      the management responsibilities map should be complete by itself and should not refer to documents not forming part of it;

    4. (d)

      every item in the management responsibilities map should only contain material about the matters required by this section;

    5. (e)

      for example, if there is relevant material in the firm's report and accounts, the folder should only contain the relevant parts or a link to those parts.

  4. (4)

    The folder and its contents should be easily identifiable as the firm'smanagement responsibilities map.

  5. (5)

    Although a management responsibilities map can be large and complex, SYSC 4.5.13G explains that, for small non-complex firms, it may be small and simple.

Purpose of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person)

SYSC 4.5.16 G
  1. (1)

    This provision explains the purpose of SYSC 4 Annex 1G.

  2. (2)

    A firm may use it as a checklist to see whether its management responsibilities map covers all its business activities.

  3. (3)

    A firm may wish to prepare its management responsibilities map using the same split of activities.

  4. (4)

    If a firm uses SYSC 4 Annex 1G to help it prepare its management responsibilities map, it should bear in mind that it is not comprehensive (see SYSC 4.5.20G).

  5. (5)

    As mentioned in SYSC 4.7.37G, a firm may also use it as a checklist when allocating responsibilities under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions).

SYSC 4.5.17 G

There is no direct link between SYSC 4 Annex 1G and the senior management regime for relevant authorised persons.

Contents of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person)

SYSC 4.5.18 G

SYSC 4 Annex 1G sets out the main business activities and functions that the FCA thinks are likely to be relevant to most firms, although the FCA does not require firms to organise themselves in this way.

SYSC 4.5.19 G

Most or all of these activities and functions will normally apply to a complex firm. Many of them may not apply to a non-complex firm.

SYSC 4.5.20 G
  1. (1)

    SYSC 4 Annex 1G is not comprehensive. While it is intended to cover most front-line business activities of a relevant authorised person, it does not cover all internal oversight and monitoring functions.

  2. (2)

    For example, it does not cover compliance or internal audit or the firm'sgoverning body or its committees.

Records

SYSC 4.5.21 G

A firm should consider past versions of its management responsibilities map as an important part of its records and as an important resource for the FCA in supervising the firm.

SYSC 4.5.22 G

Past versions of a firm'smanagement responsibilities map form part of its records under SYSC 9.1 (General rules on record-keeping).

SYSC 4.6 Management responsibilities maps for non-UK relevant authorised persons1

Application

SYSC 4.6.1 R

2This section applies to:

  1. (1)

    EEA relevant authorised persons; and

  2. (2)

    third-country relevant authorised persons;

in relation to the activities of a branch maintained by them in the United Kingdom.

SYSC 4.6.2 R

There is no territorial limitation on the application of SYSC 4.6, save as set out in SYSC 4.6.1R.

SYSC 4.6.3 R

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

Purpose

SYSC 4.6.5 G
  1. (1)

    This section sets out the rules about management responsibilities maps for branches maintained in the United Kingdom by:

    1. (a)

      third-country relevant authorised persons (see SYSC 4.6.6R to SYSC 4.6.14G and SYSC 4.6.29G);

    2. (b)

      EEA relevant authorised persons (see SYSC 4.6.15R to SYSC 4.6.28G and SYSC 4.6.29G).

  2. (2)

    This section is not intended to extend the application of the common platform requirements to matters which are reserved by an EU instrument to the firm’sHome State regulator in relation to EEA relevant authorised persons.

General rule for third-country relevant authorised persons

SYSC 4.6.6 R

A third-country relevant authorised person must, at all times, have a comprehensive and up-to-date document (the management responsibilities map) that describes the management and governance arrangements for any branch it maintains in the United Kingdom, including:

  1. (1)

    details of the reporting lines and the lines of responsibility; and

  2. (2)

    reasonable details about:

    1. (a)

      the persons who are part of those arrangements; and

    2. (b)

      their responsibilities.

(See further requirements in SYSC 4.6.9R.)

SYSC 4.6.7 R

The third-country relevant authorised person’smanagement responsibilities map for a branch must show clearly how any responsibilities covered by that management responsibilities map are shared or divided between different persons.

SYSC 4.6.8 G
  1. (1)

    One purpose of the management responsibilities map for third country relevant authorised persons is to help the firm and the FCA satisfy themselves that the branch has a clear organisational structure (as required by SYSC, where applicable).

  2. (2)

    It also helps the FCA to identify who it needs to speak to about particular issues and who is accountable if something goes wrong.

Specific requirements for third-country relevant authorised persons

SYSC 4.6.9 R
  1. (1)

    A management responsibilities map for a branch maintained by a third-country relevant authorised person must include the matters listed in SYSC 4.5.7R, subject to the modifications in (2).

  2. (2)

    Unless the context requires otherwise, the following terms in SYSC 4.5.7R are modified as follows:

    Reference in SYSC 4.5.7R

    Modification

    firm

    treated as a reference to the branch

    governing body, management body, senior management and senior personnel

    (a) treated as a reference to the branch’sgoverning body, management body, senior management or senior personnel;

    (b) the Glossary definitions of these terms are adjusted so as to refer to the branch rather than the firm as a whole

    group

    treated as including the rest of the firm

    PRA-prescribed senior management responsibilities

    treated as a reference to PRA-prescribed UK branch senior management responsibilities

    functions allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions)

    treated as a reference to functions allocated under SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions)

SYSC 4.6.10 R

SYSC 4.6.9R(1) does not require the firm to include the names of approved persons under SUP 10A.1.16BR (Appointed representatives).

