Reader s Guide: an introduction to the Handbook

Transcription

1 Reader s Guide: an introduction to the Handbook Version 3.0 (December 2013)

2 ONTENTS Part I FCA Handbook Reader s Guide 2 1. Introduction What is this guide? 3 2. What is the Handbook? 4 The Handbook 4 Instruments the definitive version of the FCA rules 4 The Handbook online 4 The Handbook in print 4 The Handbook at legal cutover 4 3. Structure and contents of the Handbook 6 High Level Standards (Block 1) 6 Prudential Standards (Block 2) 9 Business Standards (Block 3) 10 Regulatory Processes (Block 4) 13 Redress (Block 5) 14 Specialist sourcebooks (Block 6) 15 Listing, Prospectus and Disclosure Rules (Block 7) Other materials relating to the Handbook 17 Tailored Handbooks 17 Guides 19 FCA Handbook Notices and Policy development update 20 FCA Consultation papers, discussion papers, policy statements Structure of each module Status of provisions 23 Notes Understanding Handbook text 27 Defined terms 27 Interpretation tips 27 Numbering and cross-referencing Using the Handbook online 28 The Handbook online 28 The Handbook in print 28 Part 2 PRA Handbook Reader s Guide 29 The PRA Handbook 30 Using the PRA Handbook 30 Interpretation 30 Defined terms 30 Notes 30 Provisions 31 Schedules 32 The PRA Rulebook 33 Reader s Guide: an introduction to the Handbook Page 1

3 Part I FCA Handbook Reader s Guide Reader s Guide: an introduction to the Handbook Page 2

4 HAPTER ONE What is this guide? the Act FCA the Financial Services and Markets Act 2000 as amended, in particular, by the Financial Services Act 2012 Financial Conduct Authority FSA Financial Services Authority Handbook the Handbook of rules and guidance made by the FCA Board legal cutover the date as at which the FCA and PRA acquire their legal powers module either a sourcebook or manual forming part of the Handbook PRA Prudential Regulation Authority regulators the FCA and the PRA Reader s Guide: an introduction to the Handbook Page 3

5 HAPTER TWO What is the Handbook? This guide provides an introduction to the structure and contents of the FCA Handbook and its related materials, explaining how the different modules fit together, and how to interpret and use the FCA Handbook. This guide, other than specified paragraphs in Chapter 6, does not constitute formal guidance and does not have the status of guidance in the FCA Handbook. In the event of any conflict between this guide and the FCA Handbook (other than the specified paragraphs of guidance in Chapter 6), the FCA Handbook takes precedence. Below are the definitions of the most commonly used terms in this guide. The Handbook The Handbook sets out the FCA s legislative and other provisions made under powers given to them by the Act. The status of the different types of provisions is explained in Chapter 6. The Handbook is available online ( and in print. While its contents are the same in each medium, the Handbook s presentation differs slightly between media. The Handbook is an extensive document. However, most users will only refer regularly to the specific parts of the Handbook relevant to their businesses. In addition, there are many tools and functions available in the Handbook Online, designed to help you navigate and understand the Handbook please see Chapter 4 for further details. Instruments the definitive version of the rules Section 138G of the Act requires the regulators to exercise their rule-making powers in writing, in a document the Act calls a rule-making instrument, and to make all such instruments available. Most other legislative provisions made by the FCA (such as general guidance and codes) are also made by instrument. The regulators publish their instruments online. This fulfils their obligation to publish their rules. The definitive version of the rules at any particular time is the version contained in the legal instruments. The Handbook Online The instruments are consolidated into the Handbook which is available online, in both HTML and PDF formats ( The consolidated Handbook may contain typographical improvements, with no legal effect (such as cross-referencing and spelling corrections), which do not appear in the legal instruments. These typographical improvements are reported in the list of non-legal changes, found at: The Handbook in print Reader s Guide: an introduction to the Handbook Page 4

6 The Handbook is available in print and can be ordered via subscription or as print-on-demand. Please see Chapter 8 for further details. The Handbook at legal cutover At legal cutover, the original FSA Handbook will be split between the FCA and the PRA to form new Handbooks, one for the FCA and one for the PRA. Most provisions in the FSA Handbook will then be incorporated into the FCA Handbook, the PRA Handbook or both, in line with each new regulator s set of responsibilities and objectives. However, publication of the new Handbooks will begin in early March At that stage users will be able to access the following online in HTML and PDF formats: the FCA Handbook, displaying the provisions which apply to FCA-regulated firms; the PRA Handbook, displaying the provisions which apply to PRA-regulated firms; and to support the transition, a combined view which will show the provisions of both Handbooks, with clear labels indicating for each and every provision which regulator applies that provision to firms. All three versions of the Handbook (FCA, PRA and combined) will be available at: Users of any of these versions will be able to switch between them using the buttons which will be at the head of the page. Changes to rules in both the FCA and PRA Handbooks will continue to be made by instrument and these instruments will be published online. After legal cutover, the FCA and the PRA will amend their own suites of material as independent bodies in accordance with the processes laid down in the Act. Until that time: the Handbook will remain in force; new provisions added to it will show whether they are to apply to FCA-regulated firms or PRA-regulated firms or both; the basic structure of the Handbook will remain broadly as described in this Guide (see Chapters 3 to 5), as will the status of the provisions in it (see Chapter 6). Reader s Guide: an introduction to the Handbook Page 5

