CP18/28: Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation — FCA — GB

Consultation Paper
CP18/28*
October 2018
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation

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CP18/28 Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation We are asking for comments on this Consultation Paper (CP) by 7 December. You can send them to us using the form on our website at:
https://www.fca.org.uk/cp18-28- response-form Or in writing to:
Handbook Review Team
Financial Conduct Authority
12 Endeavour Square
London E20 1JN
Telephone:

44 207 066 1000
Email:
cp18-28@fca.org.uk
How to respond Contents
1 Summary 3
2 How we have reviewed the Handbook and BTS 8 3 How we will resolve cross-cutting issues 13 4 Changes to the Handbook 17 5 Binding Technical Standards 28 6 European Level 3 materials 36
Annex 1
Questions in this paper 38
Annex 2
List of relevant Statutory Instruments 40
Annex 3
List of relevant Binding Technical Standards 41
Annex 4
Compatibility statement 48
Annex 5
Abbreviations in this document 50
Appendix 1
Draft Handbook text 54
Appendix 2
Draft Binding Technical Standards Instruments 55
Appendix 3
Draft Guidance – our approach to EU non-legislative materials 56 returns you to the contents list takes you to helpful abbreviations How to navigate this document onscreen

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CP18/28
Chapter 1
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation 1 Summary
1.1 On 29 March 2019, the UK will leave the EU. In March 2018, the UK and the EU agreed
the terms of an implementation period, which will start on 29 March 2019 and last until 31 December 2020. During this period, common rules will continue to apply and access to each other’s markets will continue on current terms1 .
1.2 However, the implementation period is part of the withdrawal agreement which is
subject to further negotiations between the UK and the EU. Both sides must agree the final terms of the withdrawal agreement and, to take effect, it must be ratified by the UK and the EU. In order to be ready for all scenarios, we have worked to put the necessary arrangements in place for us to continue to meet our statutory objectives and reduce harm should the withdrawal agreement not come into effect.
1.3 As part of its Brexit preparations, Parliament has passed the European Union
(Withdrawal) Act 2018 (EUWA). The EUWA will repeal the European Communities Act 1972, preserve existing UK laws which implement EU obligations and convert existing directly applicable EU law at the point of exit into UK law2 . It gives ministers powers to make secondary legislation amending this body of law to ensure it functions effectively when the UK leaves the EU. Our Handbook also needs to be amended so that it is consistent with wider UK legislation and the UK’s new position outside of the EU.
1.4 HM Treasury (The Treasury) has laid a Statutory Instrument (SI) under the EUWA giving
us, the Prudential Regulation Authority (PRA), the Bank of England and the Payment Systems Regulator (PSR) responsibility for amending and maintaining EU-derived provisions in our Handbook and existing EU Binding Technical Standards (BTS) which will be incorporated into UK law by the EUWA, so that they function effectively after exit day3 . BTS are EU legislation but they do not set overall policy direction. They sit underneath Level 1 EU legislation and give technical detail on the overall legislative requirements. The regulators’ powers are subject to the constraints in the EUWA – they are limited to addressing deficiencies and dealing with any failure of UK law to operate effectively after exit, and the power is time-limited.
1.5 This is the first Consultation Paper (CP) setting out proposed changes to the
Handbook and to BTS as a result of Brexit. This CP principally addresses amendments to the Handbook and BTS which relate to those SIs made under the EUWA which have been published by the Government. A list of those SIs can be found in Annex 2 to this paper. The CP also explains our proposed approach to European non‑legislative material, which we have set out in draft non-Handbook guidance. Our proposals aim solely to correct ‘deficiencies’ arising from Brexit and do not revisit policy decisions, in accordance with the powers in the EUWA.
1.6 We intend to publish a second CP later in the Autumn covering the BTS and parts of
the Handbook affected by SIs which are due to be published later. We may also need to 1 For more detail on the implementation period please refer to the Treasury’s approach to financial services legislation under the European Union Withdrawal Act (27 June) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/720298/HM_Treasury_s_approach_to_financial_services_legislation_under_the_European_Union__Withdrawal__Act.pdf 2 The EUWA incorporates into UK law direct EU legislation ‘so far as operative immediately before exit day’. In particular, direct EU legislation which is in force before exit day, but stated to apply after exit day, is not treated as being operative immediately before exit day 3 The Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 http://www.legislation.gov.uk/ukdsi/2018/9780111171394/contents

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CP18/28
Chapter 1
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation revisit material consulted on in this CP as a result of further changes being made to the Handbook (for example, as a result of the Senior Managers and Certification Regime or the implementation of the Insurance Distribution Directive) or as a result of further published SIs.
1.7 As set out in our statement of 27 June 20184
, and following the announcement on
8 October5
, the Treasury has communicated that it will bring forward measures that will give the regulators some flexibility to phase in changes to firms’ regulatory requirements under the EUWA. We are willing to use these powers to waive or modify some requirements to allow for a smooth transition to the post-exit regulatory regime. This means we do not expect firms, regulated entities providing services within the UK’s regulatory remit and other stakeholders to prepare now to implement the changes from exit day. At the same time, we would be interested in views from stakeholders regarding any aspects of the proposed changes to firms’ regulatory requirements which might cause implementation challenges if the changes were to come into effect on exit day. We address this in Chapter 2.
1.8 If the UK and the EU agree on the terms of the withdrawal agreement, and there is an
implementation period, the amendments consulted on in this CP will not come into effect on 29 March 2019. The changes we make to the Handbook and to BTS after the implementation period will depend on the outcome of the negotiations on the future relationship between the UK and EU. What we cover in this CP
1.9 In April 2018, the Treasury began publishing its draft SIs to make the changes needed
to the UK’s legal and regulatory framework as part of preparations for Brexit. The SIs are designed to accommodate a scenario where there is no withdrawal agreement and no implementation period in place once the UK leaves the EU and where the UK would treat the EEA as a third country.
1.10 As noted above, this CP covers proposed changes to the Handbook and BTS and
sets out our approach to EU non‑legislative material. These proposals make sure that the regulatory framework still functions and remains in line with the EUWA and the published draft SIs from the Treasury and other ministries.
1.11 We have structured this CP as follows:

Chapter 2 sets out our approach to reviewing our Handbook and BTS. In it, we
explain the legal basis for making the proposed amendments and our approach to the proposed changes. We also ask for feedback on the implementation challenges the industry may face from the changes.
Chapter 3 discusses a range of cross-cutting issues that we have identified which
span the Handbook and BTS. The chapter sets out our proposed approach to each of these. 4 https://www.fca.org.uk/news/statements/fca-role-preparing-for-brexit 5 Proposal for a temporary transitional power to be exercised by UK regulators https://www.gov.uk/government/publications/proposal-for-a-temporary-transitional-power-to-be-exercised-by-uk-regulators/ proposal-for-a-temporary-transitional-power-to-be-exercised-by-uk-regulators

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Chapter 4 explains the Handbook proposals covered in this CP and the type of
changes we propose to make by sector. The sections of this chapter include an explanation of the more significant changes we propose:
– Section 4.1 includes a table of amendments with an overview of which sourcebooks and chapters are covered in this CP and which stakeholders we think will be most interested in these proposals. – Section 4.2 covers our proposals to amend the Prudential Standards sourcebooks. These include changes to prudential rules for solo-regulated firms prudentially regulated by us and to conduct rules with prudential aspects for insurers and friendly societies. – Section 4.3 covers our proposals to amend parts of the Conduct of Business sourcebook. These proposals include changes to conduct rules that apply to insurers and friendly societies and the territorial application of the sourcebook. – Section 4.4 covers changes affecting the fund management sector, principally, amendments to both the Investment Funds sourcebook and the Collective Investment Schemes sourcebook. – Section 4.5 covers a brief overview of MiFID-related Handbook changes.
Chapter 5 outlines the changes we propose to make to BTS. This includes an
explanation of our approach to BTS and where we propose to make amendments.
Chapter 6 explains how we intend to treat EU non-legislative material, such
as Guidelines and ‘Questions & Answers’ documents issued by the European Supervisory Authorities (ESAs) or their predecessor bodies (Level 3). Within this
chapter, we cover specific changes we propose making to chapters 19A and 19D of
the Senior Management Arrangements, Systems and Controls sourcebook (SYSC), as it refers to European Banking Authority (EBA) Guidelines on remuneration. Why we are consulting
1.12 Our Handbook implements and refers to EU legislation and to UK law which relates to
or refers to the EU. It also refers to EU institutions and concepts and to the European Economic Area (EEA). Leaving the EU, and the amendments to legislation made under the EUWA, requires us to update our Handbook to reflect the UK’s new legal and regulatory framework after exit day so that it remains functional.
1.13 Amendments are also needed to BTS so that they function effectively on exit day
including ensuring that they are consistent with the changes the Government is making to Level 1 EU legislation using its powers under the EUWA. More detail on our proposals to amend BTS can be found in Chapter 5.

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation Who this applies to
1.14 Given the breadth of changes we propose in this CP, we expect this consultation to
affect all our stakeholders. To help readers navigate this CP, we set out in Chapter 4 a list of interested stakeholders by Handbook sourcebook covered in this CP.
1.15 In addition, we expect our proposed changes to BTS to be particularly relevant to:

Credit rating agencies
Trade repositories
All firms which trade derivatives (whether they are financial or non-financial firms)
Financial market infrastructure firms
Trading venues
Central counterparties
Stakeholders involved in the fund management sector
All persons within MiFID scope and MiFID optional exemption firms
Consumers
Trade associations
The outcome we are seeking
1.16 We seek to ensure that our Handbook and BTS continue to work effectively as we
leave the EU. This is to ensure the UK has a clear and coherent legal and regulatory framework.
1.17 Most of the proposed changes are consequential in nature and follow the amendments
the Government is proposing to make under the EUWA. Our approach has not been to revisit previous policy decisions or use this as an opportunity to refine our Handbook provisions or amend BTS for purposes unconnected to Brexit. We have only made changes to our Handbook to address deficiencies arising from Brexit, in line with the approach the Treasury has adopted within the various SIs. We set out the approach we have taken in more detail in Chapter 2.
1.18 We also seek to ensure through this CP that a clear approach to the treatment after
Brexit of Level 3 material is established.
How it links to our objectives
1.19 Our Business Plan 2018/19 highlights Brexit preparations as one of the priorities for the
coming year given its impact both on those we regulate and our broader stakeholders.

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1.20 As part of our strategic objective of ensuring that the relevant markets function well,
we have been working to put in place contingencies for the UK leaving the EU without a withdrawal agreement. The proposals in this CP are part of the work we have been undertaking to ensure that there is a functioning regulatory framework in place in the event the UK leaves the EU without an agreed implementation period after March 2019.
1.21 The proposals in this CP are intended to advance our operational objectives of:
consumer protection, market integrity and promoting competition in the interests of consumers. We have also had due regard to our Mission and used our discretion to ensure harm or potential for harm is reduced. Measuring success
1.22 We will consider our changes successful if the Handbook and BTS function effectively
on exit day and if firms, consumers and our broader stakeholders are clear about what the proposed changes to the Handbook, BTS and the new guidance about EU Level 3 materials mean for them. Next steps
1.23 We want to know what you think of our proposals. Please send us your comments by
7 December. Use the online response form https://www.fca.org.uk/cp18-28-responseform on our website or write to us at the address on page 2.
1.24 The consultation period for this CP is eight weeks. This is to ensure we have sufficient
time to incorporate comments from stakeholders ahead of 29 March 2019. We intend to give feedback on this CP in early 2019 and publish final versions of these materials shortly before exit day. We may also publish further amendments to material consulted on in this CP in our later CP.

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation 2 How we have reviewed the Handbook and BTS
2.1 As explained in our Business Plan 2018/19 and our statement of 27 June 20186
, a major part of our Brexit work so far has been to ensure there is a functioning legal and regulatory framework in place when the UK leaves the EU.
2.2 We have undertaken this work collaboratively with relevant Government departments,
particularly the Treasury. This is because many of the amendments needed to our Handbook and to BTS flow from the provisions of the EUWA or the changes the Government is proposing to make to UK law in SIs. These SIs are being made under the EUWA and amend:

existing UK law, where it implements or relates to EU legislation or otherwise relates
to the EU/EEA
EU law that is incorporated into UK law under the EUWA
2.3 The process of incorporating EU law into UK law and amending it so it functions when
the UK is no longer a member of the EU is referred to by the Treasury, and in this CP, as ‘onshoring’. Amendments are being made via a series of SIs under the EUWA. The SIs are subject to parliamentary processes.
2.4 The proposals in this CP should be read alongside the EUWA, the SIs7
and the
Treasury’s accompanying policy statements so that stakeholders can understand how the overall regulatory framework will change because of Brexit.
2.5 The proposals may reflect the content of SIs which have not been made at the time
of publication and are therefore only available in draft form. More detail on how this impacts on our proposed Handbook amendments is available in paragraph 2.21. Our proposed changes to BTS in Chapter 5 have also been written to reflect the changes set out in the draft SIs. Legal basis for the proposed amendments
2.6 On 16 July 2018, the Treasury laid in Parliament its SI on Financial Regulators’ Powers8
.
This SI, if approved by Parliament, will delegate to regulators, including the FCA, powers to correct deficiencies arising from Brexit in the Handbook and in BTS.
2.7 The FCA will be subject to a number of constraints in using this power. For example,
a ‘deficiency’9 is explicitly defined in the EUWA, which limits the nature of the 6 The FCA’s role in preparing for Brexit https://www.fca.org.uk/news/statements/fca-role-preparing-for-brexit 7 The list of SIs giving rise to the amendments proposed in this CP can be found in Annex 2 8 The Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 SI http://www.legislation.gov.uk/ukdsi/2018/9780111171394 9 A definition of deficiency can be found on section 8 of the Explanatory Notes on the European Union Withdrawal Act (EUWA) https://www.legislation.gov.uk/ukpga/2018/16/pdfs/ukpgaen_20180016_en.pdf

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation amendments that can be made. All amendments under the power must also be approved by the Treasury before the FCA can make them. The Treasury may only grant approval if they consider the amendments to be within the scope of the power in the SI.
2.8 Using the powers conferred by the SI means that FSMA obligations to publicly consult
and conduct Cost Benefit Analysis (CBA) do not apply. However, we have chosen to consult stakeholders, and will continue to do so as far as possible, to help inform the amendments to our Handbook and to BTS.
2.9 Most of the changes in our instruments are consequential upon the provisions of the
EUWA or amendments the Government is proposing to make to legislation under the EUWA. In some instances, though, several options were viably open to us for how to fix deficiencies arising from Brexit. Where this was the case, we have explained the rationale for our proposal against other potential solutions. However, we have not included CBA for any of the proposals set out in this CP.
2.10 In amending our Handbook and issuing non-Handbook guidance, we are using our
general power in section 139A FSMA (power of the FCA to give guidance). Underlying assumptions
2.11 In reviewing our Handbook and BTS we have applied the test set out in the Financial
Regulators’ Powers SI. Hence, we only propose changes to the Handbook and BTS which will deal with deficiencies arising from the UK leaving the EU. We have not sought to introduce broader policy changes unrelated to Brexit.
2.12 The Treasury has made clear10 that in amending legislation under the EUWA it will
work on the basis that, if there is no withdrawal agreement, the UK cannot rely on any new specific arrangements being in place between the UK and the EU. The Treasury therefore would, in general, treat the EU and its member states in the same way as it treats non-EU or third countries after exit day (the baseline approach). This is consistent with the fact that, in the absence of agreeing a new arrangement, the UK would be outside of the EU framework for financial services and would be a third country to the EU and its member states.
2.13 However, the Treasury has made clear that there are instances where it will diverge
from this approach where it is necessary. This is to ensure that there is a functioning regime in place on exit day to enable firms and regulators to be ready for exit, to protect the existing rights of UK consumers or to ensure financial stability. To ensure consistency across the wider legislative framework we are taking the same approach. Where relevant, this baseline approach also applies to the EEA and its members.
2.14 Departures from this approach have been considered where:

we judge it is needed to ensure a sound, functional regulatory regime on exit day
we wish to avoid significant disruption to firms, investors and/or consumers
10 These can be found in HM Treasury’s approach to financial services legislation under the European Union Withdrawal Act (27 June) under the Treasury’s approach to fixing deficiencies https://assets.publishing.service.gov.uk/government/uploads/system/uploads/ attachment_data/file/720298/HM_Treasury_s_approach_to_financial_services_legislation_under_the_European_Union__ Withdrawal__Act.pdf

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2.15 Where we propose to depart from the baseline third-country approach, we have set
out our reasons. We also ask for feedback on whether there are cases where we should consider departing from the baseline approach, either on the basis set out above, or for other reasons. Our approach to the proposed changes
2.16 As set out above, the majority of individual changes we are proposing in this CP
are consequential upon the provisions of the EUWA or the changes the Treasury is proposing to make to legislation under the EUWA. These amendments do not involve a choice on our part, but reflect important effects the EUWA and proposed legislative changes will have – for example if they relate to the ability to conduct business on a cross-border basis.
2.17 For these changes, our focus has been on ensuring they are correctly expressed in the
Handbook and BTS and we are seeking views from stakeholders on whether we have done that successfully. The changes are set out in draft instruments in Appendices 1 and 2, but we have generally not provided further detail on these changes in this CP.
2.18 Many of the consequential changes we have identified through our review of the
Handbook affect several chapters or sourcebooks. We term them ‘cross-cutting’. We outline cross-cutting changes in Chapter 3.
2.19 In addition, in this CP we provide more detail on changes to the Handbook and BTS
where:

there are different potential approaches to correcting a deficiency, which covers a
small number of the changes in the CP. For these changes, we have explained the policy decisions underlying the amendments.
we consider that an explanation is appropriate to make clear the rationale for
following, or departing from, the baseline approach explained in paragraphs 2.11 to 2.15.
2.20 For all these amendments, we have sought to maintain the existing policy intent
behind the provisions.
The relevant version of the Handbook, and future consultations
2.21 This CP is based on the version of the Handbook in effect on 1 July 201811. This is to
ensure that the proposals in this CP relate to a stable set of Handbook provisions. We may need to consult further on the chapters and sourcebooks covered in this CP. This may be because:
The proposals in this CP reflect the content of SIs which have been published in
draft but have not yet passed through Parliament. The final SIs may differ from the draft versions. In addition, further SIs may be published that affect our proposals 11 The 1 July version of the Handbook can be found here:
https://www.handbook.fca.org.uk/handbook?date=01-07-2018&timeline=True

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Interdependencies with chapters and sourcebooks addressed in later CPs may
affect chapters and sourcebooks included in this CP13. As our work progresses, we may identify the need for changes in one part of the Handbook that have knock-on implications for the chapters and sourcebook on which we consult here.
Our proposals may be affected by cross-cutting issues other than those addressed
in Chapter 3 of this CP, which will be discussed in our subsequent CP. We set out in
Chapter 3 the cross-cutting issues on which we are still conducting analysis.
Between 1 July 2018 and 29 March 2019 developments unrelated to our Brexit work
may affect these proposals. The publication of final Handbook provisions regarding our Senior Managers and Certification Regime is an example of an initiative that may give rise to additional amendments to parts of the Handbook covered in this CP.
2.22 Stakeholders should further note that we are consulting in this CP on changes to the
Handbook glossary. Changes to glossary terms may affect the scope, application or meaning of Handbook chapters or sourcebooks covered by this CP. Stakeholders should have regard to these proposed changes when reviewing the amendments we propose. Further changes may be made to glossary terms included in this CP resulting from further analysis of the Handbook or the publication of later SIs. Our next CP will also include further proposals for glossary changes that may be of relevance to Handbook chapters and sourcebooks covered in this CP.
2.23 We are not consulting in this CP on forms that are related to these chapters or
sourcebooks. We will set out in due course our intentions on making changes to forms to ensure that they are fit for purpose after Brexit. Implementation challenges
2.24 In the event that the UK and the EU are unable to agree on the terms of the withdrawal
agreement and the UK leaves the EU without an implementation period, firms and other regulated persons will have a limited amount of time to act on changes to requirements before exit day.
2.25 The Treasury announced on 27 June and confirmed on 8 October14 that it will bring
forward legislation to allow regulators to phase in changes to firms’ regulatory requirements. The Treasury has said that these powers will be available to phase in changes to requirements which the regulators supervise and which have been amended under the EUWA. The powers will cover changes to requirements in 12 For example, material covered in this CP refers to incoming ECA providers and regulatory information services. As the relevant SI which relates to these provisions has not yet been published, we will cover any changes required to these provisions in a later CP. 13 For example, while MAR chapters are consulted on in this CP, provisions in GEN 2 which are referred to in these chapters are not covered in this CP. Should any amendments be made to those GEN 2 provisions in a subsequent CP, we will consider whether any further changes are required to the relevant MAR provisions. 14 Proposal for a temporary transitional power to be exercised by UK regulators https://www.gov.uk/government/publications/proposal-for-a-temporary-transitional-power-to-be-exercised-by-uk-regulators/ proposal-for-a-temporary-transitional-power-to-be-exercised-by-uk-regulators

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation FCA rules, as well as to changes in requirements in retained EU regulations and UK domestic legislation made by the Treasury through SIs. The powers will not be available where specific transitional measures are already contained in an SI.
2.26 We expect to use these powers in a proportionate manner, bearing in mind our
statutory objectives and the implementation challenges faced by firms.
2.27 Firms will not be expected to make individual applications to benefit from the
transitional powers that the Treasury is giving the regulators. We are keen to get feedback in this CP on whether compliance with changes to regulatory requirements by exit day would be a particular challenge for firms. We are interested in stakeholders’ views on the challenges associated with implementing changes that have been proposed in this CP, as well as changes set out in relevant SIs that have been laid or published in draft by the Treasury15.
2.28 We welcome feedback on:

Any situations in which compliance with new requirements may prove challenging
and, in particular where compliance with pre-exit requirements would no longer be possible post-exit.
Any systems that may need to be developed or amended, including the expected
time needed to build these changes.
Any external dependencies that may affect firms’ ability to comply with new
requirements in time for exit day.
2.29 We expect feedback on compliance challenges to provide evidence of reasons why
full compliance would be at risk, including relevant data where possible. This will allow us to understand any challenges and consider proportionate adjustments to allow for transition where necessary. In addition to providing feedback through this CP, firms should discuss specific concerns that they may have with their usual supervisory contact. Q1: Do you think any of the proposed changes in this CP or in relevant SIs represent a significant risk to compliance for your firm in time for exit day? If yes, please specify which and explain why this is the case, including projected time needed to comply with requirements were they to come into effect on exit day. 15 You can find the SIs that have been published by the Government https://www.gov.uk/government/collections/financial-services-legislation-under-the-eu-withdrawal-act#published-draftstatutory-instruments

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Chapter 3
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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation 3 How we will resolve cross-cutting issues Introduction
3.1 In this chapter we explain how a no-deal Brexit would give rise to a range of issues, each
of which would affect multiple parts of our Handbook and BTS. We term these ‘crosscutting issues’. We explain what impact they have and how they arise.
3.2 We have adopted a consistent approach across the Handbook and BTS to resolving
cross-cutting issues, unless there are specific reasons not to. We outline below our proposed approach to each cross-cutting issue, and the Handbook sourcebooks and BTS affected. However, stakeholders should also note that these issues appear in glossary terms.
3.3 We set out later in this CP where we propose to deviate from the general approaches
proposed below. This might be for a reason specific to a given Handbook sourcebook or BTS.
3.4 In our next CP, we will aim to consult on further cross-cutting issues as we finalise our
proposals to address them. These will include (but may not be limited to):

further amendments to our Handbook that are consequential to changes the PRA
makes to its Rulebook
how the EUWA will affect our ability to exercise our existing waiver and modification
powers in relation to rules which transpose EU directive requirements
3.5 These issues may be relevant to material we consult on in this CP. However, as noted in
Chapter 2, we will aim to consult on any further changes to the sourcebooks and BTS
addressed by this CP if they are impacted by our approach to these additional crosscutting issues.
3.6 Importantly, the changes we propose in this CP do not relate to any transitional
provisions or long-term relationship that may be agreed between the UK and the EU. As noted in paragraph 1.8, we will consider in due course whether our proposed Handbook and BTS changes need to be re-considered to accommodate the outcome of negotiations. The position of EU law and how it relates to our Handbook Affected Handbook sourcebooks BIPRU, COBS, COLL, CONRED, FINMAR, FUND, GEN, GENPRU, IFPRU, IPRU(FSOC), IPRU(INV), MAR, MIPRU, M2G, PRIN, RCB, SYSC, SUP

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3.7 EU law has supremacy over domestic law among member states of the EU. EU law
that takes the form of directives needs transposition into domestic law of EU member states. In the UK, EU Directives have been incorporated into the Handbook or UK legislation.
3.8 By contrast, EU Regulations are directly applicable. This means they do not need to be
transposed into the Handbook or UK legislation.
3.9 When the UK leaves the EU, directly-applicable EU Regulations will (in the absence of
a transitional arrangement) no longer apply, leaving a legislative gap. To compensate for that, the EUWA incorporates EU Regulations into UK law. They will be amended to make them work effectively by a series of SIs. Similarly, the Government is proposing in a series of SIs equivalent amendments to UK laws that:

relate to previously transposed directives
reflect the UK’s current membership of the EU or, where applicable, the EEA
otherwise refer to the EU or EEA concepts
3.10 Where appropriate, we will amend the Handbook to reflect these changes. This
includes proposing amendments so that:
the Handbook (including glossary terms) refers to the new or revised UK legislation
(or specific provisions of that legislation), rather than the EU equivalents
passages of EU law, or UK law now being amended, that have been replicated in the
Handbook are updated to reflect the new provisions
where relevant, references are kept to EU law to explain how the Handbook or BTS
implemented EU law in the past (rather than ‘implements’ them)
3.11 These changes affect many sourcebooks in the Handbook reflecting the significance
of EU law in the financial services sector. A further amendment related to EU law concerns references to the Treaty on the Functioning of the European Union (the Treaty). The Treaty sets out the organisational and functional arrangements of the EU and, along with the Treaty on European Union, establishes the basis of EU law.
3.12 As the UK will no longer be a member of the EU, references to the Treaty in our
Handbook will no longer be appropriate. This includes where such a reference is part of a specific term – for example ‘Treaty firm’ to refer to a firm exercising passporting rights under the Treaty. We propose to remove these references, including relevant glossary terms such as appropriate UK regulator or authorised person (please refer to the Glossary Instrument in Appendix 1).
3.13 There are some exceptions to this approach, where we have found good reasons to
retain a reference to EU legislation. Where so, we will keep the existing wording16. 16 For example, in COLL we are retaining references to EU Capital Requirements Regulation (‘CRR’) in addition to UK CRR and there is a new glossary definition for EU CRR

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation The loss of passporting rights Affected Handbook sourcebooks BIPRU, COBS, COLL, CONRED, FUND, INSPRU, IFPRU, IPRU(INS), MAR, WDPG, PRIN, RCB, SYSC, SUP
3.14 Under section 31 of FSMA, the definition of an authorised person includes firms which
exercise their rights to offer cross-border services into the UK or to set up a branch (to passport).
3.15 In this way, FSMA gives effect to the provisions of EU law for cross-border financial
services and activities to be carried on (to be passported).
3.16 As we leave the EU’s single market, passporting rights into the UK will cease to exist.
FSMA is being amended so that EEA firms, Treaty firms, operators and depositaries of Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Fund Managers (AIFM) qualifiers will no longer qualify as authorised persons.
3.17 This means they will not have an automatic right to carry on regulated activities in the
UK. The Government also intends to remove provisions related to passporting from relevant legislation.
3.18 Reflecting these changes in the Handbook mainly involves removing the provisions
related to passporting. This includes deleting references to the roles and responsibilities of ‘home’ and ‘host’ regulators that relate to passported activities. It also means amending or deleting some glossary terms such as consent notice, passported activity or passport right (please refer to the Glossary Instrument in
Appendix 1).
3.19 These changes are distinct from the proposals in our consultation about temporary
permissions for incoming EEA firms, Treaty firms and UCITS/AIFM qualifiers17.
3.20 We also plan to address in our next CP the implications of Brexit for Handbook
provisions which relate to the E-Commerce Directive and the Distance Marketing Directive. References to EU institutions18 Affected Handbook sourcebooks and Binding Technical Standards COBS, FINMAR, SYSC, MIFID BTS 2017/589, 2016/2020, 2017/658, 2017/585, 6016/2022, 2017/575, CRAR BTS 447/2012, 449/2012, 2015/1, 2015/2, SSR BTS 827/2012; EMIR BTS 150/201318
3.21 As the UK will no longer be a member of the EU, European institutions such as ESMA
and the European Commission will not have powers or obligations under UK law. 17 The terms UCITS qualifier and AIFM qualifier refer to UCITS management companies and AIFMs respectively that are exercising their marketing passport rights in relation to a UCITS or an AIF, without also exercising their management or services passport rights. 18 You can find the list of covered BTS in Annex 3

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3.22 We propose to remove or replace references in our Handbook and BTS to the
European institutions to ensure it is aligned with UK law, unless there is a specific reason not to do so. References to ‘other member/EEA states’ and ‘other competent authorities’ Affected Handbook sourcebooks and Binding Technical Standards BIPRU, COBS, IFPRU, GENPRU, MAR, SYSC, MIFID BTS 2017/1945, 2017/584, 2017/565, 6016/2022, CRAR BTS 449/2012, 2015/2; SSR BTS 826/2012, 827/2012, EMIR BTS 150/2013
3.23 As the UK is currently a member state of the EU/EEA, there are references in our
Handbook and BTS to ‘other member/EEA states’, ‘another member/EEA state’ or variants thereof. When the UK leaves the EU, it will no longer be appropriate for our Handbook and BTS to refer to EU or EEA member states as if the UK were still one. If we need to keep these references in some form, we propose to amend them to ‘EU member states’ or ‘EEA member states’, as appropriate. We propose equivalent amendments for references to ‘other competent authorities’ or ‘another competent authority’ (or variants) where currently these refer to EU or EEA authorities. References to information sharing with the European Supervisory Authorities or ‘other competent authorities’ Affected Handbook sourcebooks and Binding Technical Standards FINMAR, MAR, MIFID BTS 2017/1943, 2016/824, SSR BTS 826/2012, 827/2012
3.24 Within the European regulatory framework, we are obliged to share information or
data with the ESAs in many situations. After exit day, this obligation will fall away. While we may continue to share information and seek to cooperate with the ESAs, we will no longer be required to do so and therefore propose to remove the references to compulsory sharing of information with the ESAs. Q2: Do you agree that we have correctly identified all relevant amendments in our draft Handbook and BTS text related to the cross-cutting issues set out above? Do you have any other points you wish to raise regarding our approach to these cross-cutting issues?