Single document

SYSC 4.6.11 R

A management responsibilities map for a branch maintained by a third-country relevant authorised person must be a single document (see SYSC 4.6.14G(1)(b) for more on this).

Guidance about management responsibilities maps for a branch maintained by a third-country relevant authorised person

SYSC 4.6.12 G
  1. (1)

    The management responsibilities map should be consistent with the statements of responsibilities.

  2. (2)

    The statements of responsibilities and the management responsibilities map should all be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the firm.

SYSC 4.6.13 G

The management responsibilities map for a branch maintained by a third-country relevant authorised person should include functions that are:

  1. (1)

    included in a PRA controlled function under SUP 10C.9 (Minimising overlap with the PRA approved persons regime); or

  2. (2)

    excluded from the other local responsibility function under SUP 10C.8.1R (Exclusion for approved person with approval to perform other designated senior management functions).

SYSC 4.6.14 G
  1. (1)

    The guidance below applies to management responsibilities maps for branches maintained by third-country relevant authorised persons, subject to the modifications in (2):

    1. (a)

      SYSC 4.5.11G to SYSC 4.5.12G (Guidance about management responsibilities maps);

    2. (b)

      SYSC 4.5.15G (Single document);

    3. (c)

      SYSC 4.5.16G to SYSC 4.5.17G (Purpose of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person));

    4. (d)

      SYSC 4.5.18G to SYSC 4.5.20G (Contents of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person));

    5. (e)

      SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person); and

    6. (f)

      SYSC 4.5.21G to SYSC 4.5.22G (Records).

  2. (2)

    Unless the context otherwise requires, the following terms and cross-references in the guidance in (1) are modified as follows:

    Reference in guidance in (1)

    Modification

    firm

    treated as a reference to the branch

    governing body, senior management and senior personnel

    (a) treated as a reference to the branch’sgoverning body, senior management or senior personnel;

    (b) the Glossary definitions of these terms are adjusted so as to refer to the branch rather than the firm as a whole

    other overall responsibility function

    treated as a reference to the other local responsibility function

    SYSC 4.5.5R

    treated as a reference to SYSC 4.6.7R

    SYSC 4.5.7R

    subject to modification under SYSC 4.6.9R(2)

    SYSC 4.7.8R

    treated as a reference to SYSC 4.8.10R

    the reference to SYSC 4.5.13G in SYSC 4.5.15G(5)

    treated as a reference to SYSC 4.6.29G

Management responsibilities maps for EEA relevant authorised persons: General rule

SYSC 4.6.15 R

An EEA relevant authorised person must, at all times, have a comprehensive and up-to-date document (the management responsibilities map) that describes the management and governance arrangements for any branch it maintains in the United Kingdom, including:

  1. (1)

    details of the reporting lines and the lines of responsibility; and

  2. (2)

    reasonable details about:

    1. (a)

      the SMF managers who carry out activities in relation to the branch; and

    2. (b)

      their responsibilities.

SYSC 4.6.16 R

The EEA relevant authorised person’smanagement responsibilities map for a branch must show clearly how any responsibilities covered by that management responsibilities map are shared or divided between different persons.

Responsibilities maps for EEA relevant authorised persons: purpose

SYSC 4.6.17 G
  1. (1)

    The management responsibilities map is an important support to the FCA’s functions as Host Statecompetent authority.

  2. (2)

    Having requirements and powers that apply directly to individuals helps to make the requirements on firms that the FCA is required or entitled to impose as Host Statecompetent authority more effective.

  3. (3)

    The management responsibilities map helps the FCA to operate its powers and requirements for individuals. For example it helps the FCA:

    1. (a)

      to identify who is accountable if something goes wrong;

    2. (b)

      to understand the role of the approved person (or candidate) in the branch and therefore to judge how to use its powers under the approved persons regime, such as the power to grant or refuse approval.

  4. (4)

    By helping the FCA to better understand how the branch is structured, the management responsibilities map also helps the FCA to carry out more effective supervision of conduct of business, money laundering and other Host State responsibilities.

Responsibilities maps for EEA relevant authorised persons: detailed requirements

SYSC 4.6.18 R

A management responsibilities map for a branch maintained by an EEA relevant authorised person must include:

  1. (1)
    1. (a)

      the names of all the branch’s:

      1. (i)

        approved persons;

      2. (ii)

        members of its governing body and (if different) management body who are not approved persons;

      3. (iii)

        senior management; and

      4. (iv)

        senior personnel; and

    2. (b)

      details of the responsibilities which they hold;

  2. (2)

    all responsibilities described in any current statement of responsibilities;

  3. (3)

    matters reserved to the governing body of the branch, or equivalent, (including the terms of reference of its committees) and, if different, the management body;

  4. (4)

    details of how the branch’s management and governance arrangements fit together with:

    1. (a)

      the wider firm;

    2. (b)

      its group; and

    3. (c)

      any other person in (5);

  5. (5)

    details of the extent to which the branch’s management and governance arrangements are provided by, or shared with, other members of its group, the wider firm, or others;

  6. (6)

    details of the reporting lines and the lines of responsibility (if any) between the branch and those who carry out functions in relation to them and:

    1. (a)

      other members of its group, other third parties or the wider firm;

    2. (b)

      persons acting as employees or officers of, or otherwise acting for, anyone in (a); or

    3. (c)

      committees or other bodies of anyone in (a);

  7. (7)

    reasonable information about the persons described or identified in the management responsibilities map, including:

    1. (a)

      whether they are employees of the firm and, if not, by whom they are employed;

    2. (b)

      if they are certification employees of the firm; and

    3. (c)

      the responsibilities they have in relation to the wider firm, other group members or any other person in (5); and

  8. (8)

    details of how (1) to (7) fit together and fit into the branch’s management and governance arrangements as a whole.