7 HAPTER THREE Structure & contents of the Handbook The Handbook is divided into Blocks and each Block is subdivided into modules. A module may be either a sourcebook (containing regulatory obligations which are binding on firms) or a manual (containing provisions relevant to the regulatory relationship which the regulators have with firms, such as on supervision, enforcement and levying fees). Additionally, the Handbook contains a Glossary of definitions used in the Handbook. However, some other parts of the Handbook, such as the IPRU sourcebooks and a small section of FEES, have their own glossaries, and some other modules use specific local definitions. High Level Standards (Block 1) Block 1 deals with the overarching requirements for all authorised persons (firms) and approved persons. It also contains general interpretative material. PRIN PRIN (Principles for Businesses) sets out the fundamental obligations of all firms under the regulatory system. These 11 Principles are the foundation for the other rules and guidance for firms found in the Handbook. They are: 1. Integrity: A firm must conduct its business with integrity. 2. Skill, care and diligence: A firm must conduct its business with due skill, care and diligence. 3. Management and control: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. 4. Financial prudence: A firm must maintain adequate financial resources. 5. Market conduct: A firm must observe proper standards of market conduct. 6. Customers interests: A firm must pay due regard to the interests of its customers and treat them fairly. 7. Communications with clients: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading. 8. Conflicts of interest: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client. 9. Customers: relationships of trust: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment. 10. Clients assets: A firm must arrange adequate protection for clients assets when it is responsible for them. 11. Relations with regulators: A firm must deal with its regulators in an open and cooperative way, and must disclose appropriately to the appropriate regulator anything relating to the firm of which that regulator would reasonably expect notice. Reader s Guide: an introduction to the Handbook Page 6

8 SYSC COND SYSC (Senior Management Arrangements, Systems and Controls) outlines the regulators management requirements for the firms they regulate. SYSC focuses on the responsibilities of directors and senior management to ensure the firm has appropriate control, supervision and accountability systems in place, including appropriate operational risk systems and controls. It also contains the Remuneration Code and guidance on the whistle blowing requirements in the Public Interest Disclosure Act COND (Threshold Conditions) appears in the FCA Handbook only from legal cutover and sets out the minimum statutory conditions which a firm is required to satisfy, and continue to satisfy, in order to be given and to retain authorisation. It then gives guidance on these conditions. The threshold conditions are found in Schedule 6 to the Act and relate to: legal status of the firm; location of the firm s offices; effective supervision (including the firm s close links); the firm s resources; suitability of the firm and its personnel; the firm s business model; APER appointment of a claims representative; APER (Statements of Principle and Code of Practice for Approved Persons) sets out the standards of behaviour that the regulators expect of approved persons. The code of practice outlines the behaviour that, in the regulators opinion, will or will not comply with a statement of principle. There are seven statements of principle: 1. An approved person must act with integrity in carrying out his controlled function. 2. An approved person must act with due skill, care and diligence in carrying out his controlled function. 3. An approved person must observe proper standards of market conduct in carrying out his controlled function. 4. An approved person must deal with all regulators in an open and cooperative way and must disclose appropriately any information of which the FCA or PRA would reasonably expect notice. 5. An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively. Reader s Guide: an introduction to the Handbook Page 7

9 6. An approved person performing a significant influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his controlled function. FIT 7. An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the relevant requirements and standards of the regulatory system. FIT (the Fit and Proper test for Approved Persons) sets out the regulators minimum standards for becoming and remaining an approved person. These standards are relevant when a firm submits an application for an employee or other person to become an approved person and for the purposes of assessing the continuing fitness and propriety of approved persons. The regulators will have regard to a number of factors when assessing the fitness and propriety of a person to perform a particular controlled function. The most important considerations will be the person s: 1. honesty, integrity and reputation; 2. competence and capability; and 3. financial soundness. FINMAR FINMAR (Financial Stability and Market Confidence) contains guidance in relation to the FCA s functions under the short-selling regulations. It also contains other material made by the PRA. TC GEN TC (Training and Competence) contains requirements concerning staff competence. TC applies to the initial and on-going competence of staff and record keeping. GEN (General Provisions) deals with a number of topics relating to the underlying legal framework of the Handbook and the regulation of financial services and markets. It contains rules and guidance on: interpreting the Handbook, including changes at legal cutover; emergencies; disclosure of a firm s authorisation status in the course of its business; use of the regulators logos; and FEES insurance against financial penalties. FEES (Fees manual) contains the provisions relating to the funding of the regulators, including application, notification, vetting and periodic fees and provisions relating to the funding of the Financial Ombudsman Service, Financial Services Compensation Scheme and the consumer financial education body. Reader s Guide: an introduction to the Handbook Page 8

