Senior Management Arrangements, Systems and Controls (SYSC): an overview
What is the purpose of SYSC
The UK’s financial services regulators require all authorised firms to ensure appropriate allocation of responsibility for significant activities among individual directors and senior managers.
The Senior Management Arrangements, Systems and Controls sourcebook (SYSC) is located within the high-level standards block of the FCA Handbook.
An important theme of corporate governance is the nature and extent of the responsibility of particular individuals in an organisation for risk management. The FCA requires approved persons, the board and senior management of an authorised firm, to fulfil their regulatory responsibilities appropriately in terms of managing parts of a firm’s activities for which they are individually responsible.
Allocation of responsibility must be done in a way that helps the directors, senior managers and our governing body to monitor and control the business. Individual managers need to take a hands-on approach to ensure compliance in their areas of control. Senior managers are also responsible for instituting the appropriate systems and controls (for example, Customer due diligence) to ensure that our firm complies with its regulatory obligations — such as the Principles for Businesses and any other applicable regulatory rules — and maintains necessary records to evidence compliance.
On 7 March 2016, the Senior Managers and Certification Regime (SM&CR) took effect in relation to UK banks, building societies, credit unions and PRA-designated investment firms (relevant authorised persons or RAPs). HM Treasury announced in October 2015 that the SM&CR would be extended to all authorised financial services institutions from 2018. The SM&CR was extended to insurers from 10 December 2018 and it will be extended to FCA solo-regulated firms from 9 December 2019.
In summary the purpose of SYSC is to:
- encourage firms’ directors and senior management to take appropriate practical responsibility for their firms’ arrangements on matters likely to be of interest to the FCA because they impinge on the FCA’s functions under the Financial Services and Markets Act 2000 (FSMA 2000).
- increase certainty by amplifying Principle 3 of the FCA’s and Principles for Business PRIN under which, a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems
- encourage firms to vest responsibility for effective and responsible organisation in specific directors and senior managers, and
- create a common platform of organisational and systems and controls requirements for all firms
“Management and Control — A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.”
Structure of SYSC
- Senior management arrangements for insurers (SYSC 2)
- Systems and controls for insurers (SYSC 3)
- General organisational requirements (SYSC 4)
- Employees, agents and other relevant persons (SYSC 5)
- Compliance, internal audit and financial crime (SYSC 6)
- Risk control (SYSC 7)
- Outsourcing (SYSC 8)
- Record-keeping (SYSC 9)
- Conflicts of interest (SYSC 10)
- Recording telephone conversations and electronic communications (SYSC 10A)
- Group risk systems and control requirements (SYSC 12)
- Operational risk systems and controls for insurers (SYSC 13)
- Risk management and associated systems and controls for insurers (SYSC 14)
- Whistleblowing (SYSC 18)
- Remuneration codes (SYSC 19A, 19B, 19C, 19D, 19E and 19F)
- Reverse stress testing (SYSC 20)
- Additional guidance on risk control (SYSC 21)
- Regulatory references (SYSC 22)
- Senior managers and certification regime: Introduction and classification (SYSC 23)
- Senior managers and certification regime: Allocation of prescribed responsibilities (SYSC 24)
- Senior managers and certification regime: Management responsibilities maps and handover procedures and material (SYSC 25)
- Senior managers and certification regime: Overall and local responsibility (SYSC 26)
- Senior managers and certification regime: Certification regime (SYSC 27)
- Insurance distribution: specific knowledge, ability and good repute requirements (SYSC 28)
- Schedules to SYSC
- You must comply with your Firm’s allocation of responsibilities for significant activities among directors and senior managers.
- You should ensure that the allocation is done in a way that helps the senior managers and the Board to monitor and control the business.
- You need to take a ‘hands-on’ approach to ensure compliance in your area of control.
- Ensure the necessary systems and controls complies with the Principles for Businesses and any specific rules.
- Maintain up-to-date records of the allocation of responsibilities and systems and controls.
SYSC Review Mission?
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