SYSC 4.6.19 R

SYSC 4.6.18R(1) does not require the firm to include the names of approved persons under SUP 10A.1.16BR (Appointed representatives).

Responsibilities maps for EEA relevant authorised persons: leaving out information already supplied

SYSC 4.6.20 R

An EEA relevant authorised person may exclude from its management responsibilities map:

  1. (1)

    any information contained in its requisite details;

  2. (2)

    any information contained in any notice of changes to its requisite details under the EEA Passport Rights Regulations; and

  3. (3)

    any other information that has been supplied by the firm to the FCA or the PRA (including through the firm’sHome Statecompetent authority) if:

    1. (a)

      that information was supplied to the FCA or the PRA as a Host Statecompetent authority for credit institutions or investment firms; and

    2. (b)

      the Single Market Directives or any other EU legislation provides for the supply of that information to the FCA or the PRA as described in (a).

SYSC 4.6.21 G

Information contained in SYSC 4.6.20R(1) and (2) covers:

  1. (1)

    details about the branch contained in the notice given by the firm’sHome Statecompetent authority as part of the process for establishing the branch in the United Kingdom; and

  2. (2)

    any updates to that information under the EEA Passport Rights Regulations.

SYSC 4.6.22 G

The management responsibilities map of an EEA relevant authorised person may therefore consist of information:

  1. (1)

    that has changed since its requisite details were supplied or were last changed; or

  2. (2)

    that is not covered in the firm’sHome Statecompetent authority’s passport notification.

SYSC 4.6.23 G

The FCA expects that an EEA relevant authorised person that excludes information from its management responsibilities map under SYSC 4.6.20R will identify in its management responsibilities map the documents supplied to the FCA or the PRA where the omitted information can be found.

SYSC 4.6.24 G

In practice an EEA relevant authorised person may find it easier to prepare its management responsibilities map without omitting any information under SYSC 4.6.20R so that all the information referred to in SYSC 4.6.15R to SYSC 4.6.19R can be found in a single integrated document.

Management responsibilities maps for EEA relevant authorised persons: Single document

SYSC 4.6.25 R

A management responsibilities map for a branch maintained by an EEA relevant authorised person must be a single document (see SYSC 4.6.28G(7)(a) for more on this).

Management responsibilities maps for EEA relevant authorised persons: guidance about what should be included

SYSC 4.6.26 G

SYSC 4.6.27G and SYSC 4.6.28G do not take into account the right of a firm to omit information under SYSC 4.6.20R. They assume that the firm will prepare a single document under SYSC 4.6.24G. However SYSC 4.6.27G and SYSC 4.6.28G are not intended to take away the right to omit information under SYSC 4.6.20R.

SYSC 4.6.27 G
  1. (1)

    The management responsibilities map should be consistent with the statements of responsibilities.

  2. (2)

    The statements of responsibilities and the management responsibilities map should be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the branch.

SYSC 4.6.28 G
  1. (1)

    This provision gives guidance on specific aspects of SYSC 4.6.16R and SYSC 4.6.18R.

  2. (2)

    A firm need only include summary details of the persons in SYSC 4.6.18R(1).

  3. (3)

    A branch’sSMF managers and members of its governing body or equivalent may overlap with its senior management and senior personnel. If so, the firm does not have to give the same details twice.

  4. (4)

    A firm should include details of individuals in addition to those in SYSC 4.6.18R(1) if they are needed to make the management responsibilities map clear. For example, it may be necessary to include these details if the same individual has responsibilities in a number of different areas of the branch.

  5. (5)

    A firm should only include summary details about statements of responsibilities under SYSC 4.6.18R(2). There is no need to duplicate the statements of responsibilities.

  6. (6)

    If any designated senior management function is performed by more than one person, a firm’smanagement responsibilities map should give details of how the performance or discharge of the responsibilities is to be carried out by those persons.

  7. (7)

    The guidance below applies to EEA relevant authorised persons subject to the modifications in (8):

    1. (a)

      SYSC 4.5.15G (Single document);

    2. (b)

      SYSC 4.5.21G to SYSC 4.5.22G (Records).

  8. (8)

    Unless the context otherwise requires, any reference in the guidance in (7) to:

    1. (a)

      the firm should be treated as a reference to the branch:

    2. (b)

      the reference to SYSC 4.5.13G in SYSC 4.5.15G(5) should be treated as a reference to SYSC 4.6.29G.

Management responsibilities maps for small branches maintained by non-UK relevant authorised persons

SYSC 4.6.29 G
  1. (1)

    The guidance in this paragraph applies to EEA relevant authorised persons and third-country relevant authorised persons.

