Standard RA1.6. Notifications for outsourcing arrangements. Regulations and guidelines

Transcription

1 Standard RA1.6 Notifications for outsourcing arrangements Regulations and guidelines

2 How to read a standard A standard is a collection of subject-specific regulations and guidelines which both obliges and guides supervised entities and other financial market participants, indicates the quality level expected by the supervisor, sets out the supervisor s key principles of good practice and provides justification for regulation. Each paragraph in a standard is furnished with a particular margin note: : A reference to a current legal or regulatory provision. Binding: A FIN-FSA regulation that is legally binding on supervised entities or other financial market participants, issued by the FIN-FSA by virtue of its regulatory power based in Finnish law. Recommendation: FIN-FSA recommendatory guidance to supervised entities or other financial market participants. Application guideline/example: A practical application guideline or example related to a norm, binding regulation or recommendation. A reference to a FIN-FSA standard or a particular point in the standard. See the attached example. Justifications: An explanation of the background, purpose and objectives of a regulation or standard. Sample standard only FIN-FSA standards may be accessed from

3 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (3) TABLE OF CONTENTS 1 Application 4 2 Objectives 5 3 Legal basis 6 4 Notification requirement 7 5 Contents of notifications 10 6 Definition 12 7 Further details 13

4 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (4) 1 APPLICATION (1) This standard deals with the notifications for outsourcing arrangements that supervised entities are required to submit to the FIN-FSA. (2) Outsourcing refers to an arrangement whereby an external service provider (hereinafter outsourcing partner) performs an activity or supplies a service that would otherwise be carried out by the supervised entity (hereinafter institution) itself. (3) The reporting standard concerns the following institutions referred to in section 5 of the Act on the Financial Supervision Authority (587/2003): credit institutions investment firms management companies stock exchanges. (4) Here 'institution' refers to any institution falling within the scope of this standard. (5) This reporting standard is connected to standard 1.6, Outsourcing arrangements, included in section 1 Corporate governance and business activity in the FIN-FSA s set of regulations.

5 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (5) 2 OBJECTIVES (1) On the basis of the details in an institution s notification for outsourcing arrangements, the FIN-FSA will assess whether the planned outsourcing project is likely to impede the institution s internal control or risk management, conduct of business or any other material activities or hinder the supervision of the institution.

6 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (6) 3 LEGAL BASIS (1) The FIN-FSA s regulations on notification of outsourcing are based on the following legal provisions: Credit Institutions Act (121/2007): section 36 a, subsections 4 and 6 and section 49, subsection 2 Investment Firms Act (922/2007): section 29, subsection 4 Mutual Funds Act (48/1999): section 5, subsection 5, section 26 a, subsections 5 and 8 and section 30 a, subsection 2 Securities Markets Act (495/1989): chapter 3, section 24, subsection 5.

7 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (7) 4 NOTIFICATION REQUIREMENT (1) If an authorised credit institution intends to conduct business through an agent or to otherwise outsource a material activity to an enterprise not belonging to the same consolidation group or amalgamation of cooperative banks as the credit institution, the FIN-FSA must be notified in advance. 1 If, however, an authorised credit institution wishes to outsource the provision of investment services, it must first notify FIN-FSA of its intentions even if the activity will be outsourced to an enterprise belonging to the same consolidation group or amalgamation of cooperative banks as the credit 2 institution. (2) If an authorised investment firm intends to outsource the provision of an investment service or some other material activity, the FIN-FSA must be notified of the outsourcing plans in advance 3. (3) If an authorised management company intends to conduct business through an agent or otherwise outsource a material activity, the FIN-FSA must be notified of the outsourcing plans in advance. 4 However, no notification is needed if the agent or outsourcing partner belongs to the same consolidation group or amalgamation of cooperative banks as the management company. 5 If, however, an authorised management company intends to outsource the provision of investment services, the FIN-FSA must be notified of this in advance even if the activity will be outsourced to an enterprise belonging to the same consolidation group or amalgamation of cooperative banks as the management company. 6 1 See section 36 a, subsection 4 of the Credit Institutions Act. 2 See section 36 a, subsection 6 of the Credit Institutions Act. 3 See section 29, subsection 4 of the Investment Firms Act. 4 See section 26 a, subsection 5 of the Mutual Funds Act. 5 See section 26 a, subsection 6 of the Mutual Funds Act. 6 See section 26 a, subsection 8 of the Mutual Funds Act.

