Related provisions for SYSC 13.7.4

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

Some important compliance issues include:(1) insurance against fraud and dishonesty;(2) arrangements for the prevention, detection and reporting of money laundering;(3) establishing and maintaining a satisfactory system of control;(4) keeping proper books of account;(5) computation and application of profits;(6) investment of surplus funds;(7) capital requirements; (8) liquidity requirements;(9) limits on shares and loans;(10) maintenance of membership records;(11) submission
LR 7.2.1RRP

The Listing Principles are as follows:

Principle 1

A listed company must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors.

Principle 2

A listed company must take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations.

Principle 3

A listed company must act with integrity towards holders and potential holders of its listedequity shares.2


Principle 4

A listed company must communicate information to holders and potential holders of its listedequity shares2 in such a way as to avoid the creation or continuation of a false market in such listedequity shares.2


Principle 5

A listed company must ensure that it treats all holders of the same class of its listedequity shares2 that are in the same position equally in respect of the rights attaching to such listedequity shares.2


Principle 6

A listed company must deal with the FSA in an open and co-operative manner.

LR 7.2.2GRP
Principle 2 is intended to ensure that listed companies have adequate procedures, systems and controls to enable them to comply with their obligations under the listing rules and disclosure rules and transparency rules. In particular, the FSA considers that listed companies should place particular emphasis on ensuring that they have adequate procedures, systems and controls in relation to:(1) identifying whether any obligations arise under LR 10 (Significant transactions) and
COLL 8.5.10RRP
(1) The authorised fund manager must:(a) ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders of that class; and(b) not do, or omit anything that would, or might confer on itself a benefit or advantage at the expense of a unitholder or potential unitholder.(2) For the purposes of (1) the authorised fund manager may take into account sales and redemptions after the valuation point, provided it has
(1) The nature and extent of the systems and controls which a firm will need to maintain under SYSC 3.1.1 R will depend upon a variety of factors including:(a) the nature, scale and complexity of its business;(b) the diversity of its operations, including geographical diversity;(c) the volume and size of its transactions; and(d) the degree of risk associated with each area of its operation.(2) To enable it to comply with its obligation to maintain appropriate systems and controls,
REC 5.2.14GRP

Information and supporting documentation (see REC 5.2.4 G).


Details of the applicant's constitution, structure and ownership, including its memorandum and articles of association (or similar or analogous documents ) and any agreements between the applicant, its owners or other persons relating to its constitution or governance (if not contained in the information listed in REC 5.2.3A G)1. An applicant for RAP status must provide details of the relationship between the governance arrangements in place for the UK RIE and the RAP.3


Details of all business to be conducted by the applicant, whether or not a regulated activity (if not contained in the information listed in REC 5.2.3A G)1.


Details of the facilities which the applicant plans to operate, including details of the trading platform or (for an RAP) auction platform,3 settlement arrangements, clearing services and custody services which it plans to supply. An applicant for RAP status must provide details on the relationship between the auction platform and any secondary market in emissions auction products4 which it operates or plans to operate.3



Copies of the last three annual reports and accounts and, for the current financial year, quarterly management accounts.


Details of its business plan for the first three years of operation as a UK recognised body (if not contained in the information listed in REC 5.2.3A G)1.


A full organisation chart and a list of the posts to be held by key individuals (with details of the duties and responsibilities) and the names of the persons proposed for these appointments when these names are available (if not contained in the information listed in REC 5.2.3A G)1.


Details of its auditors, bankers, solicitors and any persons providing corporate finance advice or similar services (such as reporting accountants) to the applicant.


Details of any relevant functions to be outsourced or delegated, with copies of relevant agreements.


Details of information technology systems and of arrangements for their supply, management, maintenance and upgrading, and security.


Details of all plans to minimise disruption to operation of its facilities in the event of the failure of its information technology systems.


Details of internal systems for financial control, arrangements for risk management and insurance arrangements to cover operational and other risks.


Details of its arrangements for managing any counterparty risks, including details of margining systems, guarantee funds and insurance arrangements.


Details of internal arrangements to safeguard confidential or privileged information and for handling conflicts of interest.


Details of arrangements for complying with the notification rules and other requirements to supply information to the FSA.


Details of the arrangements to be made for monitoring and enforcing compliance with its rules and with its clearing, settlement and default arrangements.