  2. (2)

    The FCA expects that the management responsibilities map of a small and non-complex branch is likely to be simple and short. It may be no more than a single sheet of paper.

  3. (3)

    A branch is likely to be small and non-complex if it:

    1. (a)

      conducts a limited number of simple business lines; and

    2. (b)

      does not rely on group governance arrangements or on governance arrangements for other parts of the firm.

SYSC 4.7 Senior management responsibilities for UK relevant authorised persons: allocation of responsibilities1

Application

SYSC 4.7.1 R

This section applies to UK relevant authorised persons3..

SYSC 4.7.2 R

There is no territorial limitation on the application of this section.

SYSC 4.7.3 R

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

Purpose of this section

SYSC 4.7.4 G

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 firm's activities.

Allocation of FCA-prescribed senior management responsibilities

SYSC 4.7.5 R
  1. (1)

    A firm must allocate each of the FCA-prescribed senior management responsibilities in Part 1 of the table in SYSC 4.7.7R to one or more SMF managers of the firm.

  2. (2)

    Except as described in (3), a firm must allocate each of the FCA-prescribed senior management responsibilities in Part 2 of the table in SYSC 4.7.7R to one or more SMF managers of the firm.

  3. (3)

    Paragraph (2) does not apply to:

    1. (a)

      a firm that is a small CRR firm as defined in the part of the PRA's rulebook called “Allocation of responsibilities”; or

    2. (b)

      a credit union.

  4. (4)

    If an FCA-prescribed senior management responsibility in Part 3 of the table in SYSC 4.7.7R applies to a firm as described in column (2) of that Part, the firm must allocate that FCA-prescribed senior management responsibility to one or more SMF managers of the firm.

  5. (5)

    A 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 for that firm, subject to (6).

  6. (6)

    A firm may allocate the FCA-prescribed senior management responsibility in row (11) of the table in SYSC 4.7.7R (functions in relation to CASS) to an SMF manager who is only approved to perform the other overall responsibility function.

  7. (7)

    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 4.7.6 R
SYSC 4.7.7 R

Table: FCA-prescribed senior management responsibilities

FCA-prescribed senior management responsibility

Explanation

Equivalent PRA-prescribed senior management responsibility

Part One (applies to all firms)

(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);4

(3) compliance by the firm with its obligations under section 60A of the Act (Vetting of candidates by relevant authorised persons); and4

4(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 senior management responsibility 4.1(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:4

4(1) SYSC 5.2 (Certification Regime);

4(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

4(3) the corresponding PRA requirements.

PRA-prescribed senior management responsibility 4.1(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 senior management responsibility 4.1(3)

(4) Overall responsibility for the firm's policies and procedures for countering the risk that the firm might be used to further financial crime

(1)2 This includes the function in 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 that rule applies to the firm.

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

(3)2 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.

None

2(4A) Acting as the firm’swhistleblowers’ champion

The whistleblowers’ champion’s allocated responsibilities are set out in SYSC 18.4.4R

Part Two (applies to all firms except for small CRR firms and credit unions)

(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'sgoverning body.

PRA-prescribed senior management responsibility 4.1(13)

(6) Responsibility for monitoring the effective implementation of policies and procedures for the induction, training and professional development of all persons performing designated senior management functions on behalf of the firm other than members of the governing body.

PRA-prescribed senior management responsibility 4.1(5)

(7) Responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the internal audit function, in accordance with SYSC 6.2 (Internal Audit)

This responsibility includes responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

a person approved to perform the PRA's Head of Internal Audit designated senior management function for the firm.

PRA-prescribed senior management responsibility 4.1(15)

(8) Responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the compliance function in accordance with SYSC 6.1 (Compliance

).

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.

PRA-prescribed senior management responsibility 4.1(16)

(9) Responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

the risk function, in accordance with SYSC 7.1.21R and SYSC 7.1.22R (Risk control).

This responsibility includes responsibility for:

(a) safeguarding the independence of; and

(b) oversight of the performance of;

a person approved to perform the PRA's Chief Risk designated senior management function for the firm.

PRA-prescribed senior management responsibility 4.1(17)

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

PRA-prescribed senior management responsibility 4.1(18)

Part Three (applies in specified circumstances)

(11) Overall 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:

(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.

(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.

None

Allocation of overall responsibility for a firm’s activities, business areas and management functions

SYSC 4.7.8 R
  1. (1)

    A firm must ensure that, at all times, one or more of its SMF managers have overall responsibility for each of the activities, business areas and management functions of the firm.

  2. (2)

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

    1. (a)

      included in an FCA-prescribed senior management responsibility;

    2. (b)

      included in an PRA-prescribed senior management responsibility; or

    3. (c)

      managed (as part of the PRA-designated senior management function concerned) by any of the firm'sSMF 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;

      4. (iv)

        the Head of Key Business Area function; or

      5. (v)

        the Group Entity Senior Manager function.

  3. (3)

    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 4.7.9 G

The purpose of SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) is to avoid gaps. It is to make sure that an SMF manager has responsibility for every part of a firm's activities, business areas and management functions not otherwise covered by other parts of this section or by the equivalent PRA requirements.

SYSC 4.7.10 G

As explained in SYSC 4.7.18G, SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) does not apply to non-executive functions.

