1 Principles forBusinessesPRIN ContentsPrinciples for BusinessesPRIN and and the Principles1 Annex 1 Non-designated investment business - clients that afirm may treat as aneligible counterparty for the purposes of PRINPRIN 2 The PrinciplesPRIN 3 Rules about 4 Principles : MiFID : MiFID businessTransitional provisions and SchedulesTP 1 Transitional provisionsSch 1 Record Keeping RequirementsSch 2 Notification requirementsSch 3 Fees and other required paymentsSch 4 Powers ExercisedSch 5 Rights of action for damagesSch 6 Rules that can be waivedn Release 0l Oct iPrinciples for BusinessesChapter 1 Introductionn Release 0l Oct 1/1 PRIN 1 : IntroductionSection : Application and Release 0l Oct 1 and Principles (see n PRIN 2) apply in whole or in part to every firm. Theapplication of the Principles is modified for firms conducting MiFID business,incoming EEA firms, incoming Treaty firms, UCITS qualifiers AIFM qualifiers,and Annex II benchmark administrators.
2 N PRIN 3 (Rules about application)specifies to whom, to what and where the Principles Principles also apply to certain payment service providers and electronicmoney issuers that are not firms. n PRIN sets out the application ofthe Principles to these persons. The references to a firm in n PRIN 2 includessuch Principles are a general statement of the fundamental obligations offirms and the other persons to whom they apply under the regulatorysystem. This includes provisions which implement the Single MarketDirectives. They derive their authority from the FCA s rule-making powers asset out in the Act, including as applied by the Payment Services Regulationsand the Electronic Money Regulations, and reflect the statutory objectives.[deleted]Link to fit and proper substance, the Principles express the main dimensions of the "fit andproper" standard set for firms in threshold condition 5 (Suitability), althoughthey do not derive their authority from that standard or exhaust itsimplications.
3 Being ready, willing and organised to abide by the Principles istherefore a critical factor in applications for Part 4A permission, andbreaching the Principles may call into question whether a firm with Part 4 Apermission is still fit and persons authorised or registered under the Payment Services Regulationsor the Electronic Money Regulations, the relevant fit and proper standards are the standards set in those 1 : IntroductionSection : Application and Release 0l Oct 1/3 Taking group activities into 3 (Management and control), 4 (Financial prudence) and (in so faras it relates to disclosing to the FCA ) 11 (Relations with regulators) take intoaccount the activities of members of a firm's group. Compliance by anotherperson to whom the Principles apply with Principles 3, 4 and 11 can also beaffected by the activities of other persons who are members of their does not mean that, for example, inadequacy of a group member's riskmanagement systems or resources will automatically lead to a firmcontravening Principle 3 or 4.
4 Rather, the potential impact of a groupmember's activities (and, for example, risk management systems operatingon a group basis) will be relevant in determining the adequacy of the firm'srisk management systems or resources in markets outside the United set out in n PRIN (Where?), Principles 1 (Integrity), 2 (Skill, care anddiligence) and 3 (Management and control) apply to world-wide activities ina prudential context. Principle 5 (Market conduct) applies to world-wideactivities which might have a negative effect on confidence in the UKfinancial system. In considering whether to take regulatory action underthese Principles in relation to activities carried on outside the UnitedKingdom, the FCA will take into account the standards expected in themarket in which the firm or other person to whom the Principles apply isoperating.
5 Principle 11 (Relations with regulators) applies to world-wideactivities; in considering whether to take regulatory action under Principle 11in relation to cooperation with an overseas regulator, the FCA will haveregard to the extent of, and limits to, the duties owed by the firm or otherperson to that regulator. (Principle 4 (Financial prudence) also applies toworld-wide activities.)n PRIN 4 ( Principles : MiFID Business) provides guidance on the application ofthe Principles to MiFID of breaching the a Principle makes a firm or other person to whom the Principlesapply liable to disciplinary sanctions. In determining whether a Principle hasbeen breached it is necessary to look to the standard of conduct required bythe Principle in question. Under each of the Principles the onus will be onthe FCA to show that a firm or other person has been at fault in some constitutes "fault" varies between different Principles .