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Section 4.1 Introduction
4.1 This chapter provides an overview of the Handbook sourcebooks and chapters that are
within the scope of this CP. It summarises the changes that we are proposing to make to ensure our Handbook remains fit for purpose after Brexit.
4.2 Some sections of the Handbook chapters mentioned below are not within the scope
of this CP. In some instances, relevant SIs that will affect them have not yet been published. In other cases, some rules within a chapter are unaffected by EU withdrawal.
Annex 2 provides a list of the SIs published that are relevant to the material covered in
this CP.
4.3 Appendix 1 contains the draft instruments setting out detailed proposed amendments
to various sourcebooks, chapters and the glossary. Stakeholders should read this
appendix to gain a full understanding of all the changes proposed.
4.4 The table below gives an overview of the sourcebooks and chapters we have reviewed
for this CP and potential interested stakeholders by sourcebook. We expect all stakeholders to have an interest in our proposed changes to the glossary. Sourcebook Specific Chapters Interested stakeholders Senior Management Arrangements, Systems and Controls (SYSC) 1, 3, 4, 5, 6, 7, 8, 9, 10, 13, 14, 18, 19, 20, 21, TP2, TP3, Schedule 2 All authorised persons, employees, consumers Financial Stability and Market Confidence (FINMAR) All Stakeholders involved in the buying, selling and trading of financial instruments, market makers and authorised primary dealers General Provisions (GEN) 2, 6 and TP1 Firms, Lloyds, managing agents, members agents General Prudential sourcebook (GENPRU) 1, 2, Schedules Investment firms (and groups containing such entities) Prudential Sourcebook for Banks, Building Societies and Investment firms (BIPRU) All Investment firms (and groups containing such entities) Prudential Sourcebook for Investment firms (IFPRU) All (except 11) Investment firms (and groups containing such entities) Prudential Sourcebook for Insurers (INSPRU) All Insurers and friendly societies (and groups containing such entities) Prudential Sourcebook for Mortgage and Home Finance firms, and Insurance Intermediaries (MIPRU) 4 Mortgage and home finance firms, insurance intermediaries (and groups containing such entities) Interim Prudential Sourcebook for Friendly Societies (IFPRU-FSOC) All Friendly societies

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4.5 Most changes we are proposing are cross-cutting in nature and consequential upon
the Treasury’s approach to drafting its SIs. An overview of these types of change can be found in Chapter 3, and the detailed amendments are in the draft instruments.
4.6 We include dedicated sections below with explanations of proposals where there are
different approaches we could have adopted to correcting a deficiency. Specifically, we have done this where we deviate from the baseline approach explained in paragraphs
2.11 to 2.15 or we consider that an explanation is helpful to make clear the rationale for
following the baseline approach.
4.7 We have also reviewed the following Handbook Guides for the purposes of this CP:

the Energy Market Participants Guide (EMPS)
the Oil Markets Participants Guide (OMPS)
the Service Companies Guide (SERV)

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4.8 The respective market participants will be interested in our proposed approach to each
of these guides. We are not proposing any changes to the text of SERV, but service companies will be interested in the changes we are proposing to the glossary. As noted in paragraph 2.22, changes to glossary terms may affect the scope, application or meaning of Handbook provisions covered by this CP, including those sourcebooks where we have proposed no textual amendments. Stakeholders should have regard to these proposed changes set out in the glossary instrument in Appendix 1 when reviewing the amendments we propose. Q3: Are there any proposed changes reflected in the instruments in Appendix 1 that are not cross-cutting in nature (see Chapter 3) or discussed in this chapter where you think we should re-consider our approach? If so, why? Q4: Are there any proposed changes where you think we should not follow the baseline approach of treating the EEA as a third country? If so, why?
Section 4.2 Changes to Prudential Standards
Prudential requirements for solo-regulated firms Prudential treatment of EU 27 exposures
4.9 BIPRU sets out preferential capital treatment for certain types of exposures originating
from EU member states, reflecting the approach in the Capital Requirements Regulation (CRR). Our baseline approach of treating EU member states as third countries means that the UK version of the CRR19 will remove this preferential treatment. We propose to amend BIPRU to reflect the fact that the preferential capital treatment for certain types of exposures originating from EU member states would cease to apply after exit day. We are considering temporary transitional arrangements in this area. Conduct rules with prudential aspects for insurers and friendly societies
4.10 In addition to the cross-cutting changes to INSPRU, IPRU-INS and IPRU-FSOC20,
we have identified two changes where we have considered different approaches to correcting the deficiencies identified. These involve the treatment of:

non-UK regulated markets
stock-lending transactions where the counterparty is authorised in an EEA state
Non-UK regulated markets
4.11 The term ‘regulated market’ in INSPRU means a market that is outside the EEA (and,
therefore, outside of MiFID scope) and:
that meets comparable requirements to those for MiFID regulated markets
whose financial instruments dealt in are of comparable quality to those in a regulated
market in the UK
19 For more information on Treasury’s proposed changes please refer to the Draft Capital Requirements (Amendment) (EU Exit) Regulations 2018 https://www.gov.uk/government/publications/draft-capital-requirements-amendment-eu-exit-regulations-2018 20 For more information on proposals to COBS 21, which also contains rules applying to insurers that have a prudential aspect, please refer to the COBS chapter.

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4.12 INSPRU uses the term regulated market in two places21:

in placing restrictions on investments in derivatives or quasi-derivatives
in placing restrictions on assets held by pure reinsurers
4.13 We propose to amend the definition as it relates to INSPRU, to refer to markets
‘outside the UK’ (rather than the current ‘outside the EEA’) and require the market to have comparable requirements to the UK market (rather than the current reference to MiFID). This would mean that UK insurers could continue to hold their assets traded on EEA regulated markets in the same way as they do now where those markets meet the tests of being comparable to UK markets and trading instruments of comparable quality to those on UK markets.
4.14 We consider this is unlikely to cause any market disruption in the immediate term as
EEA markets will meet the tests of comparability and quality. This is because they are subject to the same EU-derived requirements that currently apply in the UK. Q5: Do you agree with our proposal to amend the term ‘regulated market’ as it applies in INSPRU? Stock-lending transactions where the counterparty is authorised in an EEA state – INSPRU 3
4.15 INSPRU 3.2.36R, INSPRU 3.2.36A R and INSPRU 3.2.37G set conditions under which
stock-lending transactions are approved (including in relation to permitted links). The rules limit stock-lending to transactions where the counterparty is either authorised in the UK or another EEA state, or is a person authorised by certain authorities in the USA.
4.16 The rules also exempt firms that make transactions through Euroclear Bank SA/NV’s
Securities Lending and Borrowing Programme from having to obtain collateral from the counterparty.
4.17 We considered options to:
amend the rules to prevent exposure to stock-lending transactions where the
counterparty is authorised in an EEA state
continue the current position and allow exposure to stock-lending transactions
where the counterparty is authorised in an EEA state
4.18 The baseline approach of treating EEA states as third countries would result in limiting
stock-lending transactions to those with UK or certain USA-authorised counterparties. We consider that this approach could cause significant market disruption. This could lead to firms having to redesign their investment strategies, potentially unwinding existing transactions. This would potentially result in worse outcomes for customers.
4.19 We therefore propose to continue to permit exposure to stock-lending transactions
with EEA‑authorised counterparties on the same basis as the current rules. 21 This term is used more widely in our Handbook. Outside of INSPRU, it applies to all uses of the term regulated market within the Handbook, and is derived from the Markets in Financial Instruments Directive (MiFID II).

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Section 4.3 Changes to the Conduct of Business Sourcebook
Exposure of insurance policy returns to stock-lending transactions – COBS 21
4.20 The rules in COBS 21.3.11R and COBS 21.3.12R set out the conditions under which
long-term insurance policy returns can be linked to stock-lending transactions. As with INSPRU 3, the rules:

limit stock-lending to transactions where the counterparty is either authorised in the
UK or another EEA state, or is a person authorised in the USA.
exempt firms that make transactions made through Euroclear Bank SA/NV’s
Securities Lending and Borrowing Programme from having to obtain collateral from the counterparty.
4.21 As with INSPRU 3, we are proposing to continue to allow exposure to stock-lending
transactions with EEA-authorised counterparties on the same basis as the current rules to avoid the risk of significant market upheaval. It is also in line with the approach we propose to adopt for UCITS (see paragraphs 4.46-4.48), where we propose to allow ongoing investment in EEA assets.
4.22 The rules allow exposure to loans or deposits made with an approved financial
institution. The definition of this term refers to a list of approved institutions, such as central banks including the European Central Bank and the central banks of EEA states. For the same reasons set out above, we recommend continuing to allow such exposures. The proposal does not lead to a change for firms. Q7: Do you agree we should continue to allow exposure to stock-lending transactions with EEA-authorised counterparties on the same basis as under the current rules in COBS 21.3? Q8: Do you agree we should continue to allow exposure to loans or deposits made with an approved financial institution on the same basis as under the current rules in COBS 21.3? Territorial application and other changes to COBS
4.23 This section addresses amendments to a broad range of chapters in COBS: 1, 2, 3, 6, 9,
10, and 22.
4.24 In our proposals to amend these chapters, we considered maintaining preferential
treatment for the EEA (e.g. in terms of protections provided to EEA consumers). However, given our baseline approach of treating EEA member states the same as any other third country (and the expectation EEA member states will do the same with respect to the UK), we propose to amend the provisions in COBS accordingly. We consider this to be consistent with the Treasury’s approach to corresponding

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4.25 In line with this approach, we propose to amend COBS 1, which sets out the territorial
application of COBS. At present, UK conduct rules will generally only apply to an EEA firm when it carries on business from an establishment (branch) in the UK. Incoming EEA firms providing services on a cross-border passported basis are generally subject to Home State conduct rules. After exit, if an EEA firm were to obtain authorisation from us or the PRA, then COBS would apply to it in the same way as any other UKauthorised third-country firm. Agent as client and reliance on others – COBS 2
4.26 COBS 2.4 contains rules and guidance relating to when a firm can treat an agent as
its client and when a firm is entitled to rely on information from another investment firm. COBS 2.4.4R sets out that such reliance can be placed when the latter is, among other things, an investment firm authorised in an EEA state. As the guidance in COBS 4.5G explains, this means that a firm can rely on a suitability or appropriateness assessment performed by another investment firm if that firm is subject to ‘equivalent requirements in another EEA State.’
4.27 Proceeding on the basis that passporting rights will come to an end, we propose to
restrict the application of COBS 2.4.4R so that, in the context of MiFID or equivalent third-country business, reliance can be placed only on UK authorised investment firms subject to MiFID or equivalent requirements.
4.28 In parallel, we propose that the references in COBS 2.4.5G to equivalent requirements
in other EEA States be deleted. This change would have the effect of limiting this guidance to scenarios involving reliance being placed on suitability and appropriateness assessments undertaken by firms in compliance with the requirements in COBS 9A and COBS 10A.2 respectively. Client categorisation – COBS 3
4.29 COBS 3.5.3BR through to COBS 3.5.3ER set out the circumstances in which a firm
may categorise a local public authority or municipality as an elective professional client, rather than a retail client. A firm must make an assessment, both qualitative and quantitative, of the client before re-categorising it.
4.30 With respect to MiFID business, MIFID II allows member states to set additional
or alternative quantitative criteria for firms to use to assess whether a local public authority or municipality can be re-categorised. COBS 3.5.3ER states the relevant quantitative test that we have chosen to adopt for firms categorising non-UK clients of this type. The test makes a distinction between EEA and non-EEA local public authorities and we propose to remove this distinction. This means EEA local public authorities or municipalities will be treated under COBS 3 in the same way as local authority clients based in third countries. When re-categorising EEA local public authorities, therefore, firms will need to follow the same quantitative test that is applied in relation to MiFID or equivalent third-country business generally under COBS 3.5.3R (2). Appropriateness – COBS 10
4.31 COBS 10 specifies when a firm that is carrying on non-MiFID business must determine
whether a particular type of non-advised transaction is appropriate for a client.

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4.32 COBS 10.4.1R sets out that a firm need not carry out an appropriateness assessment
where the firm is providing an execution-only service relating to particular types of financial instrument specified in COBS 10.4.1R (2) or other ‘non-complex financial instruments.’ The criteria for determining whether a financial instrument is noncomplex includes a reference to the financial instrument being capable of being realised at market prices or prices made available, or validated, by valuation systems ‘independent of the issuer’.
4.33 In COBS 10.5.5G we give guidance that sets out our views on when a valuation system
will be regarded as being ‘independent of the issuer’. The guidance provision currently provides that ‘…valuation systems will be independent of the issuer…where they are overseen by a depositary that is regulated as a provider of depositary services in a EEA state.’
4.34 To ensure that the guidance continues to apply as intended we propose to replace
references to a depositary in ‘another EEA State’ to in ‘the UK’. As such, a valuation system which is overseen by a depositary that is regulated within the EEA will fall outside the scope of this guidance provision in the future.
4.35 The COBS instrument in Appendix 1 also addresses changes to the appropriateness
rules in COBS 10A, which relate to non-advised services in respect of MiFID and insurance-based investment products. The instrument does not include changes with regard to circumstances when a firm is not required to ask its client to provide information or assess appropriateness (COBS 10A.4.1R). We will propose amendments to this rule in a subsequent consultation. Disclosure of charges, remuneration and commission – COBS 6, Suitability and basic advice (non-MiFID provisions) – COBS 9, Restriction on the distribution of certain regulatory capital instruments – COBS 22
4.36 COBS 6.4 sets out the disclosure requirements that apply to a firm selling or arranging
the sale of a packaged product to a retail client, where the selling or arranging does not relate to giving a personal recommendation. It requires a firm to disclose any commission unless the retail client ‘…is not present in the EEA at the time of the transaction…’.
4.37 COBS 9.4 specifies that a suitability report does not need to be provided ‘…if the
client is habitually resident outside the EEA and is not present in the United Kingdom at the time of acknowledging consent to the proposal form, to which the personal recommendation relates.’
4.38 COBS 22.2 sets out ‘Restrictions on the retail distribution of mutual society shares’ and
COBS 22.3 sets out ‘Restrictions on the retail distribution of contingent convertible instruments and CoCo funds’. In both chapters, the restrictions currently apply to firms dealing with retail clients in the EEA.
4.39 We propose to amend the scope of these provisions so that they refer only to clients
in the UK. In the case of application provisions (COBS 22), this will mean that relevant protections will no longer apply when firms deal with clients in the EEA. The scope of exemptions (COBS 6.4 and 9.4) will be expanded as they will dis-apply requirements for firms when dealing with clients in the EEA.
4.40 The UK-only approach maintains the current investor protections for UK retail clients,
but removes the existing protection for retail clients in the EEA provided by our rules.

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Section 4.4 Changes to fund management rules
4.41 In this section, we summarise the key changes we propose to the legal and regulatory
framework for fund management. This does not cover COLLG – the Collective Investment Scheme Information Guide. We have decided not to review COLLG as it needs a broader set of updates, beyond those related to Brexit. We will review it in due course and therefore stakeholders should refer to the amendments to the Investment Funds (FUND) and Collective Investment Schemes (COLL) sourcebooks for the relevant regulatory framework post-Brexit. Investment Funds sourcebook (FUND)
4.42 The Alternative Investment Fund Managers Directive (AIFMD) sets out a harmonised
regulatory framework for AIFMs. The AIFMD rules are largely set out in FUND. The changes we propose relate to the loss of single market passporting rights given by the Directive and reflect changes proposed by the Treasury22. They cover:

the creation of an equivalent UK AIFM regime for existing alternative investment
funds (AIFs) managed by UK AIFMs and for AIFMs who may wish to launch new funds.
continued cross-border management by AIFMs, whereby EEA AIFMs managing
unauthorised UK AIFs without carrying on a regulated activity in the UK will be subject to the same rules as third-country AIFMs (it will no longer be possible for an EEA AIFM to manage an authorised UK AIF if that AIFM is outside of the Temporary Permissions Regime (TPR)).
the continued cross-border marketing of EEA AIFs whereby, in order to access
the UK market, EEA AIFs will be subject to the National Private Placement Regime (NPPR) unless they have already notified the FCA to begin marketing before exit day and have applied to enter the TPR. Collective Investment Schemes sourcebook (COLL)
4.43 The UCITS Directive sets out a framework for authorising and supervising EEA
collective investment schemes (funds) that can be marketed to retail investors. Management companies of UCITS funds are also authorised and regulated under the Directive.
4.44 The rules for how UCITS funds should be managed are largely set out in the Collective
Investment Schemes sourcebook (COLL). The changes we propose to make to COLL 22 The Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018: explanatory information https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746539/AIFM_Amendment_ Regulations_8-10-18__for_publication_.pdf

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the creation of an equivalent UK retail fund regime for the existing UK UCITS
schemes, and for UK management companies who may wish to launch new funds of this kind in the UK (outside of the TPR EEA management companies will no longer be able to manage UK UCITS).
continued cross-border marketing of UCITS, whereby EEA UCITS wishing to
continue to market in the UK will be treated as third-country funds and will need to apply for individual recognition by the FCA under s.272 FSMA (although passporting funds already recognised under s.264 FSMA before exit day will be able to apply to enter the TPR).
cross-border mergers involving a UK UCITS scheme and a scheme based in the EEA,
which will no longer be possible using the procedure in the Directive.
provisions for master-feeder arrangements, which will still apply to a UK feeder
UCITS when it invests in units of an EEA master UCITS. We do not expect that EEA UCITS feeder funds will be allowed to invest in a UK UCITS master fund after exit day.
4.45 We are not consulting on changes to section 5.9 of COLL, concerning money market
funds, because that section was removed by the Money Market Funds Regulation Instrument 2018 (FCA 2018/37) on 20 July 2018. UCITS investment powers
4.46 The UCITS rules describe the classes of eligible assets in which funds may invest
and the borrowing and leverage arrangements they may enter into. In some cases, the UCITS regime makes a distinction between investments in EEA assets and investments in the rest of the world. Treating EEA states as third countries could cause significant disruption for some funds, resulting in them breaching risk-spreading rules and having to sell their current holdings. For existing investors who chose a fund expecting it to invest in EEA-based assets, this approach could interrupt their investment plans and it could limit the availability of alternative options for both existing and new investors. We therefore propose to allow UK UCITS schemes to retain the same freedom to invest in EEA assets as they do now.
4.47 Accordingly, we propose that references in COLL 5.2 to ‘EEA’ be amended to ‘EEA and
UK’ as needed to ensure that the current investment powers are kept.
4.48 We considered widening the range of eligible investments to treat assets from the
rest of the world the same as EEA-based assets. However, we consider this would potentially change the risk profile of funds by allowing greater investment in less well‑regulated markets or less liquid assets. As a result, we do not judge this to be the right change to make to our Handbook. Q10: Do you agree that UK UCITS schemes should have the same freedom to invest in EEA (non-UK) assets as they do now? 23 The Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2018: draft statutory instrument https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746543/2018.10.04_CIS__ Amendment_etc.__EU_Exit__SI_Draft_40__watermarked___002.pdf

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4.49 UK funds must have a depositary that is ‘established’ in the UK, which can include the
UK branch of an incoming EEA firm if that branch has a ‘top-up’ Part 4A permission to act as a depositary. After Brexit, the concept of being established in the UK will, for UK authorised funds, be limited to an entity incorporated in the UK. Depositaries of authorised funds that currently use the UK branch model will have a transitional period in which to restructure their operations. It will still be possible for branches of EEA firms to hold a Part 4A permission to act as depositary for unauthorised AIFs.
4.50 We propose to amend FUND and COLL to remove references to a depositary of an
authorised fund that is a UK branch of an EEA firm.
Q11: Do you agree with our proposal to amend FUND and COLL to remove references to a depositary of an authorised fund that is a UK branch of an EEA firm?
Section 4.5 An overview of MiFID-related changes
4.51 MiFID II is being incorporated into UK law through a mixture of legislative provisions,
Handbook changes and conversion of Binding Technical Standards into UK legal instruments. The draft Treasury legislation amends the legislative provisions it used to transpose MiFID II plus other relevant legislative provisions, and amends the UK versions of MiFIR and the Commission delegated acts. In this CP we are consulting on the Handbook changes and the Binding Technical Standards. For more information on MiFID BTS changes please refer to Chapter 5.
4.52 In the changes we made to give effect to MiFID II, we included in certain parts of
the Handbook (most notably in SYSC and COBS) text copied out from Commission delegated regulations, principally what we referred to as the MiFID Org regulation, which is being incorporated into UK law by the Treasury. We are retaining the copied out text of the Commission delegated regulations in the Handbook and have only proposed amendments to reflect the changes the Treasury has made in that process.
4.53 MiFID II includes a category of firms, so-called ‘Article 3’ firms, which are not required
to be authorised as investment firms under the Directive but are subject to some of the same obligations as MiFID investment firms. Article 3 firms are restricted in the activities they can carry out and include some financial advisors, corporate finance boutique firms and venture capital firms. Within the EU, unlike MiFID investment firms,
Article 3 firms are not allowed to passport their investment services. Brexit means
that for UK firms the MiFID II passport will no longer be available. However, we are not proposing for this reason to do away with the distinction between Article 3 firms and MiFID investment firms as we do not think this constitutes a deficiency to be dealt with under the EUWA.
4.54 In terms of deficiencies to be corrected in the incorporation of MiFID 2 into UK law,
the most significant relate to the transparency regime, transaction reporting and the ancillary activities exemption for commercial firms trading commodities derivatives. These are dealt with essentially through the Treasury’s draft legislation and the UK versions of BTS. Onshoring the MiFID II provisions in the Handbook mainly involves consequential changes to references to legislation, definitions or EU institutions. In

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation this CP we consult on changes to the MiFID 2 Guide. Some of the remaining changes to our Handbook arising from the onshoring of MiFID will be consulted upon in a later CP.
4.55 As for proposed amendments to GEN in the case of applying onshored EU regulations
to UK branches of third-country investment firms (now expanded to include EEA firms), these should be read in conjunction with the amendments to the same module relating to incoming EEA firms with temporary permissions (please refer to Chapter 4 of the TPR CP)24. 24 The Temporary Permissions Regime Consultation Paper https://www.fca.org.uk/publications/consultation-papers/cp18-29-temporary-permissions-regime-inbound-firms-and-funds

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation 5 Binding Technical Standards Our approach to Binding Technical Standards (BTS)
5.1 This consultation sets out our proposals to correct provisions in BTS25 that would no
longer operate effectively once the UK has left the EU. These changes will ensure that there is a functioning legal framework for UK financial regulation on the day that the UK leaves the EU.
5.2 This consultation does not cover all of the BTS. A further consultation will follow later in
the Autumn, alongside our consultation on other parts of the Handbook. In this paper, we are consulting on changes to BTS in respect of:

Credit Rating Agencies
Fund Management
EMIR (only BTS related to registration and application of Trade Repositories)
MIFID/MIFIR
Short Selling
Capital Requirements
5.3 As set out earlier in the paper, the Government has signalled its intention to delegate
powers to the Bank of England, PRA, FCA and PSR to correct deficiencies within BTS. On 16 July 201826, the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018 was laid before Parliament. It is under these powers that we are proposing to make changes to the Binding Technical Standards. All changes made under the delegated power will be subject to approval by the Treasury before the relevant instruments are made.
5.4 Some BTS within CRD, CRR, and MIFID are relevant to firms and persons supervised by
us, the Bank of England and the PRA. The draft SI giving us the power to correct BTS designates a regulator for each BTS and in some cases this is shared between two of the regulators. The approach we, the Bank and the PRA are taking, in preparation for exit day, is that one authority will take the lead in making corrections, based on which authority’s remit and objectives are most relevant. Where this is the case, we have collaborated with the other designated regulator, and we will be sharing consultation responses with one another.
5.5 On exit day, we and the PRA will be able to make our own changes to the BTS in line
with our respective statutory objectives and in respect of the entities we regulate. Any 25 Please see full list of BTS covered in this CP in Annex 3 26 The Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 http://www.legislation.gov.uk/ukdsi/2018/9780111171394/contents