Meaning of overall responsibility

SYSC 4.7.11 G

When SYSC 4.7 refers to a person having overall responsibility for a function, it means a person who has:

  1. (1)

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

  2. (2)

    primary and direct responsibility for:

    1. (a)

      briefing and reporting to the governing body about that function; and

    2. (b)

      putting matters for decision about that function to the governing body.

SYSC 4.7.12 G

Having overall responsibility for a matter does not mean having ultimate authority over it. The ultimate decision-making body of a firm is its governing body, acting collectively.

SYSC 4.7.13 G
  1. (1)

    A person with overall responsibility for a matter will either be a member of the governing body or will report directly to the governing body for that matter.

  2. (2)

    For example, a firm appoints A to be head of sales. A is not on the governing body. A reports to an executive director (B) and B reports to the governing body about the sales function. In this example B, rather than A, has overall responsibility for sales.

SYSC 4.7.14 G
  1. (1)

    A person who reports to another, or is subject to oversight by another, may still have overall responsibility for a function.

  2. (2)

    For example, a head of compliance may report direct to the governing body but be subject to performance appraisal by the chief executive. In this example, the head of compliance will still have overall responsibility for compliance.

  3. (3)

    If a person (A):

    1. (a)

      reports directly to the firm'sgoverning body about a particular matter; but

    2. (b)

      is not a member of the governing body; and

    3. (c)

      reports to a member of the governing body (B) about that matter;

  4. B has overall responsibility for that matter.

  5. (4)

    If:

    1. (a)

      a person (A) reports directly to the firm'sgoverning body about a particular matter;

    2. (b)

      A also reports to another person (B) about that matter;

    3. (c)

      neither A nor B is a member of the governing body; and

    4. (d)

      B also reports directly to the firm'sgoverning body about that matter;

  6. B has overall responsibility for that matter.

  7. (5)

    A member of the governing body who reports to the chief executive may still have overall responsibility for a function.

  8. (6)

    If:

    1. (a)

      a person (A) reports directly to the firm'sgoverning body about a particular matter; and

    2. (b)

      A’s function is subject to oversight by a non-executive director (B) or by a committee of the firm'sgoverning body chaired by B;

  9. A (not B) has overall responsibility for that matter.

SYSC 4.7.15 G

When this section refers to a person having overall responsibility for a function, it does not mean that that person has day-to-day management control of that function.

SYSC 4.7.16 G

In general, the FCA expects that a person to whom overall responsibility for an area of a firm is allocated under SYSC 4.7.8R will be the most senior employee or officer responsible for managing that area.

SYSC 4.7.17 G
  1. (1)

    SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) does not mean that the firm has to allocate overall responsibility for the running of the governing body itself.

  2. (2)

    This is because SYSC 4.7.8R is about assigning responsibility subject to the overall control of the governing body (see SYSC 4.7.12G).

  3. (3)

    This means that a person does not have overall responsibility for a function under SYSC 4.7.8R just by being a member of a firm'sgoverning body.

SYSC 4.7.18 G
  1. (1)

    A person who just provides oversight of a function does not have overall responsibility for that function under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions).

  2. (2)

    Paragraph (1) and SYSC 4.7.17G mean that a non-executive director acting as such does not have overall responsibility for a function under SYSC 4.7.8R or perform the other overall responsibility function.

  3. (3)

    Paragraph (1) and SYSC 4.7.17G mean that a non-executive director:

    1. (a)

      providing oversight of a function; or

    2. (b)

      being responsible for the independence of a function;

    3. does not have overall responsibility for that function under SYSC 4.7.8R or perform the other overall responsibility function.

Who functions should be allocated to

SYSC 4.7.19 G

The FCA expects a firm to allocate all the functions in SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities) and SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) to an individual and not to a legal person.

SYSC 4.7.20 G

The FCA would not consider it unusual if a person who has overall responsibility for a particular function was not a member of the governing body. For example, in some firms, the head of compliance reports directly to the governing body even though the head compliance is not a member of the governing body.

SYSC 4.7.21 G
  1. (1)

    A person may have overall responsibility for a matter without being a member of the firm'sgoverning body, which means that (ignoring (2)) a relatively junior person could have overall responsibility for an activity of a firm.

  2. (2)

    However, the FCA expects that anyone who has overall responsibility for a matter:

    1. (a)

      will be sufficiently senior and credible; and

    2. (b)

      will have sufficient resources and authority;

  3. to be able to exercise his management and oversight responsibilities effectively.

SYSC 4.7.22 G

SYSC 4.7.21G(2) also applies to someone who has responsibility for an FCA-prescribed senior management responsibility.

SYSC 4.7.23 G
  1. (1)

    It will be common for a small non-complex firm to divide overall responsibility for its activities between members of its governing body and not to assign overall responsibility for any activity to someone who is not a member.

  2. (2)

    However, when deciding how to divide up overall responsibility for its activities, a firm should avoid assigning such a wide range of responsibilities to a particular person so that the person is not able to carry out those responsibilities effectively.

  3. (3)

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

SYSC 4.7.24 G
  1. (1)

    The FCA expects that normally a firm will allocate the FCA-prescribed senior management responsibility in rows (5), (7), (8), (9) and (10) of the table in SYSC 4.7.7R to an SMF manager who is a non-executive director of the firm.

