Application and purpose

Part

SYSC Senior Management Arrangements, Systems and Controls sourcebook

Chapter

Application and purpose

Printed on: 11/11/2024

Rulebook at: 06/10/2009

SYSC 1

Application and purpose

SYSC 1.1A

Application

01/04/2009

SYSC 1.1A.1

The application of this sourcebook is summarised at a high level in the following table. The detailed application is cut back in SYSC 1 Annex 1 and in the text of each chapter.

Type of firm

Applicable chapters

Insurer

Chapters 2, 3, to 18

Managing agent

Chapters 2, 3, 11, 12, 18

Society

Chapters 2, 3, 12, 18

Every other firm

Chapters 4 to 12, 18

01/04/2009

SYSC 1.2

Purpose

01/12/2004

SYSC 1.2.1

The purposes of SYSC are:

(1) to encourage firms' directors and senior managers to take appropriate practical responsibility for their firms' arrangements on matters likely to be of interest to the FSA because they impinge on the FSA's functions under the Act;
(2) to increase certainty by amplifying Principle 3, under which a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems;
(3) to encourage firms to vest responsibility for effective and responsible organisation in specific directors and senior managers; and
(4) to create a common platform of organisational and systems and controls requirements for all firms.
(5) [deleted]

01/04/2009

SYSC 1.4

Application of SYSC 11 to SYSC 18

01/01/2007

What?

SYSC 1.4.1

The application of each of chapters SYSC 11 to SYSC 18 is set out in those chapters.

01/01/2007

Actions for damages

SYSC 1.4.2

A contravention of a rule in SYSC 11 to SYSC 18 does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

01/01/2007

SYSC 1 Annex 1

Detailed application of SYSC

01/04/2009

Part 1

Application of SYSC 2 and SYSC 3 to an insurer, a managing agent and the Society

Who?

1.1

SYSC 2 and SYSC 3 only apply to an insurer, a managing agent and the Society except that:

(1)

for an incoming EEA firm or an incoming Treaty firm:

(a)

SYSC 2.1.1 R and SYSC 2.1.2 G do not apply;

(b)

SYSC 2.1.3 R to SYSC 2.2.3 G apply, but only in relation to allocation of the function in SYSC 2.1.3 R (2) and only in so far as responsibility for the matter in question is not reserved by a European Communityinstrument to the firm's Home State regulator; and

(c)

SYSC 3 applies, but only in so far as responsibility for the matter in question is not reserved by a European Community instrument to the firm's Home State regulator;

(2)

for an incoming EEA firm which has permission only for cross border services and which does not carry on regulated activities in the United Kingdom, SYSC 2 and SYSC 3 do not apply;

(3)

for an incoming Treaty firm which has permission only for cross border services and which does not carry on regulated activities in the United Kingdom, SYSC 3.2.6A R to SYSC 3.2.6J G do not apply;

(4)

for a sole trader:

(a)

SYSC 2 applies but only if he employs any person who is required to be approved under section 59 of the Act (Approval for particular arrangements);

(b)

SYSC 3.2.6I R does not apply if he has no employees; and

(5)

SYSC 2 and SYSC 3 do not apply to an incoming ECA provider acting as such.

1.2

(1)

Question 12 in SYSC 2.1.6 G contains guidance on SYSC 1 Annex 1.1.1R(1)(b) and SYSC 1 Annex 1.1.1R(1)(c).

(2)

SYSC 1 Annex 1.1.8R further restricts the territorial application of SYSC 2 and SYSC 3 for an incoming EEA firm or an incoming Treaty firm.

(3)

SYSC 1 Annex 1.1.1R(3) puts an incoming EEA firm on an equal footing with unauthorised overseas persons who utilise the overseas persons exclusions in article 72 of the Regulated Activities Order.

(4)

Further guidance on which matters are reserved to a firm's Home State regulator can be found at SUP 13A Annex 2.

What?

1.3

SYSC 2 and SYSC 3 apply with respect to the carrying on of:

(1)

regulated activities;

(2)

activities that constitute dealing in investments as principal, disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc); and

(3)

ancillary activities in relation to designated investment business, home finance activity and insurance mediation activity;

except that SYSC 3.2.6A R to SYSC 3.2.6J G do not apply as described in SYSC 1 Annex 1.1.4R.

