SYSC - FCA Handbook

1 Senior managementarrangements,Systems and ControlsSYSC ContentsSenior management arrangements, Systems and ControlsSYSC 1 Application and of SYSC 11 to SYSC firm1 Annex 1 Detailed application of SYSCSYSC 2 Senior management of the apportionmentSYSC 3 Systems and and covered by systems and requirements for insurance requirementsSYSC 4 General organisational who effectively direct the of senior body and nomination of Annex 1 SYSC 5 Employees, agents and other relevant , knowledge and Annex 1[deleted]n Release 18l Apr iSYSC ContentsSYSC 6 Compliance, internal audit andfinancial crimeSYSC 7 Risk controlSYSC outsourcing requirementsSYSC rules on institutions providing account information services or paymentinitiation servicesSYSC 10 Conflicts of Regulation Conflicts of wallsSYSC 10 ARecording telephone conversations and electronic 11 Liquidity risk systems and 12 Group risk systems and controls 13 Operational risk: systems and controls for Release 18l Apr iiSYSC related Handbook to notify the appropriate management and events and other 14 Risk management and associated systems and controls 15 Credit risk management systems and controls for insurersSYSC 15 AOperational resilience , processes and and lessons learned exercise review and feedbackSYSC 16 Market risk management systems and controls for insurersSYSC 17 Insurance risk systems and controlsSYSC and whistleblowers agreements with obligations under the MiFID regime and other sectorallegislationn Release 18l Apr iiiSYSC ContentsSYSC 19 AIFPRU Remuneration Code [deleted]SYSC 19 BAIFM Remuneration 19 CBIPRU Remuneration Code [deleted]SYSC 19 DDual-regulatedfirms Remuneration and principles19D Annex 1 Detailed provisions on voiding and recovery (SYSC and )

2 SYSC 19 EUCITS Remuneration policies and practicesSYSC 19 FRemuneration and performance remuneration remuneration incentivesSYSC 19 GMIFIDPRU Remuneration policies and and and variable components of of remuneration requirements to material risk committee19G Annex 1 Other instruments for use in variable remunerationSYSC 20 Reverse stress testing [deleted]SYSC 21 Risk control: additional control: guidance on governance arrangementsn Release 18l Apr ivSYSC ContentsSYSC 22 Regulatory , giving and updating references: the main the reference and the request for a the reference: detailed references: additional rules and guidance for and updating references: additional rules and references: additional rules and guidance for and appointed and and transitionals22 Annex 1 Template for regulatory references given by SMCR firms and disclosurerequirements22 Annex 2 Factors to take into account when asking for and giving regulatoryreferencesSYSC 23 Senior managers and certification regime: Introduction and types of the senior managers and certification record checks for certain directors23 Annex 1 Definition of SMCR firm and different types of SMCR firms23 Annex 2 Form O: Changingfirm status under the Senior Managers andCertification RegimeSYSC 24 Senior managers and certification regime: Allocation of of FCA-prescribed senior management responsibilities: Mainallocation prescribed responsibilities should be allocated to24 Annex 1 Which FCA-prescribed senior management responsibilities apply to whichkind offirmSYSC 25 Senior managers and certification regime.

3 Managementresponsibilities maps and handover procedures and and responsibilities maps: Main responsibilities maps: Exclusion of non-financial servicesactivities for about what should be in a management responsibilities responsibilities map should be a single responsibilities maps: Material only relevant to EEA about SYSC 25 Annex responsibilities maps: procedures and materialn Release 18l Apr vSYSC Contents25 Annex 1 Examples of the business activities and functions of an SMCR firmSYSC 26 Senior managers and certification regime: Overall and on territorial of local and overall responsibility: of local and overall responsibility: Reporting to the of local and overall responsibility: Not reporting to thegoverning functions should be allocated management arrangements and between this chapter and other parts of the senior managersregimeSYSC 27 Senior managers and certification regime: Certification and of the certification material about the scope of the certification for emergency and temporary of of the FCA certification relating to several FCA certification functions27 Annex 1 Examples of how the temporary UK role rule in SYSC (the 30-day rule) worksSYSC 28 Insurance distribution: specific knowledge, ability and good knowledge, ability and good repute requirements for carryingout insurance distribution and ability requirements to considerTransitional provisions and SchedulesTP 2 Firms other than common platformfirms, insurers, managing agents andthe SocietyTP 3 Remuneration codesn Release 18l Apr viSYSC ContentsTP 5 Financial Services (Banking Reform) Act 2013: Certification andregulatory referencesTP 6 Transitional Provision 6TP 7 Bank of England and Financial Services Act 2016: Certification andregulatory referencesTP 8 Bank of England and Financial Services Act 2016.