  2. (2)

    The FCA expects that normally a firm will allocate:

    1. (a)

      the other FCA-prescribed senior management responsibilities; and

    2. (b)

      functions under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

    3. to an SMF manager who performs executive functions for the firm.

  3. (3)

    In general, the FCA expects that a person who has responsibility for an FCA-prescribed senior management responsibility in (2) will be the most senior employee or officer responsible for managing that area.

  4. (4)

    Paragraphs (1) to (3) do not apply to a small non-complex firm to the extent that they deal with those FCA-prescribed senior management responsibilities that, under the table in SYSC 4.7.7R, do not apply to small firms.

  5. (5)

    The FCA accepts that it may not be practical for a small non-complex firm (see SYSC 4.5.13G) to comply with the parts of (1), (2) and (3) that would otherwise apply to it.

Dividing and sharing management functions between different people

SYSC 4.7.25 G
  1. (1)

    The 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.

  2. (2)

    The FCA expects that a firm will not normally allocate responsibility for:

    1. (a)

      an FCA-prescribed senior management responsibility; or

    2. (b)

      a function under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

  3. to two or more SMF managers jointly.

SYSC 4.7.26 G
  1. (1)

    Although the norm should be for a firm to have a single individual performing each FCA-prescribed senior management responsibility or function allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions), 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 function or 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 4.7.27 G
  1. (1)

    The FCA expects a firm to divide and allocate responsibilities under:

    1. (a)

      SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities); and

    2. (a)

      SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

  2. between its SMF managers so that responsibilities are grouped together appropriately.

  3. (2)

    The firm should make the judgement:

    1. (a)

      in (1); and

    2. (b)

      about whether and how responsibilities and functions should be shared;

    3. under:

    4. (c)

      SYSC 4.1.1R (robust governance arrangements); and

    5. (d)

      any other applicable Handbook requirements, including SYSC 4.7.25G and SYSC 4.7.26G.

  4. (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 (see SYSC 4.7.23G).

  5. (4)

    The FCA expects a firm to allocate FCA-prescribed senior management responsibilities and responsibilities allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) to the SMF managers they are most closely linked to.

SYSC 4.7.28 G

SUP 10C.11.31G to SUP 10C.11.33G (Statements of responsibilities) contains material about:

  1. (1)

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

  2. (2)

    dividing and sharing responsibilities.

SYSC 4.7.29 G
  1. (1)

    A 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 4.7.23G (should not give too many responsibilities to one person); and

    2. (b)

      SYSC 4.7.27G (what responsibilities should be grouped together).

Allocation of responsibilities and territorial scope.

SYSC 4.7.30 G
  1. (1)

    As explained in SYSC 4.7.2R, there is no territorial limitation to the application of this section.

  2. (2)

    This means that a firm should allocate:

    1. (a)

      the FCA-prescribed senior management responsibilities; and

    2. (b)

      overall responsibilities under SYSC 4.7.8R;

    3. 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.

Group management arrangements and outsourcing

SYSC 4.7.31 G
  1. (1)

    SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) requires overall 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)

    A firm has two main choices about how to fit such arrangements into the senior management regime for relevant authorised persons.

    1. (a)

      The group employee is appointed by the firm'sgoverning body to perform the function. This means that the firm will have entered into an arrangement with that person. As explained in SUP 10C.3.9G, an arrangement with the firm is one of the factors that makes the senior management regime for relevant authorised persons apply. The result is that the group official will be performing a controlled function and will need to be approved as an SMF manager.

    2. (b)

      The firm appoints someone (A) to oversee what the group employee does (so far as it concerns the firm) and to take overall responsibility for the function. A will need to be approved as an SMF manager.

SYSC 4.7.32 G
  1. (1)

    SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) does not cover responsibility for an aspect of a firm's affairs managed by an individual approved to perform the Group Entity Senior Manager PRA-designated senior management function.

  2. (2)

    Where a responsibility is held by someone approved to perform the Group Entity Senior Manager PRA-designated senior management function for the firm, there is no need to apply the arrangements in SYSC 4.7.31G.

  3. (3)
    1. (a)

      The statement of responsibilities for the individual performing the Group Entity Senior Manager PRA-designated senior management function; and

    2. (b)

      the firm'smanagement responsibilities map;

    should clearly show what responsibilities are held by that individual.

SYSC 4.7.33 G

A firm may rely on an employee of a company in the same group to perform an FCA-prescribed senior management responsibility. However, SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities) also requires this to be arranged in such a way that the person performing the responsibility is approved as an SMF manager of the firm.

SYSC 4.7.34 G

SYSC 4.7.31G and SYSC 4.7.33G also apply to a firm that outsources functions to a third party and is relying on an individual from the outsourced services provider to carry out the functions in those paragraphs.

Link between the senior management regime and this section

SYSC 4.7.35 G
  1. (1)

    A firm should allocate between its SMF managers responsibility for every area of its activities.

  2. (2)

    This is required by a mixture of:

    1. (a)

      SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities);

    2. (b)

      SYSC 4.7.8R (Allocation of overall 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 4.7.36 G
  1. (1)

    Having overall responsibility for an activity under SYSC 4.7.8R requires approval as an SMF manager. This is because a person who has overall responsibility for an activity will be:

    1. (a)

      performing the other overall responsibility function; or

    2. (b)

      approved to perform another designated senior management function.

