2.5 Senior Management Arrangements, Systems and Controls

Question 1

FCA places requirements on directors and senior managers of organised firms

Answer 1

1) Senior management responsibility - Encouraging a firm’s directors/senior managers to take appropriate practical responsibility for their firm’s arrangements on matters of interest to the FCA
2) Effective organisation and control - to amplify Principle for Business 3 (Section 2.2) where a firm must take reasonable care to organise its affairs responsibly and with adequate risk management systems
3) Apportionment of responsibility - encourages firms to vest responsibility for an effective and responsible organisation in specific directors and senior managers so everyone knows who is responsible for what activities
4) Common Standards - a common platform of organisational systems and controls for all firms. ORiginally standards only applied to firms subject to the Capital Requirements Directive (CRD and MiDID

Question 2

The Appointment of responsibilities

Answer 2

FCA requires all firms to take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among their directors and senior managers, so that

• it is clear who has responsibilities
• the business and affairs of the firm can be monitored and controlled by the director, senior managers and governing body of the firm

Question 3

Recording the appointment

Answer 3

Firms must make a record of the arrangements they have made to satisfy the FCA’s requirement to apportion responsibilities among directors and senior managers. Must take reasonable care to keep this record up to date and retain it for 6 years form the date on which it was superseded by a more up-to-date record

Question 4

Systems and controls

Answer 4

FCA requires firms to establish and maintain such systems nad controls appropriate to their business. The nature and extent of these appropriate systems and controls depend on a variety of factors, such as the nature, scale and complexity of the business, geographical diversity, the volume nad size of the transaction and the degree of risk associated with each area of business operaiton

Question 5

Compliance

Answer 5

Taking reasonable care to est and maintain essective systems and controls for compliance

A common platform firm and a management company must maintain a permanent and effective compliance function which operates independently. The compliance function is responsible for monitoring ad assessing the esectiveness of the measures and procedures puti not place by the firm t comply with regulatory standards.

Compliance function should advise and assist persons responsible for carrying out firms regulated activities to comply with the firm’s obligations and should have the authority, resources, expertise and access to info that i relevant for the performance of its role. A firm must appoint a compliance officer who is responsible frot its compliance function.

Question 6

Governance Arrangements

Answer 6

firms must have robust governance arrangements, including 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 for effective control.

Firms must also establish, implement and maintain sstems nad procedures that safeguard the security, integrity and confidentiality of info, taking into account the nature of the info in questions

Firms must monitor and evaluate on a regular basis the effectiveness of systems, control mechanisms and arrangements

Question 7

Responsibility of Senior Personnel

Answer 7

Senior personnel, including the supervisory function, responsible for ensuring the firm complies with its obligations under the regulatory system. Senior personnel 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 system

Question 8

Other Personnel

Answer 8

Firms must employ staff with the skills, knowledge and expertise necessary for them to carry out their roles and to discharge the responsibilities attached

Question 9

Internal Audit

Answer 9

Firms must establish and maintain an internal audit function which is separate and independent from the other functions and activities of the firm

Question 10

Anti-Money Laundering (AML)

Answer 10

Firms must have adequate policies to enable them to identify, assess, monitor and manage money laundering risks. Firms must appoint an individual as the MLRO with responsibility for oversight of their compliance with the FCA’s rules on systems and controls against money laundering. MLRO should have the appropriate authority and independence and access to resources and sufficient info

Question 11

Risk Control/Function

Answer 11

Firms must establish, implement and maintain adequate risk management policies and procedures, including effective ones for risk assessment, identifying risks relating to the firm’s activities, processes and systems

Firms must monitor the effectiveness of risk management policies, the level of compliance by the firms and their relevant persons with the arrangement, ts, processes and mechanisms adopted and the adequacy of measures taken to address deficiencies

Question 12

Record-Keeping

Answer 12

Firms must