1.4

SYSC 3.2.6A R to SYSC 3.2.6J G do not apply:

(1)

with respect to the activities described in SYSC 1 Annex 1.1.3R(2) and SYSC 1 Annex 1.1.3R(3); or

(2)

in relation to the following regulated activities:

(a)

general insurance business;

(b)

insurance mediation activity in relation to a general insurance contract or pure protection contract;

(c)

long-term insurance business which is outside the Consolidated Life Directive (unless it is otherwise one of the regulated activities specified in this rule);

(d)

business relating to contracts which are within the Regulated Activities Order only because they fall within paragraph (e) of the definition of "contract of insurance" in article 3 of that Order;

(e)

(i)

arranging, by the Society, of deals in general insurance contracts written at Lloyd's; and

(ii)

managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's;

(f)

home finance mediation activity and administering a home finance transaction; and

(g)

reversion activity.

1.5

SYSC 2 and SYSC 3, except SYSC 3.2.6A R to SYSC 3.2.6J G, also apply with respect to the communication and approval of financial promotions which:

(1)

if communicated by an unauthorised person without approval would contravene section 21(1) of the Act (Restrictions on financial promotion); and

(2)

may be communicated by a firm without contravening section 238(1) of the Act (Restrictions on promotion of collective investment schemes).

1.6

SYSC 2 and SYSC 3, except SYSC 3.2.6A R to SYSC 3.2.6J G, also:

(1)

apply with respect to the carrying on of unregulated activities in a prudential context; and

(2)

take into account any activity of other members of a group of which the firm is a member.

1.7

SYSC 1 Annex 1.1.6R(2) does not mean that inadequacy of a group member's systems and controls will automatically lead to a firm contravening, for example, SYSC 3.1.1 R. Rather, the potential impact of a group member's activities, including its systems and controls, and any systems and controls that operate on a group basis, will be relevant in determining the appropriateness of the firm's own systems and controls.

Where?

1.8

SYSC 2 and SYSC 3 apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative or, where applicable, its tied agent) in the United Kingdom unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case SYSC 2 and SYSC 3 apply with that wider scope in relation to the activity described in that rule.

1.9

SYSC 2 and SYSC 3, except SYSC 3.2.6A R to SYSC 3.2.6J G, also apply in a prudential context to a UK domestic firm with respect to activities wherever they are carried on.

1.10

SYSC 3, except SYSC 3.2.6A R to SYSC 3.2.6J G, also applies in a prudential context to an overseas firm (other than an incoming EEA firm or an incoming Treaty firm) with respect to activities wherever they are carried on.

1.11

(1)

In considering whether to take regulatory action under SYSC 2 or SYSC 3 in relation to activities carried on outside the United Kingdom, the FSA will take into account the standards expected in the market in which the firm is operating.

(2)

Most of the rules in SYSC 3 are linked to other requirements and standards under the regulatory system which have their own territorial limitations so that those SYSC rules are similarly limited in scope.

Actions for damages

1.12

A contravention of the rules in SYSC 2 and SYSC 3 does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

Part 2

Application of the common platform requirements (SYSC 4 to 10)

Who?

2.1

The common platform requirements apply to every firm apart from an insurer, a managing agent and the Society unless provided otherwise in a specific rule.

2.2

For an incoming EEA firm or an incoming Treaty firm:

(1)

the rule on responsibility of senior personnel (SYSC 4.3) does not apply;

(2)

the common platform requirements apply only in so far as responsibility for the matter in question is not reserved by a European Community instrument to the firm's Home State regulator;

(3)

for an incoming EEA firm which has permission only for cross-border services and which does not carry on regulated activities in the United Kingdom, the common platform requirements do not apply;

(4)

for an incoming Treaty firm which has permission only for cross-border services and which does not carry on regulated activities in the United Kingdom, the common platform requirements on financial crime do not apply.

2.3

For a sole trader:

(1)

SYSC 4.3 and 4.4 do not apply as long as he does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements);

(2)

SYSC 4.1.4 R and SYSC 6.3.9 R do not apply if he has no employees.

2.4

For a UCITS qualifier:

(1)

the rule on responsibility of senior personnel (SYSC 4.3) does not apply; and

(2)

the common platform requirements apply in relation to the communication and approval of financial promotions only as set out in SYSC 1 Annex 1.2.12R.

[Note: section 266 of the Act.]

2.5

For an authorised professional firm when carrying on non-mainstream regulated activities, the common platform requirements on financial crime, conflicts of interest and Chinese walls do not apply.

2.6

The common platform requirements do not apply to an incoming ECA provider acting as such.

