Application and purpose

Part

SYSC Senior Management Arrangements, Systems and Controls sourcebook

Chapter

Application and purpose

Printed on: 15/10/2024

Rulebook at: 01/11/2007

SYSC 1

Application and purpose

SYSC 1.1

Application of SYSC 2 and SYSC 3

01/12/2004

Purpose of this section

Who?

SYSC 1.1.1

SYSC 2 and SYSC 3 apply to every firm 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 Community instrument 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;
(2A) 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;
(3) for a sole trader:

(a) SYSC 2 does 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);
(b) SYSC 3.2.6I R does not apply if he has no employees;

(4) for a UCITS qualifier:

(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 with respect to the activities in SYSC 1.1.4 R;
(c) SYSC 3 applies, but only with respect to the activities in SYSC 1.1.4 R;

(5) for an authorised professional firm when carrying on non-mainstream regulated activities, SYSC 3.2.6A R to SYSC 3.2.6J G do not apply;
(6) for a common platform firm, SYSC 2 and SYSC 3 do not apply; and
(7) SYSC 2 and SYSC 3 do not apply to an incoming ECA provider acting as such.

01/11/2007

SYSC 1.1.2

(1) Question 12 in SYSC 2.1.6 G contains guidance on SYSC 1.1.1 R (1)(b) and (c).
(2) SYSC 1.1.7 R and SYSC 1.1.10 R further restrict the territorial application of SYSC 2 and SYSC 3 for an incoming EEA firm, incoming Treaty firm or UCITS qualifier.
(3) SYSC 1.1.1 R (4) puts 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.

01/11/2007

What?

SYSC 1.1.3

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 1.1.3A R.

06/04/2007

SYSC 1.1.3A

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

(1) with respect to the activities described in SYSC 1.1.3 R (2) and (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 Lloyd's, 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) mortgage mediation activity and administering a regulated mortgage contract;
(g) home purchase mediation activity and administering a home purchase plan; and
(h) reversion activity.

06/04/2007

SYSC 1.1.4

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).

01/03/2006

SYSC 1.1.5

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.

01/03/2006

SYSC 1.1.6

SYSC 1.1.5 R (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.

01/12/2001

Where?

SYSC 1.1.7

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.

01/11/2007

SYSC 1.1.8

An example of the type of rule referred to in SYSC 1.1.7 R with a different territorial scope is the custody rules in the non-directive custody chapter. These rules apply, for certain UK firms, to activities carried on from branches in other EEA States as well as UK establishments (CASS 1.3.3 R (General application where?)). Therefore SYSC 2 and SYSC 3 apply to the custody activities described in the non-directive custody chapter carried on from such a branch by such a UK firm. The UK firm must, for example, take reasonable care to establish systems and controls under SYSC 3.1.1 R as are appropriate to those activities carried on from its EEA branches as well as from its UK establishments.

01/11/2007

SYSC 1.1.9

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.

01/03/2006

SYSC 1.1.10

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, incoming Treaty firm or UCITS qualifier) with respect to activities wherever they are carried on.

01/03/2006

SYSC 1.1.11

(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.

01/05/2002

SYSC 1.1.11A

ECO 1.1.6 R has the effect that SYSC does not apply to an incoming ECA provider acting as such.

01/11/2002

Actions for damages

SYSC 1.1.12

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).

01/05/2002

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;
(4) to create a common platform of organisational and systems and controls requirements for firms subject to the CRD and/or MiFID; and
(5) to set out high-level organisational and systems and controls requirements for insurers.

01/01/2007

SYSC 1.3

Application of the common platform requirements

01/01/2007

Who?

SYSC 1.3.1

The common platform requirements apply to a common platform firm unless provided otherwise in a specific rule.

01/01/2007

SYSC 1.3.1A

From 1 January 2007 until 1 November 2007, the application of the common platform requirements is limited by SYSC TP 1.

01/01/2007

SYSC 1.3.1B

Whilst the common platform requirements do not generally apply to incoming EEA firms, EEA MiFID investment firms must comply with the common platform record-keeping requirements in relation to a branch in the United Kingdom.

01/11/2007

What?

SYSC 1.3.2

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.

01/11/2007

SYSC 1.3.3

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.

01/01/2007

SYSC 1.3.4

The provisions on record-keeping in SYSC 9 apply as set out in SYSC 1.3.2 R, 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.

01/11/2007

SYSC 1.3.5

The common platform requirements on financial crime apply as set out in SYSC 1.3.2 R, 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 Lloyd's 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; and

(f) home finance mediation activity and administering a home finance transaction.

01/01/2007

SYSC 1.3.6

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).

01/01/2007

SYSC 1.3.7

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.

01/01/2007

SYSC 1.3.8

SYSC 1.3.7R (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.

01/01/2007

Where?

SYSC 1.3.9

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

01/11/2007

SYSC 1.3.10

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

01/11/2007

SYSC 1.3.10A

The common platform record-keeping requirements apply to activities carried on by:

(1) a common platform firm; or
(2) an EEA MiFID investment 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]

01/11/2007

SYSC 1.3.11

The common platform organisational requirements, except the common platform requirements on financial crime, also apply in a prudential context to a UK domestic firm with respect to activities wherever they are carried on.

01/01/2007

Actions for damages

SYSC 1.3.12

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).

01/01/2007

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