Related provisions for IPRU-INV 13.1.18

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

Although financial resources and appropriate systems and controls can generally mitigate operational risk, professional indemnity insurance has a role in mitigating the risks a firm faces in its day-to-day operations, including those arising from not meeting the legally required standard of care when advising on investments. The purpose of the rules in this section is also to ensure that a firm has in place the type, and level, of professional indemnity insurance necessary to
A firm must take out and maintain at all times professional indemnity insurance that is at least equal to the requirements in this section from: (1) an insurance undertaking which is authorised to transact professional indemnity insurance in the UK6(2) a person of equivalent status in: (a) a Zone A country; (b) the Channel Islands, Gibraltar, Bermuda or the Isle of Man. [Note: articles 10(4) and 10(5) of the IDD4
[deleted]8
(1) A firm is not required to effect or maintain professional indemnity insurance if a bank, building society or an insurer provides the firm with a comparable guarantee.(2) If the firm is a member of a group in which there is a bank, building society or an insurer, the firm's comparable guarantee must be from that bank, building society or insurer.(3) A comparable guarantee means an enforceable, written agreement on terms at least equal to those required by
The term "relevant income" in this section refers to all income received or receivable which is commission, brokerage, fees or other related income, whether arising from the firm'spermitted activities or not, for the last accounting year prior to inception or renewal of the professional indemnity insurance policy ("the policy").
If the firm is an IDD insurance intermediary48, the appropriate minimum limits of indemnity per year are no lower than: (1) EUR 1,300,3807 for a single claim against the firm; and4(2) EUR 1,924,5607 in the aggregate.4[Note: articles 10(4) and 10(5)4 of the IDD4]
[deleted]832
[deleted]844432
If the firm is not an IDD insurance intermediary,8 then the following limits of indemnity apply: 4(1) if the firm has relevant income of up to £3,000,000, no lower than £500,000 for a single claim against the firm and £500,000 in the aggregate; or (2) if the firm has relevant income of more than £3,000,000, no lower than £650,000 for a single claim against the firm and £1,000,000 in the aggregate.
[deleted]644
If a policy is denominated in any currency other than euros, a firm must take reasonable steps to ensure that the limits of indemnity are, when the policy is effected (i.e. agreed) and at renewal, at least equivalent to those denominated in euros.

In addition to the specific requirements in IPRU(INV) 13.1.9R to IPRU(INV) 13.1.13R4

, the policy must make provision for the following:

  1. (1)

    for a firm with relevant income of more than £10,000,0004, the aggregate limit identified in the table below:

  2. Relevant income is (£)

    Minimum aggregate limit of indemnity

    more than

    up to

    (£)

    4

    4

    4

    4

    4

    4

    4

    4

    4

    4

    4

    4

    10,000,000

    12,500,000

    2,000,000

    12,500,000

    15,000,000

    2,400,000

    15,000,000

    17,500,000

    2,800,000

    17,500,000

    20,000,000

    3,150,000

    20,000,000

    25,000,000

    3,800,000

    25,000,000

    30,000,000

    4,250,000

    30,000,000

    35,000,000

    4,500,000

    35,000,000

    40,000,000

    4,750,000

    40,000,000

    50,000,000

    5,500,000

    50,000,000

    60,000,000

    6,000,000

    60,000,000

    70,000,000

    6,750,000

    70,000,000

    80,000,000

    7,250,000

    80,000,000

    90,000,000

    7,750,000

    90,000,000

    100,000,000

    8,500,000

    100,000,000

    150,000,000

    11,250,000

    150,000,000

    200,000,000

    14,000,000

    200,000,000

    250,000,000

    17,000,000

    250,000,000

    300,000,000

    19,750,000

    300,000,000

    n/a

    22,500,000

  3. (2)

    full retroactive cover in respect of the kinds of liabilities described in 13.1.9R for claims arising from work carried out by the firm, or on its behalf, in the past; and

  4. (3)

    cover in respect of Ombudsman awards made against the firm.