10 Prudential Standards (Block 2) Block 2 sets out the prudential requirements that will affect firms. GENPRU BIPRU INSPRU MIPRU UPRU IPRU GENPRU (General Prudential sourcebook) contains the general prudential requirements for most business sectors. BIPRU (Prudential sourcebook for Banks, Building Societies and Investment Firms) contains the prudential requirements and specific notification requirements for these sectors. INSPRU (Prudential sourcebook for Insurers) contains the prudential requirements and specific notification requirements for this sector. MIPRU (Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries) contains the prudential requirements and specific notification requirements for these sectors. UPRU (Prudential sourcebook for UCITS Firms) contains the prudential requirements for UCITS (undertakings for collective investment in transferable securities) firms. IPRU (the Interim Prudential Sourcebook) has three parts, each dealing with the prudential requirements for different sectors: 1. IPRU (FSOC): the prudential and specific notification requirements for friendly societies; 2. IPRU (INS): the prudential and specific notification requirements for insurers; and 3. IPRU (INV): the prudential and specific notification requirements for investment firms. These modules are gradually being replaceed Reader s Guide: an introduction to the Handbook Page 9

11 Business Standards (Block 3) Block 3 sets out most of the requirements that will affect firms day to day. COBS COBS (Conduct of Business) sets out the conduct of business requirements applying to firms accepting deposits, conducting designated investment business and carrying on long-term insurance business in relation to life policies. It contains rules and guidance on: 1. general conduct of business obligations; 2. client categorisation; 3. communicating with clients, including financial promotions; 4. distance communications; 5. providing information about the firm, its services and remuneration; 6. insurance mediation; 7. client agreements; 8. suitability (including best advice); 9. appropriateness (for non-advised services); 10. dealing and managing; 11. investment research; 12. preparing product information; 13. providing product information to clients; 14. cancellation; 15. reporting information to clients; 16. claims handling for long-term care insurance; 17. specialist regimes; 18. pensions supplementary provisions; 19. with-profits business; and 20. permitted links. Reader s Guide: an introduction to the Handbook Page 10

12 ICOBS ICOBS (Insurance: Conduct of Business) sets out the conduct of business requirements which apply to the non-investment business of insurers. It contains rules and guidance on: 1. client categorisation, communications to clients and financial promotions, inducements, record-keeping and exclusion of liability; 2. distance communication; 3. providing information about the firm, its services and its remuneration; 4. identifying client needs and advising; 5. product information; 6. cancellation; and MCOB 7. claims handling. MCOB (Mortgages and Home Finance: Conduct of Business) sets out the conduct of business requirements applying to firms conducting regulated mortgage activities and home finance. MCOB contains rules and guidance on: 1. communications to customers; 2. financial promotions relating to qualifying credit, home reversion plans and regulated sale and rent back agreements; 3. advising and selling standards; 4. disclosure to the customer, before, at and after contract; 5. equity release and annual percentage rate; 6. responsible lending policies and practices; 7. charges; and BCOBS 8. treatment of customers in cases of arrears and repossessions. BCOBS (Banking: Conduct of business sourcebook) sets out the conduct of business requirements for firms that accept deposits from banking customers. BCOBS contain rules and guidance on: 1. communications with customers and financial promotions; 2. distance communications; 3. information to be communicated to banking customers; 4. post sale requirements; and 5. cancellation of contracts. Reader s Guide: an introduction to the Handbook Page 11

13 CASS MAR CASS (Client Assets) outlines rules and guidance on holding client assets and client money, including requirements as to segregation and safe custody of assets, statutory trusts in respect of client money, and retrieving information in the event of insolvency. MAR (Market Conduct) sets out rules and guidance of relevance primarily to the wholesale and professional markets. There are currently six sections to MAR: 1. Code of Market Conduct: this gives guidance on what does and does not amount to market abuse, in accordance with section 119 of the Act; 2. Price Stabilising Rules: these rules set out behaviour which does not amount to market abuse in the context of price support for offers of securities; 3. Support for the functions of the City Code on Takeovers and Mergers; 4. Multilateral Trading Facilities (MTF): rules and guidance on multilateral trading facilities, in accordance with the provisions of the Markets in Financial Instruments Directive; 5. Systematic Internalisers: rules and guidance for investment firms which deal on own account by executing client orders outside a regulated market or an MTF; and 6. Disclosure of information on certain trades undertaken outside a regulated market or MTF. Reader s Guide: an introduction to the Handbook Page 12

