6. The FCA Handbook Flashcards
Define the FCA Handbook
The FCA Handbook sets out a firm’s main regulatory obligations and is the collective term for the various source books and handbooks making up the body of FCA rules that apply to regulated firms.
Define the High Level Standards (HLS)
The first section of the FCA Handbook
it contains the regulatory obligations for all firms, senior management and approved persons
Define the Principles for Business (PRIN)
A general statement of the main regulatory obligations of the firm
Define Senior Management Arrangements, Systems and Controls (SYSC)
Rules and guidance on how key responsibilities for managing the business should be allocated among the firm’s senior management team and the systems and controls the firm should have in place
Define Code of Conduct (COCON)
Rules about conduct and to whom they apply.
N.B. This covers most employees of all firms covered by the senior manage and certification regime (SMCR) except approved persons.
Define Threshold Conditions (COND)
The minimum standards the firm must satisfy to become and remain authorised by the FCA.
Define Statements of Principles and Code of Practice for Approved Persons (APER)
This sets out the conduct requirements for approved persons.
N.B. These are primarily people carrying out a senior management or customer facing function in a firm which is NOT covered by the senior management and certification regime (non-SMCR firm)
Define The Fit and Proper Test for Employees and Senior Personnel (FIT)
This sets out the criteria which the FCA uses to assess whether an individual is suitable to perform a senior management or certified function
Define Financial Stability and Market Confidence (FINMAR)
Provisions relating to financial stability, market confidence and short selling
Training and Competence (T&C)
These set out detailed competence requirements such as exam requirements, for advisers, their supervisors and those that oversee certain administration functions.
Define General Provisions (GEN)
This sets out some of the underlying legal framework to FCA regulation and requirements regarding statutory status disclosure
Define Fees Manual (FEES)
The fees provisions for funding the FCA, Financial Ombudsman Service (FOS), Financial Services Compensation Scheme (FSCS) and Money and Pensions Services (MAPS)
Define the Threshold Conditions
COND 2.2 Location of offices - Head office must be in the UK
COND 2.3 Effective supervision - Must be capable of being effectively supervised by the FCA
COND 2.4 Appropriate resources
COND 2.5 Suitability
COND 2.7 Business model
What is a requirement of the Public Interest Disclosure Act 1998?
Firms must have procedures for whistle-blowing to someone in the firm or to the FCA, and should make staff aware of them.
What is the overriding requirement of the Remuneration Code (SYSC 19)?
Affected firms must establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote effective risk-management.
Define Code Staff
Staff members that have a material impact on a firm’s risk profile
Summarise the Twelve Remuneration Principles
- Have in place good governance structures in respect of remuneration policy approval
- Operate fair remuneration structures which take account of future risks and the quality of business undertaken. Bonus payments should be based on long-term performance
- In most circumstances, avoid an over-reliance on performance-related pay as opposed to standard salaries
- Consider deferring significant proportion of bonuses so that they are paid overtime, thus reducing the risk of short-term high-risk practices
Define Senior Management Arrangements (SYSC 2)
Each firm should appoint individuals to be personally responsible for the senior management functions within the firm
Define Systems and Controls (SYSC 3)
A firm should have systems and controls that are ‘appropriate to its business’ as well as the risks that are associated with it.
Define General Organisational Requirements (SYSC 4)
The firm must have robust governance arrangements including clear organisational structure and reporting lines, effective systems for the identification and management of risks, and appropriate administrative, accounting and information processing systems.
Define Employees, agents and other relevant persons (SYSC 5)
Personnel employed by the firm must have appropriate skills, knowledge and expertise to carry out the functions allocated to them
Define Compliance, internal audit and financial crime (SYSC 6)
The firm must have and maintain appropriate policies and procedures to enable the firm to comply with its regulatory responsibilities.
The firms must also establish and maintain appropriate systems and controls to enable it to identify and manage money laundering and other financial crime risks
Define Risk Control (SYSC 7)
The firm must establish and maintain adequate risk management policies and procedures that identify the risks to the firm’s activities, and establish the level of risk the firm is prepared to tolerate.
Define Outsourcing (SYSC 8)
The firm must ensure that it takes appropriate measures to avoid undue additional operational risks arising through any outsourcing arrangements.
N.B. Outsourcing will not be undertaken where this materially affects the firm’s internal controls and prevents the FCA from monitoring the firm’s compliance with is regulatory obligations.
Define Record-keeping (SYSC 9)
A firm must arrange for orderly records to be kept of its business and internal organisation, including all services and transactions undertake by it.
These must be sufficient to enable the FCA to monitor the firm’s compliance with the requirements under the regulatory system, and to ascertain that a firm has complied with all obligations with respect to clients.
