SIFA 4
Contents of
the handbook
SIFA 4.1
The parts of the handbook that apply to smaller investment intermediaries
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SIFA 4.1.1
See Notes
This is a Guide
for smaller investment intermediaries to highlight which parts of the Handbook
will be of most immediate practical significance to them. There will be some
variation, as not all firms undertake identical business or have permissions
to carry out the same activities.
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SIFA 4.1.2
See Notes
If your firm breaches one or more of
the Principles you could face enforcement action. For example, a serious breach
may result in your firm's authorisation being removed and could also pose
a risk to our statutory objectives.
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SIFA 4.1.3
See Notes
The application and purpose of the Principles
is as follows:
(1) The Principles apply to every firm. They
are general statements of the fundamental obligations of firms under the regulatory
system.
(2) The Principles express what is meant
by the fit and proper standard set for firms. Breaching the Principles may
call into question whether a firm is still fit and proper.
(3) The Principles require a firm to pay
due regard to the interests of its customers and treat them fairly.
(4) The Principles are also designed as a
general statement of regulatory requirements that are to be applied in new
or unforeseen situations (PRIN 1).
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SIFA 4.1.4
See Notes
The Principles are set out in the Principles
for Businesses Sourcebook (PRIN). They can be found at Section 2.1 of PRIN
and are also set out below:
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SIFA 4.1.5
See Notes
| 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 interest 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 judgement. |
| 10. | A firm must arrange adequate protection for client's assets when it is responsible for them. |
| 11. | A firm must deal with its regulators in an open and co-operative 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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SIFA 4.1.6
See Notes
These are set out in the Senior Management
Arrangements, Systems and Controls Sourcebook (SYSC). This part of the Handbook
expands the meaning of Principle 3.
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SIFA 4.1.7
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 Managing Director or
most senior person the functions of dealing with the apportionment of responsibilities
and overseeing the establishment and maintenance of systems and controls;
(4) make and keep updated a record of these
arrangements, for example, by means of an organisation chart; and
(5) take reasonable care to create and maintain
such systems and controls as are appropriate to its business.
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SIFA 4.1.9
See Notes
When evaluating whether you meet the
requirements of Principle 3 you should also consider:
(1) Threshold Conditions;
(2) Money Laundering Regulations (failure
to comply is a criminal offence); and
(3) The Money Laundering Sourcebook (ML)
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SIFA 4.1.10
See Notes
Table:
|
The
following sections of this Overview are also relevant:
• Threshold Conditions in 'Authorisation' - Chapter 5 •'Money Laundering' - Chapter 14 |
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SIFA 4.2
Abbreviations
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SIFA 4.2.1
See Notes
A list of abbreviations commonly used
to refer to parts of the Handbook and other publications are set out below:
| Manual / sourcebook | Manual / sourcebook | ||
| APER | Statements of Principle and Code of Practice for Approved Persons | FS | Feedback Statement |
| AUTH | Authorisation manual | GEN | General Provisions |
| CASS | Client Assets | ICOB | Insurance: Conduct of Business |
| COAF | Complaints against the FSA | IPRU(INV) | Interim Prudential sourcebook for Investment Businesses |
| COB | Investments: Conduct of Business | MAR | Market Conduct |
| COMP | Compensation | MCOB | Mortgages: Conduct of Business |
| COND | Threshold Conditions | ML | Money Laundering |
| CP | Consultation Paper | PERG | Perimeter Guidance |
| DEC | Decision Making (gives guidance on the FSA's decision making and other procedures for giving statutory notices) | PRIN | Principles for Businesses |
| PROF | Professional firms | ||
| PRU | Integrated Prudential sourcebook | ||
| DISP | Dispute Resolution: complaints | PS | Policy statement |
| DP | Discussion paper | SUP | Supervision manual |
| ENF | Enforcement manual | SYSC | Senior Management Arrangements Systems and Controls |
| FIT | Fit and Proper test for Approved Persons | TC | Training and Competence |
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SIFA 4.3
Contents of the Handbook
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SIFA 4.3.1
See Notes
The Handbook is divided into Blocks that
contain sourcebooks and manuals. Sourcebooks provide the source of the FSA's
rules and guidance. Manuals contain processes to be followed by firms and
by us.