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5.6 The Schedule of the Financial Regulators’ Powers SI includes the list of EU Regulations
for which we are the appropriate regulator. It also includes this for EU Regulations we share with the PRA and the Bank.
5.7 In correcting BTS, we have followed the approach envisaged by Government in its
published secondary legislation under the EUWA and so, most of our changes are consequential. These proposed changes are not described in detail in this consultation but all draft instruments showing the changes can be found in Appendix 2.
5.8 We give more detail and reasoning where our proposals depart from the general
approach taken by Government or where we consider a different approach to correcting the relevant deficiency is appropriate.
5.9 All changes to BTS should also be read alongside the amendments made to the Level 1
legislation. You may also find it useful to refer to the amendments to our Handbook. Sectoral changes
5.10 Most of the changes that we are proposing to make to BTS are to fix gaps that are
cross-cutting in nature and are reflected within the cross-cutting chapter of this consultation. We have specified below where changes are specific to certain BTS. The Credit Rating Agencies Regulation associated BTS
5.11 Credit rating agencies (CRAs) in the EU are regulated under the Credit Rating Agencies
Regulation (CRAR) and supervised by ESMA. The CRAR will be incorporated into UK law under the EUWA. This legislation will make us the supervisor responsible for CRAs. CRAs should have regard to HMT proposals relating to registration regimes and the standards that will apply to firms seeking to provide business in the UK.
5.12 The CRAR has several BTS associated with it. We will make appropriate amendments
to some of these and others will cease to be applicable. We propose to make amendments to the following BTS:

Commission Delegated Regulation (EU) No 447/2012 regarding the assessment of
compliance of credit rating methodologies
Commission Delegated Regulation (EU) No 449/2012 regarding the information for
registration and certification of credit rating agencies
Commission Delegated Regulation (EU) No 2015/1 regarding the periodic reporting
on fees charged by credit rating agencies for the purpose of ongoing supervision by the European Securities and Markets Authority
Commission Delegated Regulation (EU) No 2015/2 regarding the presentation of
the information that credit rating agencies make available to the European Securities and Markets Authority

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5.13 Most of the changes are cross-cutting and as such, explanation for such approach
can be found in the cross-cutting chapter of this CP (Chapter 3). But some changes are consequential to the approach communicated in the Treasury’s Policy note on the Credit Rating Agencies (Amendments etc.) (EU Exit) Regulations 201827. These changes include, for example, replacing references to the European Rating Platform, in Commission Delegated Regulation (EU) No 2015/2, with references to a public rating database.
5.14 We have also had to consider more substantial changes. Commission Delegated
Regulation (EU) No 2015/2 required CRAs to give information to ESMA on all ratings issued and not withdrawn when it came into force. Firms were required to submit this information within 6 months from the Delegated Regulation entering into force.
5.15 We propose that CRAs that are currently registered with ESMA and that wish to
register with us will need to send us this information by exit day. We will work closely with CRAs to test our systems in preparation to receive the information they will need to report to us. We expect CRAs to be familiar with the reporting requirements as they are consistent with those in place under CRAR.
5.16 We are also working closely with stakeholders so that we can receive data in a similar
way to ESMA.
5.17 Finally, we will remove Commission Delegated Regulation (EU) 2015/3. This BTS
sets out disclosure requirements for structured finance instruments under Article 8b of CRAR. Article 8b will be removed by Article 40 of the Securitisation Regulation (2017/2402) which will come into force on 1 January 2019. Fund Management associated BTS
5.18 This section covers changes associated with AIFMD and the UCITS Directive. It does
not cover changes to BTS associated with the Regulations for Money Market Funds, European Social Entrepreneurship Funds (EuSEF), European Venture Capital Funds (EuVECA) or European Long-term Investment Funds (ELTIF) but we anticipate being able to consult on those BTS later this year.
5.19 The BTS associated with AIFMD, Commission Delegated Regulation (EU) No 2014/694,
defines when AIFs should be considered open-ended or closed-ended. We have not identified any deficiencies with this BTS, except a cross-reference to an article of AIFMD in Article 5 that needs to be replaced by its implementing measure in the UK, and will not make any further changes to it.
5.20 Finally, we will remove the following Commission Delegated Regulation which will not
be applicable under the onshored legislation proposed by the Treasury as it relates to reporting requirements which will cease as we exit the EU:

UCITS: Commission Implementing Regulation (EU) No 2016/1212 prescribes the
process for reporting sanctions to ESMA under article 99e.
27 Draft Credit Rating Agencies (Amendments etc.) (EU Exit) Regulations 2018: explanatory information https://www.gov.uk/government/publications/draft-credit-rating-agencies-amendments-etc-eu-exit-regulations-2018/draftcredit-rating-agencies-amendments-etc-eu-exit-regulations-2018-explanatory-information

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation The European Markets and Infrastructure Regulation (EMIR)– only BTS related to registration and application of Trade Repositories
5.21 EMIR imposes requirements on entities that enter into derivative contracts. It also
establishes common organisational, conduct of business and prudential standards for central counterparties (CCPs) and trade repositories (TRs).
5.22 In this CP we are consulting on proposed changes to the two BTS associated
with registration and application of Trade Repositories (TRs) for which we are the lead authority. The changes are all consequential and derive from the SI on Trade Repositories28. They are:

Commission Implementing Regulation (EU) No 1248/2012, regarding the format of
applications for registration of trade repositories
Commission Delegated Regulation (EU) No 150/2013 regarding the details of the
application for registration as a trade repository
5.23 We intend to consult on RTS 151/2013 on data to be published and made available
by trade repositories when the Treasury publishes relevant material relating to the treatment of EMIR. The Markets in Financial Instruments associated BTS
5.24 The Markets in Financial Instruments Directive and the accompanying Markets
in Financial Instruments Regulation (collectively ‘MiFID II’) offer a framework for regulating the buying, selling and trading of financial instruments (including shares, bonds, units in collective investment schemes and derivatives) in the EU.
5.25 There are 44 BTS associated with MIFID II. This consultation paper does not cover, to
use the original numbering of the European Securities and Markets Authority, RTS 1 and 2, 3 and 11 dealing with pre-and post-trade transparency. We will communicate on the approach to these BTS in due course.
5.26 In some cases, responsibility for the BTS associated with MIFID II is shared between the
FCA and the Bank or the PRA as set out earlier in this Chapter.
5.27 In order to make the MiFID/MIFIR BTS more ‘user friendly’ we have included a specific
provision within each technical standard to define its scope and application – based on the scope provisions in the Level 1 of MiFID II together with a discrete provision setting out definitions used in the BTS.
5.28 Our review of the MIFID II/MIFIR BTS did not find any significant deficiencies, beyond
those identified in the associated Level 1 text such as the scope of definitions, except for minor amendments. Most of them are non-material in nature and included within the cross-cutting chapter (Chapter 3). The list of BTS that only included cross-cutting or minor amendments can be found in the table below. 28 Draft Trade Repositories (Amendment and Transitional Provision) (EU exit) Regulations 2018 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746257/Trade_Repositories__ Amendmentand_Transitional_Provisions___EU_Exit__Regulations18.pdf

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation BTS 2017/571, BTS 2017/581, BTS 2017/568, BTS 2017/592, BTS 2017/590, BTS 2017/591, BTS 2017/580, BTS 2017/574, BTS 2017/582, BTS 2017/575, BTS 2017/576, BTS 2017/2154, BTS 2017/ 1945, BTS 2017/1093, BTS 2017/1943, BTS 2016/2022, BTS 2017/1005, BTS 2017/1110, BTS 2017/1946, BTS 2017/579, BTS 2016/2020, BTS 2017/589, BTS 2017/584, BTS 2017/578, BTS 2017/573, BTS 2016/824, BTS 2017/566, BTS 2017/569, BTS 2017/572
5.29 However, in RTS 23 Commission Delegated Regulation (EU) No 2017/585, we are not
proposing to follow the general onshoring approach of replacing references to Central European Time (CET) with references to Greenwich Mean Time (GMT) and British Summer Time (BST). Firms must still report reference data based on CET because we recognise changing this deadline would otherwise effectively reduce the time we have for processing the data and may have cost and system implications for firms. We are however proposing to keep the data time format for data to be reported to Universal Time Coordinated (UTC) to ensure consistency across order data, instrument reference data and transaction reporting.
5.30 More generally, in the case of transaction reporting, RTS 22 maintains the application
of reporting requirements to the same categories of UK firms. Whilst the amendments to RTS 22 and 23 are technical in nature, UK firms should note that these changes have the following effects:

UK trading venues will have to report transactions on their venue by EEA firms as
they will become third-country firms and will not have an obligation to report to the FCA. They should not, however, report for UK branches of EEA firms as after exit day these should be reporting to the FCA. Trading venues will therefore need to distinguish trading by the UK branch from elsewhere where the branch is not executing
A UK firm will no longer be able to meet the conditions for transmission if they
transmit orders to an EEA firm. They will therefore have to either report transactions themselves or ensure their transmission arrangements are with firms that have obligations to report to the FCA
The FCA will publish consolidated data on instruments traded on UK trading venues
and systematic internalisers and may publish other reference data
5.31 These changes tie in with the scope of the onshored transaction reporting regime
in MiFIR. For EEA firms, see commentary in Chapter 4 of this CP (an overview of MiFID-related changes) relating to the application of GEN 2.2.22AR and the TPR CP on requirements applying to temporary permission firms; if an EEA firm executes transactions in financial instruments from a UK branch, it will need to report these to the FCA’s Market Data Processor (MDP) from exit day, either itself or using an approved reporting mechanism, and have made the necessary arrangements to do so before then.
5.32 To inform our operational onshoring programme, we seek feedback on the following
areas, in addition to the general questions set out in Chapter 2:
Q12: Do you foresee any specific challenges in implementing the changes described above?

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation Q13: How long do you anticipate it will take to implement the changes? Please describe which changes you are referring to. Q14: Are there any other impacts that you have identified?
5.33 Finally, we will remove these MiFID II/MIFIR BTS as they will not be applicable under the
onshored legislation as they relate to obligations which will cease as we exit the EU:

RTS 3A Delegated Regulation (EU) No 2017/1018 specifying information to be
Notified by investment firms, market operators and credit institutions
ITS 1 Implementing Regulation (EU) No 2017/988 on standard forms, templates
and procedures for cooperation arrangements in respect of a trading venue whose operations are of substantial importance in a host Member State
ITS 4A Implementing Regulation on standard forms, templates and procedures
for the transmission of information under the freedom to provide services, or the freedom of establishment
ITS 6 Implementing Regulation (EU) No 2017/980 on standard forms, templates and
procedures for cooperation in supervisory activities, for on-site verifications, and investigations and exchange of information between competent authorities
ITS 7 Implementing Regulation (EU) No 2017/981 on standard forms, templates and
procedures for the consultation of other competent authorities prior to granting an authorisation
ITS 8 Implementing Regulation (EU) No 2017/1111 on procedures and forms for
submitting information on sanctions and measures
Commission Implementing Regulation (EU) No 2017/2382 regarding standard
forms, templates and procedures for the transmission of information
Commission Delegated Regulation (EU) No 2017/586 regarding the exchange
of information between competent authorities when cooperating in supervisory activities, on-the-spot verifications and investigations
Commission Implementing Regulation (EU) No 2017/1944 regarding standard
forms, templates and procedures for the consultation process between relevant competent authorities in relation to the notification of a proposed acquisition of a qualifying holding in an investment firm
5.34 As discussed above these BTS, covering transparency requirements and tick sizes, are
still subject to ongoing discussions. We will consult on these in due course.
RTS 1 Commission Delegated Regulation (EU) No 2017/587 regarding transparency
requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser

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RTS 2 Commission Delegated Regulation (EU) No 2017/583, regarding transparency
requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives. Commission Delegated Regulation (EU) No 2017/2194 is an amendment to RTS 2 and will therefore also be consolidated with RTS 2 in due course
RTS 3 Commission Delegated Regulation (EU) No 2017/577, regarding the volume
cap mechanism and the provision of information for the purposes of transparency and other calculations
RTS 11 Commission Delegated Regulation (EU) No 2017/588 regarding the tick size
regime for shares, depositary receipts and exchange traded funds The Short Selling Regulation associated BTS
5.35 We propose to make changes to the 3 BTS associated with the Short Selling
Regulation, namely:
Commission Delegated Regulation (EU) No 826/2012 – this BTS relates to
notification and disclosure requirements regarding net short positions as well as the details of the information to be provided to ESMA in relation to net short positions, and the method for calculating turnover to determine exempted shares
Commission Implementing Regulation (EU) No 827/2012 – this BTS relates
to the means for public disclosure of net position in shares, the format of the information to be provided to ESMA in relation to the net short positions, the types of agreements, arrangements and measures to adequately ensure that shares or sovereign debt instruments are available for settlement and the dates and period for the determination of the principal venue for a share
Commission Delegated Regulation (EU) No 919/2012 – this BTS relates to the
method of calculation of the fall in value for liquid shares and other financial instruments
5.36 Most of the changes are cross-cutting, and as such, can be found in the chapter
on cross-cutting issues. But some changes to these BTS are consequential to the approach adopted in the Statutory Instrument by the Treasury.
5.37 These changes are relatively minor, and by way of example, include:
References to ESMA’s publishing obligation in the Commission Delegated Regulation
(EU) 827/2012, where ESMA is required to publish a list of shares which are traded on EU venues but which are exempt from the EU Short Selling Regulation as they are principally traded on venues outside of the Union, will be transferred to us. We will publish a list of shares principally traded outside of the UK.
References in the Commission Delegated Regulation (EU) No 919/2012 to financial
instruments in Section C of Annex 1 to Directive 2004/39/EC (MIFID) will be updated to refer to the category of derivatives listed in the Regulated Activities Order, in line with the Treasury’s changes.

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation Capital Requirements associated BTS
5.38 With reference to the BTS adopted under CRD IV and CRR, we share responsibilities
with the PRA for a proportion of these BTS, as set out in the Financial Regulators’ Powers SI (see para 5.6). For this dossier, we have agreed with the PRA to split each onshored BTS at exit day using the power under Regulation 4 of the Financial Regulators’ Powers (Technical Standards) (EU Exit) Regulations 2018. We intend to make the same onshoring changes as the PRA at exit and the outcome would be to have separate but identical onshored BTS applying to PRA-authorised and FCAauthorised firms.
5.39 While we are conducting our own consultation through this paper on the onshoring
amendments to our portion of each split BTS, FCA-authorised firms should have regard to the PRA consultation that will be published shortly to view the detail of the proposed amendments. Any responses to our consultation should be provided either directly to us or to the PRA, but we encourage firms to respond to the PRA where possible.
5.40 Certain CRR BTS contain reporting and disclosure templates used by both PRAauthorised and FCA-authorised firms. The PRA and we are proposing not to make line
by line changes to these templates or instructions at exit. This is due to the volume of reporting and disclosure templates and instructions, the costs to firms of changing reporting templates, and seeking to minimise/reduce the frequency of changes to reporting requirements. We both plan to issue interpretative guidance on the approach we expect firms to take after EU withdrawal in cases where reporting and disclosure fields or definitions are based on concepts related to the EU.
5.41 In relation to all the changes we have discussed in this chapter:
Q15: Do you agree that we have correctly identified all relevant amendments in our draft BTS text related to the cross-cutting issues set out in Chapter 3? Are there any proposed changes in the instruments in Appendix 2 or discussed in Chapter 5 where you think we should reconsider our approach?

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Chapter 6
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation 6 European Level 3 materials Our proposed general approach to Level 3
6.1 Under the EUWA, the broad range of non-legislative material produced by the
European Supervisory Authorities (ESAs) or their predecessor bodies (for example, CESR) will not be incorporated into UK law.
6.2 This non-legislative material includes Guidelines and Recommendations on the
application of EU law, and Opinions, and is known collectively as Level 3 material. We have also included ‘Questions and Answers’ under this umbrella.
6.3 The ESAs currently have powers under the ESA Regulations to issue Guidelines and
Recommendations which are subject to a ‘comply or explain’ requirement. Under the provisions of the EUWA, the ESA Regulations will become part of UK law. However, the Government has proposed revoking the ESA Regulations, which will mean the comply and explain requirement no longer applies.
6.4 Because of these changes, we propose to issue FCA non-Handbook guidance on our
approach after exit day to existing Level 3 material. The proposed non‑Handbook guidance can be found at Appendix 3 to this CP. In summary, it sets out that:

we recognise the value of existing Level 3 material within the current regulatory
structure and consider that this material will continue to be relevant after exit day to us, financial institutions and other market participants
we expect financial institutions and other market participants to continue to apply
ESA Guidelines and recommendations as they did before exit day
we consider that references to other pre-exit EU non-legislative material (such as
Commission Q&A’s and ESA Opinions) may continue to be relevant and that we will continue to have regard to these as appropriate
we expect to continue to apply pre-exit ESA Guidelines and recommendations which
relate to our functions, to the extent we currently comply with them
6.5 We will not carry out a detailed, line-by-line review of all existing Level 3 materials to
identify and resolve provisions which no longer have their intended effect (for example, references to legislation that may have been amended as part of the withdrawal process and may therefore no longer be correct). Instead, we expect financial institutions and other market participants to interpret all EU Level 3 material sensibly and purposively, taking into account the UK’s withdrawal from the EU, the provisions of the EUWA and amendments made to relevant legislation in the withdrawal process. Q16: Do you have any comments on the proposed guidance on our approach to EU Level 3 materials set out at Appendix 3 to this CP?

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation Q17: Have you identified any specific provision in EU nonlegislative material which should be specifically reviewed and amended because you think that the interpretive approach proposed will not be enough to ensure the regulatory framework remains fit for purpose? If so, please explain why you think this is the case. Remuneration requirements in SYSC 19
6.6 There is one area where we propose to change how we refer to EBA Guidelines. Our
IFPRU Remuneration Code and dual-regulated firms Remuneration Code allows firms to apply a notional discount rate to the total variable remuneration awarded to material risk takers (MRTs) to calculate the bonus cap. This lets firms account for the time value of awards, considering factors such as inflation, interest rates and deferral periods while continuing to meet the requirement to award variable remuneration only up to a maximum of 100% or 200% of the value of their fixed remuneration.
6.7 The Handbook requires firms wishing to apply the discount rate to apply the
methodology set out in the EBA Guidelines on Applicable Notional Discount Rate for variable remuneration, as published on 27 March 201429.
6.8 An issue arises in this case because compliance with these Guidelines is mandatory,
and the formula for calculation relies on inflation and interest rates produced by Eurostat. These figures may not continue to be produced for the UK following exit day.
6.9 To deal with this, we propose to remove from our rule the requirement to discount
variable remuneration in the way specified in the Guidelines and replace this with a Handbook note reference.
6.10 By pointing firms to the relevant Guidelines and to our approach that firms should
make every effort to comply, we would ensure they apply the same consistent method across Europe should Eurostat figures continue to be produced (as our UK equivalent statistics may differ from those of Eurostat). Should Eurostat figures not be available post-exit, firms would be expected to demonstrate that this data is not available in their efforts to comply and explain the rationale for the use of appropriate alternative figures which can then be verified by us. Other non-Handbook guidance
6.11 There are various pieces of guidance that the FCA has published which sit outside of
our Handbook. This guidance may refer to FCA Handbook provisions which we propose to change as a result of Brexit, EU legislation or otherwise refer to the EU/EU concepts. As such, this guidance may be impacted by Brexit.
6.12 We intend to publish our proposed approach to such guidance in our next consultation
paper.
29 These provisions are set out in SYSC 19A.3.44ER and SYSC 19D.3.53R.

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation
Annex 1
Questions in this paper
Q1: Do you think any of the proposed changes in this CP or in relevant SIs represent a significant risk to compliance for your firm in time for exit day? If yes, please specify which and explain why this is the case, including projected time needed to comply with requirements were they to come into effect on exit day. Q2: Do you agree that we have correctly identified all relevant amendments in our draft Handbook and BTS text related to the cross-cutting issues set out above? Do you have any other points you wish to raise regarding our approach to these cross-cutting issues? Q3: Are there any proposed changes reflected in the instruments in Appendix 1 that are not cross-cutting in nature (see Chapter 3) or discussed in this chapter where you think we should re-consider our approach? If so, why? Q4: Are there any proposed changes where you think we should not follow the baseline approach of treating the EEA as a third country? If so, why? Q5: Do you agree with our proposal to amend the term ‘regulated market’ as it applies in INSPRU? Q6: Do you agree we should continue to permit exposure to stock-lending transactions with EEA-authorised counterparties on the same basis as under the current rules in INSPRU 3.2? Q7: Do you agree we should continue to allow exposure to stock-lending transactions with EEA-authorised counterparties on the same basis as under the current rules in COBS 21.3? Q8: Do you agree we should continue to allow exposure to loans or deposits made with an approved financial institution on the same basis as under the current rules in COBS 21.3? Q9: Do you agree with our proposed changes to COBS 2, 3, 6, 9, 10 and 22? Q10: Do you agree that UK UCITS schemes should have the same freedom to invest in EEA (non-UK) assets as they do now?

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation Q11: Do you agree with our proposal to amend FUND and COLL to remove references to a depositary of an authorised fund that is a UK branch of an EEA firm? Q12: Do you foresee any specific challenges in implementing the changes described above? Q13: How long do you anticipate it will take to implement the changes? Please describe which changes you are referring to. Q14: Are there any other impacts that you have identified? Q15: Do you agree that we have correctly identified all relevant amendments in our draft BTS text related to the cross-cutting issues set out in Chapter 3? Are there any proposed changes in the instruments in Appendix 2 or discussed in Chapter 5 where you think we should reconsider our approach? Q16: Do you have any comments on the proposed guidance on our approach to EU Level 3 materials set out at Appendix 3 to this CP? Q17: Have you identified any specific provision in EU nonlegislative material which should be specifically reviewed and amended because you think that the interpretive approach proposed will not be enough to ensure the regulatory framework remains fit for purpose? If so, please explain why you think this is the case.

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation
Annex 2
List of relevant Statutory Instruments
The Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 Short Selling (Amendment) (EU Exit) Regulations 2018 Consumer Credit (Amendment) (EU Exit) Regulations 2018 Building Societies (Amendment) (EU Exit) Regulations 2018 Friendly Societies (Amendment) (EU Exit) Regulations 2018 EEA Passport Rights (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 Collective Investment Schemes (Amendment) (EU Exit) Regulations 2018 Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018 The Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 Capital Requirements (Amendment) (EU Exit) Regulations 2018 Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 Solvency 2 and Insurance (Amendment) (EU Exit) Regulations 2018 Payments and electronic money (Amendment) (EU Exit) Regulations 2018: draft statutory instrument The Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018: draft statutory instrument

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation
Annex 3
List of relevant Binding Technical Standards List of BTSs consulted on in this CP where the FCA is the sole regulator AIFMD

Commission Delegated Regulation (EU) 694/2014 supplementing Directive
2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards determining types of alternative investment fund managers. Credit Rating Agencies Regulation
Commission Delegated Regulation (EU) 2015/1 of 30 September 2014
supplementing Regulation (EC) 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards for the periodic reporting on fees charged by credit rating agencies for the purpose of ongoing supervision by the European Securities and Markets Authority.
Commission Delegated Regulation (EU) 2015/2 of 30 September 2014
supplementing Regulation (EC) 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards for the presentation of the information that credit rating agencies make available to the European Securities and Markets Authority.
Commission Delegated Regulation (EU) 2015/3 of 30 September 2014
supplementing Regulation (EC) 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on disclosure requirements for structured finance instruments.
Commission Delegated Regulation (EU) 447/2012 of 21 March 2012 supplementing
Regulation (EC) 1060/2009 of the European Parliament and of the Council on credit rating agencies by laying down regulatory technical standards for the assessment of compliance of credit rating methodologies.
Commission Delegated Regulation (EU) 449/2012 of 21 March 2012 supplementing
Regulation (EC) 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on information for registration and certification of credit rating agencies. EMIR (Trade Repositaries)
Commission Delegated Regulation (EU) 150/2013 of 19 December 2012
supplementing Regulation (EU) 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards specifying the details of the application for registration as a trade repository.
Commission Implementing Regulation (EU) 1248/2012 of 19 December 2012 laying
down implementing technical standards with regard to the format of applications

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Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation for registration of trade repositories according to Regulation (EU) 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories. MiFID

Commission Delegated Regulation (EU) 2017/1018 of 29 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards specifying information to be notified by investment firms, market operators and credit institutions.
Commission Delegated Regulation (EU) 2017/1943 of 14 July 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on information and requirements for the authorisation of investment firms.
Commission Delegated Regulation (EU) 2017/566 of 18 May 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards for the ratio of unexecuted orders to transactions in order to prevent disorderly trading conditions.
Commission Delegated Regulation (EU) 2017/568 of 24 May 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the admission of financial instruments to trading on regulated markets.
Commission Delegated Regulation (EU) 2017/569 of 24 May 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the suspension and removal of financial instruments from trading.
Commission Delegated Regulation (EU) 2017/570 of 26 May 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards for the determination of a material market in terms of liquidity in relation to notifications of a temporary halt in trading.
Commission Delegated Regulation (EU) 2017/571 of 2 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the authorisation, organisational requirements and the publication of transactions for data reporting services providers.
Commission Delegated Regulation (EU) 2017/573 of 6 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on requirements to ensure fair and Non-discriminatory co-location services and fee structures.
Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks.
Commission Delegated Regulation (EU) 2017/575 of 8 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council on markets in

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Commission Delegated Regulation (EU) 2017/576 of 8 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution.
Commission Delegated Regulation (EU) 2017/578 of 13 June 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards specifying the requirements on market making agreements and schemes.
Commission Delegated Regulation (EU) 2017/584 of 14 July 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying organisational requirements of trading venues.
Commission Delegated Regulation (EU) 2017/586 of 14 July 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the exchange of information between competent authorities when cooperating in supervisory activities, on-the-spot verifications and investigations.
Commission Delegated Regulation (EU) 2017/588 of 14 July 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the tick size regime for shares, depositary receipts and exchange-traded funds.
Commission Delegated Regulation (EU) 2017/591 of 1 December 2016
supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the application of position limits to commodity derivatives.
Commission Delegated Regulation (EU) 2017/592 of 1 December 2016
supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business.
Commission Implementing Regulation (EU) 2016/824 of 25 May 2016 laying down
implementing technical standards with regard to the content and format of the description of the functioning of multilateral trading facilities and organised trading facilities and the notification to the European Securities and Markets Authority according to Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.
Commission Implementing Regulation (EU) 2017/1005 of 15 June 2017 laying
down implementing technical standards with regard to the format and timing of the communications and the publication of the suspension and removal of financial instruments pursuant to Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.

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Commission Implementing Regulation (EU) 2017/1093 of 20 June 2017 laying down
implementing technical standards with regard to the format of position reports by investment firms and market operators.
Commission Implementing Regulation (EU) 2017/1110 of 22 June 2017 laying down
implementing technical standards with regard to the standard forms, templates and procedures for the authorisation of data reporting services and related notifications pursuant to Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.
Commission Implementing Regulation (EU) 2017/1111 of 22 June 2017 laying
down implementing technical standards with regard to procedures and forms for submitting information on sanctions and measures in accordance with Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.
Commission Implementing Regulation (EU) 2017/1944 of 13 June 2017 laying down
implementing technical standards with regard to standard forms, templates and procedures for the consultation process between relevant competent authorities in relation to the notification of a proposed acquisition of a qualifying holding in an investment firm in accordance with Directives 2004/39/EC and 2014/65/EU of the European Parliament and of the Council.
Commission Implementing Regulation (EU) 2017/2382 of 14 December 2017 laying
down implementing technical standards with regard to standard forms, templates and procedures for the transmission of information in accordance with Directive 2014/65/EU of the EU Parliament and of the Council.
Commission Implementing Regulation (EU) 2017/953 of 6 June 2017 laying down
implementing technical standards with regard to the format and the timing of position reports by investment firms and market operators of trading venues pursuant to Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.
Commission Implementing Regulation (EU) 2017/980 of 7 June 2017 laying down
implementing technical standards with regard to standard forms, templates and procedures for cooperation in supervisory activities, for on-site verifications, and investigations and exchange of information between competent authorities in accordance with Directive 2014/65/EU of the European Parliament and of the Council.
Commission Implementing Regulation (EU) 2017/981 of 7 June 2017 laying down
implementing technical standards with regard to standard forms, templates and procedures for the consultation of other competent authorities prior to granting an authorisation in accordance with Directive 2014/65/EU of the European Parliament and of the Council.
Commission Implementing Regulation (EU) 2017/988 of 6 June 2017 laying down
implementing technical standards with regard to standard forms, templates and procedures for cooperation arrangements in respect of a trading venue whose operations are of substantial importance in a host Member State.

