UK: Changes To The Structure Of The FSA Handbook For 2007

Last Updated: 9 January 2007
Article by Nick Paul

Various changes to the FSA Handbook came into effect on 1 January 2007. These include:

  • The dismantling of the Authorisation Manual (AUTH) and the Lloyd’s specialist sourcebook (LLD);
  • The restructuring of the Handbook in relation to prudential standards (following CP06/10, including new sourcebooks – GENPRU, BIPRU, INSPRU, MIPRU and UPRU; and
  • The extension of SYSC (following CP06/09 and changes to systems and controls in the light of the Capital Requirements Directive (CRD) and the Markets in Financial Instruments Directive (MiFID).

To access a more detailed analysis of these changes, please click see below:

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Full Article

Changes to the structure of the FSA handbook for 2007

Various changes to the FSA Handbook came into effect on 1 January 2007. These include:

  • The dismantling of the Authorisation Manual (AUTH) and the Lloyd’s specialist sourcebook (LLD);
  • The restructuring of the Handbook in relation to prudential standards (following CP06/10, including new sourcebooks – GENPRU, BIPRU, INSPRU, MIPRU and UPRU; and
  • The extension of SYSC (following CP06/09 and changes to systems and controls in the light of the Capital Requirements Directive (CRD) and the Markets in Financial Instruments Directive (MiFID).

1. AUTHORISATION MANUAL

AUTH has now been completely dismantled. Parts had already been removed to the Perimeter Guidance Manual (PERG) and to other parts of the Handbook. Other provisions in AUTH are replaced by online guidance. FSA has promised to publish a table showing the destination of AUTH provisions and the different online guidance.

2. PRUDENTIAL SOURCEBOOKS (CP06/10)

(a) The full titles of the new prudential sourcebooks are:

(i) GENPRU: General Prudential sourcebook

(ii) BIPRU: Prudential sourcebook for Banks, Building Societies and Investment Firms

(iii) INSPRU: Prudential sourcebook for Insurers

(iv) MIPRU: Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries

(v) UPRU: Prudential sourcebook for UCITS Firms

(b) LLD has been revoked and integrated into INSPRU and other Handbook modules.

(c) GENPRU has (in addition to new text added) incorporated old provisions of:

(i)

PRU 1.2 (Adequacy of financial resources)
PRU 1.3 (Valuation)
PRU 2.1 (Calculation of capital resources
requirements)
PRU 2.2 (Capital resources)
PRU 2 Annex 1 (Admissible assets in insurance)
PRU 2 Annex 2 (Guidance on applications for waivers
relating to implicit items)
PRU 8.4 (Cross sector groups)
PRU 8.5 (Third-country groups)
PRU 8 Annex 1
PRU 8 Annex 2
PRU 8 Annex 3 (Guidance notes for classification of
groups)
PRU 8 Annex 4

(ii)

LLD 18 (Application of PRU 1 to Lloyd's) LLD 19 (Application of PRU 2 to Lloyd's)

For full details of the creation of GENPRU, please click here.

(d) BIPRU contains completely new text and to a large extent copied out versions of the CRD.

(e) INSPRU has (in addition to new text added) incorporated old provisions of:

(i)

PRU 1.8 (Actions for damages)
PRU 2.3 (Individual Capital Assessment)
PRU 2 Annex 3
PRU 3.2 (Credit risk in insurance)
PRU 3.3 (Asset-related Capital Requirement)
PRU 4.2 (Market risk in insurance)
PRU 4.3 (Derivatives in insurance)
PRU 5.1 (Liquidity risk systems and controls)
PRU 6.1 (Operational Risk: Prudential Systems and
Controls)
PRU 7.2 (Capital resources requirements and
technical provisions for insurance business)
PRU 7.3 (Mathematical reserves)
PRU 7.4 (With-profits insurance capital component)
PRU 7.5 (Equalisation provisions)
PRU 7.6 (Internal-contagion risk)
PRU 8.3 (Group Risk: Insurance Groups)
PRU TR 5
PRU TR Table 10R