8 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (8) (4) If an authorised stock exchange intends to outsource a material activity, the FIN-FSA must be notified in advance. 7 Application guideline Application guideline (5) The FIN-FSA must be notified in advance of any essential changes in the c ontractual relationship between the institution and the outsourcing partner. 8 (6) If an earlier outsourced material activity is transferred to a third party, FIN-FSA must be notified as prescribed in this standard. (7) Activities are regarded as material if they are of such importance that any weakness or failure in carrying them out could have a significant impact on the institution s ability to comply with legal provisions, regulations or authorisation criteria, the institution s financial standing or the continued provision of investment services 9 /conduct of business. 10 (8) At least the following areas shall be regarded view of outsourcing: as material from the point of activities requiring authorisation internal control and risk management internal audit key information systems for the conduct of the business a mutual fund's portfolio management and asset value calculation of and maintenance of a fund unit register. Application guideline (9) At least the following areas shall not be regarded as material from the point of view of outsourcing: administrative functions, such as staff and materials management, invoicing, fixed assets maintenance and premises security advisory services not requiring authorisation legal services marketing and advertising services standardised services, including market information services. 7 See chapter 3, section 24, subsection 5 of the Securities Markets Act. 8 See section 36 a of the Credit Institutions Act, section 26 a, subsection 5 of the Mutual Funds Act, section 29, subsection 4 of the Investment Firms Act and chapter 3, section 24, subsection 5 of the Securities Markets Act. 9 See section 29, subsection 2 of the Investment Firms Act. 10 See section 36 a, subsection 2 of the Credit Institutions Act, section 26 a, subsection 3 of the Mutual Funds Act and chapter 3, section 24, subsection 3 of the Securities Markets Act.

9 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (9) (10) The FIN-FSA must be promptly informed of any tied agents engaged by the institution for providing investment services See section 32, subsection 5 of the Investment Firms Act.

10 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (10) 5 CONTENTS OF NOTIFICATIONS Binding (1) The notification submitted to the FIN-FSA must provide the following details: full name, domicile and business address of a natural person acting as outsourcing partner full name, business number, domicile and business address of a legal person acting as outsourcing partner a description of the type and scope of activity to be outsourced an overall review of the impact of the outsourcing project on the institution s business clarification of the outsourcing partner s financial capability to manage the activities to be outsourced clarification of how the activities are accounted for in the institution s internal control and risk management clarification of how the continuity and information security of the activities are ensured clarification of how the institution intends to preserve key areas of competence relating to the outsourced activities so that they can be resumed by the institution itself or transferred to another supplier specification of the conditions for cancelling the outsourcing agreement in case of cross-border outsourcing to a non-eea state, clarification whether the host country s legal framework will permit the FIN-FSA to obtain information needed to supervise the activities. Binding Application guideline (2) A copy of the outsourcing agreement or a draft thereof should be attached to the notification. (3) A notification concerning a tied agent should contain the following information:

11 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (11) full name, domicile and business address of a natural person acting as outsourcing partner full name, business number, domicile and business address of a legal person acting as outsourcing partner.

12 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (12) 6 DEFINITION (1) In this standard, an Uoutsourcing partneru refers to a supplier of such activities or services that would otherwise be carried out by the institution itself.

13 THE FINANCIAL SUPERVISION AUTHORITY until further notice J. No. 18/120/ (13) 7 FURTHER DETAILS Please find the necessary contact information in the list of HUPersons responsible UHfor standards provided on the FSA website. For further information, please contact: Market and Operational Risk, tel