14 Regulatory Processes (Block 4) Block 4 consists of modules describing the operation of the regulators supervisory and disciplinary functions and containing requirements on firms relating to the supervisory function. SUP SUP (Supervision) deals with supervisory issues and requirements concerning the regulators relationship with firms. It contains 21 chapters dealing with issues as diverse as: 1. firms external auditors and appointed actuaries; 2. individual guidance for firms; 3. waivers and modifications of rules; 4. the controlled functions of approved persons; 5. controllers and close links; 6. appointed representatives; 7. firms operating under a passport, both in the UK and elsewhere in the EEA; 8. qualifying for authorisation under the Act; 9. notification and reporting requirements; and DEPP 10. transfers of business. DEPP (Decision Procedures and Penalties) is principally concerned with, and sets out, the FCA s decision-making procedures that involve the giving of statutory notices, the FCA s policy in respect of the imposition and amount of penalties, and the conduct of interviews to which a direction under section 169(7) (Investigations etc in support of overseas regulator) has been given or the FCA is considering giving. Reader s Guide: an introduction to the Handbook Page 13

15 Redress (Block 5) Block 5 contains three modules dealing with the processes for handling complaints and compensation. DISP DISP (Dispute Resolution: Complaints) contains rules and guidance relating to: 1. firms internal handling of complaints about the financial services they provide, including: a. the procedures which a firm must put in place; b. the time limits within which a firm must deal with a complaint; c. the records of a complaint that a firm must make and retain; and d. the requirements on a firm to report information about complaints to the FCA; CONRED 2. the operation of the Financial Ombudsman Service, which aims to ensure that complaints are resolved quickly and with minimum formality. CONRED (Consumer Redress Schemes sourcebook) contains details of consumer redress schemes made by the FCA under section 404 of the Act, where the FCA considers there has been a widespread or regular failure by relevant firms to comply with requirements applicable to carrying on an activity and where consumers have, or may have, suffered loss which a court would remedy as a result. The FCA must also consider that such a scheme is desirable for the purpose of securing redress, having regard to other ways in which consumers may obtain redress. Currently consumer redress schemes have been made in respect of the following: Advice to invest in the CF Arch cru Diversified Funds and the Arch cru Investment Funds COMP COMP (Compensation) concerns the Financial Services Compensation Scheme the scheme for compensating consumers either when authorised firms are unable, or likely to be unable, to satisfy claims against them or when those who have assumed responsibility for certain liabilities of authorised firms are unable, or likely to be unable, to satisfy claims against them as the successors. COMP contains rules and guidance governing eligibility under the scheme, the funding of the scheme and its operation. Reader s Guide: an introduction to the Handbook Page 14

16 Specialist sourcebooks (Block 6) Block 6 contains specialist modules, which show how the Handbook applies to certain sectors, such as collective investment schemes and credit unions. BSOCS COLL BSOCS (Building Societies sourcebook) provides guidance for building societies on the management of lending and treasury investments, funding risks and financial risk management. COLL (Collective Investment Schemes) provides material for investment companies with variable capital (ICVCs) and authorised unit trusts (AUTs) in relation to: 1. the process of authorising them; and CREDS PROF RCB REC 2. their constitution and management (including rules and guidance on pricing arrangements, investment powers and on certain information to be provided to investors). CREDS (Credit unions) contains rules made specifically for credit unions and provides credit unions with guidance on the rest of the Handbook. PROF (Professional firms) contains requirements and guidance for professional firms of lawyers, accountants and actuaries when they undertake regulated activities. It is relevant to professional firms benefiting from the exemption in Part XX of the Act and those that are authorised. RCB (Regulated Covered Bonds) sets out the guidance, directions and rules made by the FCA under the Regulated Covered Bonds Regulations REC (Recognised Investment Exchanges and Recognised Clearing Houses) provides guidance on how the FCA interprets the recognition requirements and other obligations on recognised bodies, such as Recognised Investment Exchanges and Recognised Clearing Houses, under the Act. It also contains the FCA s notifications for these bodies. Reader s Guide: an introduction to the Handbook Page 15

17 Listing, Prospectus and Disclosure Rules (Block 7) Block 7 contains three modules which set out the requirements for issuers listed on, or seeking admission to, the Official List of the UKLA, rules that apply to a sponsor and a person applying for approval as a sponsor, along with the prospectus and disclosure document requirements. LR PR DTR LR (Listing Rules) PR (Prospectus Rules) DTR (Disclosure Rules and Transparency Rules) Reader s Guide: an introduction to the Handbook Page 16