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Commission Delegated Regulation (EU) 2016/2020 of 26 May 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on criteria for determining whether derivatives subject to the clearing obligation should be subject to the trading obligation.
Commission Delegated Regulation (EU) 2016/2022 of 14 July 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards concerning the information for registration of third-country firms and the format of information to be provided to the clients.
Commission Delegated Regulation (EU) 2017/2194 of 14 August 2017
supplementing Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to package orders.
Commission Delegated Regulation (EU) 2017/572 of 2 June 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on the specification of the offering of pre-and post-trade data and the level of disaggregation of data.
Commission Delegated Regulation (EU) 2017/577 of 13 June 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations.
Commission Delegated Regulation (EU) 2017/579 of 13 June 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on the direct, substantial and foreseeable effect of derivative contracts within the Union and the prevention of the evasion of rules and obligations.
Commission Delegated Regulation (EU) 2017/580 of 24 June 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the maintenance of relevant data relating to orders in financial instruments.
Commission Delegated Regulation (EU) 2017/583 of 14 July 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives.
Commission Delegated Regulation (EU) 2017/585 of 14 July 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by the European Securities and Markets Authority and competent authorities.
Commission Delegated Regulation (EU) 2017/587 of 14 July 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on

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Annex 3
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internalise.

Commission Delegated Regulation (EU) 2017/590 of 28 July 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the reporting of transactions to competent authorities. Short Selling Regulation
Commission Delegated Regulation (EU) 826/2012 of 29 June 2012 supplementing
Regulation (EU) 236/2012 of the European Parliament and of the Council with regard to regulatory technical standards on notification and disclosure requirements with regard to net short positions, the details of the information to be provided to the European Securities and Markets Authority in relation to net short positions and the method for calculating turnover to determine exempted shares.
Commission Delegated Regulation (EU) 919/2012 of 5 July 2012 supplementing
Regulation (EU) 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps with regard to regulatory technical standards for the method of calculation of the fall in value for liquid shares and other financial instruments.
Commission Implementing Regulation (EU) 827/2012 of 29 June 2012 laying down
implementing technical standards with regard to the means for public disclosure of net position in shares, the format of the information to be provided to the European Securities and Markets Authority in relation to net short positions, the types of agreements, arrangements and measures to adequately ensure that shares or sovereign debt instruments are available for settlement and the dates and period for the determination of the principal venue for a share according to Regulation (EU) 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps. UCITS Directive
Commission Delegated Regulation (EU) 2017/2417 of 17 November 2017
supplementing Regulation (EU) 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on the trading obligation for certain derivative.
Commission Implementing Regulation (EU) 2016/1212 of 25 July 2016 laying down
implementing technical standards with regard to standard procedures and forms for submitting information in accordance with Directive 2009/65/EC of the European Parliament and of the Council.
Commission Implementing Regulation (EU) 584/2010 of 1 July 2010 implementing
Directive 2009/65/EC of the European Parliament and of the Council as regards the form and content of the standard notification letter and UCITS attestation, the use of electronic communication between competent authorities for the purpose of notification, and procedures for on-the-spot verifications and investigations and the exchange of information between competent authorities.

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation List of BTSs that are shared with the Bank of England or the PRA, where the FCA is the lead authority MiFID FCA Lead, shared with the PRA

Commission Delegated Regulation (EU) 2017/1946 of 11 July 2017 supplementing
Directives 2004/39/EC and 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for an exhaustive list of information to be included by proposed acquirers in the notification of a proposed acquisition of a qualifying holding in an investment firm.
Commission Delegated Regulation (EU) 2017/589 of 19 July 2016 supplementing
Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the organisational requirements of investment firms engaged in algorithmic trading.
Commission Implementing Regulation (EU) 2017/1945 of 19 June 2017 laying
down implementing technical standards with regard to notifications by and to applicant and authorised investment firms according to Directive 2014/65/EU of the European Parliament and of the Council. MiFIR FCA Lead, shared with the Bank of England
Commission Delegated Regulation (EU) 2017/2154 of 22 September 2017
supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on indirect clearing arrangements.
Commission Delegated Regulation (EU) 2017/581 of 24 June 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on clearing access in respect of trading venues and central counterparties.
Commission Delegated Regulation (EU) 2017/582 of 29 June 2016 supplementing
Regulation (EU) 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards specifying the obligation to clear derivatives traded on regulated markets and timing of acceptance for clearing.

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Annex 4
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation
Annex 4
Compatibility statement
This annex records the FCA’s compliance with legislation relevant to the proposals in this consultation. The Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 The FCA considers that all changes in this CP are appropriate to prevent, remedy or mitigate any failure of the relevant FCA Handbook provisions or BTS to operate effectively, or any other deficiency in the relevant FCA Handbook provisions or BTS, arising from the withdrawal of the United Kingdom from the EU. The proposals do not impose or increase taxation or fees; make retrospective provision; create a criminal offence which is capable of leading to imprisonment of more than two years; establish a public authority; implement the Article 50 Withdrawal Agreement; result in the transfer of a function of an EU authority to a UK authority; confer any power to legislate by means of orders, rules, regulations or any other subordinate instrument; or amend any legislation other than the relevant FCA Handbook provisions and BTS. Equality and diversity We are required under the Equality Act 2010 (the Act) in exercising our functions to ‘have due regard’ to the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by or under the Act, advance equality of opportunity between persons who share a relevant protected characteristic and those who do not, and to foster good relations between people who share a protected characteristic and those who do not. As explained in paragraph 2.16 the cross-cutting and sector-specific technical changes proposed in chapter 3 have not involved a choice being made on our part. By contrast, some of the changes proposed do involve a choice being made. We have therefore focused on these changes in assessing the risk of people with protected characteristics being adversely impacted. Overall, we do not consider it likely that the proposed discretionary changes would adversely impact people with protected characteristics. This is because the majority of changes in question impact directly on financial institutions rather than on individual products, which is where they would be more likely to affect individuals. Where individual products are directly affected (e.g. amending the territorial scope of COBS 22), we do not expect these changes to have a material impact on people with protected characteristics. We would, however, welcome stakeholders’ input on this assessment.

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Annex 4
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation Legislative and Regulatory Reform Act We are required under the LRRA to have regard to the principles in the LRRA and to the Regulator’ Compliance Code when determining general policies and principles and giving general guidance (but this duty does not apply to regulatory functions exercisable through our rules). We have had regard to the principles in the LRRA for the parts of the proposals that consist of general policies, principles or guidance. We believe that our proposals will be effective in helping firms and others subject to Handbook requirements understand and meet regulatory requirements more easily. We also believe that our proposals are a proportionate response to the need to amend the Handbook to take account of Brexit and to explain the approach to EU level 3 materials after Brexit. We have also had regard to the Regulators’ Compliance Code for the parts of the proposals that consist of general policies, principles or guidance. Treasury recommendations about economic policy In the remit letter published by the Chancellor of the Exchequer on 8 March 2017, the Chancellor affirms our role in ensuring that stability in financial services can create the right conditions for access to finance. This is part of the Government’s economic objective to create strong, sustainable and balanced growth. We have regard to this letter and the recommendations within. As set out in this CP, our proposals ensure that there is a functioning, legally sound Handbook should the UK leave the EU without a transitional arrangement.

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Annex 5
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation
Annex 5
Abbreviations in this document
AIFM Alternative Investment Fund Managers AIFMD Alternative Investment Fund Managers Directive AIFs Alternative Investment Funds BIPRU Prudential Sourcebook for Banks, Building Societies and Investment Firms BST British Summer Time BTS Binding Technical Standards CBA Cost Benefit Analysis CCPs Central Counterparties CESR Committee of European Securities Regulators CET Central European Time COBS Conduct of Business Sourcebook COLL Collective Investment Schemes Sourcebook CONRED Consumer Redress Schemes Sourcebook CP Consultation Paper CRAs Credit Rating Agencies CRAR Credit Rating Agencies Regulation CRD Capital Requirements Directive CRR Capital Requirements Regulation EBA European Banking Authority ECA Electronic Commerce Activity EEA European Economic Area

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation ELTIF European Long-Term Investment Fund EMIR European Markets and Infrastructure Regulation EMPS Energy Market Participants Guide ESAs European Supervisory Authorities ESMA European Securities and Markets Authority EU European Union EuSEF European Social Entrepreneurship Fund EuVECA European Venture Capital Fund EUWA European Union Withdrawal Act FCA Financial Conduct Authority FICOD Financial Conglomerates Directive FINMAR Financial Stability and Market Confidence FSMA Financial Services and Markets Act 2000 FUND Investment Funds Sourcebook GEN General Provisions GENPRU General Prudential sourcebook GMT Greenwich Meridian Time IDD Insurance Distribution Directive IFPRU Prudential Sourcebook for Investment Firms INSPRU Prudential Sourcebook for Insurers IPRU(FSOC) Interim Prudential sourcebook for friendly societies IPRU(INS) Interim Prudential Sourcebook for Insurers IPRU(INV) Prudential Sourcebook for Investment Business M2G MiFID 2 Guide MAR Market Conduct Sourcebook

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Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation MDP Market Data Processor MiFID Markets in Financial Instruments Directive MIFIR Markets in Financial Instruments Regulation MIPRU Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries MRTs Material Risk Takers MTFs Multilateral Trading Facility NCAs National Competent Authorities NPPR National Private Placement Regime NURS Non-UCITS Retail Schemes OMPS Oil Markets Participants Guide OTC Over-the-counter Derivatives OTFs Organised Trading Facility PRA Prudential Regulation Authority PSR Payment Systems Regulator RCB Regulated Covered Bonds RPPD Responsibilities of Providers and Distributors for the Fair Treatment of Customers RTS Regulatory Technical Standards SERV Service Companies Guide SIs Statutory Instruments SSR Short Selling Regulation SUP Supervision SYSC Systems and Controls Sourcebook TP Transitional Provisions TR Trade Repositories UCITS Undertakings for Collective Investment in Transferable Securities

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Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation UK United Kingdom USA United States of America WDPG Wind-down Planning Guide We have developed the policy in this Consultation Paper in the context of the existing UK and EU regulatory framework. The Government has made clear that it will continue to implement and apply EU law until the UK has left the EU. We will keep the proposals under review to assess whether any amendments may be required in the event of changes in the UK regulatory framework in the future. We make all responses to formal consultation available for public inspection unless the respondent requests otherwise. We will not regard a standard confidentiality statement in an email message as a request for non-disclosure. Despite this, we may be asked to disclose a confidential response under the Freedom of Information Act 2000. We may consult you if we receive such a request. Any decision we make not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal. All our publications are available to download from www.fca.org.uk. If you would like to receive this paper in an alternative format, please call 020 7066 9644 or email: publications_graphics@fca.org. uk or write to: Editorial and Digital team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

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Appendix 1
Financial Conduct Authority
Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation
Appendix 1
Draft Handbook text

FCA 201X/XX
EXITING THE EUROPEAN UNION: HIGH LEVEL STANDARDS (AMENDMENTS) INSTRUMENT 201[X] Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of:
(1) regulation 3 of the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018; and (2) section 139A (Power of the FCA to give guidance) of the Financial Services and Markets Act 2000. Commencement B. This instrument comes into force on [29 March 2019 at 11 p.m]. Amendments to the FCA Handbook
C. The modules of the FCA’s Handbook of rules and guidance listed in column (1)
below are amended in accordance with the Annexes in this instrument listed in column (2) below. (1) (2) Senior Management Arrangements, Systems and Controls sourcebook (SYSC)
Annex A
Financial Stability and Market Confidence sourcebook (FINMAR)
Annex B
General Provisions (GEN) Annex C
Citation
D. This instrument may be cited as the Exiting the European Union: High Level Standards (Amendments) Instrument 201[X]. By order of the Board [date]

FCA 201X/XX
Editor’s notes

(1) The amendments proposed in this instrument relate to the statutory instruments set out in Annex 2 of the accompanying paper and other matters arising from the UK’s withdrawal from the EU. We will set out our approach in due course for any additional amendments which are required to these provisions as a result of the publication of further statutory instruments. (2) The text in this instrument may also need to be amended at the time of the final instrument if there are further changes to the content of the statutory instruments set out in Annex 2 of the consultation paper. (3) The amendments in this instrument are based on the text of the Handbook in force on 1 July 2018. If amendments are made to the relevant text between 1 July 2018 and exit day, we will consider whether these give rise to further deficiencies or have a material impact on the proposed amendments set out in this instrument. Unless this is the case, we intend to proceed in the final instrument with deleting or amending the relevant provision based on the text of the Handbook in force immediately before exit day, rather than the text of the Handbook in force on 1 July 2018. (4) The consultation is based on the assumption that the Financial Conduct Authority will have the power under the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018 to make the proposed rule changes.

FCA 201X/XX
Annex A
Amendments to the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application and purpose 1.1A Application … 1.1A.2 G The provisions in SYSC should be read in conjunction with GEN 2.2.23R to GEN 2.2.25G. In particular:
(1) [deleted]
(2) Provisions made by the FCA, and by the PRA in the PRA Rulebook, may be applied by both regulators to PRA-authorised persons. Such provisions are applied by each regulator to the extent of its powers and regulatory responsibilities. (3) For Solvency II firms, the FCA considers that the requirements and guidance in Chapters 2, 3, 12 to 18, 21 and 22 of SYSC are not inconsistent with:
(a) the parts of the PRA Rulebook implementing which implemented the governance provisions in the Solvency II Directive (articles 40 to 49); (b) the Solvency II Regulation (EU) 2015/35 of 10 October 2014 (articles 258 to 275), or (c) EIOPA guidelines on systems of governance dated 28 January 2015 (EIOPA-BoS-14/253 EN). In most cases, there is no direct overlap with those provisions because the SYSC requirements are directed at FCA conduct requirements not expressly covered by or under provisions which implemented or supplemented the Solvency II Directive. Where there is a direct overlap with SYSC rules and guidance, the FCA will take requirements and guidelines which implemented or supplemented the Solvency II Directive derived requirements and guidelines into account and will interpret the SYSC rules and guidance in a way that avoids inconsistency. The definition of Solvency II firm includes (for SYSC) large non-directive insurers because the PRA have applied certain Solvency II derived requirements to those firms. Where SYSC refers to the PRA Rulebook applicable to Solvency II firms, large non-directive

FCA 201X/XX insurers should read those references as if they were references to the corresponding part of the PRA Rulebook applicable to large nondirective insurers. … 1 Annex 1 Detailed application of SYSC 1
Part 1 Application of SYSC 2 and SYSC 3 to an insurer, a UK ISPV, a managing
agent and the Society
Who?
1.1 R SYSC 2 and SYSC 3 only apply to an insurer, a UK ISPV, a managing
agent and the Society except that:
(1) for an incoming EEA firm or an incoming Treaty firm:
(a) SYSC 2.1.1R and SYSC 2.1.2G do not apply; (b) SYSC 2.1.3R to SYSC 2.2.3G apply, but only in relation to allocation of the function in SYSC 2.1.3R(2) and only in so far as responsibility for the matter in question is not reserved by an EU instrument to the firm’s Home State regulator; and (c) SYSC 3 applies, but only in so far as responsibility for the matter in question is not reserved by an EU instrument to the firm’s Home State regulator; [deleted] (2) for an incoming EEA firm which has permission only for cross border services and which does not carry on regulated activities in the United Kingdom, SYSC 2 and SYSC 3 do not apply; [deleted] (3) for an incoming Treaty firm which has permission only for cross border services and which does not carry on regulated activities in the United Kingdom, SYSC 3.2.6AR to SYSC 3.2.6JG do not apply; [deleted] (4) … (5) SYSC 2 and SYSC 3 do not apply to an incoming ECA provider acting as such. [deleted] … … …
1.2 G (1) Question 12 in SYSC 2.1.6G contains guidance on SYSC 1 Annex
1.1.1R(1)(b) and SYSC 1 Annex 1.1.1R(1)(c).

FCA 201X/XX
(2) SYSC 1 Annex 1.1.8R further restricts the territorial application of SYSC 2 and SYSC 3 for an incoming EEA firm or an incoming Treaty firm. (3) SYSC 1 Annex 1.1.1R(3) puts an incoming EEA firm on an equal footing with unauthorised overseas persons who utilise the overseas persons exclusions in article 72 of the Regulated Activities Order. (4) Further guidance on which matters are reserved to a firm’s Home State regulator can be found at SUP 13A Annex 2. [deleted] What? …
1.4 R SYSC 3.2.6AR to SYSC 3.2.6JG do not apply:
(1) …
(2) in relation to the following regulated activities:
…
(c) long-term insurance business which is outside the scope of the Solvency II Directive (unless it is otherwise one of the regulated activities specified in this rule); …
1.10 R (1) SYSC 3, except SYSC 3.2.6AR to SYSC 3.2.6JG, also applies in a
prudential context to an overseas firm (other than an incoming EEA firm or an incoming Treaty firm) with respect to activities wherever they are carried on. … …
Part 2 Application of the common platform requirements
Who?
…
2.2 R For an incoming EEA firm or an incoming Treaty firm:
(1) the rule on responsibility of senior personnel (SYSC 4.3) does not apply;

FCA 201X/XX
(2) the common platform requirements apply only in so far as responsibility for the matter in question is not reserved by an EU instrument to the firm’s Home State regulator; (3) for an incoming EEA firm which has permission only for crossborder services and which does not carry on regulated activities in the United Kingdom, the common platform requirements do not apply; (4) for an incoming Treaty firm which has permission only for crossborder services and which does not carry on regulated activities in the United Kingdom, the common platform requirements on financial crime do not apply. [deleted] … 2.6A R The common platform requirements do not apply to a firm (including an incoming EEA firm) in relation to its carrying on of auction regulation bidding, except for:
(1) SYSC 6.1.1R which only applies to the extent that it relates to the obligation to establish, implement and maintain adequate policies and procedures for countering the risk that the firm (including its managers, employees and appointed representatives) might be used to further financial crime; and (2) SYSC 6.3 (Financial crime). … 2.6F R The common platform requirements do not apply to an incoming EEA AIFM branch in respect of its management of a UK AIF, except for:
(1) those common platform requirements which are AIFMD host state requirements; (2) SYSC 6.1.1R which only applies to the extent that it relates to the obligation to establish, implement and maintain adequate policies and procedures for countering the risk that the firm (including its managers and employees) might be used to further financial crime; and (3) SYSC 6.3. [deleted] …
2.7 G EEA MiFID investment firms are reminded in particular that they must
comply with the common platform record-keeping requirements in relation to a branch in the United Kingdom. [deleted]

FCA 201X/XX
2.7A G EEA UCITS management companies are also reminded that they must comply with:
|(1) the common platform requirements indicated in Column A+ (Application to a management company) in Table A in Part 3 of this
Annex;
(2) the common platform record-keeping requirements; and (3) the common platform requirements on financial crime; in relation to activities carried on from a branch in the United Kingdom. Where the common platform requirement addresses matters within the scope of article 12 of the UCITS Directive, an EEA UCITS management company should note that those matters may also be subject to the rules of its Home State regulator. [deleted] [Note: articles 12(1)(b), 14(1)(c),14(1)(d), 17(4), 18(3) and 19(1) of the UCITS Directive and articles 4(1)(e), 10(1), 10(2) and 10(3) of the UCITS implementing Directive] What? … 2.8A R (1) Subject to (2) and (3), articles 1(2), 21 to 25, 30 to 32 and 72 of the MiFID Org Regulation (including any relevant definitions in MiFID the Glossary, MiFIR and the MiFID Org Regulation) apply as if they were rules or guidance in accordance with Part 3 (Tables summarising the application of the common platform requirements to different types of firm) to a firm’s carrying on of the business set out in SYSC 1 Annex 1 2.8R which is not MiFID business or a structured deposits regulated activity. (1 A) Subject to (2) and (3), articles 33 to 35 of the MiFID Org Regulation of the MiFID Org Regulation (including any relevant definitions in MiFID the Glossary, MiFIR and the MiFID Org Regulation) apply as if they were rules or guidance in accordance with Part 3 (Tables summarising the application of the common platform requirements to different types of firm) to a firm’s carrying on of the business set out in SYSC 10.1.1R which is not MiFID business or a structured deposits regulated activity. (2) References in Column (1) to a word or phrase used in the MiFID Org Regulation for the purpose of (1) have the meaning indicated in Column (2) of the table below:
(1) (2)

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“ancillary services” ancillary services or ancillary activities associated with the firm’s regulated activities “client” and “potential client” client “competent authority” FCA “investment firm” and “firm” firm “investment service” and “investment services and activities” designated investment business “portfolio management” and “portfolio management service” managing investments “Directive 2014/65/EU”; “Regulation (EU) No 600/2014”; “Directive 2014/57/EU” and “Regulation (EU) No 596/2014” and their implementing measures regulatory system, except where the reference is to a specific provision of a Directive or Regulation in Column (1) in which case the reference must be read as referring to such specific provision “shall” must (3) Any references within the MiFID Org Regulation for the purpose of (1) to other provisions of EU law must be interpreted in light of this rule. [deleted] (4) This rule does not apply to a collective portfolio management investment firm in relation to the firm’s business other than its MiFID business. [Note: The MiFID Org Regulation can be found at: http://eurlex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32017R0565&from=EN.] …
2.16 R The common platform requirements, except the common platform
requirements on financial crime and the common platform record-keeping requirements, apply to a firm that is not a UK UCITS management

FCA 201X/XX company in relation to passported activities carried on by it from a branch in another EEA State. [deleted] 2.16A R (1) The common platform requirements referred to in Column A+ in
Table A of Part 3 (below) apply to a UK UCITS management
company in relation to passported activities carried on by it from a branch in another EEA State. (2) Any other common platform requirement applies to a UK UCITS management company in relation to passported activities carried on by it from a branch in another EEA State to the extent that the requirement addresses matters within the scope of article 12 of the UCITS Directive. [deleted] 2.16B G The matters referred to in paragraph 2.16AR of this Annex may also be subject to the rules of the UK UCITS management company’s Host State regulator. [deleted] … 2.16D R The common platform requirements, except those which are AIFMD host state requirements, apply to a full-scope UK AIFM in respect of its management of an EEA AIF from a branch in another EEA State. [deleted] … 2.16F R The common platform requirements, except the common platform requirements on financial crime and the common platform record-keeping requirements, apply to an AIFM investment firm in respect of its MiFID business where carried on from a branch in another EEA State. [deleted] …
2.18 R The common platform organisational requirements, except the common
platform requirements on financial crime, also apply in a prudential context to a UK domestic firm and to an overseas firm (other than an incoming EEA firm or an Incoming Treaty firm) with respect to activities wherever they are carried on. However, SYSC 4.5 (Management responsibilities maps for UK relevant authorised persons), SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons), SYSC 4.8 (Senior management responsibilities for third country relevant authorised persons: allocation of responsibilities), SYSC 4.7 (Senior management responsibilities for UK relevant authorised persons:
allocation of responsibilities), SYSC 4.9 (Handover procedures and material) and SYSC 5.2 (Certification regime) apply in accordance with the rules in those sections. … …

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Table A: Application of the common platform requirements in SYSC 4 to SYSC 10
Provision
SYSC 4
COLUMN A
Application to a common platform firm other than to a UCITS investment firm COLUMN A+ Application to a UCITS management company COLUMN A++ Application to a full-scope UK AIFM of an authorised AIF COLUMN B Application to all other firms apart from insurers, UK ISPVs, managing agents the Society, fullscope UK AIFMs of unauthorised AIFs, MiFID optional exemption firms and third country firms … SYSC 4.3.1R Not applicable Rule Not applicable Rule (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers) SYSC 4.3.2R Not applicable Rule Not applicable Guidance (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers) SYSC 4.3.2AG Not applicable Not applicable Not applicable Guidance (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers)

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SYSC
4.3.3G
Guidance Guidance Not applicable Guidance (but not applicable to incoming EEA firms, incoming Treaty firms or UCITS qualifiers) … SYSC 4.4.1AR Not applicable Not applicable Not applicable Rule applies this
section only to:
…
(2A) a credit firm which holds a limited permission (other than a notfor-profit debt advice body) with respect to the relevant credit activity (as defined in paragraph 2G of
Schedule 6 to the
Act) for which it has limited permission; and (3) an incoming Treaty firm, an incoming EEA firm and a UCITS qualifier, (but only SYSC 4.4.5R(2) applies for these firms); and [deleted] … … Provision SYSC 5 COLUMN A Application to a common platform firm other than to a COLUMN A+ Application to a UCITS COLUMN A++ Application to a full-scope UK AIFM of COLUMN B Application to all other firms apart from insurers, UK ISPVs, managing

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UCITS investment firm management company an authorised AIF agents the Society, fullscope UK AIFMs of unauthorised AIFs, MiFID optional exemption firms and third country firms … SYSC 5.1.5AAR Rule Not applicable save in relation to a UCITS investment firm and its MiFID business Not applicable Rule applicable to the branch of an incoming EEA firm in relation to its MiFID business Other firms:
Not applicable
SYSC
5.1.5ABR
Rule Not applicable save in relation to a UCITS investment firm and its MiFID business Not applicable Rule applicable to the branch of an incoming EEA firm in relation to its MiFID business Other firms:
Not applicable
SYSC
5.1.5ACG
Guidance Not applicable save in relation to a UCITS investment firm and its MiFID business Not applicable Guidance applicable to the branch of an incoming EEA firm in relation to its MiFID business Other firms:
Not applicable
SYSC
5.1.5ADG
Guidance Not applicable save in relation to a Not applicable Guidance applicable to the branch of an incoming EEA

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UCITS investment firm and its
MiFID business firm in relation to its MiFID business Other firms:
Not applicable
[deleted]
SYSC
5.1.5AEG
Guidance Not applicable save in relation to a UCITS investment firm and its MiFID business Not applicable Guidance applicable to the branch of an incoming EEA firm in relation to its MiFID business Other firms:
Not applicable
[deleted]
…
Provision
SYSC 9
COLUMN A
Application to a common platform firm other than to a UCITS investment firm COLUMN A+ Application to a UCITS management company COLUMN A++ Application to a full-scope UK AIFM of an authorised AIF COLUMN B Application to all other firms apart from insurers, UK ISPVs, managing agents the Society, fullscope UK AIFMs of unauthorised AIFs, MiFID optional exemption firms and third country firms … SYSC 9.2 G Not applicable Not applicable Not applicable Applicable to credit institutions only, not including incoming EEA firms which have permission for cross border

FCA 201X/XX services only and which do not carry on regulated activities in the United Kingdom.
Table C:
Part 1: Application of the requirements in articles 1(2), 21 to 25, 30 to 32 and 72 of the
MiFID Org Regulation to MiFID optional exemption firms and third country firms Provision MiFID Org Regulation Text of the MiFID Org Regulation as of:
MiFID optional exemption firm
Third country firm
Article 1 – Subjectmatter and scope
(2) 31/3/2017 Not applicable Not applicable
Article 21 – General
organisational requirements
(1) 31/3/2017 Rule (a), (b) and (g):
Guidance;
(c), (d), (e), (f) and final paragraph: Rule (2) Rule Rule (3) Rule Guidance (4) Rule Guidance (5) Rule Guidance
Article 22 –
Compliance
(1) 31/3/2017 Guidance Guidance
(2) Guidance Guidance
(3) Guidance (a), (c), (d) and
(e): Guidance;
(b): Rule
(4) Guidance Guidance
Article 23 – Risk
management
31/3/2017 Guidance Guidance
Article 24 – Internal audit 31/3/2017 Guidance Guidance

