CRED 2

Part

CRED Credit Unions

Chapter

CRED 2

Printed on: 26/11/2024

Rulebook at: 31/12/2004

CRED 2

CRED 2.1

What is this guide?

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CRED 2.1.1

This guide is an introduction to the Credit Unions sourcebook (CRED). It describes the contents of CRED, where to find them and how to make use of them. This guide is a summary of salient points in the Reader's Guide to the Handbook.

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CRED 2.2

Structure

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CRED 2.2.1

CRED is available on the Internet, on CD-ROM and on paper. Its structure and contents are the same in each medium.

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CRED 2.2.2

CRED follows the same structure as the Handbook, which consists of sourcebooks (providing sources of the FSA's requirements and guidance) and manuals (containing processes to be followed) arranged in groups according to their subject matter. A table of contents of the Handbook is provided at Appendix 1 to this sourcebook.

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CRED 2.2.3

Appendix 2 sets out the contents of CRED. These are the same as those of the Handbook except that those sourcebooks and manuals which are not relevant to credit unions have been omitted.

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CRED 2.2.4

Each sourcebook or manual has a reference code of two or more letters. This is usually a contraction or abbreviation of its title, for use in cross-references in the text and in the index. Thus, for example the Credit Unions sourcebook abbreviates to CRED, while the Authorisation manual abbreviates to AUTH .

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CRED 2.3

Contents of CRED

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CRED 2.3.1

CRED contains:

(1) a list of transitional provisions;
(2) the introduction to CRED;
(3) this guide, which is a summary of the Reader's Guide in the Handbook;
(4) the main text, with any annexes and appendices to it;
(5) schedules of supplementary information.

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CRED 2.3.2

Most chapters of CRED begin with an application provision. This explains to what types of firm or other person, or to persons carrying on what types of business, the chapter applies.

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CRED 2.3.3

After the application provision, each chapter will normally contain a statement of purpose. This explains the objective of the provisions in the chapter: What standards is it intended to uphold? Does it reinforce one or more of the Principles for Businesses? What result does it aim at?

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CRED 2.4

Status of provisions

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CRED 2.4.1

CRED contains the same types of provision as the Handbook. Their status is indicated by icons containing the letters below. The precise legal status of any particular provision depends upon the terms of the Act and the particular power exercised to create that provision. Schedule 4 of the Handbook lists the powers used to make the various parts of the Handbook. So what follows is only an introduction.

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Rules: R

CRED 2.4.2

The letter R is used to indicate general rules made under section 138 of the Act and specialised rules made under sections 140 to 147 and other powers. The legal effect of a rule varies, depending on the power under which it is made, and on the language used in the rule - is it mandatory language or not? Most of the rules in the Handbook create binding obligations on firms (that is, authorised persons). If a firm contravenes such a rule, it may be subject to enforcement action(see ENF).

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CRED 2.4.3

The FSA Principles for Businesses are rules.

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Evidential provisions: E

CRED 2.4.4

The letter E is used to indicate an evidential provision. This usually indicates a practice or procedure in relation to a rule which, if observed, will "tend to establish compliance" with the rule to which it relates. Conversely, failure to observe that practice or procedure will "tend to establish contravention" of the rule to which it relates. For example, CRED 14.3.11 G indicates that a failure of a credit union to have an internal audit function would "tend to establish contravention" of the rule (described earlier in CRED 4.3.1 G) that all firms should take reasonable care to establish and maintain such systems and controls as are appropriate to their business.

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CRED 2.4.5

E is also used for paragraphs that make up the Code of Practice for Approved Persons (APER 3) made under section 64 of the Act. That code may be relied on so far as it tends to establish whether or not the conduct of an approved person complies with the Statements of Principle for approved persons.

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Guidance: G

CRED 2.4.6

The letter G is normally used to indicate guidance given under section 157. The guidance in the Handbook relates to the operation of the Act, the rules in the Handbook and other matters. Most general guidance will be given through the Handbook, but in certain cases, where the guidance is urgent or temporary, it will be published in a separate Guidance Note. Material published in vehicles other than it Handbook or Guidance Notes, for example in newsletters or on the FSA's website, is not guidance unless it says that it is.

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CRED 2.4.7

Guidance may be used to explain the implications of other provisions, to indicate possible means of compliance, to recommend a particular course of action or arrangement, and for other purposes. Whatever guidance is used for, it is not binding on those to whom the Act and rules apply, nor does it have 'evidential' effect. It need not be followed in order to achieve compliance with the relevant rule or other requirement. So a credit union cannot incur disciplinary liability merely because it has not followed guidance. Nor is there any presumption that departing from guidance is indicative of a breach of the relevant rule. However, credit unions should at all times take care to ensure that where the guidance refers to, or describes rules in CRED or elsewhere in the Handbook, those rules are observed.

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CRED 2.4.8

Guidance is generally designed to throw light on a particular aspect of regulatory requirements, not to be an exhaustive description of credit unions' obligations. If a person acts in accordance with guidance in the circumstances contemplated by that guidance, then the FSA will proceed on the footing that the person has complied with the aspects of the rule or other requirement to which the guidance relates.

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CRED 2.4.9

Rights conferred on third parties (such as credit union members) cannot be affected by guidance given by the FSA. Guidance on rules, the Act or other legislation represents the FSA's view, and does not bind the courts, for example in relation to an action for damages brought by a private person for breach of a rule, or in relation to the enforceability of a contract where there has been a breach of general prohibition on carrying on a regulated activity in the United Kingdom without authorisation). A person may need to seek his own legal advice.