  2. (2)

    The other overall responsibility function applies because this is the effect of SUP 10C.7.1R (definition of other overall responsibility function).

  3. (3)

    SUP 10C.7.1R says that the other overall responsibility function does not apply to a person who is approved to perform another designated senior management function.

Link between SYSC 4 Annex 1G and this section

SYSC 4.7.37 G
  1. (1)

    The purpose of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person) is to help a firm to prepare its management responsibilities map (see SYSC 4.5.16G).

  2. (2)

    There is no direct link between SYSC 4 Annex 1G and this section.

  3. (3)

    However, a firm may find SYSC 4 Annex 1G useful as a checklist to help it make sure that it has not failed to allocate overall responsibility under SYSC 4.7.8R for a particular activity of the firm.

  4. (4)

    If a firm uses SYSC 4 Annex 1G to help it check whether it has allocated overall responsibility as described in (3), it should bear in mind that it is not comprehensive (see SYSC 4.5.20G).

SYSC 4.7.38 G

SYSC 4.7.26G (a firm should normally allocate responsibility for particular areas to a single SMF manager) does not mean that the FCA expects there to be a separate person with overall responsibility for each individual business area in SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person).

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

SYSC 4.8.1 R
SYSC 4.8.2 R

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

SYSC 4.8.3 R

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

SYSC 4.8.4 R

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

Purpose

SYSC 4.8.5 G

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 4.8.6 R
  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 4.8.7 R
SYSC 4.8.9 R

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 UKregulatory 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’sgroup

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 4.8.10 R
  1. (1)

    A firm must ensure that, at all times, one or more of its SMF managers has overall responsibility (subject to the branch’sgoverning body) for each of the activities, business areas and management functions of the branch that are under the management of the branch’sgoverning 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’sSMF 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’sgoverning 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 4.8.11 G
  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’sgoverning 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’sgoverning 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’sgoverning 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’sgoverning 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 4.8.12 G

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 4.8.13 G
  1. (1)

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

SYSC 4.8.14 G
  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 4.8.15 G
  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’sgoverning 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 UKfirm’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 4.8.16 G

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’sgoverning body or equivalent; and

    2. (b)

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

SYSC 4.8.17 G

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’sgoverning body.

SYSC 4.8.18 G

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 4.8.19 G

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 branchmanager 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 4.8.20 G
  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’sgoverning 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 4.8.21 G

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 4.8.22 G
  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’sgoverning body or equivalent.

  2. (2)

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

SYSC 4.8.23 G

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 4.8.24 G

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

SYSC 4.8.25 G
  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’sgoverning 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’sgoverning body).

SYSC 4.8.26 G
  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 4.8.27 G
  1. (1)

    Generally, where a firm allocates responsibility under SYSC 4.8.10R to one of the firm’sSMF 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 4.8.28 G
  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’sgoverning body between members of the branchgoverning 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’sgoverning 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’sgoverning body. In that case, a firm may allocate responsibility for the function to someone who is not a member of the branch’sgoverning 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’sgoverning body.

Group arrangements and outsourcing

SYSC 4.8.29 G
  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 4.8.30 G
  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 4.8.31 R
  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’sgoverning body” is a reference to “the branch’sgoverning body or equivalent”.

Link between the senior management regime and this section

SYSC 4.8.32 G
  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 4.8.33 G
  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 4.8.34 G

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 4.8.35 G

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.

SYSC 4.9 1Handover procedures and material

Application

SYSC 4.9.1 R
  1. (1)

    This section applies to UK relevant authorised persons and to third-country relevant authorised persons.2

  2. (2)

    For third-country relevant authorised persons, references in this section to an SMF manager are references to the SMF manager when acting as an SMF manager for the firm’sbranch in the United Kingdom.2

SYSC 4.9.2 R

There is no territorial limitation on the application of this section.

SYSC 4.9.3 R

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

Rules about handover material

SYSC 4.9.4 R

A firm must take all reasonable steps to ensure that:

  1. (1)

    a person who is becoming an SMF manager;

  2. (2)

    an SMF manager:

    1. (a)

      taking on a new job or new responsibilities; or

    2. (b)

      whose responsibilities or job are being changed; and

  3. (3)

    anyone who has management or supervisory responsibilities for the SMF manager in (1) or (2);

  4. has, when the SMF manager starts to perform his new or revised responsibilities or job, all information and material that a person in (1) to (3) could reasonably expect to have to perform those responsibilities or that job effectively and in accordance with the requirements of the regulatory system.

SYSC 4.9.5 R
  1. (1)

    A firm must have a policy about how it complies with SYSC 4.9.4R, including the systems and controls it uses.

  2. (2)

    A firm must make and maintain adequate records of the steps taken to comply with SYSC 4.9.4R.

SYSC 4.9.6 G

The information and material in SYSC 4.9.4R that should be made available includes details:

  1. (1)

    about unresolved or possible breaches of the requirements of the regulatory system; and

  2. (2)

    of any unresolved concerns expressed by the FCA, the PRA or another regulatory body.

SYSC 4.9.7 G
  1. (1)

    The main purpose of SYSC 4.9.4R is to help the SMF manager with his new or revised responsibilities or job and to help the managers of SMF managers.

  2. (2)

    It should be a practical and helpful document and not just a record.