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Article 25 – Responsibility of
senior management
31/3/2017 Guidance (1): Rule;
(2), (3) and (4):
Guidance
Article 30 – Scope of critical
and important operational functions
31/3/2017 Guidance Guidance
Article 31 – Outsourcing
critical or important operational functions 31/3/2017 (1): Rule; (2), (3), (4) and (5):
Guidance
(1): Rule;
(2), (3), (4) and
(5): Guidance
Article 32(1) and (2) –
Service providers located in third countries 31/3/2017 Rule Guidance
Article 72 – Retention of
records
31/3/2017 Rule Guidance
Part 2: Articles 1(2), 21 to 25, 30 to 32 and 72 of the MiFID Org Regulation
EU
UK
Article 1 - Subject-matter and scope
2 References to investment firms shall encompass credit institutions and references to financial instruments shall encompass structured deposits in relation to all the requirements (so far as relevant) in Chapters II to IV of this Regulation. referred to in Article 1(3) and 1(4) of Directive 2014/65/EU and their implementing provisions as set out under this Regulation. EU UK
Article 21 - General organisational requirements
1 Investment firms shall comply with the following organisational requirements:
(a) establish, implement and maintain decision-making procedures and an organisational structure which clearly and in documented manner specifies reporting lines and allocates functions and responsibilities; (b) ensure that their relevant persons are aware of the procedures which must be followed for the proper discharge of their responsibilities;

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(c) establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the investment firm; (d) employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them; (e) establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the investment firm; (f) maintain adequate and orderly records of their business and internal organisation; (g) ensure that the performance of multiple functions by their relevant persons does not and is not likely to prevent those persons from discharging any particular function soundly, honestly, and professionally. When complying with the requirements set out in the this paragraph, investment firms shall take into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business. 2 Investment firms shall establish, implement and maintain systems and procedures that are adequate to safeguard the security, integrity and confidentiality of information, taking into account the nature of the information in question. 3 Investment firms shall establish, implement and maintain an adequate business continuity policy aimed at ensuring, in the case of an interruption to their systems and procedures, the preservation of essential data and functions, and the maintenance of investment services and activities, or, where that is not possible, the timely recovery of such data and functions and the timely resumption of their investment services and activities. 4 Investment firms shall establish, implement and maintain accounting policies and procedures that enable them, at the request of the competent authority, to deliver in a timely manner to the competent authority financial reports which reflect a true and fair view of their financial position and which comply with all applicable accounting standards and rules. 5 Investment firms shall monitor and, on a regular basis, evaluate the adequacy and effectiveness of their systems, internal control mechanisms and

FCA 201X/XX arrangements established in accordance with paragraphs 1 to 4, and take appropriate measures to address any deficiencies. EU UK
Article 22 - Compliance
1 Investment firms shall establish, implement and maintain adequate policies and procedures designed to detect any risk of failure by the firm to comply with its obligations under Directive 2014/65/EU UK law on markets in financial instruments (“UK obligations”), as well as the associated risks, and put in place adequate measures and procedures designed to minimise such risk and to enable the competent authorities to exercise their powers effectively under that Directive UK law on markets in financial instruments. Investment firms shall take into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business. 2 Investment firms shall establish and maintain a permanent and effective compliance function which operates independently and which has the following responsibilities:
(a) to monitor on a permanent basis and to assess, on a regular basis, the adequacy and effectiveness of the measures, policies and procedures put in place in accordance with the first subparagraph of paragraph 1, and the actions taken to address any deficiencies in the firm's compliance with its obligations; (b) to advise and assist the relevant persons responsible for carrying out investment services and activities to comply with the firm's obligations under Directive 2014/65/EU UK obligations; (c) to report to the management body, on at least an annual basis, on the implementation and effectiveness of the overall control environment for investment services and activities, on the risks that have been identified and on the complaints-handling reporting as well as remedies undertaken or to be undertaken; (d) to monitor the operations of the complaints-handling process and consider complaints as a source of relevant information in the context of its general monitoring responsibilities. In order to comply with points (a) and (b) of this paragraph, the compliance function shall conduct an assessment on the basis of which it shall establish a risk-based monitoring programme that takes into consideration all areas of the investment firm’s investment services, activities and any relevant ancillary

FCA 201X/XX services, including relevant information gathered in relation to the monitoring of complaints handling. The monitoring programme shall establish priorities determined by the compliance risk assessment ensuring that compliance risk is comprehensively monitored. 3 In order to enable the compliance function referred to in paragraph 2 to discharge its responsibilities properly and independently, investment firms shall ensure that the following conditions are satisfied:
(a) the compliance function has the necessary authority, resources, expertise and access to all relevant information; (b) a compliance officer is appointed and replaced by the management body and is responsible for the compliance function and for any reporting as to compliance required by Directive 2014/65/EU in relation to its UK obligations and by Article 25(2) of this Regulation; (c) the compliance function reports on an ad-hoc basis directly to the management body where it detects a significant risk of failure by the firm to comply with its obligations under Directive 2014/65/EU UK obligations; (d) the relevant persons involved in the compliance function are not involved in the performance of services or activities they monitor; (e) the method of determining the remuneration of the relevant persons involved in the compliance function does not compromise their objectivity and is not likely to do so. 4 An investment firm shall not be required to comply with point (d) or point (e) of paragraph 3 where it is able to demonstrate that in view of the nature, scale and complexity of its business, and the nature and range of investment services and activities, the requirements under point (d) or (e) are not proportionate and that its compliance function continues to be effective. In that case, the investment firm shall assess whether the effectiveness of the compliance function is compromised. The assessment shall be reviewed on a regular basis. EU UK
Article 23 - Risk management
1 Investment firms shall take the following actions relating to risk management:
(a) establish, implement and maintain adequate risk management policies and procedures which identify the risks relating to the firm's activities,

FCA 201X/XX processes and systems, and where appropriate, set the level of risk tolerated by the firm; (b) adopt effective arrangements, processes and mechanisms to manage the risks relating to the firm's activities, processes and systems, in light of that level of risk tolerance; (c) monitor the following:
(i) the adequacy and effectiveness of the investment firm's risk management policies and procedures; (ii) the level of compliance by the investment firm and its relevant persons with the arrangements, processes and mechanisms adopted in accordance with point (b); (iii) the adequacy and effectiveness of measures taken to address any deficiencies in those policies, procedures, arrangements, processes and mechanisms, including failures by the relevant persons to comply with such arrangements, processes and mechanisms or follow such policies and procedures. 2 Investment firms shall, where appropriate and proportionate in view of the nature, scale and complexity of their business and the nature and range of the investment services and activities undertaken in the course of that business, establish and maintain a risk management function that operates independently and carries out the following tasks:
(a) implementation of the policy and procedures referred to in paragraph 1; (b) provision of reports and advice to senior management in accordance with Article 25(2). Where an investment firm does not establish and maintain a risk management function under the first sub-paragraph, it shall be able to demonstrate upon request that the policies and procedures which it is has adopted in accordance with paragraph 1 satisfy the requirements therein. EU UK
Article 24 - Internal audit
Investment firms shall, where appropriate and proportionate in view of the nature, scale and complexity of their business and the nature and range of investment services and activities undertaken in the course of that business, establish and

FCA 201X/XX maintain an internal audit function which is separate and independent from the other functions and activities of the investment firm and which has the following responsibilities:
(a) establish, implement and maintain an audit plan to examine and evaluate the adequacy and effectiveness of the investment firm's systems, internal control mechanisms and arrangements; (b) issue recommendations based on the result of work carried out in accordance with point (a) and verify compliance with those recommendations; (c) report in relation to internal audit matters in accordance with Article 25(2). EU UK
Article 25 - Responsibility of senior management
1 Investment firms shall, when allocating functions internally, ensure that senior management, and, where applicable, the supervisory function, are responsible for ensuring that the firm complies with its obligations under Directive 2014/65/EU UK law on markets in financial instruments (“UK obligations”). In particular, senior management and, where applicable, the supervisory function shall be required to assess and periodically review the effectiveness of the policies, arrangements and procedures put in place to comply with the obligations under Directive 2014/65/EU UK obligations and to take appropriate measures to address any deficiencies. The allocation of significant functions among senior managers shall clearly establish who is responsible for overseeing and maintaining the firm’s organisational requirements. Records of the allocation of significant functions shall be kept up-to-date. 2 Investment firms shall ensure that their senior management receive on a frequent basis, and at least annually, written reports on the matters covered by Articles 22, 23 and 24 indicating in particular whether the appropriate remedial measures have been taken in the event of any deficiencies. 3 Investment firms shall ensure that where there is a supervisory function, it receives written reports on the matters covered by Articles 22, 23 and 24 on a regular basis. 4 For the purposes of this Article, the supervisory function shall be the function within an investment firm responsible for the supervision of its senior management.

FCA 201X/XX
EU
UK
Article 30 - Scope of critical and important operational functions
1 For the purposes of the first subparagraph of Article 16(5) of Directive 2014/65/EU [SYSC 8.1.1R] and rule 2.1 of the Outsourcing Part of the PRA Rulebook, an operational function shall be regarded as critical or important where a defect or failure in its performance would materially impair the continuing compliance of an investment firm with the conditions and obligations of its authorisation or its other obligations under Directive 2014/65/EU UK law on markets in financial instruments, or its financial performance, or the soundness or the continuity of its investment services and activities. 2 Without prejudice to the status of any other function, the following functions shall not be considered as critical or important for the purposes of paragraph 1:
(a) the provision to the firm of advisory services, and other services which do not form part of the investment business of the firm, including the provision of legal advice to the firm, the training of personnel of the firm, billing services and the security of the firm's premises and personnel; (b) the purchase of standardised services, including market information services and the provision of price feeds. EU UK
Article 31 - Outsourcing critical or important operational functions
1 Investment firms outsourcing critical or important operational functions shall remain fully responsible for discharging all of their obligations under Directive 2014/65/EU UK law on markets in financial instruments and shall comply with the following conditions:
(a) the outsourcing does not result in the delegation by senior management of its responsibility; (b) the relationship and obligations of the investment firm towards its clients under the terms of Directive 2014/65/EU UK law on markets in financial instruments is not altered; (c) the conditions with which the investment firm must comply in order to be authorised in accordance with Article 5 of Directive 2014/65/EU have permission under Part 4A of FSMA to carry on a regulated activity which is any of the investment services and activities (within

FCA 201X/XX the meaning of regulation 2(1) of the Markets in Financial Instruments Regulations 2017), and to remain so, are not undermined; (d) none of the other conditions subject to which the firm's authorisation was granted is removed or modified. 2 Investment firms shall exercise due skill, care and diligence when entering into, managing or terminating any arrangement for the outsourcing to a service provider of critical or important operational functions and shall take the necessary steps to ensure that the following conditions are satisfied:
(a) the service provider has the ability, capacity, sufficient resources, appropriate organisational structure supporting the performance of the outsourced functions, and any authorisation required by law to perform the outsourced functions, reliably and professionally; (b) the service provider carries out the outsourced services effectively and in compliance with applicable law and regulatory requirements, and to this end the firm has established methods and procedures for assessing the standard of performance of the service provider and for reviewing on an ongoing basis the services provided by the service provider; (c) the service provider properly supervises the carrying out of the outsourced functions, and adequately manage the risks associated with the outsourcing; (d) appropriate action is taken where it appears that the service provider may not be carrying out the functions effectively or in compliance with applicable laws and regulatory requirements; (e) the investment firm effectively supervises the outsourced functions or services and manage the risks associated with the outsourcing and to this end the firm retains the necessary expertise and resources to supervise the outsourced functions effectively and manage those risks; (f) the service provider has disclosed to the investment firm any development that may have a material impact on its ability to carry out the outsourced functions effectively and in compliance with applicable laws and regulatory requirements; (g) the investment firm is able to terminate the arrangement for outsourcing where necessary, with immediate effect when this is in the interests of its clients, without detriment to the continuity and quality of its provision of services to clients;

FCA 201X/XX
(h) the service provider cooperates with the competent authorities of the investment firm in connection with the outsourced functions; (i) the investment firm, its auditors and the relevant competent authorities have effective access to data related to the outsourced functions, as well as to the relevant business premises of the service provider, where necessary for the purpose of effective oversight in accordance with this article, and the competent authorities are able to exercise those rights of access; (j) the service provider protects any confidential information relating to the investment firm and its clients; (k) the investment firm and the service provider have established, implemented and maintained a contingency plan for disaster recovery and periodic testing of backup facilities, where that is necessary having regard to the function, service or activity that has been outsourced; (l) the investment firm has ensured that the continuity and quality of the outsourced functions or services are maintained also in the event of termination of the outsourcing either by transferring the outsourced functions or services to another third party or by performing them itself. 3 The respective rights and obligations of the investment firms and of the service provider shall be clearly allocated and set out in a written agreement. In particular, the investment firm shall keep its instruction and termination rights, its rights of information, and its right to inspections and access to books and premises. The agreement shall ensure that outsourcing by the service provider only takes place with the consent, in writing, of the investment firm. 4 Where the investment firm and the service provider are members of the same group, the investment firm may, for the purposes of complying with this
Article and Article 32, take into account the extent to which the firm controls
the service provider or has the ability to influence its actions. 5 Investment firms shall make available on request to the competent authority all information necessary to enable the authority to supervise the compliance of the performance of the outsourced functions with the requirements of Directive 2014/65/EU and its implementing measures UK law on markets in financial instruments.

FCA 201X/XX
EU
UK
Article 32 - Service providers located in third countries
1 In addition to the requirements set out in Article 31, where an investment firm outsources functions related to the investment service of portfolio management provided to clients to a service provider located in a third country, that investment firm ensures that the following conditions are satisfied:
(a) the service provider is authorised or registered in its home country to provide that service and is effectively supervised by a competent authority in that third country; (b) there is an appropriate cooperation agreement between the competent authority of the investment firm and the supervisory authority of the service provider. 2 The cooperation agreement referred to in point (b) of paragraph 1 shall ensure that the competent authorities of the investment firm are able, at least, to:
(a) obtain on request the information necessary to carry out their supervisory tasks pursuant to Directive 2014/65/EU UK law on markets in financial instruments and Regulation (EU) No 600/2014; (b) obtain access to the documents relevant for the performance of their supervisory duties maintained in the third country; (c) receive information from the supervisory authority in the third country as soon as possible for the purpose of investigating apparent breaches of the requirements of Directive 2014/65/EU and its implementing measures UK law on markets in financial instruments and Regulation (EU) No 600/2014; (d) cooperate with regard to enforcement, in accordance with the national and international law applicable to the supervisory authority of the third country and the competent authorities in the Union United Kingdom in cases of breach of the requirements of Directive 2014/65/EU and its implementing measures and relevant national law UK law on markets in financial instruments. 3 Competent authorities shall publish on their The FCA must publish on its website a list of the supervisory authorities in third countries with which they have a cooperation agreement referred to in point (b) of paragraph 1.

FCA 201X/XX
Competent authorities shall update cooperation agreements concluded before the date of entry into application of this Regulation within six months from that date. EU UK
Article 72 - Retention of records
1 The records shall be retained in a medium that allows the storage of information in a way accessible for future reference by the competent authority, and in such a form and manner that the following conditions are met:
(a) the competent authority is able to access them readily and to reconstitute each key stage of the processing of each transaction; (b) it is possible for any corrections or other amendments, and the contents of the records prior to such corrections or amendments, to be easily ascertained; (c) it is not possible for the records otherwise to be manipulated or altered; (d) it allows IT or any other efficient exploitation when the analysis of the data cannot be easily carried out due to the volume and the nature of the data; and (e) the firm’s arrangements comply with the record keeping requirements irrespective of the technology used. 2 Investment firms shall keep at least the records identified in Annex I to this Regulation depending upon the nature of their activities. The list of records identified in Annex I to this Regulation is without prejudice to any other record-keeping obligations arising from other legislation. 3 Investment firms shall also keep records of any policies and procedures they are required to maintain pursuant to Directive 2014/65/EU, Regulation (EU) No 600/2014, Directive 2014/57/EU and Regulation (EU) No 596/2014 and their respective implementing measures Regulation (EU) No 600/2014, Regulation (EU) No 596/2014 and their implementing measures (as amended under the European Union (Withdrawal) Act 2018) and the law of the United Kingdom or any part of the United Kingdom which was relied on immediately before exit day to implement Directive 2014/65/EU, Directive 2014/57/EU and their implementing measures in writing.

FCA 201X/XX
Competent authorities may require investment firms to keep additional records to the list identified in Annex I to this Regulation. 3 Systems and Controls …
3.2 Areas covered by systems and controls
…
3.2.18 G It is possible that firms’ remuneration policies will from time to time lead to
tensions between the ability of the firm to meet the requirements and standards under the regulatory system and the personal advantage of those who act for it. Where tensions exist, these should be appropriately managed. See also Solvency II Regulation (EU) 2015/35 of 10 October 2014 (Article 275) and EIOPA Guidelines on system of governance dated 28 January 2015 (EIOPA-BoS-14/253 EN) (Guidelines 9 and 10). … 4 General organisational requirements
4.1 General requirements
…
4.1.1D R A UK UCITS management company must comply with the UCITS Remuneration Code if it:
(1) manages a UCITS scheme.; or
(2) manages an EEA UCITS scheme.
[Note: article 14a(1) of the UCITS Directive] 4.1.1E R A UK UCITS management company must have appropriate procedures for its employees to report potential or actual breaches of national provisions transposing UK provisions which implemented the UCITS Directive internally through a specific, independent and autonomous channel. [Note: article 99d(5) of the UCITS Directive] … 4.1.2B R For a management company or a full-scope UK AIFM, the arrangements, processes and mechanisms referred to in SYSC 4.1.1R and SYSC 4.1.1AR must also take account of the UCITS schemes and EEA UCITS schemes managed by the management company or the AIFs managed by the fullscope UK AIFM.

FCA 201X/XX
[Note: article 12(1) second paragraph of the UCITS Directive and article 18(1) second paragraph of AIFMD] Resources for management companies and AIFMs 4.1.2C R A management company, and a full-scope UK AIFM and an incoming EEA AIFM branch must have, and employ effectively, the resources and procedures that are necessary for the proper performance of its business activities. [Note: articles 12(1)(a) and 14(1)(c) of the UCITS Directive and article 12(1)(c) of AIFMD] … Subordinate measures relating to provisions implementing article 12(1) of AIFMD 4.1.2E G Articles 16 to 29 of the AIFMD level 2 regulation provide detailed rules supplementing the provisions of UK provisions which implemented article 12(1) of AIFMD, and articles 57 to 66 of the AIFMD level 2 regulation provide detailed rules supplementing the UK provisions which implemented articles 12 and 18 of AIFMD. …
4.2 Persons who effectively direct the business
General requirement
4.2.1 R The senior personnel of a common platform firm, a management company,
a full-scope UK AIFM, or of the UK branch of a non-EEA non-UK bank must be of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the firm. [Note: article 9(1)(4) of MiFID, article 7(1)(b) of the UCITS Directive, article 8(1)(c) of AIFMD and article 91(1) of CRD] … Composition of management
4.2.2 R A common platform firm, a management company, a full-scope UK AIFM
and the UK branch of a non-EEA bank non-UK bank must ensure that its management is undertaken by at least two persons meeting the requirements laid down in SYSC 4.2.1R and:
(a) for a full-scope UK AIFM, SYSC 4.2.7R; or (b) for a common platform firm, SYSC 4.3A.3R.

FCA 201X/XX
[Note: article 9(6) first paragraph of MiFID, article 7(1)(b) of the UCITS Directive, article 8(1)(c) of AIFMD and article 13(1) of CRD] … 4.3A Management body and nomination committee … 4.3A.7 R For the purposes of SYSC 4.3A.5R and SYSC 4.3A.6R:
…
(2) the following shall count as a single directorship:
…
(b) executive or non-executive directorships held within:
(i) firms that are members of the same institutional protection scheme provided that the conditions set out in article 113(7) of the EU CRR are fulfilled; or [deleted] (ii) undertakings (including non-financial entities) in which the firm holds a qualifying holding. [Note: article 91(4) and (5) of CRD and article 9(1) of MiFID] … 5 Employees, agents and other relevant persons
5.1 Skills, knowledge and expertise
…
5.1.5AD G ESMA has issued guidelines specifying The ESMA “Guidelines for the assessment of knowledge and competence”, 3 January 2017 (ESMA71- 1154262120-153), specify the criteria for the assessment of knowledge and competence for the purposes of SYSC 5.1.5ABR. The ESMA guidelines can be found at https://www.esma.europa.eu/document/guidelines-assessmentknowledge-and-competence. … 6 Compliance, internal audit and financial crime
6.1 Compliance
…

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Adequate policy and procedures
6.1.1 R A firm must establish, implement and maintain adequate policies and
procedures sufficient to ensure compliance of the firm including its managers, employees and appointed representatives (or where applicable, tied agents) with its obligations under the regulatory system and for countering the risk that the firm might be used to further financial crime. [Note: article 16(2) of MiFID and article 12(1)(a) of the UCITS Directive] …
6.1.2 R A management company must, taking into account the nature, scale and
complexity of its business, and the nature and range of financial services and activities undertaken in the course of that business, establish, implement and maintain adequate policies and procedures designed to detect any risk of failure by the firm to comply with its obligations under the regulatory system, as well as associated risks, and put in place adequate measures and procedures designed to minimise such risks and to enable the FCA to exercise its powers effectively under the regulatory system and to enable any other competent authority to exercise its powers effectively under the UCITS Directive. [Note:16 article 10(1) of the UCITS implementing Directive] …
6.1.7 R (1) This rule applies to a common platform firm conducting
investment services and activities from a branch in another EEA State. (2) References to the regulatory system in SYSC 6.1.1R, SYSC 6.1.2R and SYSC 6.1.3R apply in respect of a firm’s branch as if regulatory system includes a Host State;s requirements under MiFID and the MiFID Org Regulation which are applicable to the investment services and activities conducted from the firm’s branch. [deleted] [Note: article 16 of MiFID] … 7 Risk control
7.1 Risk control
…
7.1.2B G A management company should be aware that COLL 6.11 contains requirements implementing article 12 of the UCITS implementing Directive in relation to risk control and internal reporting that will apply to it.

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…
8 Outsourcing
8.1 General outsourcing requirements
…
8.1.11 R A firm (other than a common platform firm) must make available on request
to the FCA and any other relevant competent authority all information necessary to enable the FCA and any other relevant competent authority to supervise the compliance of the performance of the outsourced activities with the requirements of the regulatory system. … 9 Record-keeping
9.1 General rules on record-keeping
General requirements
9.1.1 R A firm (other than a common platform firm) must arrange for orderly
records to be kept of its business and internal organisation, including all services and transactions undertaken by it, which must be sufficient to enable the FCA or any other relevant competent authority under the UCITS Directive to monitor the firm’s compliance with the requirements under the regulatory system, and in particular to ascertain that the firm has complied with all obligations with respect to clients. [Note: article 12(1)(a) of the UCITS Directive and article 4(1)(e) of the UCITS implementing Directive] …
9.2 Credit institutions providing account information services or payment
initiation services
9.2.1 R A credit institution must keep records of any account information services
and payment initiation services it provides in the UK.
9.2.2 R A UK firm must keep the records required by SYSC 9.2.1R in respect of
account information services and payment initiation services provided anywhere in the EEA. The records must make clear in which EEA State those services were provided. [deleted]
9.2.3 R An EEA firm must keep the records required by SYSC 9.2.1R in respect of
account information services and payment initiation services provided in the UK. [deleted]

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…
10 Conflicts of interest
10.1 Application
…
General application
10.1.1 R …
(2) This section also applies to a management company UK UCITS management company. … 10.1.1A R This section also applies to:
(1) a full-scope UK AIFM of:
(a) a UK AIF; and
(b) an EEA AIF managed or marketed from an establishment in the UK; and [deleted] (c) a non-EEA AIF non-UK AIF; and (2) an incoming EEA AIFM branch which manages or markets a UK AIF. [deleted] … Additional requirements for a management company
10.1.17 R A management company UK UCITS management company, when
identifying the types of conflict of interests for the purposes of SYSC 10.1.4R, must take into account:
(1) the interests of the firm, including those deriving from its belonging to a group or from the performance of services and activities, the interests of the clients and the duty of the firm towards the UCITS scheme or EEA UCITS scheme it manages; and (2) where it manages two or more UCITS schemes or EEA UCITS schemes, the interests of all of them. …
10.1.18 G For a management company UK UCITS management company, references
to client in SYSC 10.1.4R and in the other rules in this section should be construed as referring to any UCITS scheme or EEA UCITS scheme

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10.1.19 R A management company UK UCITS management company must be
structured and organised in such a way as to minimise the risk of a UCITS scheme’s, EEA UCITS scheme’s or client’s interests being prejudiced by conflicts of interest between the management company UK UCITS management company and its clients, between two of its clients, between one of its clients and a UCITS scheme or an EEA UCITS scheme, or between two such schemes. … Avoidance of conflicts of interest for a management company
10.1.20 R A management company UK UCITS management company must try to
avoid conflicts of interest and, when they cannot be avoided, ensure that the UCITS schemes and EEA UCITS schemes it manages are fairly treated. … Disclosure of conflicts of interest for a management company
10.1.21 R (1) Where the organisational or administrative arrangements made by a
management company UK UCITS management company for the management of conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the UCITS scheme or EEA UCITS scheme it manages or of its Unitholders will be prevented, the senior personnel or other competent internal body of the firm must be promptly informed in order for them to take any necessary decision to ensure that in all cases the firm acts in the best interests of the scheme and of its Unitholders. (2) A management company UK UCITS management company must report situations referred to in (1) to the Unitholders of the UCITS scheme or EEA UCITS scheme it manages by any appropriate durable medium and give reasons for its decision. … … 13 Operational risk: systems and controls for insurers
13.1 Application
13.1.1 G SYSC 13 applies to an insurer unless it is:
(1) a non-directive friendly society; or

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(2) an incoming EEA firm; or
(3) an incoming Treaty firm.
13.1.2 G SYSC 13 applies to:
(1) an EEA-deposit insurer; and
(2) a Swiss general insurer; only in respect of the activities of the firm carried on from a branch in the United Kingdom. …
13.9 Outsourcing
…
13.9.9 G …
(4) EIOPA guidelines on system of governance dated 28 January 2015 (EIOPA-BoS-14/253 EN) include guidelines on, or relating to, outsourcing. … … 14 Risk management and associated systems and controls for insurers
14.1 Application
14.1.1 R This section applies to an insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or
(3) an incoming Treaty firm.
14.1.2 G This section applies to:
(1) an EEA-deposit insurer; and
(2) a Swiss general insurer; only in respect of the activities of the firm carried on from a branch in the United Kingdom. …

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18 Whistleblowing
18.1 Application and purpose
…
Purpose
18.1.2 G (1) The purposes of this chapter are to:
…
(ca) set out the requirements which implement implemented the whistleblowing obligation under article 73(2) of MiFID, which require MiFID investment firms (except collective portfolio management firms) to have in place appropriate procedures for their employees to report potential or actual infringements of the MiFID and MiFIR regime (SYSC 18.6); …
18.3 Internal arrangements
…
Reporting of concerns by employees to regulators … 18.3.6A G For the purposes of SYSC 18.3.6R(1) the possibility for P’s employees to disclose reportable concerns to the PRA or to the FCA does not override any obligation of P or its employees to report breaches to P’s Home State regulator of matters reserved by an EU instrument to that regulator. [deleted] … …
18.6 Whistleblowing obligations under the MiFID regime and other EU sectoral
legislation
Whistleblowing obligations under the MiFID regime
18.6.1 R (1) A UK MiFID investment firm (except a collective portfolio
management investment firm) must have appropriate procedures in place for its employees to report a potential or actual breach of:
(a) any rule implementing which implemented MiFID; or

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(b) a requirement imposed by MiFIR or any onshored regulation which was previously an EU regulation adopted under MiFID or MiFIR.
18.6.2 R SYSC 18.6.1R applies to a third country investment firm as if it were a UK
MiFID investment firm (unless it is a collective portfolio management investment firm) when the following conditions are met:
…
18.6.3 G When considering what procedures may be appropriate for the purposes of
SYSC 18.6.1R(1), a MIFID investment firm or a third country investment firm may wish to consider the arrangements in SYSC 18.3.1R(2). Whistleblowing obligations under other sectoral legislation
18.6.4 G In addition to obligations under the MiFID regime, similar whistleblowing
obligations apply to miscellaneous persons subject to regulation by the FCA under the following non-exhaustive list of EU legislation:
(1) article 32(3) of the Market Abuse Regulation, as implemented in
section 131AA of the Act;
(2) the UK provisions which implemented article 71(3) of the CRD (see IFPRU 2.4.1R in respect of IFPRU investment firms); (3) the UK provisions which implemented article 99d(5) of the UCITS Directive (see SYSC 4.1.1ER in respect of UK UCITS management companies, and COLL 6.6B.30R in respect of depositaries); and (4) article 24(3) of the securities financing transactions regulation. … 19A IFPRU Remuneration Code 19A.1 General application and purpose Who? What? Where? 19A.1.1 R (1) The Remuneration Code applies to:
…
(d) an overseas firm that:
(i) is not an EEA firm;
(ii) has its head office outside the EEA; and (iii) …

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…
19A.1.2 G Part 2 of SYSC 1 Annex 1 provides for the application of SYSC 4.1.1R (General Requirements). In particular, and subject to the provisions on group risk systems and controls requirements in SYSC 12, this means that:
…
(2) in relation to where the Remuneration Code applies, it applies in relation to:
(a) a firm’s UK activities; and
(b) a firm’s passported activities carried on from a branch in another EEA State; and [deleted] … … Purpose 19A.1.6 G … (2) The Remuneration Code implements the main provisions of the CRD which relate to remuneration. In applying the Remuneration Code, firms should comply with the EBA “Guidelines on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 450 of Regulation (EU) No 575/2013”, 21 December 2015 (EBA/GL/2015/22). Guidelines published by the EBA on 21 December 2015 on sound remuneration policies under articles 74(3) and 75(2) of the CRD and on disclosures under article 450 of the EU CRR. The Guidelines can be found at:
http://www.eba.europa.eu/documents/10180/1314839/EBA-GL2015- 22+Guidelines+on+Sound+Remuneration+Policies.pdf/1b0f3f99- f913-461a-b3e9-fa0064b1946b. (3) [deleted] … 19A.3 Remuneration principles for IFPRU investment firms Application: groups 19A.3.1 R (1) A firm must apply the requirements of this section at group, parent undertaking and subsidiary undertaking levels, including those subsidiaries established in a country or territory which is not an EEA State outside the UK.