4 Application to claimsmanagement companiesTP 9 Updates to reflect CRD VTP 10 Operational resilienceTP 11 MIFIDPRU Remuneration Code transitional provisionSch 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 18l Apr viiSenior management arrangements, Systems and ControlsChapter 1 Application and purposen Release 18l Apr 1/1 SYSC 1 : Application andSection : Release 18l Apr 1 application of this sourcebook is summarised at a high level in thefollowing table. The detailed application is cut back in n SYSC 1 Annex 1 and inthe text of each of firmApplicable chaptersInsurer, UK ISPVC hapters 2, 3, 12 to 18, , 21, 22, 23, 24, 25,26, 27, 28 Managing agentChapters 2, 3, 11, 12, 15A, 18, , 21, 22, 23,24, 25, 26, 27, 28 SocietyChapters 2, 3, 12, 15A, 18, , 21, 22, 23, 24,25, 26, 27, 28 Any other SMCR firmChapters 4 to 12, 15A, 18, 19D, 19F, 19G, 21, 22,23, 24, 25, 26, 27, 28 Every other firmChapters 4 to 12, 15A, 18, 19D, 19F, 19G, 21, 22,28 Firms that n SYSC 19D applies to should also refer to the Remuneration part ofthe PRA application of this sourcebook to specific firms that are not PRA-authorised persons is summarised at a high level in the following table.

5 Thedetailed application is cut back in n SYSC 1 Annex 1 and in the text of of firmApplicable chaptersFull-scope UK AIFMC hapters 4 to 10, 12, 18, 19B, , 21, 22, 23,24, 25, 26, 27, 28 MIFIDPRU investmentChapters 4 to 10, 12, 18, 19F, 19G, 21, 22, 23, 24,firm (including an over-25, 26, 27, 28seas firm that wouldhave been a MIFIDPRU in-vestment firm if it hadbeen a UK domestic firm,except that SYSC 19 Gdoes not apply to such afirm)Chapter 15A of this sourcebook also applies to:(1) an electronic money institution, a payment institution and aregistered account information service provider;SYSC 1 : Application andSection : Release 18l Apr 1/3(2) a UK set out in the text of that provisions in SYSC should be read in conjunction with n GEN R ton GEN G. In particular:(1) [deleted](2) Provisions made by the FCA, and by the PRA in the PRA Rulebook,may be applied by both regulators to PRA-authorised persons. Suchprovisions are applied by each regulator to the extent of its powersand regulatory responsibilities.

6 (3) For Solvency II firms, the FCA considers that the requirements andguidance in Chapters 2, 3, 12 to 18, , 21, 22 and 28 of SYSC arenot inconsistent with:(a) the parts of the PRA Rulebook which implemented thegovernance provisions in the Solvency II Directive (articles 40 to49);(b) the Solvency II Regulation, or(c) EIOPA guidelines on systems of governance dated 28 January2015 (EIOPA-BoS-14/253 EN).In most cases, there is no direct overlap with those provisionsbecause the SYSC requirements are directed at FCA conductrequirements not expressly covered by or under provisions whichimplemented or supplemented the Solvency II Directive. Where thereis a direct overlap with SYSC rules and guidance, the FCA will takerequirements and guidelines which implemented or supplementedthe Solvency II Directive into account. The definition of Solvency IIfirm includes (for SYSC) large non-directive insurers because the PRAhave applied certain Solvency II derived requirements to those SYSC refers to the PRA Rulebook applicable to Solvency IIfirms, large non-directive insurers should read those references as ifthey were references to the corresponding part of the PRA Rulebookapplicable to large non-directive 1 : Application andSection : Release 18l Apr 1 purposes of SYSC are:(1) to encourage firms' directors and senior managers to takeappropriate practical responsibility for their firms' arrangements onmatters likely to be of interest to the FCA because they impinge onthe FCA s functions under the Act;(2) to increase certainty by amplifying Principle 3, under which a firmmust take reasonable care to organise and control its affairsresponsibly and effectively, with adequate risk management systems.