The policy must not be subject to conditions or exclusions which unreasonably limit its cover5.
(1) The FCA1 considers it reasonable for a firm's policy to exclude cover for:(a) specific business lines if that type of business has not been carried out by the firm in the past and will not be carried out by the firm during the life of the policy; or (b) specific claims that have been previously notified to the firm'sinsurer and claimed for under another policy. (2) The FCA1 does not consider it reasonable for a firm's policy to treat legal defence
A firm must notify the FCA1 immediately if it becomes aware, or has information which reasonably suggests, that any of the following matters in relation to its professional indemnity insurance has occurred, may have occurred or may occur in the foreseeable future: (1) professional indemnity insurance cannot be obtained within 28 days of the inception or renewal date; (2) professional indemnity insurance is cancelled; (3) the amount of aggregate cover is exhausted;
(1) 1For the purposes of the provisions relating to professional indemnity insurance, “additional capital resources” means readily realisable own funds or capital resources under IPRU-INV 13.15.3R, depending on the type of firm1.(2) 1The FCA1 expects items included in own funds or capital resources under IPRU-INV 13.15.3R, depending on the type of firm,1 to be regarded as “readily realisable” only if they can be realised, at any given time, within 90 days.
MIPRU 3.2.1RRP
A firm must take out and maintain professional indemnity insurance that is at least equal to the requirements of this section from:(1) an insurance undertaking authorised to transact professional indemnity insurance in the UK7; or(2) a person of equivalent status in:(i) a Zone A country; or(ii) the Channel Islands, Gibraltar, Bermuda or the Isle of Man.[Note: articles 10(4) and 10(5)6 of theIDD6]22
MIPRU 3.2.2GRP
The minimum limits of indemnity for a firm whose Part 4A permission covers both insurance distribution activity6 and home finance mediation activity1is the higher of the limits of indemnity for these activities. If the firm opts for a single comparable guarantee to finance the claims which might arise as a result of both activities, the requirements for insurance distribution activity6 apply.1
MIPRU 3.2.3GRP
A non-UK firm7 (such as a captive insurance company outside the UK7) will be able to provide professional indemnity insurance only if it is authorised to do so in one of the specified countries or territories.. The purpose of this provision is to balance the level of protection required for the policyholder against a reasonable level of flexibility for the firm.
MIPRU 3.2.4RRP
The contract of professional indemnity insurance must incorporate terms which make provision for:(1) cover in respect of claims for which a firm may be liable as a result of the conduct of itself, its employees and its appointed representatives (acting within the scope of their appointment);(2) the minimum limits of indemnity per year set out in this section;(3) an excess as set out in this section;(4) appropriate cover in respect of legal defence costs;(5) continuous cover in
MIPRU 3.2.7RRP
If the firm is an insurance intermediary, then the minimum limits of indemnity per year6are:(1) for a single claim, €1,300,3809; and336(2) in aggregate, the higher of:633(a) €1,924,5609; and6(b) an amount equivalent to 10% of annual income (this amount being subject to a maximum of £30 million).6[Note: articles 10(4) and 10(5)6 of theIDD6]22
MIPRU 3.2.7AGRP
[deleted]7366
MIPRU 3.2.8RRP
If a policy is denominated in any currency other than euros, a firm must take reasonable steps to ensure that the limits of indemnity are, when the policy is effected and at renewal, at least equivalent to those required.
MIPRU 3.2.9RRP
If the firm is a home finance intermediary that is not subject to MIPRU 3.2.9A R, then the minimum limit of indemnity is the higher of 10% of annual income up to £1 million, and:11(1) for a single claim, £100,000; or(2) in aggregate, £500,000.
MIPRU 3.2.9ARRP
4If the firm is: (1) an MCD article 3(1)(b) credit intermediary who is not also an MCD article 3(1)(b) creditor carrying out direct sales only5; or(2) a home finance intermediary that is:5(a) an MCD mortgage adviser; or(b) an MCD mortgage arranger,5who is not also an MCD mortgage lender carrying out direct sales only; then the minimum limit of indemnity is that specified in MIPRU 3.2.9BR8.7[Note: article 29(2) of the MCD]
MIPRU 3.2.9BRRP
7The minimum monetary amount of the professional indemnity insurance or comparable guarantee is7:(1) EUR 460 000 for each individual claim;(2) in aggregate EUR 750 000 per calendar year for all claims.[Note: article 1 of the Commission Delegated Regulation (EU) No 1125/2014.]7
MIPRU 3.2.11RRP
For a firm which does not hold client money or other client assets, the excess must not be more than the higher of:(1) £2,500; and(2) 1.5% of annual income.
MIPRU 3.2.12RRP
For a firm which holds client money or other client assets, the excess must not be more than the higher of:(1) £5,000; and(2) 3% of annual income.
MIPRU 3.2.13RRP
If a policy provides cover to more than one firm, then:(1) the limits of indemnity must be calculated on the combined annual income of all the firms named in the policy; and(2) each firm named in the policy must have the benefit of the relevant minimum limits of indemnity.
MIPRU 3.2.14RRP

