Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to a third country CRR firm;

(1) with respect to the carrying on of the following from an establishment in the UK:

(a) regulated activities except auction regulated bidding;

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

(c) ancillary activities;

(d) in relation to MiFID business, providing ancillary services; and

(e) unregulated activities in a prudential context; and

(2) in a prudential context with respect to activities wherever they are carried on; and

(3) taking into account any activity of other members of a group of which the firm is a member.

1.2

A reference to a firm in this Part is to a firm within the scope of 1.1.

1.3

In this Part, the following definitions shall apply:

auction platform

means a platform on which auctions of allowances are held in accordance with the auction regulation.

auction regulation

Commission Regulation (EU) No 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowances trading within the Community.

auction regulation bidding

means the regulated activity of bidding in emissions auctions where it is carried on by:

(a) a firm that is exempt from MiFID under article 2(1)(i); or

(b) a MiFID investment firm (other than a UCITS investment firm) on behalf of its clients in relation to a two-day emissions spot.

authorisation

means authorisation as an authorised person for the purposes of FSMA.

two-day emissions spot

means an allowance where delivery is to be made at an agreed date no later than the second trading day from the day of an auction on an auction platform (within the meaning of article 3(3) of the auction regulation).

UCITS investment firm

means a firm which:

(a) is a management company (whether or not it is also the operator of other collective investment schemes); and

(b) has a Part 4A permission (or an equivalent permission from its Home State regulator) to manage investments where:

(i) the investments managed include one or more of the instruments listed in Section C of Annex 1 to MiFID; and

(ii) the permission extends to activities permitted by article 6(3) of the UCITS Directive as well as those permitted by article 6(2).

2.1

A firm must have robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, and internal control mechanisms, including sound administrative and accounting procedures and effective control and safeguard arrangements for information processing systems.

2.2

A firm must, taking into account the nature, scale and complexity of the business of the firm, and the nature and range of the financial services and activities undertaken in the course of that business establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the firm.

3.1

The senior personnel of a firm must be of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the firm.

3.2

A firm must ensure that its management is undertaken by at least two persons meeting the requirements laid down in 3.1.

3.3

If the firm is:

(1) a natural person; or

(2) a legal person managed by a single natural person;

it must have alternative arrangements in place which ensure sound and prudent management of the firm.

4.1

A firm, when allocating functions internally, must ensure that senior personnel and, where appropriate, the supervisory function, are responsible for ensuring that the firm complies with its obligations under the regulatory system. In particular, senior personnel and, where appropriate, the supervisory function must assess and periodically review the effectiveness of the policies, arrangements and procedures put in place to comply with the firm's obligations under the regulatory system and take appropriate measures to address any deficiencies.

5.1

A firm must employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them, taking into account the nature, scale and complexity of its business and the nature and range of financial services and activities undertaken in the course of that business.

6.1

This chapter applies to the carrying on of an auction regulation bidding, to the extent that it relates to the obligation to establish, implement and maintain adequate policies and procedures for countering the risk that the firm (including its managers, employees and appointed representatives) might be used to further financial crime.

6.2

A firm must establish, implement and maintain adequate policies and procedures sufficient to ensure compliance of the firm including its managers, employees and appointed representatives (or where applicable, tied agents) with its obligations under the regulatory system and for countering the risk that the firm might be used to further financial crime.

6.3

In order to ensure compliance in accordance with 6.2, a firm that carries on designated investment business with or for retail clients or professional clients must appoint a compliance officer who is responsible for compliance.

7.1

If a firm outsources critical or important operational functions or any relevant services and activities, it remains fully responsible for discharging all of its obligations under the regulatory system and must comply, in particular, with the following conditions:

(1) the outsourcing must not result in the delegation by senior personnel of their responsibility;

(2) the relationship and obligations of the firm towards its clients under the regulatory system must not be altered;

(3) the conditions with which the firm must comply in order to be authorised, and to remain so, must not be undermined;

(4) none of the other conditions subject to which the firm's authorisation was granted must be removed or modified.

8.1

This chapter applies to activities carried on by a firm from an establishment maintained in the UK, unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case this chapter applies with that wider scope in relation to the activity described in that rule.

8.2

A firm must arrange for orderly records to be kept of its business and internal organisation, including all services and transactions undertaken by it, which must be sufficient to enable the PRA or any other relevant competent authority under MiFID to monitor the firm's compliance with the requirements under the regulatory system, and in particular to ascertain that the firm has complied with all obligations with respect to clients.