7 (3) to encourage firms to vest responsibility for effective and responsibleorganisation in specific directors and senior managers; and(4) to create a common platform of organisational and systems andcontrols requirements for all firms.(5) [deleted]SYSC 1 : Application andSection : Application of SYSC 11 to Release 18l Apr 1 of SYSC 11 to 28 What?..The application of each of chapters n SYSC 11 to n SYSC 21 is set out in thosechapters and in n SYSC application of each of the chapters n SYSC , n SYSC 22 to n SYSC 28 isset out in those SYSC 12 and n SYSC 21 do not apply to a firm in relation to its carrying on ofauction regulation from n SYSC 12, and n SYSC 21 which are disapplied by n SYSC R,the other chapters of n SYSC 11 to n SYSC 14 do not apply in relation to afirm's carrying on of auction regulation bidding because they only apply toan insurer. n SYSC 18 provides guidance on the Public Interest Disclosure chapters of SYSC may not apply to auction regulation bidding, forexample because an exempt MiFID commodities firm will not be a MIFIDPRU investment for contravention of a rule in n SYSC 11 to n SYSC 14, n SYSC 18 to n SYSC 21,n SYSC , n SYSC or n SYSC 23 to n SYSC 28 does not give rise to aright of action by a private person under section 138D of the Act (and eachof those rules is specified under section 138D(3) of the Act as a provisiongiving rise to no such right of action).

8 SYSC 1 : Application andSection : Significant SYSC Release 18l Apr 1 SYSC (1) The purpose of n SYSC is to set out the definition of a significantSYSC firm.(2) The following governance requirements in SYSC apply by reference tothe term significant SYSC firm:(a) n SYSC on the limitations in the number of directorships;(b) n SYSC on the nomination committee; and(c) n SYSC and n SYSC on the risk committee.(3) MIFIDPRU investment firms are not subject to n SYSC orn SYSC , and should refer instead to n MIFIDPRU (4) The definition of significant SYSC firm is also relevant in determiningwhether a firm is an enhanced scope SMCR firm for the purposes ofthe senior managers and certification of a significant SYSC firm is a significant SYSC firm if it meets one or more of the followingconditions:(1) its total assets exceed 530 million;(2) its total liabilities exceed 380 million;(3) the annual fees and commission income it receives in relation to theregulated activities carried on by the firm exceeds 160 million in the12-month period immediately preceding the date the firm carries outthe assessment under this rule;(4) the client money that it receives or holds exceeds 425 million; and(5) the assets belonging to its clients that it holds in the course of, or inconnection with, its regulated activities exceeds billion.

9 (1) This rule defines some of the terms used in n SYSC (2) Total assets means the firm s total assets:(a) as set out in the most recent relevant report submitted to thefca under n SUP (Integrated Regulatory Reporting); orSYSC 1 : Application andSection : Significant SYSC Release 18l Apr 1/7(b) (where the firm carries out the assessment under n SYSC atany time after the date of its most recent report in (a)) as thefirm would report to the FCA in accordance with the relevantreport, as if the reporting period for that report ended on thedate of the assessment.(3) Total liabilities means the firm s total liabilities:(a) as set out in the most recent relevant report submitted to thefca under n SUP (Integrated Regulatory Reporting); or(b) (where the firm carries out the assessment under n SYSC atany time after the date of its most recent report in (a)) as thefirm would report to the FCA in accordance with the relevantreport, as if the reporting period for that report ended on thedate of the assessment.

10 (4) client money means client money that a firm receives or holds inthe course of, or in connection with, all of the regulated activitiesthat it carries on:(a) as set out in the most recent client money and client asset reportsubmitted to the FCA under n SUP (Integrated RegulatoryReporting); or(b) (where the firm carries out the assessment under n SYSC atany time after the date of its most recent report in (a)) as thefirm would report to the FCA in accordance with the relevantreport, as if the reporting period for that report ended on thedate of the assessment.(5) Assets belonging to its clients means the assets to which thecustody rules apply:(a) as set out in the most recent client money and client asset reportsubmitted to the FCA under n SUP (Integrated RegulatoryReporting); or(b) (if the firm carries out the assessment under n SYSC at anytime after the date of its most recent report in (a)) as the firmwould report to the FCA in accordance with the relevant report,as if the reporting period for that report ends on the date theassessment is carried firm must assess regularly whether it becomes a significant SYSC firm.