6 Under Principle1 (Integrity), for example, the FCA would need to demonstrate a lack ofintegrity in the conduct of a firm's or other person s business. Under Principle2 (Skill, care and diligence) a firm or other person would be in breach if itwas shown to have failed to act with due skill, care and diligence in theconduct of its business. Similarly, under Principle 3 (Management andcontrol) a firm or other person would not be in breach simply because itfailed to control or prevent unforeseeable risks; but a breach would occur ifthe firm or other person had failed to take reasonable care to organise andcontrol its affairs responsibly or Principles are also relevant to the FCA's powers of information-gathering, to vary a firm's Part 4A permission or authorisation or registrationunder the Payment Services Regulations or Electronic Money Regulations,PRIN 1 : IntroductionSection : Application and Release 0l Oct 1/4and of investigation and intervention, and provide a basis on which the FCAmay apply to a court for an injunction or restitution order or require a firmor other person to make restitution.
7 However, the Principles do not give riseto actions for damages by a private person (see n PRIN R).Some of the other rules and guidance in the Handbook deal with thebearing of the Principles upon particular circumstances. However, since thePrinciples are also designed as a general statement of regulatoryrequirements applicable in new or unforeseen situations, and in situations inwhich there is no need for guidance, the FCA's other rules and guidance orEU regulations should not be viewed as exhausting the implications of thePrinciples of providers and distributors under contains guidance on the responsibilities of providers and distributorsfor the fair treatment of customers under the 1 : IntroductionSection : Clients and the Release 0l Oct 1 and the PrinciplesCharacteristics of the 6 (Customers' interests), 7 (Communications with clients), 8(Conflicts of interest), 9 (Customers: relationships of trust) and 10 (Clients'assets) impose requirements on firms expressly in relation to their clients orcustomers.
8 These requirements depend, in part, on the characteristics of theclient or customer concerned. This is because what is "due regard" (inPrinciples 6 and 7), "fairly" (in Principles 6 and 8), "clear, fair and notmisleading" (in Principle 7), "reasonable care" (in Principle 9) or "adequate"(in Principle 10) will, of course, depend on those characteristics. For example,the information needs of a general insurance broker will be different fromthose of a retail general insurance to client 6, 8 and 9 and parts of Principle 7, as qualified by n PRIN R,apply only in relation to customers. The approach that a firm (other than forcredit-related regulated activities, and regulated claims managementactivities payment services and issuing electronic money (where not aregulated activity) in relation to which client categorisation does not apply)needs to take regarding categorisationof clients into customers and eligiblecounterparties will depend on whether the firm is carrying on designatedinvestment business, insurance risk transformation and activities directlyarising from insurance risk transformation, or other activities, as described inn PRIN G.
9 (1) In relation to the carrying on of designated investment business,insurance risk transformation and activities directly arising frominsurance risk transformation, a firm's categorisation of a client underthe COBS client categorisation chapter (n COBS 3) will be applicablefor the purposes of Principles 6, 7, 8 and 9.(1AA) In relation to the carrying on of insurance risk transformation andactivities directly arising from insurance risk transformation, the COBS client categorisation chapter (n COBS 3) applies as modified byn COBS (1A) Client categorisation under n COBS 3 or n PRIN 1 Annex 1 is not relevantto credit-related regulated activities and therefore the guidance onclient categorisation does not apply in relation to a credit-relatedregulated activity. The definitions of client and customer in relationto those regulated activities reflect the modified meaning of consumer in articles 36J, 39M, 60LA, 60S and 89E of the RegulatedPRIN 1 : IntroductionSection : Clients and the Release 0l Oct 1/6 Activities Order, as well as the definitions of individual and of relevant recipient of credit in that Order.
10 (1AB) Client categorisation under n COBS 3 or n PRIN 1 Annex 1R is notrelevant to regulated claims management activities and therefore theguidance on client categorisation does not apply in relation to aregulated claims management activity.(2) The person to whom a firm gives basic advice on a stakeholderproduct will be a retail client for all purposes, including the purposesof Principles 6, 7, 8 and 9.(3) In relation to carrying on activities other than designated investmentbusiness, insurance risk transformation or activities directly arisingfrom insurance risk transformation (for example, general insurancebusiness or accepting deposits) the firm may choose to comply withPrinciples 6, 7, 8 and 9 as if all its clients were , it may choose to distinguish between eligiblecounterparties and customers in complying with those Principles .