2.7

EEA MiFID investment firms are reminded in particular that they must comply with the common platform record-keeping requirements in relation to a branch in the United Kingdom.

What?

2.8

The common platform organisational requirements apply with respect to the carrying on of the following (unless provided otherwise within a specific rule):

(1)

regulated activities;

(2)

activities that constitute dealing in investments as principal, disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc);

(3)

ancillary activities; and

(4)

in relation to MiFID business, ancillary services.

2.9

The application of the provisions on the conflicts of interest in SYSC 10 is set out in SYSC 10.1.1 R and SYSC 10.2.1 R

2.10

The provisions on record-keeping in SYSC 9 apply as set out in SYSC 1 Annex 1.2.8R, except that they only apply to the carrying on of ancillary activities that are performed in relation to:

(1)

designated investment business;

(2)

home finance activity; and

(3)

insurance mediation activity .

2.11

The common platform requirements on financial crime apply as set out in SYSC 1 Annex 1.2.8R, except that they do not apply:

(1)

with respect to:

(a)

activities that constitute dealing in investments as principal, disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc); and

(b)

ancillary activities; or

(2)

in relation to the following regulated activities:

(a)

general insurance business;

(b)

insurance mediation activity in relation to a general insurance contract or pure protection contract;

(c)

long-term insurance business which is outside the Consolidated Life Directive (unless it is otherwise one of the regulated activities specified in this rule);

(d)

business relating to contracts which are within the Regulated Activities Order only because they fall within paragraph (e) of the definition of "contract of insurance" in article 3 of that Order;

(e)

(i)

arranging by the Society of deals in general insurance contracts written at Lloyd's; and

(ii)

managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's;

(f)

home finance mediation activity and administering a home finance transaction;

(g)

reversion activity ; and

(h)

meeting of repayment claims and managing dormant account funds (including the investment of such funds).

2.12

The common platform organisational requirements, except the common platform requirements on financial crime, also apply with respect to the communication and approval of financial promotions which:

(1)

if communicated by an unauthorised person without approval would contravene section 21(1) of the Act (Restrictions on financial promotion); and

(2)

may be communicated by a firm without contravening section 238(1) of the Act (Restrictions on promotion of collective investment schemes).

2.13

The common platform organisational requirements, except the common platform requirements on financial crime, also:

(1)

apply with respect to the carrying on of unregulated activities in a prudential context; and

(2)

take into account any activity of other members of a group of which the firm is a member.

2.14

SYSC 1 Annex 1.2.13R(2) does not mean that inadequacy of a group member's systems and controls will automatically lead to a firm contravening any of the common platform organisational requirements. Rather, the potential impact of a group member's activities, including its systems and controls, and any systems and controls that operate on a group basis, will be relevant in determining the appropriateness of the firm's own systems and controls.

Where?

2.15

The common platform requirements, except the common platform record-keeping requirements, apply to a firm in relation to activities carried on by it from an establishment in the United Kingdom.

2.16

The common platform requirements, except the common platform requirements on financial crime and the common platform record-keeping requirements, apply to a firm in relation to passported activities carried on by it from a branch in another EEA State.

2.17

The common platform record-keeping requirements apply to activities carried on by a firm from an establishment maintained in the United Kingdom, unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case the common platform record-keeping requirements apply with that wider scope in relation to the activity described in that rule.

[Note: article 13(9) of MiFID]

2.18

The common platform organisational requirements, except the common platform requirements on financial crime, also apply in a prudential context to a UK domestic firm and to an overseas firm (other than an incoming EEA firm or an Incoming Treaty firm) with respect to activities wherever they are carried on.

Actions for damages

2.19

A contravention of a rule in the common platform requirements does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

Part 3

Tables summarising the application of the common platform requirements to different types of firm

3.1

The common platform requirements apply in the following two ways (subject to the provisions in Part 2 of this Annex).

3.2

For a common platform firm, they apply in accordance with Column A in the table below.

3.3

For all other firms apart from insurers, managing agentsand the Society, they apply in accordance with Column B in the table below. For these firms, where a rule is shown modified in Column B as 'Guidance', it should be read as guidance (as if "should" appeared in that rule instead of "must") and should be applied in a proportionate manner, taking into account the nature, scale and complexity of the firm's business.