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(2) Paragraph (1) does not limit SYSC 12.1.13R(2)(dA) (which relates to the application of the Remuneration Code within UK consolidation groups and non-EEA non-UK sub-groups). [Note: article 92(1) of CRD] 19A.3.2 G SYSC 12.1.13R(2)(dA) requires the firm to ensure that the risk management processes and internal control mechanisms at the level of any UK consolidation group or non-EEA non-UK sub-group of which a firm is a member comply with the obligations set out in this section on a consolidated (or sub-consolidated) basis. In the FCA’s view, the application of this section at group, parent undertaking and subsidiary undertaking levels in SYSC 19A.3.1R(1) is in line with article 109(2) of CRD on the application of systems and controls requirements to groups (as in SYSC 12.1.13R). … 19A.3.4 R (1) Remuneration Code staff comprises:
(a) an employee of an IFPRU investment firm whose professional activities have a material impact on the firm’s risk profile, including any employee who is deemed to have a material impact on the firm’s risk profile in accordance with Regulation (EU) 604/2014 of 4 March 2014 (Regulatory technical standards to identify staff who are material risk takers) the Material Risk Takers Regulation; or (b) subject to (2) and (3), an employee of an overseas firm in SYSC 19A1.1.1R(1)(d) (i.e., an overseas firm that would have been an IFPRU investment firm if it had been a UK domestic firm) whose professional activities have a material impact on the firm’s risk profile, including any employee who would meet any of the criteria set out in articles 3 or 4(1) of Regulation (EU) 604/2014 of 4 March 2014 (Regulatory technical standards to identify staff who are material risk takers) the Material Risk Takers Regulation if it had applied to him. (2) An overseas firm in SYSC 19A1.1.1R(1)(d) (i.e., an overseas firm that would have been an IFPRU investment firm if it had been a UK domestic firm) may deem an employee not to be Remuneration Code staff where:
(a) the employee:
(i) would meet the criteria in article 4(1) of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation;

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(ii) would not meet any of the criteria in article 3 of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation; and (iii) was awarded total remuneration of less than €750,000 in the previous year; and (b) the overseas firm determines that the professional activities of the employee do not have a material impact on its risk profile on the grounds described in article 4(2) of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation. (3) Where the overseas firm deems an employee not to be Remuneration Code staff as set out in (2), it must notify the FCA, applying the approach described in article 4(4) of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation. [Note: article 92(2) of CRD and articles 3 and 4 of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation.] … Remuneration Principle 11: Non-compliance with the Remuneration Code 19A.3.32 R A firm must ensure that variable remuneration is not paid through vehicles or methods that facilitate non-compliance with the Remuneration Code, the EU CRR UK CRR or the UK legislation that implemented the CRD. [Note: article 94(1)(q) of CRD] … 19A.3.44 B R A firm must ensure that any approval by the its shareholders or owners or members for the purposes of SYSC 19A.3.44AR is carried out in accordance with the following procedure:
…
(3) the firm must:
…
(b) demonstrate to the FCA that the proposed higher ratio does not conflict with its obligations under the UK legislation that implemented the CRD and the EU CRR UK CRR, having particular regard to the firm’s own funds obligations; … …

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19A.3.44
D
R A firm may apply a discount rate to a maximum of 25% of an employee’s total variable remuneration provided it is paid in instruments that are deferred for a period of not less than five years. [Note: article 94(1)(g)(iii) of CRD] [Note: on 27 March 2014, the EBA published “Guidelines on the applicable notional discount rate for variable remuneration”, 27 March 2014 (EBA/GL/2014/01).] 19A.3.44 E R In applying the discount rate in SYSC 19A.3.44DR, a firm must apply the EBA Guidelines on the applicable notional discount rate for variable remuneration published on 27 March 2014. [deleted] [Note: the EBA Guidelines on the applicable notional discount rate for variable remuneration can be found at:
http://www.eba.europa.eu/documents/10180/643987/EBA-GL-2014- 01+%28Final+Guidelines+on+the+discount+rate+for+remuneration%29 .pdf/e8b3b3f6-6258-439d-a2d9-633e6e5de5e9] … 19B AIFM REMUNERATION CODE 19B.1 Application 19B.1.1 R The AIFM Remuneration Code applies to a full-scope UK AIFM of:
(1) a UK AIF; and
(2) an EEA AIF a non-UK AIF.; and
(3) a non-EEA AIF. [deleted]
19B.1.1
A
G (1) Full-scope UK AIFMs are advised that ESMA published Guidelines on sound remuneration policies under the AIFMD on 3 July 2013 (Guidelines on sound remuneration policies under the AIFMD, 03.07.2013|ESMA/2013/232), which full-scope UK AIFMs should comply with in applying the rules in this section. The Guidelines can be found at: http://www.esma.europa.eu/system/files/2013- 232_aifmd_guidelines_on_remuneration_-_en.pdf (2) … … 19C BIPRU Remuneration Code 19C.1 General application and purpose …

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19C.1.2 G Part 2 of SYSC 1 Annex 1 provides for the application of SYSC 4.1.1R and SYSC 4.1.1CR (General Requirements). In particular, and subject to the provisions on group risk systems and controls requirements in SYSC 12, this means that:
…
(2) where the BIPRU Remuneration Code applies, it applies to:
(a) a firm’s UK activities; and
(b) a firm’s passported activities carried on from a branch in another EEA State; and [deleted] … … 19C.3 Remuneration principles Application: groups 19C.3.1 R (1) A firm must apply the requirements of this section at group, parent undertaking and subsidiary undertaking levels, including those subsidiaries established in a country or territory which is not an EEA State outside the UK. (2) Paragraph (1) does not limit SYSC 12.1.13R and SYSC 12.1.15R (which relate to the application of the BIPRU Remuneration Code within UK consolidation groups and non-EEA non-UK sub-groups). 19C.3.2 G The effect of SYSC 12.1.13R (2)(dA) and SYSC 12.1.15R is that the firm is required to ensure that the risk management processes and internal control mechanisms at the level of any consolidation group or non-EEA non-UK sub-group of which a firm is a member comply with the obligations set out in this section on a consolidated (or sub-consolidated) basis. … 19D Dual-regulated firms Remuneration Code 19D.1 Application and purpose Who? What? Where? 19D.1.1 R (1) The dual-regulated firms Remuneration Code applies to:
…
(d) an overseas firm that;
(i) is not an EEA firm;

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(ii) has its head office outside the EEA; and (iii) would be a firm in (a), (b) or (c) if it had been a UK domestic firm, had carried on all of its business in the United Kingdom and had obtained whatever authorisations for doing so as are required under the Act. (2) For a firm which falls under (1)(a), (1)(b) or (1)(c), the dualregulated firms Remuneration Code applies in relation to:
(a) its UK activities; and
(b) its passported activities carried on from a branch in another EEA State; and [deleted] … … … Purpose 19D.1.6 G … (2) The dual-regulated firms Remuneration Code implements the main provisions of the CRD which relate to remuneration. In applying the rules in the dual-regulated firms Remuneration Code, firms should comply with the EBA “Guidelines on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 450 of Regulation (EU) No 575/2013”, 21 December 2015 (EBA/GL/2015/22). Guidelines published by the EBA on 21 December 2015 on sound remuneration policies under articles 74(3) and 75(2) of the CRD and on disclosures under article 450 of the EU CRR. The Guidelines can be found at:
http://www.eba.europa.eu/documents/10180/1314839/EBA-GL2015- 22+Guidelines+on+Sound+Remuneration+Policies.pdf/1b0f3f99- f913-461a-b3e9-fa0064b1946b … 19D.3 Remuneration principles Application: groups 19D.3.1 R (1) A firm must apply the requirements of this section at group, parent undertaking and subsidiary undertaking levels, including those subsidiaries established in a country or territory which is not an EEA State outside the UK.

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(2) Paragraph (1) does not limit SYSC 12.1.13R(2)(dA) (which relates to the application of the dual-regulated firms Remuneration Code within UK consolidation groups and non-EEA non-UK sub-groups). [Note: article 92(1) of CRD] 19D.3.2 G SYSC 12.1.13R(2)(dA) requires the firm to ensure that the risk management processes and internal control mechanisms at the level of any UK consolidation group or non-EEA non-UK sub-group of which a firm is a member, comply with the obligations in this section on a consolidated basis (or sub-consolidated basis). In the FCA’s view, the application of this
section at group, parent undertaking and subsidiary undertaking levels in
SYSC 19D.3.1R(1) is in line with article 109(2) of the CRD on the application of systems and controls requirements to groups (as in SYSC 12.1.13R). … 19D.3.4 R (1) Dual-regulated firms Remuneration Code staff comprises:
(a) an employee of a dual-regulated firm whose professional activities have a material impact on the firm’s risk profile, including any employee who is deemed to have a material impact on the firm’s risk profile in accordance with Regulation (EU) 604/2014 of 4 March 2014 (Regulatory technical standards to identify staff who are material risk takers) the Material Risk Takers Regulation; or (b) subject to (2) and (3), an employee of an overseas firm in SYSC 19D.1.1R(1)(d) (i.e., an overseas firm that would have been a UK bank, building society or UK designated investment firm if it had been a UK domestic firm) whose professional activities have a material impact on the firm’s risk profile, including any employee who would meet any of the criteria set out in articles 3 or 4(1) of Regulation (EU) 604/2014 of 4 March 2014 the Material Risk Takers Regulation if it had applied to him. (2) An overseas firm in SYSC 19D1.1.R(1)(d) (i.e., an overseas firm that would have been a dual-regulated firm if it had been a UK domestic firm) may deem an employee not to be a dual-regulated firm Remuneration Code staff where:
(a) the employee:
(i) would meet the criteria in article 4(1) of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation; (ii) would not meet any of the criteria in article 3 of Regulation (EU) No 604/2014 of 4 March 2014 the Material Risk Takers Regulation; and

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(iii) was awarded total remuneration of less than €750,000 in the previous year; and (b) the overseas firm determines that the professional activities of the employee do not have a material impact on its risk profile on the grounds described in article 4(2) of Regulation (EU) 604/2014 of 4 March 2014 the Material Risk Takers Regulation. (3) Where the overseas firm deems an employee not to be dualregulated firms Remuneration Code staff as set out in (2), it must notify the FCA, applying the approach described in article 4(4) of Regulation (EU) 604/2014 of 4 March 2014 the Material Risk Takers Regulation. [Note: article 92(2) of CRD and articles 3 and 4 of Regulation (EU) No 604/2014 of 4 March 2014.] 19D.3.5 G Where an overseas firm in SYSC 19D1.1R(1)(d) (i.e., an overseas firm that would have been a dual-regulated firm if it had been a UK domestic firm) wishes to deem an employee who earns more than €750,000 not to be dualregulated firms Remuneration Code staff, the overseas firm may apply for a waiver of the requirement in SYSC 19D.3.4R in respect of that employee. … Remuneration Principle 11: Non-compliance with the Remuneration Code 19D.3.34 R A firm must ensure that variable remuneration is not paid through vehicles or methods that facilitate non-compliance with the Remuneration Code, the EU CRR UK CRR or the UK legislation that implemented the CRD. [Note: article 94(1)(q) of CRD] … 19D.3.50 R A firm must ensure that any approval by the its shareholders or owners or members, for the purposes of SYSC 19D.3.49R, is carried out in accordance with the following procedure:
…
(3) the firm must:
…
(b) demonstrate to the FCA that the proposed higher ratio does not conflict with its obligations under the UK legislation that implemented the CRD and the EU CRR UK CRR, having particular regard to the firm’s own funds obligations; …

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19D.3.52 R A firm may apply a discount rate to a maximum of 25% of an employee’s total variable remuneration provided it is paid in instruments that are deferred for a period of not less than five years. [Note: article 94(1)(g)(iii) of CRD] [Note: on 27 March 2014, the EBA published “Guidelines on the applicable notional discount rate for variable remuneration”, 27 March 2014 (EBA/GL/2014/01).] 19D.3.53 R In applying the discount rate in SYSC 19D.3.52R, a firm must apply the EBA Guidelines on the applicable notional discount rate for variable remuneration published on 27 March 2014. [deleted] [Note: the EBA Guidelines on the applicable notional discount rate for variable remuneration can be found at:
http://www.eba.europa.eu/documents/10180/643987/EBA-GL-2014- 01+%28Final+Guidelines+on+the+discount+rate+for+remuneration%29 .pdf/e8b3b3f6-6258-439d-a2d9-633e6e5de5e9] … 19E UCITS Remuneration Code 19E.1 Application 19E.1.1 R (1) The UCITS Remuneration Code applies to a UK UCITS management company that:
(a) manages a UCITS scheme; or
(b) manages an EEA UCITS scheme.
(2) This section does not apply to an EEA UCITS management company that manages a UCITS scheme. [deleted] (3) In this section, a firm under (1)(a) or (1)(b) above, is referred to as a management company. … 19F Remuneration and performance management of sales staff 19F.1 MiFID remuneration incentives Application 19F.1.1 R (1) SYSC 19F.1 applies to:
…
(b) … ; and

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(c) … . ; and
(d) a UK branch of an EEA MiFID investment firm, unless it is a UCITS investment firm or an AIFM investment firm. [deleted] … … 20 Reverse stress testing
20.1 Application and purpose
Application
20.1.1A R …
(3) Subject to (4), where all of the BIPRU firms within the same UK consolidation group or the non-EEA sub-group non-UK sub-group, taken together, as if they were one firm, meet any of the criteria in (2), SYSC 20 applies to each of those BIPRU firms as if it individually met the criteria in (2). … …
20.2 Reverse stress testing requirements
…
20.2.2 R Where the firm is a member of:
…
(2) a UK consolidation group; or
(3) a non-EEA sub-group non-UK sub-group; it must conduct the reverse stress test on a solo basis as well as on a consolidated basis in relation to the UK consolidation group or the non-EEA sub-group non-UK sub-group, as the case may be.
Annex B
Amendments to the Financial Stability and Market Confidence sourcebook (FINMAR) In this Annex, underlining indicates new text and striking through indicates deleted text. 2 Short selling

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…
2.5 Measures to prohibit, restrict or limit transactions in short selling
…
2.5.5 G Where the FCA imposes measures under article 23 of the short selling
regulation it will normally specify that the measures will not apply to natural or legal persons who have satisfied the criteria to use the market maker exemption or the authorised primary dealer exemption and who are included on the list maintained and published by ESMA the FCA pursuant to article 17(13) of the short selling regulation. Exchange rate calculations
2.5.6 G (1) For the purposes of article 23(1)(b) of Commission Delegated
Regulation (EU) No 918/2012 the SSR Delegated Regulation 2 the FCA will convert the figure of EUR 0.50 into pounds sterling using the daily spot foreign exchange rate of Sterling to Euro of the Bank of England applicable at the end of the first business day of October 2012 rounded up to the nearest £0.01. The FCA will state this figure (the ‘sterling figure’) on its public website. …
2.5.7 G The FCA will treat the FTSE 100 index as the main national equity index of
the Member State United Kingdom for the purposes of article 6(4) of Commission Implementing Regulation (EU) No 827/2012 the SSR Implementing Regulation and article 4 of Commission Delegated Regulation (EU) No 826/2012and article 23(1) of Commission Delegated Regulation (EU) No 918/2012, the SSR Delegated Regulation 2 all subject to approval by European Parliament and Council. …

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[Editor’s note: the text in this Annex takes account of the proposed definition ‘TP firm’ suggested by CP18/29 ‘Temporary permissions regime for inbound firms and funds’ (October 2018) as if it was made.]
Annex C
Amendments to the General Provisions (GEN) In in this Annex underlining indicates new text and striking through indicates deleted text.
2.2 Interpreting the Handbook
…
EU Onshored Regulations and third country firms 2.2.22A R (1) Unless exempted in (2) and subject to (3), MiFIR, and any EU regulation onshored regulations adopted as at 3 January 2018 under previously deriving from MiFIR or MiFID, apply to a third country investment firm as if it were a UK MiFID investment firm when the following conditions are met:
…
(2) Paragraph (1) does not apply:
(a) to the extent MiFIR or an EU regulation onshored regulation adopted under previously deriving from MiFIR or MiFID imposes a specific requirement in relation to a third country investment firm; and (b) to EU regulations onshored regulations which were previously EU regulations adopted under articles article 7, 34 and 35 of MiFID. … (4) GEN 2.2.22AR(1) is subject to articles 2A to 2E of MiFIR and article 1(3) to (5) of the MiFID Org Regulation. (5) In relation to TP firms GEN 2.2.22AR(1) does not apply requirements imposed by and under MiFIR or by the MiFID Org Regulation in addition to those referred to in articles 2A to 2E MiFIR and article 1(3) to (5) of the MiFID Org Regulation. 2.2.22B G (1) The purpose of GEN 2.2.22AR is to ensure consistency with the principle referred to in recital 109 to MiFID that a third country investment firm should not be treated in a more favourable way than an EEA firm a UK firm. A third country investment firm does not, however, benefit from passporting rights in the manner envisaged for EEA firms and its authorisation requires consideration of other issues,

FCA 201X/XX including the nature and extent of regulation provided by its Home State regulator. (2) … …

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EXITING THE EUROPEAN UNION: PRUDENTIAL SOURCEBOOKS (AMENDMENTS) INSTRUMENT 201[X] Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of:
(1) regulation 3 of the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018; and (2) section 139A (Power of the FCA to give guidance) of the Financial Services and Markets Act 2000. Commencement B. This instrument comes into force on [29 March 2019 at 11 p.m]. Amendments to the FCA Handbook
C. The modules of the FCA’s Handbook of rules and guidance listed in column (1)
below are amended in accordance with the Annexes in this instrument listed in column (2) below. (1) (2) General Prudential sourcebook (GENPRU) Annex A Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU)
Annex B
Prudential sourcebook for Investment Firms (IFPRU) Annex C Prudential sourcebook for insurers (INSPRU) Annex D Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU)
Annex E
Interim Prudential sourcebook for Friendly Societies (IPRU(FSOC))
Annex F
Interim Prudential sourcebook for Insurers (IPRU(INS)) Annex G Interim Prudential sourcebook for Investment Businesses (IPRU(INV))
Annex H
Citation
D. This instrument may be cited as the Exiting the European Union: Prudential Sourcebooks (Amendments) Instrument 201[X]. By order of the Board [date]

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Editor’s notes

FCA 201X/XX
Annex A
Amendments to the General Prudential sourcebook (GENPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application …
1.2 Adequacy of financial resources
…
Purpose
…
1.2.14 G In the case of a BIPRU firm this section implements the third paragraph of
article 95(2) of the EU UK CRR applying requirements that correspond to
Article 34 of the Capital Adequacy Directive so far as that Article applies
Article 123 of the Banking Consolidation Directive.
…
Application of this section on a solo and consolidated basis: Processes and tests
1.2.46 R …
(2) apply on a sub-consolidated basis under BIPRU 8.3.1R (Basic consolidation rule for a non-EEA sub-group non-UK sub-group). …
1.2.48 R …
(3) (if BIPRU 8.3.1R (Basic consolidation rule for a non-EEA subgroup non-UK sub-group) applies) the non-EEA sub-group nonUK sub-group of which the firm is a member.
1.2.49 R …
(2) For the purpose of this rule the relevant group is the group referred to in GENPRU 1.2.48R and the members of that group are those undertakings that are included in the scope of consolidation with respect to the UK consolidation group or, as the case may be, nonEEA sub-group non-UK sub-group in question. …

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Group risk (BIPRU firm only)
…
1.2.88 R A firm should include in the written record referred to in GENPRU
1.2.60R a description of the broad business strategy of the UK consolidation group or the non-EEA sub-group non-UK sub-group of which it is a member, the group’s view of its principal risks and its approach to measuring, managing and controlling the risks. This description should include the role of stress testing, scenario analysis and contingency planning in managing risk at the solo and consolidated level.
1.2.89 R A firm should satisfy itself that the systems (including IT) of the UK
consolidation group or the non-EEA sub-group non-UK sub-group of which it is a member are sufficiently sound to support the effective management and, where applicable, the quantification of the risks that could affect the UK consolidation group or the non-EEA sub-group nonUK sub-group, as the case may be. …
1.3 Valuation
…
1.3.3 G (1) In the case of a BIPRU firm, this This section corresponds to
implements Articles 64(4) and 64(5) of the Banking Consolidation Directive (Own funds) and Article 33 and Part B of Annex VII of the Capital Adequacy Directive. … 2 Capital
2.1 Calculation of capital resources requirements
Application
…
2.1.2 G The scope of application of this section is not restricted to firms that are
subject to the relevant EU Directives. [deleted] … Purpose …
2.1.8 G (2) This section also implements the third paragraph of article 95(2) of
the EU UK CRR applying requirements that correspond to the provisions of the Capital Adequacy Directive and Banking

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Consolidation Directive concerning the level of capital resources which a BIPRU firm is required to hold. In particular it implements corresponds (in part) to article 75 of the Banking Consolidation Directive and Articles 5, 9, 10 and 18 of the Capital Adequacy Directive. … Definition of BIPRU firm
2.1.49 G The Capital Adequacy Directive sets out various categories of investment
firms subject to differing levels of initial capital. For the purpose of the third paragraph of article 95(2) of the EU CRR, a BIPRU firm falls into the category in article 5(3) of the Capital Adequacy Directive. In summary, a BIPRU firm:
…
…
2.2 Capital resources
…
Purpose
…
2.2.4 G This section also implements minimum EC standards for the composition
of capital resources required to be held by a BIPRU firm. In particular it implements pursuant to the third paragraph of article 95(2) of the EU UK CRR, applying it applies requirements that correspond to Articles 56 – 61, Articles 63 – 64, Article 66 and Articles 120 – 122 of the Banking Consolidation Directive (2006/48/EC) and Articles 12 – 16, Article 17 (in
part), Article 22(1)(c) (in part) and paragraphs 13 - 15 of Part B of Annex
VII of the Capital Adequacy Directive (2006/49/EC).
…
Notification of issuance of capital instruments … 2.2.61H G Details of the notification to be provided by a BIPRU firm in relation to capital instruments issued by another undertaking in its group for inclusion in its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group are set out in BIPRU 8.6.1AR to BIPRU 8.6.1FR. …

FCA 201X/XX
2 Annex 6 Capital resources table for a BIPRU firm with a waiver from consolidated supervision …
Part 2 of the capital resources calculation for an investment firm with a waiver from
consolidated supervision
…
Note (4): The material holdings that must be deducted at part 2 of stage E are material holdings issued by undertakings which would have been members of the firm’s UK consolidation group or non-EEA sub-group non-UK sub-group if the firm did not have an investment firm consolidation waiver if:
(1) in relation to a BIPRU firm, the holding forms part of the undertaking’s tier one capital resources; or (2) (subject to (3)) in relation to any other undertaking, the holding would form part of the undertaking’s tier one capital resources if:
(a) that undertaking were a BIPRU firm with a Part 4A permission; and (b) it had carried on all its business in the United Kingdom and had obtained whatever permissions for doing so are required under the Act; or (3) in relation to any undertaking not falling within (1) and for which the methodology in (2) does not give an answer, the holding would form part of its tier one capital resources if the undertaking were a BIPRU firm of the same category as the firm carrying out the calculation under this Annex. Note (5): The material holdings that must be deducted by a firm at part 3 of stage E and at stage J or at Part 1 of stage M are material holdings issued by undertakings which would have been members of that firm’s UK consolidation group or non-EEA sub-group non-UK sub-group if the firm did not have an investment firm consolidation waiver and which do not fall into Note (4). Note (6): The contingent liabilities that must be deducted by a firm at Part 1 of stage M are any contingent liabilities which the firm has in favour of BIPRU firms, financial institutions, asset management companies and ancillary services undertakings which would have been members of the firm’s UK consolidation group or non-EEA sub-group non-UK sub-group if the firm did not have an investment firm consolidation waiver.

