Prudential Regulation Authority Rulebook

SYSC 6.1

SYSC 6.1.1

See Notes

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.

[Note: article 13(2) of MiFID and article 12(1)(a) of the UCITS Directive]

SYSC 6.1.2

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A common platform firm and a management company must, taking intoaccount 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, establish, implement and maintain adequate policies and procedures designed to detect any risk of failure by the firm to comply with its obligations under the regulatory system, as well as associated risks, and put in place adequate measures and procedures designed to minimise such risks and to enable the FSA to exercise its powers effectively under the regulatory system and to enable any other competent authority to exercise its powers effectively under MiFID or the UCITS Directive.

[Note: article 6(1) of the MiFID implementing Directive and article 10(1) of the UCITS implementing Directive]

SYSC 6.1.2A

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SYSC 6.1.3

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A common platform firm and a management company must maintain a permanent and effective compliance function which operates independently and which has the following responsibilities:

1. (1) to monitor and, on a regular basis, to assess the adequacy and effectiveness of the measures and procedures put in place in accordance with SYSC 6.1.2 R, and the actions taken to address any deficiencies in the firm's compliance with its obligations; and
2. (2) to advise and assist the relevant persons responsible for carrying out regulated activities to comply with the firm's obligations under the regulatory system.

[Note: article 6(2) of the MiFID implementing Directive and article 10(2) of the UCITS implementing Directive]

SYSC 6.1.3A

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1. (1) Other firms should take account of the compliance function rule (SYSC 6.1.3 R) as if it were guidance (and as if should appeared in that rule instead of must) as explained in SYSC 1 Annex 1.3.3 G.
2. (2) Notwithstanding SYSC 6.1.3 R, as it applies under (1), 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 SYSC 6.1.3 R and SYSC 6.1.4 R as guidance.

SYSC 6.1.4

See Notes

In order to enable the compliance function to discharge its responsibilities properly and independently, a common platform firm and a management company must ensure that the following conditions are satisfied:

1. (1) the compliance function must have the necessary authority, resources, expertise and access to all relevant information;
2. (2) a compliance officer must be appointed and must be responsible for the compliance function and for any reporting as to compliance required by SYSC 4.3.2 R;
3. (3) the relevant persons involved in the compliance functions must not be involved in the performance of services or activities they monitor;
4. (4) the method of determining the remuneration of the relevant persons involved in the compliance function must not compromise their objectivity and must not be likely to do so.

[Note: article 6(3) first paragraph of the MiFID implementing Directive and article 10(3) of the UCITS implementing Directive]

SYSC 6.1.4-A

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SYSC 6.1.4A

See Notes

1. (1) A firm which is not a common platform firm or management company and which carries on designated investment business with or for retail clients or professional clients must allocate to a director or senior manager the function of:
1. (a) having responsibility for oversight of the firm's compliance; and
2. (b) reporting to the governing body in respect of that responsibility.
2. (2) In SYSC 6.1.4A R (1) compliance means compliance with the rules in:
1. (a) COBS (Conduct of Business sourcebook);
2. (b) COLL (Collective Investment Schemes sourcebook) and CIS (Collective Investment Schemes sourcebook) (where appropriate);
3. (c) CASS (Client Assets sourcebook); and
4. (d) ICOBS (Insurance: Conduct of Business sourcebook).

SYSC 6.1.5

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A common platform firm and a management company need not comply with SYSC 6.1.4 R (3) or SYSC 6.1.4 R (4) if it is able to demonstrate that in view of the nature, scale and complexity of its business, and the nature and range of financial services and activities, the requirements under those rules are not proportionate and that its compliance function continues to be effective.

[Note: article 6(3) second paragraph of the MiFID implementing Directive and article 10(3) second paragraph of the UCITS implementing Directive]

SYSC 6.1.6

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SYSC 6.1.7

See Notes

1. (1) This rule applies to a common platform firm conducting investment services and activities from a branch in another EEA State.
2. (2) References to the regulatory system in SYSC 6.1.1R, SYSC 6.1.2 R and SYSC 6.1.3 R apply in respect of a firm's branch as if regulatory system includes a Host State's requirements under MiFID and the MiFID implementing Directive which are applicable to the investment services and activities conducted from the firm's branch.

[Note: article 13(2) of MiFID]

SYSC 6.2

SYSC 6.2.1

See Notes

A common platform firm and a management company must, where appropriate and proportionate in view of the nature, scale and complexity of its business and the nature and range of its financial services and activities, undertaken in the course of that business, establish and maintain an internal audit function which is separate and independent from the other functions and activities of the firm and which has the following responsibilities:

1. (1) to establish, implement and maintain an audit plan to examine and evaluate the adequacy and effectiveness of the firm's systems, internal control mechanisms and arrangements;
2. (2) to issue recommendations based on the result of work carried out in accordance with (1);
3. (3) to verify compliance with those recommendations;
4. (4) to report in relation to internal audit matters in accordance with SYSC 4.3.2 R.

[Note: article 8 of the MiFID implementing Directive and article 11 of the UCITS implementing Directive]

SYSC 6.2.1A

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SYSC 6.2.2

See Notes

SYSC 6.3

SYSC 6.3.1

See Notes

A firm must ensure the policies and procedures established under SYSC 6.1.1 R include systems and controls that:

1. (1) enable it to identify, assess, monitor and manage money laundering risk; and
2. (2) are comprehensive and proportionate to the nature, scale and complexity of its activities.

SYSC 6.3.2

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SYSC 6.3.3

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SYSC 6.3.4

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SYSC 6.3.5

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SYSC 6.3.6

See Notes

In identifying its money laundering risk and in establishing the nature of these systems and controls, a firm should consider a range of factors, including:

1. (1) its customer, product and activity profiles;
2. (2) its distribution channels;
3. (3) the complexity and volume of its transactions;
4. (4) its processes and systems; and
5. (5) its operating environment.

SYSC 6.3.7

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A firm should ensure that the systems and controls include:

1. (1) appropriate training for its employees in relation to money laundering;
2. (2) appropriate provision of information to its governing body and senior management, including a report at least annually by that firm's money laundering reporting officer (MLRO) on the operation and effectiveness of those systems and controls;
3. (3) appropriate documentation of its risk management policies and risk profile in relation to money laundering, including documentation of its application of those policies (see SYSC 9);
4. (4) appropriate measures to ensure that money laundering risk is taken into account in its day-to-day operation, including in relation to:
1. (a) the development of new products;
2. (b) the taking-on of new customers; and
3. (c) changes in its business profile; and
5. (5) appropriate measures to ensure that procedures for identification of new customers do not unreasonably deny access to its services to potential customers who cannot reasonably be expected to produce detailed evidence of identity.

SYSC 6.3.8

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SYSC 6.3.9

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A firm (with the exception of a sole trader who has no employees) must:

1. (1) appoint an individual as MLRO, with responsibility for oversight of its compliance with the FSA's rules on systems and controls against money laundering; and
2. (2) ensure that its MLRO has a level of authority and independence within the firm and access to resources and information sufficient to enable him to carry out that responsibility.

SYSC 6.3.10

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