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High Level Standards (Block 1):
SIFA 4.3.2
See Notes
Block 1 deals with the fundamental requirements
for all firms and so is relevant to you.
| Sourcebook | Contents |
| PRIN | Sets out the overarching standards we expect of firms and will be familiar to you. It includes the Principles. |
| SYSC | Outlines our management arrangement requirements. While this is important to all firms, management control and accountability should clearly be simpler in a small firm. |
| FIT | Sets out our standards applied when giving approved person status and so is relevant when a firm submits an application for an employee to become an approved person. It is also relevant for the purposes of assessing the continuing fitness and propriety of approved persons. |
| APER | Is of continuing relevance as it sets out the standards of behaviour that we expect of approved persons. |
| COND | Sets out the minimum standards that firms must satisfy to retain authorisation (the 'Threshold Conditions'). |
| GEN | Sets out some of the underlying legal framework. GEN 1.2 is likely to be one of the most relevant parts. The purpose of the section is to ensure that clients are not misled about the extent to which we have approved a firm's affairs. GEN 4 on statutory status disclosure is discussed at section 9.11 of the Guide. GEN 5.1 deals with the use of the FSA logo and the Keyfacts logo which must be included on a firm's initial disclosure document (IDD) and menu. |
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Prudential Standards (Block 2):
SIFA 4.3.3
See Notes
Chapters 1 and 13 of IPRU(INV) cover
the financial resources requirements, including professional indemnity insurance
(PII), that are likely to be relevant to smaller investment intermediaries.
In most cases the other Interim Prudential sourcebooks will not be immediately
relevant. These Prudential sourcebooks explain the financial resource requirements
for other kinds of firm such as banks and insurance companies. Firms that
do mortgage or insurance mediation as well as investment business need to
consider the requirements of both PRU 9 and IPRU(INV) 13. There
is more information in Chapter 8 of the Guide.
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Business standards (Block 3):
SIFA 4.3.4
See Notes
Block 3 sets out most of the detailed
requirements that will affect firms on a day-to-day basis.
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SIFA 4.3.5
See Notes
COB will be of immediate practical relevance
to you. COB has wide and varied application and so it is important for you
to read the application provisions at the beginning of each chapter.
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SIFA 4.3.6
See Notes
However, for typical smaller investment
intermediaries, here is a broad indicator of those parts that are likely to
be most immediately relevant to you (depending on the nature of your business):
| COB Sourcebook | |
| Chapter | Subject |
| Most of the following chapters will have practical relevance: | |
| 4 | Accepting customers and customer classification |
| 5 | Advising and selling |
| 5A | Providing basic advice on stakeholder products |
| 6 | Product disclosure and the customer's right to cancel or withdraw |
| Parts of the following chapters will have practical relevance: | |
| 2 | Rules which apply when conducting designated investment business |
| 3 | Financial promotion |
| 7 | Dealing and managing |
| 8 | Reporting to customers |
| Not relevant in most cases: | |
| 1 | General application: the various limitations of application are unlikely to be relevant to small firms doing UK business |
| 8A | Claims handling under long-term care insurance contracts |
| 10 | Collective investment schemes |
| 11 | Trustee and depositary activities |
| 12 | Lloyd's |
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SIFA 4.3.7
See Notes
The rest of Block 3 contains:
•Insurance: Conduct
of Business (ICOB) sets out the business requirements applying to firms conducting
business relating to general insurance or pure protection policies. This is
likely to be relevant to smaller investment intermediaries with the relevant
permission.•Mortgages: Conduct
of Business (MCOB) sets out the conduct of business requirements applying
to firms conducting regulated mortgage activities. This is also likely to
be relevant to smaller investment intermediaries with the relevant permission.•Money Laundering
(ML) has immediate relevance to smaller investment intermediaries, and builds
on existing money laundering requirements.•Training &
Competence (TC) has immediate relevance to smaller investment intermediaries.•Client Assets
(CASS) provides rules and guidance on holding client assets and client money,
including requirements regarding segregation and safe custody of assets and
statutory trusts in respect of client money. It includes the rules and guidance
that were previously included in COB 9. CASS will not be relevant
to firms who do not have permission to hold client money or assets.•Market Conduct
(MAR) is unlikely to be relevant but 'MAR 1:
The Code of Market Conduct' provides guidance to all persons on whether or
not behaviour amounts to market abuse.
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Regulatory processes (Block 4):
SIFA 4.3.8
See Notes
Block 4 sets out our regulatory processes
and procedures and contains the Authorisation (AUTH), Supervision (SUP), Enforcement
(ENF), and Decision Making (DEC) manuals. Most of this may be of interest
but will not be of immediate importance unless you are applying to vary the
activities you are permitted to carry on, or facing potential enforcement
action.
