SIFA 5
FSA Principles, Systems and Controls
SIFA 5.1
FSA Principles
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SIFA 5.1.1
See Notes
The Principles set out in simple terms
the fundamental or overarching standards (called high-level standards) that
all firms must meet. The rest of the Handbook contains more detailed requirements
that expand on these standards.
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SIFA 5.1.2
See Notes
If a firm breaches one or more of the
Principles it becomes liable to disciplinary sanctions. For example, a serious
breach may result in your firm's authorisation being removed.
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SIFA 5.2
Who do the Principles apply to and what is their purpose?
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SIFA 5.2.1
See Notes
The application and purpose of the Principles
is as follows:
•They apply to
every firm. They are a general statement of the fundamental obligations of
firms under the regulatory system.•They express
what is meant by the fit and proper standard set for firms in the threshold
conditions. Breaching the Principles may call into question whether a firm
is still fit and proper.•They require
a firm to pay due regard to the interests of its customers and treat them
fairly.•They 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 5.3
Where are the Principles in the Handbook?
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SIFA 5.3.1
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:
| The Principles | |
| 1. | Integrity: A firm must conduct its business with integrity. |
| 2. | Skill, care and diligence: A firm must conduct its business with due skill, care and diligence. |
| 3. | Management and control: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. |
| 4. | Financial prudence: A firm must maintain adequate financial resources. |
| 5. | Market conduct: A firm must observe proper standards of market conduct. |
| 6. | Customers' interests: A firm must pay due regard to the interests of its customers and treat them fairly. |
| 7. | Communications with clients: 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. | Conflicts of interest: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client. |
| 9. | Customers: relationships of trust: 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. | Clients' assets: A firm must arrange adequate protection for client's assets when it is responsible for them. |
| 11. | Relations with regulators: 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 5.4
Senior Management Arrangements, Systems and Controls
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SIFA 5.4.1
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 5.4.2
See Notes
This means that a firm must (in line
with SYSC 2 and SYSC 3):
•apportion responsibilities
among its directors and senior managers so it is clear who has which of these
responsibilities and the business and affairs of the firm can be adequately
monitored and controlled;•allocate to
the Chief Executive or most senior person the functions of apportioning responsibilities
and overseeing the establishment and maintenance of systems and controls;•make and keep
updated a record of these arrangements, for example, by means of an organisation
chart and job descriptions; and•take reasonable
care to create and maintain such systems and controls as are appropriate to
its business.
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SIFA 5.4.3
See Notes
The rules and guidance in SYSC 3.2 cover some of the main issues which a firm is expected to consider
in establishing and maintaining the systems and controls appropriate to its
business. These include:
We do not expect small and large firms to have similar systems and controls. The important point is that they should be fit for purpose given the size and business of the firm. With a sole practitioner, one person is responsible for all aspects of the firm but we expect there to be systems that allow that person to monitor and manage the firm adequately.
•the size of
the firm;•the scale and
complexity of its business;•the need to
counter the risk the firm might be used to further financial crime;•the need to
establish and maintain systems for compliance with regulatory requirements;•the suitability
of employees;•audit requirements;
and•record-keeping.
We do not expect small and large firms to have similar systems and controls. The important point is that they should be fit for purpose given the size and business of the firm. With a sole practitioner, one person is responsible for all aspects of the firm but we expect there to be systems that allow that person to monitor and manage the firm adequately.
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SIFA 5.4.4
See Notes
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SIFA 5.5
Other Requirements
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SIFA 5.5.1
See Notes
When evaluating whether you meet the
requirements of Principle 3 you should also consider:
•Threshold Conditions
(COND);•Money Laundering
Regulations 2003 (failure to comply is a criminal offence); and•Money Laundering
sourcebook (ML).
| The following sections of the Guide are also relevant: | |
| • | Threshold Conditions in 'Authorisation' - Chapter 6 |
| • | 'Money Laundering' - Chapter 14 |
| If you do mortgage or general insurance business you should also refer to MIGI 3. | |
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