18 HAPTER FOUR Other materials relating to the Handbook Tailored handbooks Until legal cutover the FSA will continue to produce electronically 14 sector-specific tailored handbooks of rules and guidance for smaller firms. These bespoke rulebooks are about 90 per cent smaller than the full Handbook and provide the most relevant information for each industry segment. They cover around 70 per cent of the FSA s regulated firms, are targeted at smaller firms such as insurance brokers, IFAs and friendly societies, and are listed below. Asset managers Authorised professional firms Corporate finance advisory firms Fund managers (collective investment scheme operators) General insurance brokers General insurers with sales arms Intermediaries selling insurance and investments, but not mortgages or home reversions Intermediaries selling investments only Intermediaries selling investments, mortgages and home reversions, but not general insurance Intermediaries selling non-investment insurance, investments, mortgages and home revisions Life insurers with sales arm Mortgage and home reversion brokers Mortgage, home reversion and general insurance brokers Small friendly societies To rely upon a tailored handbook, a firm needs to satisfy itself that it matches the attributes listed for that tailored handbook. If a firm does not have the required attributes it should use the full Handbook. The tailored handbooks do not contain the following (this material remains available in the full Handbook): the FSA s policies and procedures on enforcement, decision making or handling complaints against itself (tailored handbooks do contain the FSA s supervisory policies and practices); material governing the handling of complaints by the Financial Ombudsman Service (tailored handbooks do contain the reporting requirements for, and rules on gaining exemption from, FOS levies; the FOS complaints handling rules will be relevant to a firm if a complaint against it is referred to the FOS); Reader s Guide: an introduction to the Handbook Page 17

19 material governing the Financial Services Compensation Scheme; this material is relevant if a firm is wound up, cannot meet its obligations or in similar circumstances only; a firm will also need to refer to COMP if it wishes to recover money from another firm in default and which it holds on behalf of customers in connection with non-investment insurance mediation; tailored handbooks do contain the applicable reporting requirements for, and rules on gaining exemption from, compensation levies; fee and levy rules; a firm will be invoiced for the fees and levies that it must pay; it only needs these materials if it wishes to understand how they are calculated; and if a firm is an investment firm and subject to consolidated supervision rules outside IPRU(INV), those rules. Can a firm rely on a tailored handbook? If a firm follows the published instructions relating to tailored handbooks and breaches a requirement in the Handbook because it reasonably relied on the fact that the requirement isn t in a tailored handbook, the FSA will not bring disciplinary action. Tailored handbooks do not take account of any requirement or waiver that modifies the application of the Handbook for your firm. The definitive version of the Handbook for legal purposes (including for actions brought by third parties) remains the legal instruments published online: After legal cutover? At legal cutover, the facility to produce tailored handbooks will be withdrawn. Reader s Guide: an introduction to the Handbook Page 18

20 Guides In addition to this Reader s Guide, there are Handbook and Regulatory Guides. Handbook Guides are guides to the Handbook as a whole and are aimed at particular kinds of firm. They point firms in the direction of material in the Handbook applicable to them. The Handbook Guides are addressed to: EMPS OMPS SERV Energy Markets Participants Oil Markets Participants Service Companies Regulatory Guides are guides to particular regulatory topics in the Handbook: BSOG COLLG EG FC PERG RPPD UNFCOG BSOG (Building Societies Regulatory Guide) provides guidance for building societies on constitutional matters under the Building Societies Act COLLG (Collective Investment Schemes Regulatory Guide) contains some key facts on the regulation of collective investment schemes in the United Kingdom. It is of interest primarily to those who wish to gain a general understanding of the regulatory regime governing these schemes. EG (Enforcement Guide) describes the FCA s approach to using the main enforcement powers given to it under the Act and by regulation 12 of the Unfair Terms Regulations. FC (Financial Crime: a guide for firms) provides guidance to firms on the steps they can take to reduce their financial crime risk. PERG (Perimeter Guidance manual) contains guidance about circumstances in which authorisation is required, or exempt person status is available, including guidance on the activities regulated under the Act and the exclusions that are available. RPPD (Responsibilities of Providers and Distributors for the Fair Treatment of Customers) sets out these responsibilities under the FCA s Principles and rules. UNFCOG (Unfair Contract Terms Regulatory Guide) sets out the FCA s powers under the Unfair Terms in Consumer Contract Regulations and explains the FCA s approach to using them. Reader s Guide: an introduction to the Handbook Page 19