(ii)

LLD 3 (The Central Fund)
LLD 4 (Capacity transfer market)
LLD 5 (Former underwriting members)
LLD 16 (General provisions applying PRU to Lloyds)
LLD 17 (Special provisions for Lloyds)
LLD 18.4 (Prudential risk management and associated
systems and controls)
LLD 19.4 (Individual capital assessment)
LLD 20 (Application of PRU 3 to Lloyd's)
LLD 21 (Application of PRU 4 to Lloyd's)
LLD 22.2 (Liquidity risk systems and controls)
LLD 23.2 (Operational risk: prudential systems
and controls)
LLD 24 (Regulatory intervention points for Lloyd's)

For full details of the creation of INSPRU, please click here.

(f) MIPRU has incorporated the old provisions of PRU 9 as follows:

(i) PRU 9.1 (Responsibility for insurance mediation activity) has been moved to MIPRU 2 (Insurance mediation activity: responsibility, knowledge, ability and good repute);

(ii) PRU 9.2 (Professional indemnity insurance requirements for insurance and mortgage mediation activities) has been moved to MIPRU (Professional indemnity insurance);

(iii) PRU 9.3 (Capital resources for insurance and mortgage mediation activity and mortgage lending and administration) has been moved to MIPRU 4 (Capital resources);

(iv) PRU 9.4 (Insurance undertakings and mortgage lenders using insurance or mortgage mediation services) has been moved to MIPRU 5 (Insurance undertakings and mortgage lenders using insurance or mortgage mediation services); and

(v) PRU 9 Annex 1 has been deleted.

(g) UPRU has incorporated the old provisions of IPRU-INV 7 (UCITS Management Companies).

3. SYSTEMS AND CONTROLS (CP06/09)

(a) SYSC 1 (Application and Purpose), 3 (Systems and Controls), Schedule 1 (Record keeping requirements), Schedule 5 (Rights of action for damages) and Schedule 6 (Rules that can be waived) have been amended;

(b) SYSC 4 (General Organisational Requirements), 5 (Employees, Agents and Other Relevant Persons), 6 (Compliance (including internal audit) and Financial Crime), 7 (Risk Control), 8 (Outsourcing), 9 (To Follow) and 10 (Conflicts of Interest) contain new text;

(c) SYSC 11 (Liquidity Risk Systems and Controls) contains (in addition to new text) transferred and amended text from old PRU 5.1;

(d) SYSC 12 (Group Risk Systems and Controls Requirements) contains transferred and amended text from old PRU 8.1;

(e) SYSC 13 (Operational Risk: Systems and Controls) contains transferred text from SYSC 3A;

(f) SYSC 14 (Prudential Risk Management and Associated Systems and Controls) (except 14.1.65) contains transferred text from old PRU 1.4;

(g) SYSC 14.1.65 contains transferred text from old PRU 6.1.9;

(h) SYSC 15 (Credit Risk Management Systems and Controls) contains transferred text from old PRU 3.1;

(i) SYSC 16 (Market Risk Management Systems and Controls) contains transferred text from old PRU 4.1;

(j) SYSC 17 (Insurance Risk Systems and Controls) contains transferred text from old PRU 7.1; and

(k) SYSC 18 (Guidance on Public Interest Disclosure Act: Whistleblowing) contains transferred text from old SYSC 4.

For full details of the creation of new SYSC, please click here.

The new Handbook rules and guidance which implement the CRD requirements commenced for firms subject to the CRD on 1 January 2007 while the common platform (SYSC 4 to 10) will commence for firms subject to CRD or MiFID, or both, on 1 November 2007. Firms have the option of adopting the common platform at any time between 1 January 2007 and 1 November 2007, if they so wish. In the event that they do, firms should record the date of their decision and the date it becomes effective, and inform the FSA. From the effective date, they should comply with the common platform and not SYSC 3.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 09/01/2006.

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