Provision

SYSC 4

COLUMN A

Application to a common platform firm

COLUMN B

Application to all other firms apart from insurers, managing agents and the Society

SYSC 4.1.1 R

Rule

SYSC 4.1.2 R

Rule

Guidance

SYSC 4.1.2A G

Not applicable

Guidance

SYSC 4.1.3 R

Rule applies only to a BIPRU firm

Not applicable

SYSC 4.1.4 R

Rule

(1) and (3) Guidance
(2) Rule

SYSC 4.1.4A G

Not applicable

Guidance

SYSC 4.1.5 R

Rule applies only to a MiFID investment firm

Not applicable

SYSC 4.1.6 R

Rule

Guidance

SYSC 4.1.7 R

Rule

Guidance

SYSC 4.1.7A G

Not applicable

Guidance

SYSC 4.1.8 G

Guidance

SYSC 4.1.9 R

Rule

Not applicable

SYSC 4.1.10 R

Rule

Guidance - except reference to SYSC 4.1.9 R which does not apply to these firms

SYSC 4.1.10A G

Not applicable

Guidance

SYSC 4.1.11 G

Guidance

SYSC 4.2.1 R

Rule

-UK branch of non-EEA bank - rule applies.-Other firms - Guidance

SYSC 4.2.1A G

Not applicable

-Guidance

SYSC 4.2.2 R

Rule

-UK branch of a non-EEA bank - Rule applies-Other firms - this provision does not apply

SYSC 4.2.3 G - 4.2.5 G

Guidance

-UK branch of a non-EEA bank - Guidance-Other firms - these provisions do not apply

SYSC 4.2.6 R

Rule

-UK branch of a non-EEA bank - Rule applies-Other firms - this provision does not apply

SYSC 4.3.1 R

Rule

Rule (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers)

SYSC 4.3.2 R

Rule

Guidance (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers)

SYSC 4.3.2A G

Not applicable

Guidance (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers)

SYSC 4.3.3 G

Guidance

Guidance (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers)

SYSC 4.4.1 R

Not applicable

Rule applies this section only to:
(1) an authorised professional firm in respect of its non-mainstream regulated activities unless the firm is also conducting other regulated activities and has appointed approved persons to perform the governing functions with equivalent responsibilities for the firm's non-mainstream regulated activities and other regulated activities;
(2) activities carried on by a firm whose principal purpose is to carry on activities other than regulated activities and which is:
(a) an oil market participant;
(b) a service company;
(c) an energy market participant
(d) a wholly-owned subsidiary of:

(i) a local authority (ii) a registered social landlord;

(e) a firm with permission to carry on insurance mediation activity in relation to non-investment insurance contracts but no other regulated activity;
(3) an incoming Treaty firm, an incoming EEA firm and a UCITS qualifier, (but only SYSC 4.4.5R (2) applies for these firms); and
(4) a sole trader, but only if he employs any person who is required to be approved under section 59 of the Act (Approval for particular arrangements).

SYSC 4.4.2 G

Not applicable

Guidance only applying to the firms specified in SYSC 4.4.1 R

SYSC 4.4.3 R

Not applicable

Rule only applying to the firms specified in SYSC 4.4.1 R

SYSC 4.4.4 G

Not applicable

Guidance only applying to the firms specified in SYSC 4.4.1 R

SYSC 4.4.5 R

Not applicable

Rule only applying to the firms specified in SYSC 4.4.1 R

Provision

SYSC 5

COLUMN A

Application to a common platform firm

COLUMN B

Application to all other firms apart from insurers, managing agents and the Society

Rule

Guidance

Guidance

Guidance

Guidance

Guidance

Guidance

Rule

Guidance

SYSC 5.1.7 R

Rule

Guidance

SYSC 5.1.7A G

Not applicable

Guidance

Guidance

Guidance

Guidance

Guidance

Rule

Guidance

SYSC 5.1.12A G

Not applicable

Guidance

SYSC 5.1.13 R

Rule

SYSC 5.1.14 R

Rule

Guidance

SYSC 5.1.15 G

Not applicable

Guidance

Provision

SYSC 6

COLUMN A

Application to a common platform firm

COLUMN B

Application to all other firms apart from insurers, managing agents and the Society

SYSC 6.1.1 R

Rule

SYSC 6.1.2 R

Rule

Guidance

SYSC 6.1.2A G

Not applicable

Guidance

SYSC 6.1.3 R

Rule

-Guidance-This provision shall be read with the following additional sentence at the start.
"Depending on the nature, scale and complexity of its business, it may be appropriate for a firm to have a separate compliance function. Where a firm has a separate compliance function, the firm should also take into account 6.1.3 R and 6.1.4 R as guidance."