21 FCA Handbook Notices and Policy development updates Handbook Notices and Policy Development Updates are an important means of keeping up to date with changes to the Handbook and regulatory issues. They are available to the public on the FCA s website. You can also subscribe for notification of the release of Handbook Notices by registering with the Handbook Online at: The Handbook Notice is published after each monthly FCA Board meeting, and summarises and explains the additions and changes to the Handbook made by the Board at its meeting. The Handbook Notice also includes feedback to some consultations and an outline of FCA policy where the FCA is not publishing this separately (usually for minor amendments that do not warrant a separate Policy Statement). It also contains a comprehensive list of the rule-making instruments, by module. Policy Development Updates currently summarise Consultation Papers, Discussion Papers and Policy Statements issued by the FSA and FCA over the preceding month, lists forthcoming publications with expected month of issue and gives other information, such as training offered by the FCA to the industry. FCA Consultation papers, discussion papers, policy statements Before the FCA makes any legislative provisions, it usually publishes the proposed rules and guidance in draft for consultation. Consultation Papers (CPs) are the formal means by which this consultation takes place. Discussion Papers (DPs) are preliminary and informal discussion stimulating papers. Policy Statements (PSs) detail our policy and contain the feedback on formal consultations. You can access these publications by going to: Material published by the FSA can also be accessed on the FSA s archived website by going to: [TBC]. Consultation Papers either deal with one discrete issue of significance or a number of small and/or relatively uncontroversial topics in the Quarterly CPs. Current consultations are listed at: Discussion Papers are used to stimulate debate on issues about which the FCA is considering making rules or giving general guidance. The FCA uses the responses it receives on DPs to help formulate its policy. Once the FCA establishes a preferred position, draft rules and guidance will be prepared and then the formal consultation process, by way of a CP, will commence. Policy Statements set out the FCA s feedback on consultation responses, together with the final Handbook text made. Policy Statements are only issued where there have been extensive comments by the public and industry. Smaller topics are dealt with in the Handbook Notice. Sometimes, instead of a Policy Statement, the FCA will provide feedback in a Feedback Statement. A Feedback Statement will simply report on the outcome of a consultation (either in a CP or a DP) but will not contain a statement of the FCA s intended policy line. The FCA may also publish other occasional papers on financial regulation, with a view to encouraging debate among academics, practitioners and policy-makers in all aspects of financial regulation. These papers may be independently refereed and may have external (non-fca) authors. As any such occasional papers are intended to stimulate interest and debate, the papers will express the views of the author and not necessarily those of the FCA. Reader s Guide: an introduction to the Handbook Page 20

22 HAPTER FIVE Structure of each module Each module is divided into chapters. Generally, chapters are divided into sections, and each section is divided into paragraphs. However, where a chapter contains guidance that is presented as a series of questions and answers (Q&As), these Q&As do not follow the standard Handbook paragraph numbering convention. Instead, questions are numbered consecutively (1, 2, 3 etc.) with questions on related topics grouped together under appropriate section headings. If used, flowcharts and tables will usually be inserted towards the end of the chapter. Generally, each module, or each chapter or section in it, begins with an application provision. This explains the types of firm or other person to which the module, or the chapter or section, applies. After the application provision, each chapter will normally contain a statement of purpose. This explains the objective of the provisions in the chapter: the standards it intends to uphold; whether it reinforces one or more of the Principles for Businesses; whether it implements UK and European (EEA) measures; and the result at which it is aimed. A chapter may have one or more annexes, containing material that supplements the contents of the chapter, but would interrupt the flow of the text if it were included in the chapter itself. A module may have one or more appendices. These normally relate to the whole module, or to more than one chapter in it. Modules may also contain a schedule of transitional provisions and schedules numbered 1 to 6. If included, these schedules appear at the end of the module. A summary of these schedules is set out below: Schedule TP Contents Transitional Provisions this schedule: 1. sets out the transitional provisions for the module (if any); 2. specifies the parts of the module to which each transitional provision relates, and when those parts commenced; and 3. gives the dates on which each transitional provision: a. came into force; and b. expires. Schedule 1 Record keeping requirements this schedule provides a list of the detailed recordkeeping requirements in the module and where they are to be found. Schedule 2 Notification and reporting requirements this schedule provides a list of the detailed notification and reporting requirements in the module and where they are to be found. Reader s Guide: an introduction to the Handbook Page 21

23 Schedule Contents Schedule 3 Fees and other required payments this schedule provides a list of any fees and other payments for which a firm may be liable under the module and where details of them are to be found. (Most fee requirements have now been moved to the Fees manual (FEES)) Schedule 4 (no longer used) Schedule 5 Rights of action for damages under section 138D of the Act this schedule lists the rules in the module to which rights of action: 1. apply for private persons under section 138D of the Act; 2. apply not only for a private person, but also for a person who is not a private person, in accordance with section 138D(4); and 3. do not apply because the rights have been removed under section 138D(3) of the Act. Schedule 6 Rules that can be waived or modified this schedule specifies the rules in the module (if any) that the regulators have power to waive or modify under the Act, and the section of the Act that gives the regulators that power in respect of the rules in question. For more information about this power and its limits, see SUP 8 (Waiver and modification of rules) or REC 3.3 (Waivers). Readers should note that the regulators may be constrained by EU requirements, and these are not taken into account in Schedule 6. Reader s Guide: an introduction to the Handbook Page 22