If a firm seeks to have an excess which is higher than the relevant limit, it must hold additional capital as calculated in accordance with the appropriate table below:

Table: Calculation of additional capital for firm not holding client money or other client assets (£000's)

Income

Excess obtained up to and including:

More than

Up to

2.5

5

10

15

20

25

30

40

50

75

100

150

200+

0

100

0

5

9

12

14

17

19

23

26

33

39

50

59

100

200

0

7

12

16

19

22

25

30

34

43

51

64

75

200

300

0

7

12

16

20

24

27

32

37

47

56

71

84

300

400

0

0

12

16

21

24

28

34

39

50

60

77

91

400

500

0

0

11

16

21

24

28

34

40

53

63

81

96

500

600

0

0

10

16

20

24

28

35

41

54

65

84

100

600

700

0

0

0

15

20

24

28

35

41

55

67

87

104

700

800

0

0

0

14

19

24

28

35

42

56

68

89

107

800

900

0

0

0

13

18

23

27

35

42

56

69

91

109

900

1,000

0

0

0

0

17

22

27

34

41

57

70

92

111

1,000

1,500

0

0

0

0

0

21

26

34

41

57

71

97

118

1,500

2,000

0

0

0

0

0

0

0

30

38

56

71

98

121

2,000

2,500

0

0

0

0

0

0

0

24

33

53

69

99

126

2,500

3,000

0

0

0

0

0

0

0

0

28

50

68

101

130

3,000

3,500

0

0

0

0

0

0

0

0

0

47

67

101

132

3,500

4,000

0

0

0

0

0

0

0

0

0

43

65

101

133

4,000

4,500

0

0

0

0

0

0

0

0

0

39

62

101

134

4,500

5,000

0

0

0

0

0

0

0

0

0

0

58

99

134

5,000

6,000

0

0

0

0

0

0

0

0

0

0

54

97

133

6,000

7,000

0

0

0

0

0

0

0

0

0

0

0

91

131

7,000

8,000

0

0

0

0

0

0

0

0

0

0

0

84

126

8,000

9,000

0

0

0

0

0

0

0

0

0

0

0

75

120

9,000

10,000

0

0

0

0

0

0

0

0

0

0

0

0

113

10,000

100,000

0

0

0

0

0

0

0

0

0

0

0

0

0

100,000

n/a

0

0

0

0

0

0

0

0

0

0

0

0

0

Table: Calculation of additional capital for firm holding client money or other client assets (£000's)

Income

Excess obtained up to and including:

More than

Up to

5

10

15

20

25

30

40

50

75

100

150

200+

0

100

0

4

7

9

12

14

18

21

28

34

45

54

100

200

0

7

11

14

17

20

25

29

38

46

59

70

200

300

0

7

11

14

17

20

25

30

40

49

64

77

300

400

0

0

9

13

16

19

25

30

40

50

67

81

400

500

0

0

0

11

14

18

24

29

40

51

68

83

500

600

0

0

0

8

12

15

22

28

40

51

69

85

600

700

0

0

0

0

9

13

20

26

39

50

69

86

700

800

0

0

0

0

6

10

17

24

38

49

69

87

800

900

0

0

0

0

0

7

15

22

36

48

69

87

900

1,000

0

0

0

0

0

0

12

19

34

47

68

87

1,000

1,500

0

0

0

0

0

0

0

16

32

45

67

86

1,500

2,000

0

0

0

0

0

0

0

0

18

34

59

81

2,000

2,500

0

0

0

0

0

0

0

0

0

19

48

71

2,500

3,000

0

0

0

0

0

0

0

0

0

6

37

64

3,000

3,500

0

0

0

0

0

0

0

0

0

0

26

55

3,500

4,000

0

0

0

0

0

0

0

0

0

0

14

45

4,000

4,500

0

0

0

0

0

0

0

0

0

0

1

33

4,500

5,000

0

0

0

0

0

0

0

0

0

0

0

21

5,000

6,000

0

0

0

0

0

0

0

0

0

0

0

8

6,000

7,000

0

0

0

0

0

0

0

0

0

0

0

0

7,000

8,000

0

0

0

0

0

0

0

0

0

0

0

0

8,000

9,000

0

0

0

0

0

0

0

0

0

0

0

0

9,000

10,000

0

0

0

0

0

0

0

0

0

0

0

0

10,000

100,000

0

0

0

0

0

0

0

0

0

0

0

0

100,000

n/a

0

0

0

0

0

0

0

0

0

0

0

0

A full-scope UK AIFM should: (1) cover the professional liability risks set out in article 12 of the AIFMD level 2 regulation (professional liability risks) (as replicated in IPRU-INV 11.3.12UK1) by either:(a) maintaining an amount of own funds in line with article 14 of the AIFMD level 2 regulation (additional own funds) (as replicated in IPRU-INV 11.3.14UK) (the professional negligence capital requirement); or (b) holding professional indemnity insurance and
IPRU-INV 11.3.12UKRP
(1) 1The professional liability risks to be covered pursuant to the UK legislation that implemented1 Article 9(7) of Directive 2011/61/EU shall be risks of loss or damage caused by a relevant person through the negligent performance of activities for which the AIFM has legal responsibility.(2) Professional liability risks as defined in paragraph 1 shall include, without being limited to, risks of:(a) loss of documents evidencing title of assets
IPRU-INV 11.3.13UKRP
(1) An AIFM shall implement effective internal operational risk management policies and procedures in order to identify, measure, manage and monitor appropriately operational risks including professional liability risks to which the AIFM is or could be reasonably exposed. The operational risk management activities shall be performed independently as part of the risk management policy.(2) An AIFM shall set up a historical loss database, in which any operational failures,
IPRU-INV 11.3.14UKRP
(1) 1This Article shall apply to AIFMs that choose to cover professional liability risks through additional own funds.(2) The AIFM shall provide additional own funds for covering liability risks arising from professional negligence at least equal to 0,01 % of the value of the portfolios of AIFs managed. The value of the portfolios of AIFs managed shall be the sum of the absolute value of all assets of all AIFs managed by the AIFM, including assets acquired through use of leverage,
IPRU-INV 11.3.15UKRP
(1) 1This Article shall apply to AIFMs that choose to cover professional liability risks through professional indemnity insurance. (2) The AIFM shall take out and maintain at all times professional indemnity insurance that: (a) shall have an initial term of no less than one year; (b) shall have a notice period for cancellation of at least 90 days;(c) shall cover professional liability risks as defined in Article 12(1) and (2); (d) is taken out from an EU or non-EU undertaking
IPRU-INV 11.3.15EURP
(1) This Article shall apply to AIFMs that choose to cover professional liability risks through professional indemnity insurance. (2) The AIFM shall take out and maintain at all times professional indemnity insurance that: (a) shall have an initial term of no less than one year; (b) shall have a notice period for cancellation of at least 90 days; (c) shall cover professional liability risks as defined in Article 12(1) and (2); (d) is taken out
If a firm satisfies the requirement referred to in IPRU-INV 11.3.11G with professional indemnity insurance it must, in addition to maintaining an amount of own funds to cover any defined excess, hold adequate own funds to cover any exclusions in the insurance policy that would otherwise result in the firm having insufficient resources to cover liabilities arising. A firm may satisfy its requirements for professional indemnity insurance with a policy that also provides cover to
MIPRU 3.1.1RRP
62(1) [deleted]6(1A) Subject to the exceptions in (3) to (8), this chapter applies to a firm with Part 4A permission to carry on any of the following activities:6(a) insurance distribution activity8;6(b) home finance mediation activity; and6(c) MCD article 3(1)(b) credit intermediation activity.6(2) [deleted]61515(3) In6 relation to insurance distribution activity8, this chapter does not apply to a firm if another authorised person which has net tangible assets of more than £10
MIPRU 3.1.3GRP
The purposes of this chapter are to:(1) reflect the UK provisions which implemented9 articles 10(4) and 10(5)8 of the IDD8 in so far as it required 9insurance intermediaries to hold professional indemnity insurance, or some other comparable guarantee, against any liability that might arise from professional negligence; and(2) meet the statutory objectives12 of consumer protection and protecting and enhancing the integrity of the UK financial system12 by ensuring that firms have
MIPRU 3.1.4GRP
Any breach in the duty of a firm or of its agents under the regulatory system or civil law can give rise to claims being made against the firm. Professional indemnity insurance has an important role to play in helping to finance such claims. In so doing, this chapter amplifies threshold condition 4 (Adequate resources). This threshold condition provides that a firm must have, on a continuing basis, resources that are, in the opinion of the appropriate regulator, adequate in relation
MIPRU 3.1.6GRP
Although financial resources and appropriate systems and controls can generally mitigate operational risk, professional indemnity insurance has a role in mitigating the risks a firm faces in its day to day operations, including those arising from not meeting the legally required standard of care when advising on investments. The purpose of this chapter is to ensure that a firm has in place the type, and level, of professional indemnity insurance necessary to mitigate these ri
IPRU-INV 2.3.1RRP
A firm must effect and maintain at all times adequate professional indemnity insurance cover for all the business activities which it carries on, or for which it is responsible.
IPRU-INV 2.3.2GRP
In assessing the adequacy of a firms' professional indemnity insurance cover for the purposes of IPRU-INV 2.3.1R, the FCA may have regard to a firm's compliance with the professional indemnity insurance requirements of its designated professional body in force at the time.
A firm must: (1) when it first becomes a collective portfolio management firm or a collective portfolio management investment firm, hold initial capital of not less than the applicable base own funds requirement (in line with IPRU-INV 11.3.1R);(2) at all times, maintain own funds which equal or exceed:(a) the higher of:(i) the funds under management requirement (in line with IPRU-INV 11.3.2R); and(ii) the amount specified in IPRU-INV 11.3.3AR2; plus 11(b) whichever is applicable
(1) The professional negligence capital requirement applies to a full-scope UK AIFM which, in line with IPRU-INV 11.3.11G(1)(a), covers professional liability risks by way of own funds. (2) The PII capital requirement applies to a full-scope UK AIFM which, in line with IPRU-INV 11.3.11G(1)(b), decides to cover professional liability risks by professional indemnity insurance.
SUP 16.12.22ARRP