A summary of the legal due diligence carried out in relation to ascertaining the enforceability of its rules (including default rules)and arrangements for margin against any of its members based outside the United Kingdom, and the results and conclusions reached.


Details of the procedures to be followed for declaring a member in default, and for taking action after that event to close out positions, protect the interests of other members and enforce its default rules.


Details of membership selection criteria, rules and procedures, including (for an RAP) details of how the rules of the UK RIE will change in order to reflect RAP status.3


Details of arrangements for recording transactions effected by, or cleared through, its facilities.


Details of arrangements for detecting financial crime and market abuse , including arrangements for complying with money laundering law.


Details of criteria, rules and arrangements for selecting specified investments to be admitted to trading on (or cleared by) an RIE, or to be cleared by an RCH and, where relevant, details of how information regarding specified investments will be disseminated to users of its facilities.


Details of arrangements for cooperating with the FSA and other appropriate authorities, including draft memoranda of understanding or letters.


Details of the procedures and arrangements for making and amending rules, including arrangements for consulting on rule changes.


Details of disciplinary and appeal procedures, and of the arrangements for investigating complaints.

2In relation to the written statement referred to in ICOBS 8.4.4R (1)(b):(1) ICOBS 8.4.4R (1)(b) does not preclude the relevant director from, in addition, including in the director's statement any of the following as relevant:(a) if a firm's employers’ liability register is more than materially compliant, a statement to this effect, and/or a statement of the extent to which the director considers, to the best of his knowledge, the firm to be compliant in its production of the
COLL 11.6.13RRP
Where the authorised fund manager of a feeder UCITS gives notice to the FSA under section 251 of the Act or regulation 21 of the OEIC Regulations that it intends to wind up the scheme, it must inform:(1) the unitholders of the feeder UCITS; and(2) where notice is given under COLL 11.6.5R (4) (Application for approval by a feeder UCITS where a master UCITS merges or divides), the authorised fund manager of the master UCITS;of its intention without undue delay.[Note: articles 20(3)
COLL 6.2.12GRP

Explanatory table: This table belongs to COLL 6.2.2 G (4) (Purpose).

Correction of box management errors


Controls by authorised fund managers

An authorised fund manager needs to be able to demonstrate that it has effective controls over:


its calculations of what units are owned by it (its 'box'); and


compliance with COLL 6.2.8 R which is intended to prevent a negative box.


Controls by depositaries


Under COLL 6.6.4 (General duties of the depositary), a depositary should take reasonable care to ensure that a scheme2 is managed in accordance with COLL 6.2 (Dealing) and COLL 6.3 (Pricing and valuation).


A depositary should therefore make a regular assessment of the authorised fund manager's box management procedures (including supporting systems) and controls. This should include reviewing the authorised fund manager's controls and procedures when the depositary assumes office, on any significant change and on a regular basis, to ensure that a series of otherwise minor changes do not have a cumulative and a significant effect on the accuracy of the controls and procedures.


Recording and reporting of box management errors


An authorised fund manager should record all errors which result in a breach of COLL 6.2.8 R (Controls over the issue and cancellation of units) and as soon as an error is discovered, the authorised fund manager should report the fact to the depositary, together with details of the action taken, or to be taken, to avoid repetition of the error.


A depositary should report material box management errors to the FSA immediately. Materiality should be determined by taking into account a number of factors including:

  • the implications of the error for the sufficiency of controls put into place by the authorised fund manager;
  • the significance of any breakdown in the authorised fund manager's management controls or other checking procedures;
  • the significance of any failure of systems or back-up arrangements;
  • the duration of an error; and
  • the level of compensation due to the scheme, and an authorised fund manager's ability (or otherwise) to meet claims for compensation in full.


A depositary should also make a return to the FSA (in the manner prescribed by SUP 16.6.8 R) on a quarterly basis.

SYSC 14.1.28GRP
The precise role and organisation of internal controls can vary from firm to firm. However, a firm'sinternal controls should normally be concerned with assisting its governing body and relevant senior managers to participate in ensuring that it meets the following objectives:(1) safeguarding both the assets of the firm and its customers, as well as identifying and managing liabilities;(2) maintaining the efficiency and effectiveness of its operations;(3) ensuring the reliability