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Annex B
Amendments to the Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application
1.1 Application
…
Purpose
1.1.4 G BIPRU 1.1 implements in part the third paragraph of article 95(2) of the EU
UK CRR that permits the FCA to apply certain requirements that correspond to the Banking Consolidation Directive and the Capital Adequacy Directive. The definition of a BIPRU firm
1.1.7 R None of the following is a BIPRU firm:
(1) an incoming EEA firm; [deleted]
(2) an incoming Treaty firm; [deleted]
(3) any other an overseas firm;
(4) an ELMI; [deleted]
(5) an insurer; and
(6) an ICVC.
…
1.1.10 G …
(2) Except in exceptional circumstances, it is the appropriate regulator’s policy that it will not give an overseas applicant a Part 4A permission unless the appropriate regulator is satisfied that the applicant will be subject to prudential regulation by its home state regulatory body that is broadly equivalent to that provided for in the Handbook and the applicable EEA UK prudential sectoral legislation. The appropriate regulator will take into account not only the requirements to which the firm is subject but how they are enforced. The appropriate regulator will also take into account the laws, regulations and administrative provisions to which it is subject in its home state. The reasons for that policy include:

FCA 201X/XX
…
…
…
Meaning of dealing on own account
1.1.23 R (1) Dealing on own account means (for the purpose of GENPRU and
BIPRU) the service of dealing in any financial instruments for own account as referred to in point 3 of Section A of Annex I to MiFID paragraphs 3 of Part 3 of Schedule 2 to the Regulated Activities Order, subject to (2) and (3). (2) In accordance with article 5(2) of the Capital Adequacy Directive (Definition of dealing on own account), a A CAD investment firm that executes investors’ orders for financial instruments and holds such financial instruments for its own account does not for that reason deal on own account if all of the following conditions are met:
…
(d) (in the case of a CAD investment firm that is an EEA firm) it complies with the CRD implementation measures of its Home State for Articles 18 and 20 (Minimum capital requirements) of the Capital Adequacy Directive; [deleted] (e) (in the case of any other a CAD investment firm) it would comply with the rules in (2)(c) if it had been a BIPRU firm on the basis of the following assumptions:
(i) its head office had been in an EEA State the UK; and (ii) it had carried on all its business in the EEA UK and had obtained whatever authorisations Part 4A permission required for doing so as are required under MiFID; and … (3) In accordance with in article 5(2) of the Capital Adequacy Directive, the holding Holding of non-trading book positions in financial instruments in order to invest capital resources is not dealing on own account for the purposes referred to in article 4(1)(2)(c) of the EU UK CRR (see BIPRU 1.1.7AG). [Note: Article 5(2) of the Capital Adequacy Directive (Definition of dealing on own account)] …

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1.2 Definition of the trading book
…
Purpose
1.2.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, the this
section implements applies certain provisions of that correspond to the
Capital Adequacy Directive and the Banking Consolidation Directive relating to the trading book. The precise provisions being implemented are listed as a note after each rule. …
1.2.8 R CRD financial instruments include both primary CRD financial instrument
or cash instruments, and derivative CRD financial instruments the value of which is derived from the price of an underlying CRD financial instrument, a rate, an index or the price of another underlying item and include as a minimum the instruments specified in Section C of Annex I to the MIFID
Part 1 of Schedule 2 to the Regulated Activities Order.
[Note: CAD Article 3(1) last paragraph]
…
1.3 Applications for advanced approaches and waivers
…
Purpose
1.3.2 G (1) A firm may apply for an Article 129 permission or a waiver in
respect of:
…
(2) A firm should apply for a waiver if it wants to:
…
(c) disapply consolidated supervision under BIPRU 8 for its UK consolidation group or non-EEA sub-group non-UK subgroup; or …
Article 129
1.3.3 G An EEA parent institution and its subsidiary undertakings or the subsidiary
undertakings of its EEA parent financial holding company or the subsidiary undertakings of its EEA parent mixed financial holding company that wish to use any of the approaches listed in BIPRU 1.3.2G(1) in respect of its

FCA 201X/XX group, including members of its group that are BIPRU firms, may apply for an Article 129 permission. [deleted]
1.3.4 G The Article 129 procedure allows an EEA parent institution and its
subsidiary undertakings or the subsidiary undertakings of its EEA parent financial holding company or the subsidiary undertakings of its EEA parent mixed financial holding company to apply for permission to use the approaches in BIPRU 1.3.2G(1) without making separate applications to the competent authority of each EEA State where members of a firm’s group are authorised. [deleted]
1.3.5 G The Capital Requirements Regulations 2006 set out the Article 129
procedure. [deleted]
1.3.6 G Where a firm or its group has been granted an Article 129 permission, each
competent authority, including the lead competent authority, will need to take action to apply that Article 129 permission to the institutions that they authorise. Part 3 of the Capital Requirements Regulations 2006 governs how the appropriate regulator will take that action, whether or not the appropriate regulator is the lead competent authority. [deleted] … Forms and method of application …
1.3.15 D If a firm wishes to apply for a waiver or an Article 129 permission to use the
IRB approach, it must complete and submit the form in BIPRU 1 Annex 2 D D.
1.3.16 D If a firm wishes to apply for a waiver or an Article 129 permission to use the
CCR internal model method, it must complete and submit the form in BIPRU 1 Annex 3DD.
1.3.17 D Where a firm makes an application in accordance with BIPRU 1.3.14D,
BIPRU 1.3.15D or BIPRU 1.3.16D, the firm must state on the application whether it is making an application for a waiver or an Article 129 permission. [deleted]
1.3.18 D Where a firm applies for a VaR model permission, the firm must state
whether it is making an application for a waiver or an Article 129 permission. [deleted]
1.3.19 G In respect of the application for waivers to apply the approaches set out in
BIPRU 1.3.2G(1), the appropriate regulator will aim to give decisions on applications as soon as practicable. However, the appropriate regulator expects that it will take a significant period to determine and give a decision due to the complexity of the issues raised by the applications. Details of timelines for applications for waivers to use advanced approaches and under the Article 129 procedure are set out on the appropriate regulator website.

FCA 201X/XX
…
1.3.21 G Before sending in an application for a waiver or Article 129 permission, a
firm may find it helpful to discuss the application with its usual supervisory contact at the appropriate regulator. However, the firm should still ensure that all relevant information is included in the application. … 2 Capital
2.1 Solo consolidation
…
Purpose
2.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, the
purpose of this section is to implement this section applies requirements that correspond to Articles 70 and 118 of the Banking Consolidation Directive so far as they apply under Articles 2 and 28 of the Capital Adequacy Directive to CAD investment firms that are subject to the requirements imposed by the UK legislation that implemented MiFID (or which would have been subject to that Directive those requirements if its head office were in an EEA State the UK), but excluding a bank, building society, a credit institution, a local and an exempt CAD firm. … The basic rules for solo consolidation …
2.1.8 R …
(2) If (1) applies, SYSC 12.1.13R applies to the group made up of the firm and its subsidiary undertakings referred to in (1) in the same way as it applies to a UK consolidation group or non-EEA sub-group non-UK sub-group. … Solo consolidation and capital and concentration risk requirements …
2.1.10 R A firm must treat itself and each subsidiary undertaking referred to in
BIPRU 2.1.7R as a single undertaking and must apply, on that basis, BIPRU 8 (Group risk - consolidation) to the group made up of the firm and such subsidiary undertakings in the same way as BIPRU 8 applies to a UK consolidation group or non-EEA sub-group non-UK sub-group.

FCA 201X/XX
…
Minimum standards
…
2.1.23 R Where the firm is a parent institution in a Member State the UK, it must
have measures in place that ensure the satisfactory allocation of risks within the group consisting of the firm and each subsidiary undertaking to which BIPRU 2.1 is applied. …
2.2 Internal capital adequacy standards
…
The drafting of individual capital guidance and capital planning buffer …
2.2.19 G (1) …
(2) If BIPRU 8.2.1R (General consolidation rule for a UK consolidation group) applies to the firm the guidance relates to its UK consolidation group. If BIPRU 8.3.1R (General consolidation rule for a non-EEA sub-group non-UK sub-group) applies to the firm the guidance relates to its non-EEA sub-group non-UK sub-group. If both apply to the firm the guidance relates to its UK consolidation group and to its non-EEA sub-group non-UK sub-group. … … Business risk: Stress tests for firms using the IRB approach …
2.2.43 R …
(1) references to capital resources are to the consolidated capital resources of the firm’s UK consolidation group or, as the case may be, its non-EEA sub-group non-UK sub-group; and (2) references to the capital requirements in GENPRU 2.1 (Calculation of capital resources requirements) are to the consolidated capital requirements with respect to the firm’s UK consolidation group or, as the case may be, its non-EEA sub-group non-UK sub-group under BIPRU 8 (Group risk - consolidation). …

FCA 201X/XX
2.3 Interest rate risk in the non-trading book
…
Purpose
…
2.3.5 G BIPRU 2.3 implements applies requirements that correspond to Article
124(5) of the Banking Consolidation Directive.
…
3 Standardised credit risk
3.1 Application and purpose
…
Purpose
3.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, BIPRU 3
implements applies requirements that correspond to:
(1) Articles 78 to 80, paragraph (1) of Article 81, Article 83, Annex II and Parts 1 and 3 of Annex VI of the Banking Consolidation Directive; (2) Article 18 of the Capital Adequacy Directive so far as it applies Articles 78 to 80, paragraph (1) of Article 81, Article 83 and Parts 1 and 3 of Annex VI of the Banking Consolidation Directive to investment firms; and (3) Article 40 of the Capital Adequacy Directive for the purposes of the calculation of credit risk under the Banking Consolidation Directive. …
3.2 The central principles of the standardised approach to credit risk
…
Zero risk-weighting for intra-group exposures: core UK group … 3.3.29A G (1) … (2) For the purpose of BIPRU 3.2.25R(1)(d) (Incorporation in the UK), if a counterparty is of a type that falls within the scope of the Council Regulation of 29 May 2000 on insolvency proceedings (Regulation 1346/2000/EC) Insolvency Proceedings Regulation and it is

FCA 201X/XX established in the United Kingdom other than by incorporation, a firm wishing to include that counterparty in its core UK group may apply to the appropriate regulator for a waiver of this condition if it can demonstrate fully to the appropriate regulator that the counterparty’s centre of main interests is situated in the United Kingdom within the meaning of that Regulation. …
3.3 The use of the credit assessments of ratings agencies
…
Recognition of ratings agencies
…
3.3.3 G Regulation 22 of the Capital Requirements Regulations 2006 deals with
recognition by the appropriate regulator of eligible ECAIs for exposure risk weight purposes. Regulation 25 deals with revoking recognition. …
3.3.6 G The list of eligible ECAIs includes those who have been recognised as
eligible for exposure risk weighting purposes by a competent authority of another EEA State and are subsequently recognised as eligible ECAIs by the appropriate regulator without carrying out its own evaluation process under Regulation 22(2) of the Capital Requirements Regulations 2006. [deleted] Mapping of credit assessments …
3.3.9 G The table mapping the credit assessments of eligible ECAIs to credit quality
steps is published on the appropriate regulator’s website and amended from time to time in line with additions to and deletions from the list of eligible ECAIs. The table includes mappings made by a competent authority of another EEA State which are subsequently recognised by the appropriate regulator without carrying out its own determination process under Regulation 22(5) of the Capital Requirements Regulations 2006. [Note: For the most recent version of the table, refer to:
http://www.fca.org.uk/your-fca/documents/fsa-ecais-standardised for the FCA and http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2 013/ecaisstandardised.pdf for the PRA]
3.4 Risk weights under the standardised approach to credit risk
…

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Exposures in the national currency of the borrower
3.4.5 R Exposures to EEA States’ central governments the central government of the
UK and central banks the Bank of England denominated and funded in £ sterling must be assigned a risk weight of 0%. [Note: BCD Annex VI Part 1 point 4]
3.4.6 R When the competent authorities of a third country which apply supervisory
and regulatory arrangements at least equivalent to those applied in the EEA UK assign a risk weight which is lower than that indicated in BIPRU 3.4.1R to BIPRU 3.4.3R to exposures to their central government and central bank denominated and funded in the domestic currency, a firm may risk weight such exposures in the same manner. [Note: BCD Annex VI Part 1 point 5] … Exposures to regional governments or local authorities: General
3.4.10 R Without prejudice to BIPRU 3.4.1R to BIPRU 3.4.19R:
(1) a firm must risk weight exposures to regional governments and local authorities in accordance with BIPRU 3.4.11R to BIPRU 3.4.14R and BIPRU 3.4.19AR; and … …
Table: Central government risk weight based method
…
3.4.17 R A firm must treat an exposure to a regional government or local authority of
an EEA State other than the United Kingdom as an exposure to the central government in whose jurisdiction that regional government or local authority is established if that regional government or local authority is included on the list of regional governments and local authorities drawn up by the competent authority in that EEA State under a CRD implementation measure with respect to point 9 of Part 1 of Annex VI of the Banking Consolidation Directive. [deleted] [Note: BCD Annex VI Part 1 point 9]
3.4.18 R Exposures to churches or religious communities constituted in the form of a
legal person under public law must, in so far as they raise taxes in accordance with legislation conferring on them the right to do so, be treated as exposures to regional governments and local authorities, except that BIPRU 3.4.15R and BIPRU 3.4.17R do does not apply.

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[Note: BCD Annex VI Part 1 point 10]
…
3.4.19 R When competent authorities of a third country jurisdiction which apply
supervisory and regulatory arrangements at least equivalent to those applied in the EEA UK treat exposures to regional governments and local authorities as exposures to their central government, a firm may risk weight exposures to such regional governments and local authorities in the same manner. [Note: BCD Annex VI Part 1 point 11] 3.4.19A R Without prejudice to BIPRU 3.4.17R to BIPRU 3.4.19R, an exposure to a regional government or local authority of an EEA State denominated and funded in the domestic currency of that regional government or local authority must be assigned a risk weight of 20%. [deleted] [Note: BCD Annex VI Part 2(b)] … Public sector entities …
3.4.25 R Where a competent authority of another EEA State implements points 14 or
15 of Part 1 of Annex VI of the Banking Consolidation Directive by exercising the discretion to treat exposures to public sector entities as exposures to institutions or as exposures to the central government of the EEA State concerned, a firm may risk weight exposures to the relevant public sector entities in the same manner. [deleted] [Note: BCD Annex VI Part 1 point 16]
3.4.26 R When competent authorities of a third country jurisdiction, which apply
supervisory and regulatory arrangements at least equivalent to those applied in the EEA UK, treat exposures to public sector entities as exposures to institutions, a firm may risk weight exposures to the relevant public sector entities in the same manner. [Note: BCD Annex VI Part 1 point 17] Exposures to multilateral development banks: Treatment …
3.4.29 R A risk weight of 20% must be assigned to the portion of unpaid capital
subscribed to the European Investment Fund. [deleted] [Note: BCD Annex VI Part 1 point 21] Exposures to international organisations

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…
3.4.31 R BIPRU 3.4.32R to BIPRU 3.4.48R 3.4.47R set out the treatment to be
accorded to exposures to institutions.
Exposures to institutions: Treatment
3.4.32 R Without prejudice to BIPRU 3.4.33R to BIPRU 3.4.47R, exposures to
financial institutions authorised and supervised by the competent authorities responsible for the authorisation and supervision of credit institutions PRA and FCA and subject to prudential requirements equivalent to those applied to credit institutions must be risk weighted as exposures to institutions. [Note: BCD Annex VI Part 1 point 24] … Exposures to institutions: Short-term exposures in the national currency of the borrower …
3.4.45 R (1) Where a competent authority of another EEA State implements point
37 of Part 1 of Annex VI of the Banking Consolidation Directive by exercising the discretion to allow the treatment in that point, a firm may assign to the relevant national currency exposures the risk weight permitted by that CRD implementation measure. [deleted] (2) When the competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the EEA UK assigns to an exposure to an institution formed under the law of that third country of a residual maturity of 3 months or less denominated and funded in the national currency a risk weight that is one category less favourable than the preferential risk weight, as described in BIPRU 3.4.6R (Exposures in the national currency of the borrower), assigned to exposures to the central government of that third country, a firm may risk weight such exposures in the same manner. [Note: BCD Annex VI Part 1 point 37] … Exposures to institutions: Minimum reserves required by the ECB
3.4.48 R Where an exposure to an institution is in the form of minimum reserves
required by the European Central Bank or by the central bank of an EEA State to be held by the firm, a firm may assign the risk weight that would be assigned to exposures to the central bank of the EEA State in question provided:

FCA 201X/XX
(1) the reserves are held in accordance with Regulation (EC) No. 1745/2003 of the European Central Bank of 12 September 2003 or a subsequent replacement regulation or in accordance with national requirements in all material respects equivalent to that Regulation; and (2) in the event of the bankruptcy or insolvency of the institution where the reserves are held, the reserves will be fully repaid to the firm in a timely manner and will not be available to meet other liabilities of the institution. [deleted] [Note: BCD Annex VI Part 1 point 40] … Exposures secured by real estate property
3.4.54 R BIPRU 3.4.55R to BIPRU 3.4.94R BIPRU 3.4.89R set out the treatment to
be accorded to exposures secured by real estate property.
…
Exposures secured by mortgages on residential property …
3.4.57 R Exposures fully and completely secured, to the satisfaction of the firm, by
shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of residential property which is or shall be occupied or let by the owner must be assigned a risk weight of 35%. [deleted] [Note: BCD Annex VI Part 1 point 46] …
3.4.60 R …
(6) The value of the property exceeds the exposures by a substantial margin as set out in BIPRU 3.4.81R, BIPRU 3.4.83R, BIPRU 3.4.84R or BIPRU 3.4.85R (as applicable). [Note: BCD Annex VI Part 1 point 48] …
3.4.62 G The Banking Consolidation Directive permits a competent authority to
disapply FCA may disapply the condition in BIPRU 3.4.60R(3), if it has evidence that a well-developed and long-established residential real estate market is present in its territory the UK with loss rates which are sufficiently low to justify such treatment disapplying the condition in BIPRU 3.4.60R(3). BIPRU 3.4.61R implements that option. However, if the

FCA 201X/XX evidence changes so that these conditions are no longer satisfied, the appropriate regulator may be obliged to revoke BIPRU 3.4.61R.
3.4.63 R If a CRD implementation measure of another EEA State exercises the
discretion in point 49 of Part 1 of Annex VI of the Banking Consolidation Directive to dispense with the condition corresponding to BIPRU 3.4.60R(3) (The risk of the borrower should not materially depend upon the performance of the underlying property or project), a firm may apply a risk weight of 35% to such exposures fully and completely secured by mortgages on residential property situated in that EEA State. [deleted] [Note: BCD Annex VI Part 1 point 50] …
3.4.77 R The property must be valued by an independent valuer at or less than the
market value. In those EEA States that have laid down In the UK where rigorous criteria for the assessment of the mortgage lending value exist in statutory or regulatory provisions the property may instead be valued by an independent valuer at or less than the mortgage lending value. [Note: BCD Annex VIII Part 3 point 62] …
3.4.83 R A firm may only treat an exposure as fully and completely secured by
residential property situated in another EEA State for the purposes of BIPRU 3.4.56R or BIPRU 3.4.58R if it would be treated as fully and completely secured by the relevant CRD implementation measures in that EEA State implementing points 45 and 47 of Part 1 of Annex VI of the Banking Consolidation Directive. [deleted] …
3.4.87 G If a firm has more than one exposure secured on the same property they
should be aggregated and treated as if they were a single exposure secured on the property for the purposes of BIPRU 3.4.56R and BIPRU 3.4.58R and BIPRU 3.4.81R, BIPRU 3.4.83R and BIPRU 3.4.84R. … Exposures secured by mortgages on commercial real estate …
3.4.90 R Exposures fully and completely secured by shares in Finnish housing
companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of offices or other commercial premises may be assigned a risk weight of 50%. [deleted] [Note: BCD Annex VI Part 1 point 52]

FCA 201X/XX
3.4.91 R If a CRD implementation measure in another EEA State implements the
discretion in point 51 of Part 1 of Annex VI of the Banking Consolidation Directive, a firm may apply the same treatment as that CRD implementation measure to exposures falling within the scope of that CRD implementation measure which are fully and completely secured by mortgages on offices or other commercial premises situated in that EEA State. [deleted] [Note: BCD Annex VI Part 1 points 51 and 57]
3.4.92 R If a CRD implementation measure in another EEA State implements the
discretion in point 53 of Part 1 of Annex VI of the Banking Consolidation Directive, a firm may apply the same treatment as that CRD implementation measure to exposures related to property leasing transactions concerning offices or other commercial premises situated in that EEA State and governed by statutory provisions whereby the lessor retains full ownership of the rented assets until the tenant exercises his option to purchase, as long as that exposure falls within the scope of that CRD implementation measure. [deleted] [Note: BCD Annex VI Part 1 points 53 and 57]
3.4.93 R In particular, if a firm applies BIPRU 3.4.91R or BIPRU 3.4.92R, it must
comply with the corresponding CRD implementation measures in relation to points 54-56 of Part 1 of Annex VI of the Banking Consolidation Directive. [deleted] [Note: BCD Annex VI Part 1 points 54 to 56]
3.4.94 R (1) If a CRD implementation measure in another EEA State implements
the discretion in point 58 of Part 1 of Annex VI of the Banking Consolidation Directive to dispense with the condition in point 54(b) for exposures fully and completely secured by mortgages on commercial property situated in that EEA State, a firm may apply the same treatment as that CRD implementation measure to exposures fully and completely secured by mortgages on commercial property situated in that EEA State falling within the scope of that CRD implementation measure. (2) However a firm may not apply the treatment in (1) if the eligibility to use that treatment under the CRD implementation measure referred to in (1) ceases as contemplated under point 59 of Annex VI of the Banking Consolidation Directive (condition in point 54(b) must apply where conditions in point 58 are not satisfied). [deleted] [Note: BCD Annex VI Part 1 points 58, 59 and 60] Past due items …

FCA 201X/XX
3.4.99 R Exposures indicated in BIPRU 3.4.56R to BIPRU 3.4.63R BIPRU 3.4.61R
(Exposures secured by mortgages on residential property) must be assigned a risk weight of 100% net of value adjustments if they are past due for more than 90 days. If value adjustments are no less than 20% of the exposure gross of value adjustments, the risk weight to be assigned to the remainder of the exposure is 50%. [Note: BCD Annex VI Part 1 point 64] …
3.4.101 R Exposures indicated in BIPRU 3.4.89R to BIPRU 3.4.94R (Exposures
secured by mortgages on commercial real estate) must be assigned a risk weight of 100% if they are past due for more than 90 days. [Note: BCD Annex VI Part 1 point 65] … Items belonging to regulatory high-risk categories …
3.4.105 G For the purposes of point 66 of Part 1 of Annex VI of the Banking
Consolidation Directive, the The exposures listed in BIPRU 3 Annex 3R are in the view of the appropriate regulator associated with particularly high risk. [Note: BCD Annex VI Part 1 point 66] Exposures in the form of covered bonds …
3.4.107 R (1) Covered bonds means covered bonds as defined in paragraph (1) of
the definition in the glossary (Definition based on Article 22(4) of the UCITS Directive) and collateralised by any of the following eligible assets:
(a) exposures to or guaranteed by the central governments, central bank, UK central government, the Bank of England, public sector entities, regional governments and local authorities in the EEA UK; (b) (i) exposures to or guaranteed by non-EEA UK central governments, non-EEA UK central banks, multilateral development banks, international organisations that qualify for the credit quality step 1; (ii) exposures to or guaranteed by non-EEA UK public sector entities, non-EEA UK regional governments and non-EEA UK local authorities that are risk

FCA 201X/XX weighted as exposures to institutions or central governments and central banks according to BIPRU 3.4.23R, BIPRU 3.4.24R, BIPRU 3.4.10R or BIPRU 3.4.16G to BIPRU 3.4.17R respectively and that qualify for the credit quality step 1; and … … (d) loans secured:
(i) by residential real estate or shares in Finnish residential housing companies as referred to in BIPRU 3.4.57R up to the lesser of the principal amount of the liens that are combined with any prior liens and 80% of the value of the pledged properties; or (ii) by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of an EEA State securitising residential real estate exposures provided that the special public supervision to protect bond holders as provided for in Article 52(4) of Directive 2009/65/EC of the European Parliament and of the Council ensures that the assets underlying such units must, at any time while they are included in the cover pool, be at least 90% composed of residential mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 80% of the value of the pledged properties, that the units qualify for credit quality step 1 and that such units do not exceed 10% of the nominal amount of the outstanding issue; or [deleted] (e) (i) loans secured by commercial real estate or shares in Finnish housing companies as referred to in BIPRU 3.4.57R up to the lesser of the principal amount of the liens that are combined with any prior liens and 60% of the value of the pledged properties; or [deleted] (ii) loans secured by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of an EEA State securitising commercial real estate exposures provided that the special public supervision to protect bond holders as provided for in Article 52(4) of Directive 2009/65/EC of the European Parliament and of the Council ensures that the assets underlying such units must, at any time while they are included in the

FCA 201X/XX cover pool, be at least 90% composed of commercial mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 60% of the value of the pledged properties, that the units qualify for credit quality step 1 and that such units do not exceed 10% of the nominal amount of the outstanding issue; or [deleted] (iii) a firm may recognise loans secured by commercial real estate as eligible where the loan to value ratio of 60% is exceeded up to a maximum level of 70% if the value of the total assets pledged as collateral for the covered bonds exceed the nominal amount outstanding on the covered bond by at least 10%, and the bondholders’ claim meets the legal certainty requirements set out in BIPRU 3 and BIPRU 5; the bondholders’ claim must take priority over all other claims on the collateral; or (f) loans secured by ships where only liens that are combined with any prior liens within 60% of the value of the pledged ship. (2) For the purposes of BIPRU 3.4.107R(1)(d)(ii) and BIPRU 3.4.107 R(1)(e)(ii) exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities must not be comprised in calculating the 90% limit. [deleted] … (4A) Until 31 December 2013, the 10% limit for senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities as specified in (1)(d)(ii) and (1)(e)(ii) does not apply, provided that:
(a) the securitised residential or commercial real estate exposures were originated by a member of the same consolidated group of which the issuer of the covered bonds is also a member or by an entity affiliated to the same central body to which the issuer of the covered bonds is also affiliated (that common group membership or affiliation to be determined at the time the senior units are made collateral for covered bonds); and (b) a member of the same consolidated group of which the issuer of the covered bonds is also a member or an entity affiliated to the same central body to which the issuer of the covered

FCA 201X/XX bonds is also affiliated retains the whole first loss tranche supporting those senior units. [deleted] (5) Until 31 December 2010 the figure of 60% in (1)(f) can be replaced with a figure of 70%. [deleted] [Note: BCD Annex VI Part 1 point 68] …
3.4.109 R Notwithstanding BIPRU 3.4.107R to BIPRU 3.4.108R, covered bonds
meeting the definition of Article 22(4) of the UCITS Directive paragraph (1) of the definition in the glossary and issued before 31 December 2007 are also eligible for the preferential treatment until their maturity. [Note: BCD Annex VI Part 1 point 69] … Exposures in the form of collective investment undertakings (CIUs) ….
3.4.121 R Where BIPRU 3.4.116R does not apply, a firm may determine the risk
weight for a CIU as set out in BIPRU 3.4.123R to BIPRU 3.4.125R, if the following eligibility criteria are met:
(1) one of the following conditions is satisfied:
(a) the CIU is managed by a company which is subject to supervision in an EEA State the UK; or (b) the following conditions are satisfied:
(i) the CIU is managed by a company which is subject to supervision that is equivalent to that laid down in EU UK law; and (ii) cooperation between competent authorities and third country competent authorities is sufficiently ensured; and …
3.4.122 R If another EEA competent authority approves a third country CIU as eligible
under a CRD implementation measure with respect to point 77(a) of Part 1 of Annex VI of the Banking Consolidation Directive then a firm may make use of this recognition. [deleted] [Note: BCD Annex VI Part 1 point 78] …

FCA 201X/XX
3.5 Simplified method of calculating risk weights
…
3.5.5 G Table: Simplified method of calculating risk weights
This table belongs to BIPRU 3.5.4G.
Exposure class Exposure subclass
Risk weights Comments
Central government Exposures to
United Kingdom government or
Bank of England in sterling
0%
Exposures to
United Kingdom government or
Bank of England in the currency of another EEA State 0% See Note 2. Exposures to EEA State’s central government or central bank in currency of that state 0% Exposures to EEA State’s central government or central bank in the currency of another EEA State 0% See Notes 2 and 3. Exposures to central governments or central banks of certain countries outside the EEA UK in currency of that country See next column The risk weight is whatever it is under local law. See BIPRU 3.4.6R for precise details.