2The applicable data items referred to in SUP 16.12.4 R are set out according to type of firm in the table below:

89Description of data item

Firms’ prudential category and applicable data item (note 1)

MIFIDPRU investment firms

Firms subject to IPRU(INV)

Chapter 13

Firms that are also in one or more of RAGs 2 to 6 and not subject to IPRU(INV)

Chapter 13

Solvency statement

No standard format

(note 2)

Balance sheet

FSA029

(note 3)

Section A RMAR

Income statement

FSA030

(note 3)

Section B RMAR

Capital adequacy

MIF001

(notes 3 and 6)

Section D1 RMAR (note 9)

Liquidity

MIF002 (notes 3, 4 and 6)

Metrics monitoring

MIF003

(notes 3 and 6)

Concentration risk

(non-K-CON)

MIF004

(notes 3, 5 and 6)

Concentration risk

(K-CON)

MIF005

(notes 3, 5 and 6)

Group capital test

MIF006

(notes 6 and 8)

ICARA assessment questionnaire

MIF007

(note 6)

Supplementary capital data for collective portfolio management investment firms

FIN067

(note 10)

Professional indemnity insurance (note 11)90

Section E RMAR

Section E RMAR

Section E RMAR

Threshold conditions

Section F RMAR

Training and competence

Section G RMAR

Section G RMAR

Section G RMAR

COBS data

Section H RMAR

Section H RMAR

Section H RMAR

Client money and client assets

Section C RMAR

Section C RMAR

Fees and levies

Section J RMAR

Section J RMAR

Adviser charges

Section K RMAR (note 7)

Section K RMAR (note 7)

Section K RMAR (note 7)

Note 1

When submitting the completed data item required, a firm (except a MIFIDPRU investment firm in relation to an item reported under MIFIDPRU 9) must use the format of the data item set out in SUP 16 Annex 24R, or SUP 16 Annex 18AR in the case of the RMAR. Guidance notes for completion of the data items are contained in SUP 16 Annex 25, or SUP 16 Annex 18BG in the case of the RMAR.

Note 2

Only applicable to a firm that is a sole trader or partnership. Where the firm is a partnership, this report must be submitted by each partner.

Note 3

A UK parent entity of an investment firm group to which consolidation applies under MIFIDPRU 2.5 must also submit this report on the basis of the consolidated situation.

Note 4

Does not apply to an SNI MIFIDPRU investment firm which has been granted an exemption from the liquidity requirements in MIFIDPRU 6.

Note 5

Only applicable to a non-SNI MIFIDPRU investment firm.

Note 6

Data items MIF001 – MIF007 must be reported in accordance with the rules in MIFIDPRU 9.

Note 7

This item only applies to firms that provide advice on retail investment products and P2P agreements.

Note 8

Only applicable to a parent undertaking to which the group capital test applies.

Note 9

Where a firm submits data items for both RAG 7 and RAG 9, the firm must complete Section D1.

Note 10

Only applicable to firms that are collective portfolio management investment firms.

