UK: Amendments to FSA's Systems and Controls Regime March 23, 2009 | Print this page | Email this page From 1 April, amendments to the FSA's Senior Management Arrangements, Systems and Controls sourcebook (SYSC) will extend the application of the so-called "common platform requirements" (SYSC 4 to 10) to all FSA-regulated firms other than insurers, managing agents and the Society of Lloyd's. Insurance intermediaries authorised by the FSA will, therefore, be obliged to comply with the more detailed common platform requirements, although insurers will not have to do so, even in relation to their insurance mediation activities. Previously, the common platform requirements had applied only to common platform firms - which included building societies, banks and other firms subject to MiFID, while insurers and insurance intermediaries were subject to SYSC 2 and 3 instead.

A new table at Annex 1 of SYSC 1 sets out the scope of application of those rules to firms other than common platform firms. Many of the rules which form the common platform requirements will apply only as guidance to other firms, and the FSA states that such guidance should be applied in a proportionate manner, taking into account the nature, scale and complexity of the firm's business.

The common platform requirements cover the following key areas of a firm's business:

  • general organisational requirements
  • supervision of employees, agents and other relevant persons, and ensuring that they have appropriate skills
  • compliance, internal audit and controls against financial crime
  • risk management policies and procedures
  • outsourcing
  • record-keeping
  •  management of conflicts of interest.

In its consultation, the FSA took the view that the common platform requirements cover much of the same ground as SYSC 2 and 3 (to which intermediaries are currently subject) and that a firm that is complying with SYSC 2 and 3 will not need to change its behaviour to comply with the common platform requirements. There are a few new rules under the common platform requirements, for example in relation to outsourcing, that intermediaries will have to consider more carefully, although the FSA believes that the new outsourcing rules will have no material impact on the majority of firms.

The FSA intends to consider the application of the common platform requirements to insurers, managing agents and Lloyd's when it consults on the implementation of Solvency II.

The FSA's amending instrument can be found here.