  3. (3)

    The material should include an assessment of what issues should be prioritised.

  4. (4)

    It should include judgement and opinion, not just facts and figures.

Handover arrangements and certificates

SYSC 4.9.8 G
  1. (1)

    Where the responsibilities or job in SYSC 4.9.4R are being taken over from another person, the firm should have arrangements for an orderly transition.

  2. (2)

    As part of these arrangements, the firm should take reasonable steps to ensure that the predecessor contributes to the information and material in SYSC 4.9.4R all that would be reasonable to expect the predecessor to know and consider relevant, including the predecessor’s opinions.

  3. (3)

    One way of doing this could be for the predecessor to prepare a handover certificate.

  4. (4)

    However, the FCA accepts that there will be cases in which it will be impractical to ask the predecessor to prepare a handover certificate.

Application of this section to other parts of a firm’s management

SYSC 4.9.9 G

A firm should consider whether to apply the procedures in this section to other parts of its management.

SYSC 4 Annex 1 The main business activities and functions of a relevant authorised person1

SYSC 4 Annex 1 G

Business areas and management functions

Explanation

(1) Payment services

This means:

(1) payment services;

(2) issuing and administering other means of payment (for example, cheques and bankers' drafts);

(3) issuing electronic money; and

(4) current accounts.

(2) Settlement

This means clearing and settlement of any transactions described in rows (3) and (6) to (9) of this annex, in relation to the assets covered by (9).

It also includes clearing and settlement of any transactions described in row (10).

(3) Investment management

This has the same meaning as managing investments with the following adjustments:

(a) it covers all types of assets; and

(b) the exclusions in the Regulated Activities Order do not apply.

It also covers fund management.

(4) Financial or investment advice

This includes advising on investments.

(5) Mortgage advice

This has the same meaning as advising on regulated mortgage contracts but is expanded to cover land anywhere in the world and to cover security of any kind over land.

(6) Corporate investments

This means acquiring, holding, managing and disposing a firm's investments made for its own account.

(7) Wholesale sales

This means the selling of any investment to a person other than a retail customer.

It does not include the activities in (1).

(8) Retail sales

This means the selling of any investment to a retail customer.

It includes savings accounts. It does not include the activities in (1).

(9) Trading for clients

This means dealing in investments as agent and execution of orders on behalf of clients but the list of products includes money market instruments and foreign exchange.

(10) Market making

This has the same meaning as it does in MIFID (see the definition of market maker in article 4.1(8)).

(11) Investment research

(12) Origination/syndication and underwriting

Origination and syndication include:

(1) entering into or acquiring (directly or indirectly) any commitment or investment with a view to transferring some or all of it to others, or with a view to others investing in the same transaction;

(2) sub-participation; and

(3) any transaction described in the Glossary definition of originator.

Underwriting includes underwriting that is not on a firm commitment basis.

A commitment or investment includes an economic interest in some or all of it.

This activity also includes the provision of services relating to such transactions.

(13) Retail lending decisions

Deciding whether, and on what terms, to lend to retail customers.

Lending includes granting credit, leasing and hire (including finance leasing).

(14) Wholesale lending decisions

Deciding whether, and on what terms, to lend to persons who are not retail customers.

Lending includes granting credit, leasing and hire (including finance leasing).

(15) Design and manufacturing of products intended for wholesale customers

Wholesale customers mean persons who are not retail customers

(16) Design and manufacture of products intended for retail customers

(17) Production and distribution of marketing materials and communications

This includes financial promotions

(18) Customer service

This means dealing with clients after the point of sale, including queries and fulfilment of client requests

(19) Customer complaints handling

This includes the firm's compliance with DISP.

It also includes:

(1) any similar procedures relating to activities that do not come under the jurisdiction of the Financial Ombudsman Service;

(2) activities that take place outside the UK; and

(3) activities that are not subject to any ombudsman service.

(20) Collection and recovering amounts owed to a firm by its customers

Dealing with customers in arrears

‘Customer’ means any person falling into any of the definitions of client in the Glossary so far as they apply to the FCA's Handbook. The definition is extended to cover all services provided by the firm and not just those that are provided in the course of carrying on a regulated activity or an ancillary service.

(21) Middle office

This means risk management and controls in relation to, and accounting for, transactions in securities or derivatives

(22) The firm's information technology

(23) Business continuity planning

This means the functions described in SYSC 4.1.6R and SYSC 4.1.7R

(24) Human resources

This includes recruitment, training and competence and performance monitoring

(25) Incentive schemes for the firm's staff

This is not limited to schemes based on sales.

(26) Providing information in relation to a specified benchmark

(27) Administering a specified benchmark

Note (1): The purpose of this annex is explained in SYSC 4.5 (Management responsibilities maps for UK2 relevant authorised persons) and SYSC 4.7.37G. This annex is also referred to in SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons) and SYSC 4.8 (Senior management responsibilities for third-country relevant authorised persons: allocation of responsibilities) (see SYSC 4.6.14 and SYSC 4.8.35).2

Note (2): A firm does not have to use the split of activities in this annex for the purposes in Note (1). If a firm does decide to use it, it may adapt it to suit its management arrangements better.

For example, a firm may find the split of activities into retail and wholesale activities unsuitable. If so, the firm might:

(a) treat retail and wholesale activities together; or

(b) use its own definition of retail and wholesale activities.