Note 11

This item only applies94 to firms that are subject to an FCA requirement to hold professional indemnity insurance94.

90
SUP 16.12.28ARRP

2The applicable data items, reporting frequencies and submission deadlines referred to in SUP 16.12.4 R are set out in the table below. Reporting frequencies are calculated from a firm'saccounting reference date, unless indicated otherwise. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period.

Description of data item11

Data item11 (note 1)

Frequency

Submission deadline

Annual regulated business revenue up to and including £5 million

Annual regulated business revenue over £5 million

88Home finance mediation activity and insurance distribution activity

Balance Sheet

Section A RMAR

Half yearly

Quarterly

30 business days

Income Statement

Section B RMAR

Half yearly

Quarterly

30 business days

Capital Adequacy (note 3)58

Section D1 RMAR

Half yearly

Quarterly

30 business days

Professional indemnity insurance

(note 2)11

Section E RMAR

Half yearly

Quarterly 11

11

30 business days

Threshold Conditions

Section F RMAR

Half yearly

Half yearly

30 business days

Training and Competence

Section G RMAR

Half yearly

Half yearly

30 business days

COBS11 data

Section H RMAR

Half yearly

Half yearly

30 business days

Supplementary product sales data

Section I RMAR

Half yearly11

11

Annually

30 business days

Client money and client assets (note 3)58

Section C RMAR

Half yearly

Quarterly

30 business days

Fees and levies

Section J RMAR

Annually

Annually

30 business days

88Funeral plan distribution activity

88Funeral plan financials return: distributors (note 4)]

FPR003b92

Half yearly (note 5)

80 business days

Note 1

When submitting the completed data item required, a firm must use the format of the data item set out in SUP 16 Annex 18A. Guidance notes for the completion of the data items is set out in SUP 16 Annex 18B.

11Note 2

This item only applies to firms that may be subject to an FCA80 requirement to hold professional indemnity insurance94.

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58Note 3

This item does not apply to firms who only carry on home finance mediation activities exclusively in relation to second charge regulated mortgage contracts or legacy CCA mortgage contracts (or both)66 and who are not otherwise expected to complete it by virtue of carrying out other regulated activities.

This item also does not apply if the firm is a P2P platform operator facilitating home finance transactions and is not required to submit it by virtue of carrying out other regulated activities. 83

88Note 4

When submitting the completed data item required, a firm must use the format of the data item set out in SUP 16 Annex 50B92. Guidance notes for the completion of the data item are set out in SUP 16 Annex 50B92.

88Note 5

Reporting frequencies and reporting periods for this data item are calculated on a calendar year basis and not from a firm’s accounting reference date. The relevant half year periods end on 30 June and 31 December.

(1) This chapter amplifies threshold condition 2D (Appropriate resources) by providing that a firm must meet, on a continuing basis, a minimum capital resources requirement. This chapter also amplifies Principles 3 and 4 which require a firm to take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems, and to maintain adequate financial resources by setting out a capital resources requirement for a firm according
CREDS 10.1.3GRP

Module

Relevance to Credit Unions

The Principles for Businesses (PRIN)

The Principles for Businesses (PRIN) set out 3high-level requirements 3imposed by the FCA3. They provide a general statement of regulatory requirements. The Principles apply to all11credit unions. In applying the Principles to credit unions, the FCA3 will be mindful of proportionality. In practice, the implications are likely to vary according to the size and complexity 3of the credit union.

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Senior Management Arrangements, Systems and Controls (SYSC)

SYSC 1,3SYSC 4 to 10 and SYSC 213 apply to all credit unions in respect of the carrying on of their regulated activities and unregulated activities in a prudential context. SYSC 23 (Senior managers and certification regime: Introduction and classification), SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities), SYSC 25 (Senior managers and certification regime: Management responsibilities maps and handover procedures and material), SYSC 26 (Senior managers and certification regime: Overall and local responsibility), SYSC 27 (Senior managers and certification regime: Certification regime)7 and SYSC 18 apply to all credit unions in respect of both their regulated activities and their unregulated activities.

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3Code of Conduct (COCON)

This contains rules and guidance that are directly applicable to a credit union’sSMF managers, certification employees and (from 2017) other conduct rules staff. There is also guidance for credit unions on giving their staff training about COCON.

Threshold Conditions (COND)

In order to become authorised under the Act all firms must meet the threshold conditions. The threshold conditions must be met on a continuing basis by credit unions. Failure to meet one of the conditions is sufficient grounds for the exercise by the FCA3 of its powers.