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SIFA 4.3.9
See Notes
Parts of SUP do have more immediate relevance
to smaller investment intermediaries. These are Chapters 8 - 10, 11
(if the firm is incorporated or is a partnership), 12, 15, parts of 16, and
20. They cover topics such as individual guidance, approved persons, notifications,
financial reporting, and fee rules.
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Redress (Block 5):
SIFA 4.3.10
See Notes
Block 5 contains the Dispute resolution
(DISP), Compensation (COMP) and Complaints against the FSA (COAF) sourcebooks.
Chapter 1 of DISP sets out requirements for a firm's complaint-handling
procedures.
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Specialist sourcebooks (Block 6):
SIFA 4.3.11
See Notes
Block 6 contains specialist sourcebooks,
which show how the Handbook applies to certain sectors, such as collective
investment schemes and credit unions. These are unlikely to be relevant to
most smaller investment intermediaries, but the sourcebook for Professional
Firms (PROF) may be of interest. Professional firms means firms of solicitors,
accountants and actuaries.
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Listing, Prospectus and Disclosure Rules (Block 7):
SIFA 4.3.12
See Notes
Block 7 contains the Listing Rules (LR),
Prospectus Rules (PR) and Disclosure Rules (DR). These modules set out the
requirements for issuers listed on, or seeking admission to, the Official
List of the UKLA, along with the prospectus and disclosure document requirements.
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Special guides:
SIFA 4.3.13
See Notes
Special guides include documents such
as this one. Special guides contain information aimed at helping a class or
type of firm to meet their regulatory responsibilities. Small mortgage and
insurance intermediaries will find the following useful:
'MIGI' - General rules
http://fsahandbook.info/FSA/html/handbook/MIGI
'MOGI' Mortgage intermediaries (additional rules)
http://fsahandbook.info/FSA/html/handbook/MOGI
and 'GIGI' - Insurance Intermediaries (additional rules)
http://fsahandbook.info/FSA/html/handbook/GIGI.
'MIGI' - General rules
http://fsahandbook.info/FSA/html/handbook/MIGI
'MOGI' Mortgage intermediaries (additional rules)
http://fsahandbook.info/FSA/html/handbook/MOGI
and 'GIGI' - Insurance Intermediaries (additional rules)
http://fsahandbook.info/FSA/html/handbook/GIGI.
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SIFA 4.4
Fees
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SIFA 4.4.1
See Notes
Various parts of SUP, DISP and COMP will
be relevant to the fees payable by smaller investment intermediaries. However,
you will receive the necessary information about this with your invoices.
Chapter 18 includes more information on fees.
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SIFA 4.5
Interpreting the handbook
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SIFA 4.5.1
See Notes
Every provision in the Handbook must
be interpreted with its purpose in mind (GEN 2.2).
The purpose of any provision in the Handbook is to be gathered first and foremost
from the text of the provision in question and its context among other relevant
provisions.
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SIFA 4.6
Rules and guidance
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SIFA 4.6.1
See Notes
We have prepared a Reader's Guide to
help firms navigate the Handbook - you can access it via 'Handbook' on the
CD-ROM or by clicking on 'FSA Handbook' on the homepage of our
website.
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SIFA 4.6.2
See Notes
As explained more fully in the Reader's
Guide the provisions in the Handbook do not all have the same status. The
difference between Rules and Guidance is important. The Rules in the Handbook
(marked with an 'R') create binding obligations on firms. If a
firm breaches such a rule, it may be subject to enforcement action and in
some circumstances to an action for damages.
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SIFA 4.6.3
See Notes
Guidance in the Handbook (marked with
a 'G') is general Guidance given to more than one firm or individual.
Guidance is not binding on a firm. But where a firm follows Guidance that
indicates a possible way to comply with a rule or recommends a course of action
or arrangement, we intend to proceed on the basis that the firm has complied
with the relevant Handbook rule. A small firm may find that Guidance is a
helpful indication of how compliance with a Rule may be achieved without devising
its own approach to that Rule.
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SIFA 4.6.4
See Notes
There are also Evidential Provisions.
These are rules but they are not binding in their own right - they are marked
with a status letter 'E' in the margin or header. You can find
a more detailed explanation in the Reader's Guide.
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SIFA 4.6.5
See Notes
We have introduced two types of Handbook
provisions where we have 'copied out' material from UK and EU legislation.
Where appropriate a UK and EU flag icon will appear against the relevant paragraphs,
and the letters 'UK' or 'EU' used in cross-references.
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SIFA 4.6.6
See Notes
To help readers we have also introduced
other informative text within or at the end of relevant paragraphs of the
Handbook. These will be identified as 'Notes'. They will not form part of
the legislative material and have no legal status.
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