SYSC 6.1.3A G

Not applicable

Guidance

SYSC 6.1.4 R

Rule

(1) (3) and (4) Guidance
(2)

-Rule for firms which carry on designated investment business with or for retail clients or professional clients.-Guidance for all other firms.

SYSC 6.1.5 R

Rule

-Guidance-"investment services and activities" shall be read as "financial services and activities"

SYSC 6.1.6 R

Not applicable

Guidance

SYSC 6.2.1 R

Rule

Guidance

SYSC 6.2.1A G

Not applicable

Guidance

Guidance

Rule

Guidance

Rule

Guidance

Guidance

Guidance

Guidance

Rule

Rule

Guidance

Provision

SYSC 7

COLUMN A

Application to a common platform firm

COLUMN B

Application to all other firms apart from insurers, managing agents and the Society

SYSC 7.1.1 G

Guidance

SYSC 7.1.2 R

Rule

Guidance

SYSC 7.1.2A G

Not applicable

Guidance

SYSC 7.1.3 R

Rule

Guidance

SYSC 7.1.4 R

Rule

Guidance

SYSC 7.1.4A G

Not applicable

Guidance

SYSC 7.1.5 R

Rule

Guidance

SYSC 7.1.6 R

Rule

Guidance

SYSC 7.1.7 R

Rule

Guidance

SYSC 7.1.7A G

Not applicable

Guidance

SYSC 7.1.8G (1), (2)

(1) Guidance applies only to a BIPRU firm
(2) Guidance

(1) Not applicable
(2) Guidance

SYSC 7.1.9 R

Rule applies only to a BIPRU firm

Not applicable

SYSC 7.1.10 R

Rule applies only to a BIPRU firm

Not applicable

SYSC 7.1.11 R

Rule applies only to a BIPRU firm

Not applicable

SYSC 7.1.12 G

Guidance applies only to a BIPRU firm

Not applicable

SYSC 7.1.13 R - 7.1.16 R

Rule applies only to a BIPRU firm

Not applicable

Provision

SYSC 8

COLUMN A

Application to a common platform firm

COLUMN B

Application to all other firms apart from insurers, managing agents and the Society

SYSC 8.1.1 R

Rule

Guidance

SYSC 8.1.1A G

Not applicable

Guidance

SYSC 8.1.2 G

Guidance

SYSC 8.1.3 G

Guidance

SYSC 8.1.4 R

Rule

Guidance

SYSC 8.1.5 R

Rule

Guidance

SYSC 8.1.5A G

Not applicable

Guidance

SYSC 8.1.6 R

Rule

SYSC 8.1.7 R

Rule

Guidance

SYSC 8.1.8 R

Rule

Guidance

SYSC 8.1.9 R

Rule

Guidance

SYSC 8.1.10 R

Rule

Guidance

SYSC 8.1.11 R

Rule

Guidance

SYSC 8.1.11A G

Not applicable

Guidance

SYSC 8.1.12 G

Guidance

SYSC 8.2

MiFID investment firms only

Not applicable

SYSC 8.3

MiFID investment firms only

Not applicable

Provision

SYSC 9

COLUMN A

Application to a common platform firm

COLUMN B

Application to all other firms apart from insurers, managing agents and the Society

SYSC 9.1.1 R

Rule

SYSC 9.1.2 R

Rule applies only in relation to MiFID business

Not applicable

SYSC 9.1.3 R

Rule applies only in relation to MiFID business

Not applicable

Guidance

Guidance

Guidance

Guidance applies only in relation to MiFID business

Not applicable

Provision

SYSC 10

Column A

Application to a common platform firm

Column B

Application to all other firms apart from insurers, managing agents and the Society

Rule

Guidance

Rule

Rule

Guidance - but applies as a rule in relation to the production or arrangement of production of investment research in accordance with COBS 12.2, or the production or dissemination of non-independent research in accordance with COBS 12.3

SYSC 10.1.4A G

Not applicable

Guidance

SYSC 10.1.5 G

Guidance

SYSC 10.1.6 R

Rule

Guidance - but applies as a rule in relation to the production or arrangement of production of investment research in accordance withCOBS 12.2 , or the production or dissemination of non-independent research in accordance with COBS 12.3

SYSC 10.1.6A G

Not applicable

Guidance

Rule

Rule

Rule

Guidance