MIGI 3
The Principles and Senior Management
Arrangements, Systems and Controls
MIGI 3.1
Principles for businesses
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What are the Principles?
MIGI 3.1.1
See Notes
The Principles apply to every firm.
They are general statements of the main regulatory obligations of authorised
firms. The Principles set out in simple terms the high level standards that
all firms must meet. They express what is meant by the fit and proper standard
set for firms. The rest of the Handbook contains more detailed requirements
that expand on these standards.
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MIGI 3.1.2
See Notes
If your firm contravenes one or more
of the Principles, it could face enforcement action. This could, for example,
result in your firm's authorisation being removed.
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Where are the relevant rules in the Handbook?
MIGI 3.1.3
See Notes
The Principles
are set out in the Principles for Businesses sourcebook (PRIN) and are also
set out below:
| The Principles | |
| 1 | A firm must conduct its business with integrity. |
| 2 | A firm must conduct its business with due skill, care and diligence. |
| 3 | A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. |
| 4 | A firm must maintain adequate financial resources. |
| 5 | A firm must observe proper standards of market conduct. |
| 6 | A firm must pay due regard to the interests of its customers and treat them fairly. |
| 7 | A firm must pay due regard to the information needs of its clients, and communicate information to them in a way, which is clear, fair and not misleading. |
| 8 | A firm must manage conflicts of interests fairly, both between itself and its customers and between a customer and another client. |
| 9 | A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment. |
| 10 | A firm must arrange adequate protection for clients' assets when it is responsible for them. |
| 11 | A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice. |
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MIGI 3.2
Senior Management Arrangements, Systems and Controls
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What are Senior management arrangements, systems and controls?
MIGI 3.2.1
See Notes
Principle 3 requires firms to take reasonable
care to organise and control their affairs responsibly and effectively. This
Principle is amplified by our rules in the Senior Management Arrangements,
Systems and Controls sourcebook (SYSC), which provides further details on
what internal systems and controls we require regulated firms to have in place.
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MIGI 3.2.2
See Notes
This means that a firm must (in line
with SYSC 2 and SYSC
3):
(1) clearly apportion responsibilities amongst its directors and senior
managers;
(2) ensure the business and affairs of the firm can be adequately
monitored;
(3) allocate to the chief executive (if there is one), or a director
or senior manager, the functions of dealing with the apportionment of responsibilities
and overseeing the establishment and maintenance of systems and controls.
This function may be allocated to one or more persons, but if your firm has
a chief executive officer he must be one of them (or the only one if you appoint
only one person);
(4) make and keep updated a record of these arrangements (for example,
in an organisational chart); and
(5) take reasonable care to create and maintain such systems and controls
as are appropriate to its business.
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MIGI 3.2.3
See Notes
The rules and guidance in SYSC
3.2 cover some of the main issues that a firm is expected to consider
in establishing and maintaining the systems and controls appropriate to its
business. These include:
(1) the size of the firm, the scale and complexity of the business;
(2) the need to counter the risk that the firm might be used to further
financial crime; and
(3) the need to establish and maintain compliance with regulatory
requirements and record keeping.
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MIGI 3.2.4
See Notes
The rules in SYSC are to a large extent
intended to ensure good business practice by firms. Therefore, if your firm's
business is well-run and well-organised you should find that your firm should
satisfy much of what is required by SYSC.
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MIGI 3.2.5
See Notes
We do not, therefore, expect the same
kind of systems and controls in both small and large firms. The important
point is that a firm's systems and controls should be fit for purpose given
the size and the business of the firm. In the case of a sole trader, one person
is responsible for all aspects of the firm, but we expect there to be adequate
systems to allow that person to manage and monitor the firm.
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MIGI 3.2.6
See Notes
The following chapters
of this Guide are also relevant:
| • | Threshold conditions in Authorisation - Part I, Chapter 4 |
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