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CRED 2.4.10

G is also used for the FSA's statement of the procedure for giving statutory notices under section 395 of the Act(see DEC), for the various statements of policy regarding use of the FSA's enforcement powers (see ENF), and to indicate the arrangements made by the FSA under paragraph 7 of Schedule 1 to the Act for the investigation of complaints arising in connection with its exercise of its non-legislative functions (see COAF).

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Direction: D

CRED 2.4.11

The letter D is used to indicate directions and requirements given under various powers conferred by the Act, for example, directions under section 51(3) of the Act about the form and content of applications for Part IV permission. Directions and requirements are binding upon the persons or categories of person to whom they are addressed.

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CRED 2.4.12

The letter D is also used to indicate non-FSA legislative material, namely directly applicable EU and UK materials, such as directives, statutes and regulations. In such cases, the source material is clearly indicated.

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CRED 2.5

Numbering: Pages

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CRED 2.5.1

Page numbers are not important in CRED. In the paper version, page numbering starts again at the beginning of each chapter. But each page of a chapter shows:

(1) the reference code for the sourcebook or manual;
(2) the number and title of the chapter; and
(3) the number and title of the section of the chapter.

For example, the first page of Chapter 3 of the Supervision manual shows at the top, on the left 'SUP 3: Auditors' and on the right 'Section 1: Application'. In addition, each page of a chapter shows, at the foot of the page, the number of the last paragraph on the page.

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CRED 2.5.2

Each page of an annex shows, at the top of the page, the reference code, number and title of the chapter to which the annex relates, and the number and status of the annex.

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CRED 2.5.3

Each page of an appendix shows, at the top of the page, the reference code of the sourcebook or manual to which the appendix relates, and the number and title of the appendix.

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CRED 2.5.4

Each page of CRED also shows, at the foot of the page, the number, month and year of the release with which the page was published (for example, FSA Handbook: Release 003: October 2001).

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CRED 2.5.5

Both the electronic and the paper editions of the Handbook represent the text of CRED current at the date of the last release, including all amendments to that date.

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CRED 2.6

Numbering: Contents

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CRED 2.6.1

The main text of CRED is numbered as follows:

(1) chapter 1 (2, 3 etc)
(2) section 1.1 (1.2, 1.3 etc)
(3) paragraph 1 (1.1.2, 1.1.3 etc)
(4) sub-paragraph 1.1.1(1) (1.1.1(2), 1.1.1(3) etc)

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CRED 2.6.2

Further sub-paragraphs are shown by (a), (b), (c) and so on, and then by (i), (ii), (iii) and so on. For example, the third paragraph of the second section of the first chapter in the Conduct of Business sourcebook, if it were a rule, would be COB 1.2.3G. If there were two further sub-paragraphs, it would be COB 1.2.3R (1)(a)

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CRED 2.7

Defined terms

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CRED 2.7.1

Defined terms used in the text are shown in italic type. Where a word or phrase is in italics, its definition can be found in the Handbook Glossary. Where a word or phrase which is shown in italics in one part of the text appears without italics in another part, it is meant to be given, where un-italicised, its ordinary natural meaning.

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CRED 2.8

Schedules

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CRED 2.8.1

CRED contains eight schedules as follows:

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Transitional provisions

CRED 2.8.2

The list of transitional provisions in CRED modifies the general transitional provisions contained elsewhere in the Handbook to apply specifically to credit unions.

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Schedule 1: Record keeping requirements

CRED 2.8.3

Schedule 1 provides a list of the detailed record keeping requirements in CRED and where they are to be found.

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Schedule 2: Notification requirements

CRED 2.8.4

Schedule 2 provides a list of the detailed notification requirements in CRED and where they are to be found.

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Schedule 3: Fees and other required payments

CRED 2.8.5

Schedule 3 provides a list of any fees and other payments for which a credit union may be liable under CRED. As details of fees and other payments appear elsewhere in the Handbook, we have also included a table of where these can be found. (Note that these will also be summarised in Schedule 3 to the relevant Handbook module in which they appear).

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Schedule 4: Powers exercised in making the Handbook.

CRED 2.8.6

Schedule 4 specifies the powers given by the Act which the FSA has exercised in making the provisions in the sourcebook or manual.

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Schedule 5: Rights of action for damages

CRED 2.8.7

Schedule 5:

(1) gives guidance (where relevant) on the availability of rights of action to private persons under section 150 of the Act; and
(2) lists the rules in CRED:

(a) to which rights of action under section 150(1) of the Act; and
(b) to which rights of action apply at the suit, not only of a private person, but of a person who is not a private person, in accordance with section 150(3), with a statement to whom the rights have been extended.

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Schedule 6: Rules that can be waived

CRED 2.8.8

(1) Schedule 6 specifies the rules in the sourcebook or manual (if any) which the FSA has power to waive or modify, and the section of the Act which gives the FSA that power in respect of the rules in question.

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Schedule 7: Schedule of releases

CRED 2.8.9

(1) The purpose of schedule 7 is to help credit unions keep track of amendments made to CRED since it was first published. It lists by serial number each release issued, its date of publication and its contents. The full text of each release is on the FSA's website at www.fsa.gov.uk.

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CRED 2.9

Glossary of definitions

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CRED 2.9.1

The Handbook has a Glossary of definitions that lists the defined terms used in CRED and gives their meaning. This is most easily accessed through the electronic version on CD-ROM or the FSA's Website.

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