24 HAPTER SIX Status of provisions The Handbook contains the following types of provision, whose status is indicated by icons containing the letters below. Icon R What it means The letter R is used to indicate general rules made by the FCA under sections 137A to 137F, 137H, 137O to 137R and 137T of the Act, specialised rules made under sections 140 to 147, listing rules made under section 73A and rules made under other powers. It is not used for evidential provisions (see E, below). Most of the rules in the Handbook create binding obligations on firms. If a firm contravenes such a rule, it may be subject to enforcement action (see DEPP and EG) and, in certain circumstances, to an action for damages. E For the avoidance of doubt, the Principles for Businesses are rules. 1. The letter E is used to identify evidential provisions with the characteristics specified in section 138C of the Act. An evidential provision is a rule, but it is not binding in its own right. It always relates to some other binding rule. When it says so, compliance with an evidential provision may be relied on as tending to establish compliance with the rule to which it relates. And when it says so, contravention of an evidential provision may be relied on as tending to establish contravention of the rule to which it relates. An evidential provision of this kind will always say one of these things, and it may say both. Such evidential provisions are thus indicative in nature: they create rebuttable presumptions of compliance with or contravention of the binding rules to which they refer. 2. E is also used for the paragraphs that make up the Code of Practice for Approved Persons (APER 3) made under section 64 of the Act. That code may be relied on so far as it tends to establish whether or not the conduct of an approved person complies with the Statements of Principle for approved persons. 3. E is also used for certain paragraphs in the Code of Market Conduct (MAR 1) made under section 119 of the Act. These paragraphs specify: (1) descriptions of behaviour that, in the opinion of the FCA, amount to market abuse; and (2) factors that, in the opinion of the FCA, are to be taken into account in determining whether or not behaviour amounts to market abuse. These paragraphs of the Code of Market Conduct may be relied on so far as they indicate whether or not particular behaviour should be taken to amount to market abuse. Reader s Guide: an introduction to the Handbook Page 23

25 Icon G What it means 1. The letter G is normally used to indicate guidance given under section 139A of the Act. The guidance in the Handbook relates to the operation of the Act, the rules in the Handbook and other matters. General guidance includes guidance given to persons or regulated persons generally or to a class of regulated person. Most general guidance will be given through the Handbook or in a Regulatory Guide, but in certain cases, where the guidance is urgent or temporary, it will be published in a separate Guidance Note. Material published in vehicles other than the Handbook or Guidance Notes, for example in newsletters or on the FCA s website, is not general guidance unless it says that it is. Guidance may be used to explain the implications of other provisions, to indicate possible means of compliance, to recommend a particular course of action or arrangement, and for other purposes. Whatever guidance is used for, it is not binding on those to whom the Act and rules apply, nor does it have evidential effect. It need not be followed in order to achieve compliance with the relevant rule or other requirement. So a firm cannot incur disciplinary liability merely because it has not followed guidance. Nor is there any presumption that departing from guidance is indicative of a breach of the relevant rule. Guidance is generally designed to throw light on a particular aspect of regulatory requirements, not to be an exhaustive description of firms obligations. If a person acts in accordance with general guidance in the circumstances contemplated by that guidance, then the FCA will proceed as if that person has complied with the aspects of the rule or other requirement to which the guidance relates. For the reliance that can be placed on other guidance, see SUP 9.4 (Reliance on individual guidance). (This paragraph is guidance under section 139A of the Act.) Rights conferred on third parties (such as a firm s clients) cannot be affected by guidance given by the FCA. Guidance on rules, the Act or other legislation represents the FCA s view, and does not bind the courts, for example in relation to an action for damages brought by a private person for breach of a rule, or in relation to the enforceability of a contract where there has been a breach of the general prohibition on carrying on a regulated activity in the United Kingdom without authorisation. A person may need to seek his own legal advice. 2. G is also used for the FCA s statement of the procedure for giving statutory notices under sections 312J and 395 of the Act, the FCA s statements of policies on penalties as required by the Act and the conduct of interviews to which a direction under section 169(7) of the Act has been given or the FCA is considering giving (see DEPP). Reader s Guide: an introduction to the Handbook Page 24

26 Icon D or UK or EU What it means The letter D is used to indicate directions and requirements given under various powers conferred by the Act and relevant statutory instruments for example, directions under section 55U(4) of the Act about the form and content of applications for Part 4A permission. Directions and requirements are binding upon the persons or categories of person to whom they are addressed. The UK flag icon is used to indicate directly applicable UK legislative material, such as Acts of Parliament and statutory instruments, regulations and orders. Cross-references to this material will use the letters UK. For emphasis or clarity, UK provisions may be set out in grey boxes. Where the UK flag icon is used, the source of the text will be referenced, either in the heading of the paragraph or at the end of the paragraph. Changes made to UK text (such as use of Handbook defined terms rather than those found in the original Act) are normally indicated by square brackets. An EU flag icon is used to indicate EU legislative material, such as EU Directives and directly applicable EU Regulations. Cross-references to this material will use the letters EU. For emphasis or clarity, EU provisions may be set out in grey boxes. Where the EU flag icon is used, the source of the text will be referenced, either in the heading of the paragraph or at the end of the paragraph. Changes made to EU text (such as use of the Handbook defined terms rather than those found in the original Directive) are normally indicated by square brackets. The status and effect of EU legislation depends on its nature. For example, the articles of an EU Regulation are directly applicable to, and binding on, the persons to whom it is addressed, whereas recitals in an EU Regulation are not binding, although they may assist in interpretation. P C Firms should not look to the Handbook as a comprehensive statement of their obligations under EU legislation. Additionally, only European Union legislation printed in the paper edition of the Official Journal of the European Union is deemed authentic. The letter P is used to indicate the Statements of Principle for approved persons made under section 64 of the Act. The Statements of Principle are binding on approved persons. The letter C is used for paragraphs made under section 119(2)(b) of the Act which specify descriptions of behaviour that, in the opinion of the FCA, do not amount to market abuse. These descriptions are conclusive because such behaviour is to be taken, for the purposes of the Act, as not amounting to market abuse. Reader s Guide: an introduction to the Handbook Page 25