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3

3

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The Fit and Proper test for Employees and Senior Personnel7 (FIT)

The purpose of FIT is to set out and describe the criteria that a firm should3 consider when assessing the fitness and propriety of a person (1)3 in respect of whom an application is being made for approval to undertake a controlled function under the senior managers7 regime, (2)3 who has already been approved, (3) who is a certification employee or (4) whom a firm is considering appointing to be a certification employee3.

It also sets out and describes criteria that the FCA will consider when assessing the fitness and propriety of a candidate for a controlled function position and that it may consider when assessing the continuing fitness and propriety of approved persons.3

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General Provisions (GEN)

GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the FCA's3 logo and insurance against financial penalties.

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Fees manual (FEES)

This manual sets out the fees applying to credit unions.

3Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU)

MIPRU applies to any credit union carrying out insurance distribution activity5 or home finance mediation activity, or using these services. In particular, it sets out requirements for allocation of responsibility for the credit union’sinsurance distribution activity5 (MIPRU 2), for the use of home finance intermediaries (MIPRU 5) and for professional indemnity insurance (MIPRU 3).

Conduct of Business sourcebook (COBS)

A credit union which acts as a CTF provider or provides a cash-deposit ISA will need to be aware of the relevant requirements in COBS. COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Approving and confirming compliance of10 financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply with respect to accepting deposits as set out in those provisions, COBS 4.1 and BCOBS. A credit union that communicates with clients, including in a financial promotion, in relation to the promotion of deferred shares and credit union subordinated debt will need to be aware of the requirements of COBS 4.2 (Fair, clear and not misleading communications) and COBS 4.5 (Communicating with retail clients).4

3Insurance: Conduct of Business sourcebook (ICOBS)

ICOBS applies to any credit union carrying on non-investment insurance distribution5 activities, such as arranging or advising on general insurance contracts to be taken out by members. But ICOBS does not apply to a credit union taking out an insurance policy5 for itself, such as a policy5 against default by members on their loans where the credit union is the beneficiary of the policy5, since in this circumstance the credit union would not be acting as an insurance intermediary, but would itself be the customer. Credit unions are reminded that they are subject to the requirements of the appropriate legislation, including the Credit Unions Act 1979, relating to activities a credit union may carry on.

3Mortgages and Home Finance: Conduct of Business sourcebook (MCOB)

MCOB applies to any credit union that engages in any home finance activity. MCOB rules cover advising and selling standards, responsible lending (including affordability assessment), charges, and the fair treatment of customers in payment difficulties.

Banking: Conduct of Business sourcebook (BCOBS)

BCOBS sets out rules and guidance for credit unions on how they should conduct their business with their customers. In particular there are rules and guidance relating to communications with banking customers3and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers3(BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6). 3The rules in BCOBS 3.1 that relate to distance contracts may apply 3to a credit union. This is because BCOBS 3 contains requirements which implemented9 the Distance Marketing Directive39where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)) of the Distance Marketing Directive)9, i.e. if the credit union routinely sells any of its services by post, telephone, fax or the internet3.

Supervision manual (SUP)

The following provisions of SUP are relevant to credit unions: 12SUP 1A12 (The FCA’s 3 approach to supervision), SUP 2 (Information gathering by the FCA or PRA 3 on its own initiative), SUP 3.1 to SUP 3.8 (Auditors), SUP 5 (Skilled persons), SUP 6 (Applications to vary or cancel Part 4A11permission), SUP 7 (Individual requirements), SUP 8 (Waiver and modification of rules), SUP 9 (Individual guidance), 12SUP 10C (FCA senior managers7 regime for approved persons in SMCR firms7), SUP 11 (Controllers and Close links), SUP 15 (Notifications to the FCA or PRA 3) and SUP 16 (Reporting Requirements).

Credit unions are reminded that they are subject to the requirements of the Act and SUP 11 on close links, and are bound to notify the FCA3 of changes. It may be unlikely, in practice, that credit unions will develop such relationships. It is possible, however, that a person may acquire close links with a 3credit union3 within the meaning of the Act by reason of holding the prescribed proportion of deferred shares in the credit union.

In relation to SUP 16, credit unions are exempted from the requirement to submit annual reports of 3close links.

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3Consumer Credit sourcebook (CONC)

CONC contains rules that apply to firms carrying on credit-related regulated activities. PERG 2.7.19IG provides guidance on relevant exemptions. Most credit union lending is therefore outside the scope of CONC. However, subject to the constraints in the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 (as relevant), credit unions may undertake credit-related regulated activities to which CONC does apply if the activity is carried out by way of business. This could include lending under a borrower-lender-supplier agreement, or debt adjusting or debt counselling where the credit union is not the lender. A credit union carrying on such activities should consider whether it requires permission to do so. Further information can be found on the FCA’s website.

Decision, Procedure and Penalties manual (DEPP)

DEPP is relevant to credit unions because it sets out:

(1) the FCA's11 decision-making procedure for giving statutory notices. These are warning notices, decision notices and supervisory notices (DEPP 1.2 to DEPP 5); and

(2) the FCA's11 policy with respect to the imposition and amount of penalties under the Act (see DEPP 6).

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Dispute Resolution: Complaints (DISP)

DISP sets out rules and guidance in relation to treating complainants fairly and the Financial Ombudsman Service.

Compensation (COMP)

COMP sets out rules relating to the scheme for compensating consumers when authorised firms are unable, or likely to be unable, to satisfy claims against them.11

6General guidance on Benchmark Administration, Contribution and Use (BENCH)

BENCH provides guidance about which parts of the Handbook are relevant to a firm when carrying out benchmark activities and when using a benchmark. It also provides guidance about the benchmarks regulation.

The Enforcement Guide (EG)

The Enforcement Guide (EG) describes the FCA's11 approach to exercising the main enforcement powers given to it by the Act and by other legislation.2

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Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG) and Financial Crime Thematic Reviews (FCTR)8

FCG and FCTR provide8guidance on steps that a firm can take to reduce the risk that it might be used to further financial crime.

SUP 15.13.4GRP
The circumstances in which a CBTL firm which does not have a Part 4A permission should notify the FCA include but are not limited to when:(1) it ceases to carry on CBTL business and does not propose to resume carrying on CBTL business in the immediate future; this does not include circumstances where the CBTL firm temporarily withdraws its products from the market or is preparing to launch fresh products; or(2) it changes its registered office or place of residence as the case
EG 8.2.6RP
1Examples of circumstances in which the FCA will consider varying a firm'sPart 4A permission because it has serious concerns about a firm, or about the way its business is being or has been conducted include where: (1) in relation to the grounds for exercising the power under section 55J(1)(a) or section 55L(2)(a) of the Act, the firm appears to be failing, or appears likely to fail, to satisfy the threshold conditions relating to one or more, or all, of its regulated activities,
MIPRU 4.1.15GRP
Capital has an important role to play in protecting consumers and complements the roles played by professional indemnity insurance and client money protection (see the client money rules). Capital provides a form of protection for situations not covered by a firm's professional indemnity insurance and it provides the funds for the firm's PII excess, which it has to pay out of its own finances (see MIPRU 3.2.11 R and MIPRU 3.2.12 R for the relationship between the firm's capital
MIPRU 4.3.1RRP
This section contains provisions relating to the calculation of annual income for the purposes of: (1) the limits of indemnity for professional indemnity insurance; and(2) the capital resources requirements.
SUP 12.4.10ARRP
10Before a firm appoints a person as an appointed representative to carry on an MCD credit intermediation activity, it must ensure that the person has, and will maintain on a continuing basis after appointment, professional indemnity insurance in accordance with the rules applicable to MCD credit intermediaries. A firm will satisfy this requirement if:(1) [deleted]22(2) the firm has professional indemnity insurance in respect of claims for which the firm may be liable as a result
PERG 8.14.40CGRP
1An advice centre is defined in article 73 as a body which:(1) gives advice which is free and in respect of which it does not receive any fee, commission or other reward;(2) provides debt advice as its principal financial services activity; and(3) in the case of a body which is not part of a local authority, holds adequate professional indemnity insurance or a guarantee providing comparable cover.This exemption should be of particular use to bodies such as Citizens Advice Bur
COBS 20.2.46GRP
A firm may include, within the policyholder advocate's terms of appointment, arrangements for the policyholder advocate to be indemnified in respect of certain claims that may be made against him in connection with the performance of his functions. If such indemnity is included, it should not include protection against any liability arising from acts of bad faith.
BIPRU 2.2.64GRP
In relation to the issues identified in BIPRU 2.2.63 G, an asset manager should consider, for example:(1) the direct cost to it resulting from fraud or theft;(2) the direct cost arising from customers' claims and legal action in the future; an asset manager could consider the impact on its financial position if a legal precedent were to encourage its customers to take legal action against that firm for failing to advise correctly on a certain type of product; the relevance of