27 Annexes and appendices may also display icons. The contents of an annex are normally all of one status, shown by an icon, containing the status letter at the top of the page. The contents of an appendix may, like the main text, be of more than one status. This is shown in the same way, by icons. Notes Occasionally, the Handbook contains informative text for the convenience of readers that is not part of the legislative material. This text is preceded by Note: and is either contained in square brackets within the legislative material or in a distinct paragraph. Where the note consists of a reference to a provision of an EU Directive, this indicates that the associated legislative text is substantially derived from that EU provision. Reader s Guide: an introduction to the Handbook Page 26

28 HAPTER SEVEN Understanding Handbook text Defined terms Defined terms used in the text are shown in italic type and can be found in the Handbook Glossary. The main exceptions to this are the IPRUs and parts of FEES, although some other modules may contain local defined terms. Where a word or phrase that is shown in italics in one part of the text appears without italics in another part, it is meant to be given, where un-italicised, its ordinary natural meaning. Interpretation tips GEN 2 (Interpreting the Handbook) helps readers to interpret the Handbook. Perhaps the most important provision of GEN 2 is that it requires a purposive interpretation of the rules. GEN 2 also confirms that the Interpretation Act 1978 applies throughout the Handbook and that in writing for the purposes of the Handbook means in legible form and capable of being reproduced on paper, irrespective of the medium used. GEN 2 also includes guidance on how Handbook provisions (particularly identical or joint provisions) should be read in the light of the particular regulatory responsibilities and powers of the FCA and PRA. The Glossary of definitions is a necessary tool to help you to interpret the Handbook. However, you cannot rely on the Handbook in isolation. If you need to know exactly what is said by and under the Act, you will need to consult the Act itself, or the statutory instruments made under it. Numbering and cross referencing Each module adopts the following numbering convention (shown here with rule status): Chapter 1 2, 3 etc. Section , 1.3 etc. Paragraph 1.1.1R 1.1.2R, 1.1.3R etc. Sub-paragraph 1.1.1R(1) 1.1.1R(2), 1.1.1R(3) etc. Sub-sub-paragraph 1.1.1R(1)(a) 1.1.1R(1)(b), 1.1.1R(1)(c) etc. Sub-sub-sub-paragraph 1.1.1R(1)(a)(i) 1.1.1R(1)(a)(ii), 1.1.1R(1)(a)(iii) etc. If it becomes necessary to add new material between two pieces of existing text, the Handbook numbering will change in the same way as would a statute. For example, new rules inserted between COBS 1.2.3R and COBS 1.2.4R would be numbered COBS 1.2.3AR and COBS 1.2.3BR. A table in the text is numbered as if it were a paragraph. Reader s Guide: an introduction to the Handbook Page 27

29 HAPTER EIGHT Using the Handbook Online The Handbook Online The online Handbook is available in HTML and in a PDF format. The Handbook online includes the following features: time travel to past and future consolidated versions of the Handbook; tailored handbooks for certain industry sectors; alerts and advanced navigation tools. The Handbook Online also contains an extensive user guide, which explain how to use the Handbook. The Handbook in print The Handbook is also available in print, through a subscription, by using the self-service option or by print-on-demand order. Hard-copy subscriptions The regulators have appointed Thomson Reuters to publish the hard copy Handbook and to service the subscriptions to this publication. If you are interested in a hard-copy subscription, you can obtain further information by to, by using the order form at: or by calling. It is possible to subscribe to the entire Handbook or a select number of modules. The hard-copy subscription includes monthly updates in the form of the Handbook Release. This contains all the pages to be inserted into the paper version of the Handbook and instructions as to which pages to remove/insert to update a hardcopy Handbook. These pages incorporate the changes in force on a particular date, as described in the relevant Handbook Notice. Self-service hard copy The Handbook Release is published on the regulators website at: Policy/Handbook/Releases/index.shtml and contains the updated pages for the Handbook, by module, so that users can print off each release to update their copy of the Handbook, or any module. It is also possible to download and print a copy of any page, section or chapter of any module of the Handbook either by using the View as PDF button or the Printer Friendly View button at the head of the Handbook Online pages. Readers Guide: an introduction to the FSA Handbook Page 28