FCA 201X/XX
Exposures to
European
Central Bank
0%
Other exposures 100%
Regional/local governments
Exposures to the
Scottish
Parliament,
National
Assembly for
Wales and
Northern Ireland
Assembly in sterling
0%
Exposures to the
Scottish
Parliament,
National
Assembly for
Wales and
Northern Ireland
Assembly in the currency of another EEA
State
0% See Note 2.
Exposures to
EEA States’ equivalent regional/local governments in currency of that state 0% See BIPRU 3.4.17R for details of type of local/regional government covered. Exposures to EEA States’ equivalent regional/local governments in the currency of another EEA State 0% See BIPRU 3.4.17R for details of type of local/regional government covered. See Notes 2 and 3. Exposures to local or regional governments of certain countries 0% See BIPRU 3.4.19R for details of type of

FCA 201X/XX outside the EEA
UK in currency of that country local/regional government covered. See Note 1 . Exposures to United Kingdom or EEA States ’ local/regional government in currency of that state sterling if the exposure has original effective maturity of 3 months or less 20% Exposures to United Kingdom or EEA States ’ local/regional government in the currency of another EEA State if the exposure has original effective maturity of 3 months or less 20% See Note 2. See Note 3 for local/regional government of an EEA State other than the United Kingdom Exposures to local or regional governments of countries outside the EEA UK in currency of that country if the exposure has original effective maturity of 3 months or less 20% See Note 1 . Other exposures 100% PSE Exposures to a PSE of the United Kingdom 0% BIPRU 3.4.24R describes the

FCA 201X/XX or of an EEA
State if that PSE is guaranteed by its central government and if the exposure is be in currency of that PSE’s state in sterling. United Kingdom PSEs covered and BIPRU 3.4.25R describes the EEA PSEs covered. Exposures to PSE of a country outside the EEA UK if that PSE is guaranteed by the country’s central government and if the exposure is in currency of that country. 0% See BIPRU 3.4.26R and Note 1. Exposures to a PSE of the United Kingdom or of an EEA State in currency of that state sterling if the exposure has original effective maturity of 3 months or less 20% Exposures to a PSE of the United Kingdom or of an EEA State in the currency of another EEA State if the exposure has original effective maturity of 3 months or less 20% See Notes 2 and 3.

FCA 201X/XX
Exposures to
PSE of a country outside the EEA UK in currency of that country if the exposure has original effective maturity of 3 months or less 20% See Note 1. Other exposures 100% Multilateral development banks Exposures to multilateral development banks listed in paragraph (1) of the Glossary definition 0% Simplified approach does not apply. Normal rules apply. Other exposures Various Treated as an institution EU, the The International Monetary Fund and the Bank for International Settlements 0% Simplified approach does not apply. Normal rules apply. Institutions Exposures to United Kingdom institution in sterling with original effective maturity of three months or less 20% Exposures to United Kingdom institution in the currency of another EEA State with original effective 20% See Note 2.

FCA 201X/XX maturity of three months or less Exposures to institution whose head office is in another EEA State in the currency of that state with original effective maturity of three months or less 20% Exposures to institution whose head office is in another EEA State in the currency of another EEA State with original effective maturity of three months or less 20% See Notes 2 and 3. Exposures to institution with a head office in a country outside the EEA UK in the currency of that country with original effective maturity of three months or less 20% See Note 1. Exposures to United Kingdom institution in sterling with original effective maturity of over three months 50%

FCA 201X/XX
Exposures to
United Kingdom institution in the currency of another EEA State with original effective maturity of over three months 50% See Note 2. Exposures to an EEA institution with a head office in another EEA State in the currency of that state with original effective maturity of over three months 50% Exposures to an EEA institution with a head office in another EEA State in the currency of another EEA State with original effective maturity of over three months 50% See Notes 2 and 3. Exposures to institution with a head office in a country outside the EEA UK in the currency of that country with original effective maturity of over three months 50% See Note 1. Other exposures 100%

FCA 201X/XX
4 The IRB approach
4.1 The IRB approach: Application, purpose and overview
…
Purpose
4.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, BIPRU 4
implements applies requirements that correspond to the following provisions of the Banking Consolidation Directive:
(1) Articles 84 - 89; and
(2) Annex VII.
4.1.3 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, BIPRU 4
also implements applies requirements that correspond to Annex VIII of the Banking Consolidation Directive so far as it applies to the IRB approach. In particular, it implements applies requirements corresponding to (in part):
(1) from Part 1 of that Annex, points 12-16, 19-22, 26(g)(ii) and 27; (2) from Part 2 of that Annex, points 8-11; and (3) from Part 3 of that Annex, points 1, 11, 20, 23-24, 58(h), 61, 64-79 and 90-93.
4.1.4 G Similarly, BIPRU 4 also implements applies requirements that correspond to
article 40 of the Capital Adequacy Directive as it applies to the IRB
approach.
…
Note 1: The risk weight should not be lower than the risk weight that applies for national currency exposures of the central government of the third country in question under BIPRU 3.5. That means that this risk weight only applies if the third country is one of those to which BIPRU 3.4.6R (Preferential risk weight for exposures of the central government of countries outside the EEA UK that apply equivalent prudential standards) applies. Note 2: This is a transitional measure. It lasts until 31 December 2012. Note 3: The risk weight should not be lower than the risk weight that applies for exposures of the central government of the EEA State in question in the currency of another EEA State under BIPRU 3.5.

FCA 201X/XX
…
Overview
4.1.6 G The IRB approach is an alternative to the standardised approach for
calculating a firm’s credit risk capital requirements. It may be applied to all a firm’s exposures or to some of them, subject to various limitations on partial use as set out in BIPRU 4.2. Under the IRB approach capital requirements are based on a firm’s own estimates of certain parameters together with other parameters as set out in the Banking Consolidation Directive BIPRU 4. … IRB permissions: general …
4.1.13 G The appropriate regulator recognises that the nature of IRB approaches will
vary between firms. The scope of and the requirements and conditions set out in an IRB permission may therefore differ in substance or detail from BIPRU 4 in order to address individual circumstances adequately. However any differences will only be allowed if they are compliant with the Banking Consolidation Directive The FCA will consider any differences by having regard to the Banking Consolidation Directive. An IRB permission will implement any such variation by modifying the relevant provisions of GENPRU and BIPRU. An IRB permission may also include additional conditions to meet the particular circumstances of the firm. … Link to standard rules: Incorporation of the IRB output into the capital calculation …
4.1.23 R If a provision of the Handbook relating to the IRB approach says that a firm
may do something if its IRB permission allows it, a firm may do that thing unless its IRB permission expressly says that it may not do so except that:
…
(6) (in the case of collateral that is only eligible for recognition under paragraph 21 of Part 1 of Annex VIII of the Banking Consolidation Directive (Other physical collateral)) a firm may not recognise as eligible collateral an item of a type referred to in BIPRU 4.10.16R (Other physical collateral) unless that item is of a type specified as permitted in its IRB permission. [Note: BCD Annex VIII Part 1 point 21] …

FCA 201X/XX
4.2 The IRB approach: High level material
…
General approach to granting an IRB permission …
4.2.3 R Where an EEA parent institution a parent institution in the UK and its
subsidiary undertakings or an EEA parent financial holding company a parent financial holding company in the UK and its subsidiary undertakings or an EEA parent mixed financial holding company a parent mixed financial holding company in the UK and its subsidiary undertakings use the IRB approach on a unified basis, the question whether the minimum IRB standards are met is answered by considering the parent undertaking and its subsidiary undertakings together, unless the firm’s IRB permission specifies otherwise. [Note: BCD Article 84(2) (part)] Outsourcing
4.2.4 G (1) This guidance sets out the basis on which a firm may rely upon a
rating system or data provided by another member of its group. (2) A firm may rely upon a rating system or data provided by another member of its group if the following conditions are satisfied:
(a) the firm only does so to the extent that it is appropriate, given the nature and scale of the firm’s business and portfolios and the firm’s position within the group; (b) the group is an EEA banking and investment group; … (e) (if the provision of the rating system or data is not carried out in the United Kingdom or in the jurisdiction of the competent authority that is the lead regulator of the group) the firm can demonstrate to the appropriate regulator that the ability of the appropriate regulator and that lead regulator to carry out their responsibilities under the Handbook, the Banking Consolidation Directive and the Capital Adequacy Directive are is not adversely affected. … … Combined use of methodologies: Basic provisions

FCA 201X/XX
4.2.26 R (1) …
(2) A firm may apply the standardised approach to the IRB exposure class referred to in BIPRU 4.3.2R(1) (Sovereigns) where the number of material counterparties is limited and it would be unduly burdensome for the firm to implement a rating system for these counterparties. A firm may include in this treatment an exposure of the type described in BIPRU 3.4.18R (Exposures to churches or religious communities) that would fall within BIPRU 3.4.15R or BIPRU 3.4.17R (Exposure to a regional government or local authority) if those provisions that provision had not been excluded by BIPRU 3.4.18R. … (5) A firm may apply the standardised approach to exposures to the UK’s central governments of EEA States and their regional governments, local authorities and administrative bodies, provided that:
…
…
(9) A firm may apply the standardised approach to the exposures identified in BIPRU 3.4.48R (Exposures in the form of minimum reserves required by the European Central Bank or by the central bank of an EEA State) meeting the conditions specified therein. [deleted] … …
4.3 The IRB approach: Provisions common to different exposure classes
…
Corporate governance
…
4.3.12 G Where the firm’s rating systems are used on a unified basis for the parent
undertaking and its subsidiary undertakings under BIPRU 4.2.3R, and approval and reporting of the ratings systems are carried out at the group level, the governance requirements in BIPRU 4.3.9R and BIPRU 4.3.11R may be met if:
(1) the subsidiary undertakings have delegated to the governing body or designated committee of the EEA parent institution parent institution in the UK or EEA parent financial holding company parent financial

FCA 201X/XX holding company in the UK responsibility for approval of the firm’s rating systems; (2) the governing body or designated committee of the EEA parent institution parent institution in the UK or EEA parent financial holding company parent financial holding company in the UK approves either:
(a) all aspects of the firm’s rating systems, and material changes; or (b) all aspects of the firm’s rating systems that are material in the context of the group, and material changes to those, and a policy statement defining the overall approach to material aspects of rating and estimation processes for all rating systems, including non-material rating systems. …
4.4 The IRB approach: Exposures to corporates, institutions and sovereigns
…
Risk quantification: Definition of default
4.4.22 R …
(3) For counterparts that are PSEs situated in another EEA State the number of days past due is the lower of:
(a) 180; and
(b) the number of days past due fixed under the CRD implementation measure with respect to point 48 of Part 4 of
Annex VII of the Banking Consolidation Directive for that
EEA State for such exposures. [deleted]
(4) For counterparts that are PSEs in a state outside the EEA other than the UK the number of days past due is the lower of:
(a) 180; and
(b) (if a number of days past due for such exposures has been fixed under any law of that state applicable to undertakings in the banking sector or the investment services sector that implements the IRB approach) that number. [Note: BCD Annex VII Part 4 point 44 (part) and point 48 (part)] … Double default

FCA 201X/XX
…
4.4.83 R An institution, an insurance undertaking (including an insurance
undertaking that carries out reinsurance) or an export credit agency which fulfils the following conditions may be recognised as an eligible provider of unfunded credit protection which qualifies for the treatment set out in BIPRU 4.4.79R:
(1) the protection provider has sufficient expertise in providing unfunded credit protection; (2) the protection provider is regulated in a manner equivalent to the rules laid down in the Banking Consolidation Directive GENPRU and BIPRU or had, at the time the credit protection was provided, a credit assessment by an eligible ECAI which is associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under the standardised approach; … …
4.6 The IRB approach: Retail exposures
…
Risk quantification: Definition of default …
4.6.20 R (1) This rule, in accordance with BIPRU 4.3.57R(4) (Definition of
default), sets the exact number of days past due that a firm must abide by in the case of retail exposures. (2) For retail exposures to counterparts situated within the United Kingdom the number of days past due is 180 days with the exception of retail SME exposures. For these exposures the number is 90 days. (3) For retail exposures to counterparts situated in another EEA State the number of days past due is the lower of:
(a) 180; and
(b) the number of days past due fixed under the CRD implementation measure in that EEA State with respect to paragraph 48 of Part 4 of Annex VII of the Banking Consolidation Directive for such exposures. [deleted] (4) For retail exposures to counterparts in a state outside the EEA United Kingdom the number of days past due is the lower of:

FCA 201X/XX
…
…
4.9 The IRB approach: Securitisation, non-credit obligations assets and CIUs
…
Collective investment undertakings
4.9.11 R (1) Where exposures in the form of a CIU meet the criteria set out in
BIPRU 3.4.121R to BIPRU 3.4.122R (Conditions for look through treatment under the standardised approach) and the firm is aware of all of the underlying exposures of the CIU, the firm must look through to those underlying exposures in order to calculate risk weighted exposure amounts and expected loss amounts in accordance with the methods set out in BIPRU 4. BIPRU 4.9.12R applies to the
part of the underlying exposures of the CIU of which the firm is not
aware or could not reasonably be aware. In particular, BIPRU 4.9.12R must apply where it would be unduly burdensome for the firm to look through the underlying exposures in order to calculate risk weighted exposure amounts and expected loss amounts in accordance with methods set out in this rule. …
4.9.12 R (1) Where exposures in the form of a CIU do not meet the criteria set out
in BIPRU 3.4.121R to BIPRU 3.4.122R (Conditions for look through treatment under the standardised approach) or the firm is not aware of all of the underlying exposures of the CIU, a firm must look through to the underlying exposures and calculate risk weighted exposure amounts and expected loss amounts in accordance with the approach set out in BIPRU 4.7.9R - BIPRU 4.7.12R (Simple risk weights). If, for those purposes, the firm is unable to differentiate between private equity, exchange-traded and other equity exposures, it must treat the exposures concerned as other equity exposures. For these purposes, non-equity exposures must be assigned to one of the classes (private equity, exchange traded equity or other equity) set out in BIPRU 4.7.9R (Simple risk weight approach) and unknown exposures must be assigned to the other equity class. … …
4.10 The IRB approach: Credit risk mitigation
…
Eligibility of funded credit protection: General

FCA 201X/XX
4.10.5 R In addition to the collateral set out in BIPRU 5.3.1R to BIPRU 5.3.2R,
BIPRU 5.4.1R to BIPRU 5.4.8R and BIPRU 5.6.1R (Eligibility of funded credit protection) the provisions of BIPRU 4.10.6R - BIPRU 4.10.11R BIPRU 4.10.12R (Eligibility of real estate collateral), BIPRU 4.10.14R (Eligibility: receivables), BIPRU 4.10.16R (Eligibility: other physical collateral), and BIPRU 4.10.19R (Eligibility: leasing), apply where a firm calculates risk weighted exposure amounts and expected loss amounts under the IRB approach. [Note: BCD Annex VIII Part 1 point 12] … Real estate collateral: Types of eligible collateral: General …
4.10.8 G (1) Under paragraph 16 of Part 1 of Annex VIII of the Banking
Consolidation Directive, a competent authority The FCA may only disapply the condition in BIPRU 4.10.6R(3) if the competent authority it has evidence that the relevant UK market is welldeveloped and long-established with loss-rates which are sufficiently low to justify such action. (2) If the evidence were to change so that the action was no longer justified the appropriate regulator would expect to revoke BIPRU 4.10.7R. [Note: BCD Annex VIII Part 1 point 16]
4.10.9 R (1) The condition in BIPRU 4.10.6R(3) does not apply for exposures
secured by residential real estate property situated within the territory of another EEA State outside the UK. (2) However (1) only applies if and to the extent that the CRD implementation measures for that EEA State in relation to the IRB approach implement the option set out in paragraph 16 of Part 1 of
Annex VIII of the Banking Consolidation Directive (waiver for
residential real estate property) with respect to residential real estate property situated within that EEA State. Therefore (1) does not apply if the eligibility to use this treatment under those measures ceases as contemplated under paragraph 18 of Part 1 of Annex VIII of the Banking Consolidation Directive (suspension of alternative treatment). [deleted] [Note: BCD Annex VIII Part 1 point 16 (part)]
4.10.10 R (1) The condition in BIPRU 4.10.6R(3) does not apply for commercial
real estate property situated within the territory of another EEA State outside the UK.

FCA 201X/XX
(2) However (1) only applies if and to the extent that the CRD implementation measures for that EEA State in relation to the IRB approach implement the option set out in paragraph 17 of Part 1 of
Annex VIII of the Banking Consolidation Directive (waiver for
commercial real estate property) with respect to commercial real estate property situated within that EEA State. Therefore (1) does not apply if the eligibility to use this treatment under those measures ceases as contemplated under paragraph 18 of Part 1 of Annex VIII of the Banking Consolidation Directive (suspension of alternative treatment). [deleted] [Note: BCD Annex VIII Part 1 point 19] Real estate collateral: Types of eligible collateral: Finnish housing legislation
4.10.11 R A firm may also recognise as eligible collateral shares in Finnish residential
housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation in respect of residential property which is or will be occupied or let by the owner, as residential real estate collateral, provided that the conditions in BIPRU 4.10.6R are met. [deleted] [Note: BCD Annex VIII Part 1 point 14]
4.10.12 R A firm may also recognise as eligible collateral shares in Finnish housing
companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation as commercial real estate collateral, provided that the conditions in BIPRU 4.10.6R are met. [deleted] [Note: BCD Annex VIII Part 1 point 15] …. Other physical collateral: Types of eligible collateral
4.10.16 R A firm may recognise as eligible collateral a physical item of a type other
than those types indicated in BIPRU 4.10.6R - BIPRU 4.10.8R BIPRU 4.10.12R (Eligibility of real estate collateral) if its IRB permission provides that the firm may treat collateral of that type as eligible and if the firm is able to demonstrate the following:
…
….
Calculating risk weighted exposure amounts and expected loss amounts: General treatment
4.10.23 R BIPRU 4.10.24 R - BIPRU 4.10.28R BIPRU 4.10.29R apply to collateral in
the form of real estate collateral, receivables, other physical collateral and leasing permitted by BIPRU 4.10 and exposures secured by such collateral.

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…
Calculating risk weighted exposure amounts and expected loss amounts for funded credit risk mitigation: Alternative treatment for real estate collateral
4.10.29 R (1) A firm may apply the treatment in paragraph 74 of Part 3 of Annex
VIII of the Banking Consolidation Directive (50% risk weight for exposures secured by real estate) in respect of exposures collateralised by:
(a) residential real estate property; or
(b) commercial real estate property; located in the territory of another EEA State. (2) However (1)(a) or (1)(b) only applies if the CRD implementing measures for that EEA State with respect to the IRB approach have implemented the option set out in the provision of the Banking Consolidation Directive referred to in (1) with respect to the relevant category of real estate property situated within that EEA State. (3) The use of the treatment in (1) with respect to property in another EEA State must be subject to the same conditions as apply under the relevant CRD implementation measures for that EEA State. [deleted] [Note: BCD Annex VIII Part 3 point 75] … 5 Credit risk mitigation
5.1 Application and purpose
…
Purpose
5.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, BIPRU 5
implements applies requirements that correspond, in part, to Articles 78(1) and 91 to 93 and Annex VIII of the Banking Consolidation Directive. …
5.1.4 G BIPRU 4.10 implements applies requirements that correspond to those parts
of Articles 91 to 93 and Annex VIII of the Banking Consolidation Directive which are specific to the recognition of credit risk mitigation by firms using the IRB approach, and modifies the application of the provisions in BIPRU 5 to those firms. …

FCA 201X/XX
5.4 Financial collateral
…
The financial collateral simple method: Repurchase transactions and securities lending or borrowing transactions
5.4.19 R A risk weight of 0% must be assigned to the collateralised portion of the
exposure arising from transactions which fulfil the criteria enumerated in BIPRU 5.4.62R or BIPRU 5.4.65R. If the counterparty to the transaction is not a core market participant a risk weight of 10% must be assigned. [Note: BCD Annex VIII Part 3 point 27] … The financial collateral comprehensive method: General …
5.4.24 R In valuing financial collateral for the purposes of the financial collateral
comprehensive method, volatility adjustments must be applied to the market value of collateral, as set out in BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R, in order to take account of price volatility. [Note: BCD Annex VIII Part 3 point 30
5.4.25 R Subject to the treatment for currency mismatches in the case of financial
derivative instrument set out in BIPRU 5.4.26R, where collateral is denominated in a currency that differs from that in which the underlying exposure is denominated, an adjustment reflecting currency volatility must be added to the volatility adjustment appropriate to the collateral as set out in BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. [Note: BCD Annex VIII Part 3 point 31] …
5.4.27 R In the case of a firm using the financial collateral comprehensive method,
where an exposure takes the form of securities or commodities sold, posted or lent under a repurchase transaction or under a securities or commodities lending or borrowing transaction, and margin lending transactions the exposure value must be increased by the volatility adjustment appropriate to such securities or commodities as prescribed in BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. [Note: BCD Article 78(1), third sentence] The financial collateral comprehensive method: Calculating adjusted values
5.4.28 R …

FCA 201X/XX
(3) The fully adjusted value of the exposure, taking into account both volatility and the risk-mitigating effects of collateral is calculated as follows:
E* = max {0, [EVA - CVAM]}
Where:
…
(e) HE is the volatility adjustment appropriate to the exposure (E), as calculated under BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. (f) HC is the volatility adjustment appropriate for the collateral, as calculated under BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. (g) HFX is the volatility adjustment appropriate for currency mismatch, as calculated under BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. … … The financial collateral comprehensive method: Calculation of volatility adjustments to be applied: General
5.4.29 R BIPRU 5.4.30R - BIPRU 5.4.64R BIPRU 5.4.65R set out the calculation of
volatility adjustments under the financial collateral comprehensive method. … The financial collateral comprehensive method: Conditions for applying a 0% volatility adjustment ….
5.4.65 R If under the CRD implementation measure for a particular EEA State with
respect to point 58 of Part 3 of Annex VIII of the Banking Consolidation Directive (Conditions for applying the 0% volatility adjustment) the treatment set out in that point is permitted to be applied in the case of repurchase transactions or securities lending or borrowing transactions in securities issued by the domestic government of that EEA State, then a firm may adopt the same approach to the same transactions. [deleted] [Note: BCD Annex VIII Part 3 point 59] …
5.5 Other funded credit risk mitigation

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…
Life insurance policies: Minimum requirements
5.5.5 R For life insurance policies pledged to a lending firm to be recognised the
following conditions must be met:
(1) the party providing the life insurance must be subject to the Solvency II Directive a Solvency II firm listed in paragraphs (a), (d) or (e) of the definition in the Glossary, or is subject to supervision by a competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Community UK; …
5.6 Master netting arrangements
…
Calculation of the fully adjusted exposure value: the supervisory volatility adjustments approach and the own estimates of volatility adjustments approach …
5.6.5 R In calculating the ‘fully adjusted exposure value’' (E*) for the exposures
subject to an eligible master netting agreement covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions, a firm must calculate the volatility adjustments to be applied in the manner set out in BIPRU 5.6.6R to BIPRU 5.6.11R either using the supervisory volatility adjustments approach or the own estimates of volatility adjustments approach as set out in BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R for the financial collateral comprehensive method. For the use of the own estimates of volatility adjustments approach the same conditions and requirements apply as under the financial collateral comprehensive method. [Note: BCD Annex VIII Part 3 point 5] …
5.6.7 R For the purposes of BIPRU 5.6.6R, type of security means securities which
are issued by the same entity, have the same issue date, the same maturity and are subject to the same terms and conditions and are subject to the same liquidation periods as indicated in BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. [Note: BCD Annex VIII Part 3 point 7] …

FCA 201X/XX
Calculation of the fully adjusted exposure value: the master netting agreement internal models approach …
5.6.18 R A firm may use the master netting agreement internal models approach
independently of the choice it has made between the standardised approach and the IRB approach for the calculation of risk weighted exposure amounts. However, if a firm uses the master netting agreement internal models approach, it must do so for all counterparties and securities, excluding immaterial portfolios where it may use the supervisory volatility adjustments approach or the own estimates of volatility adjustments approach as set out in BIPRU 5.4.30R to BIPRU 5.4.64R BIPRU 5.4.65R. [Note: BCD Annex VIII Part 3 point 13] …
5.7 Unfunded credit protection
…
Additional requirements for guarantees
…
5.7.12 R In the case of guarantees provided in the context of mutual guarantee
schemes recognised for these purposes by another EEA competent authority under a CRD implementation measure with respect to point 19 of Part 2 of
Annex VIII of the Banking Consolidation Directive or provided by or
counter-guaranteed by entities referred to in BIPRU 5.7.9R, the requirements in BIPRU 5.7.1R(1) - (3) will be satisfied where either of the following conditions are met:
(1) the lending firm has the right to obtain in a timely manner a provisional payment by the guarantor calculated to represent a robust estimate of the amount of the economic loss, including losses resulting from the non-payment of interest and other types of payment which the borrower is obliged to make, likely to be incurred by the lending firm proportional to the coverage of the guarantee; or (2) the lending firm is able to demonstrate to the appropriate regulator that the loss-protecting effects of the guarantee, including losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment. [Note: BCD Annex VIII Part 2 point 19] …

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7 Market risk
7.1 Application, purpose, general provisions and non-standard transactions
…
Purpose
7.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, the
purpose of this chapter is to implement apply requirements that correspond to Annexes I, III, IV and V of the Capital Adequacy Directive. …
7.2 Interest rate PRR
…
Derivation of notional positions: Futures, forwards or synthetic futures on a basket or index of debt securities …
7.2.15 G Under BIPRU 7.2.14R(2)(b), a forward on basket of three Euro denominated
debt securities and two Dollar denominated debt securities would be treated as a forward on a single notional Euro denominated debt security and a forward on a single notional Dollar denominated debt security. … Specific risk calculation …
7.2.44 R Table: specific risk position risk adjustments
This table belongs to BIPRU 7.2.43R.
Issuer Residual maturity
Position risk adjustment
Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States’ United Kingdom regional governments or local authorities which would qualify for credit quality step 1 or which would receive a 0% risk weight under the standardised approach to credit risk. Any 0%

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(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States’ United Kingdom regional governments or local authorities which would qualify for credit quality step 2 or 3 under the standardised approach to credit risk. … Zero to six months … 0.25% … (A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States’ United Kingdom regional governments or local authorities or institutions which would qualify for credit quality step 4 or 5 under the standardised approach to credit risk. (B) Debt securities issued or guaranteed by corporates which would qualify for credit quality step 4 under the standardised approach to credit risk. Any 8%

FCA 201X/XX
(C) Exposures for which a credit assessment by a nominated ECAI is not available. (A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States’ United Kingdom regional governments or local authorities or institutions which would qualify for credit quality step 6 under the standardised approach to credit risk. (B) Debt securities issued or guaranteed by corporates which would qualify for credit quality step 5 or 6 under the standardised approach to credit risk. (C) An instrument that shows a particular risk because of the insufficient solvency of the issuer of liquidity. This paragraph applies even if the instrument would otherwise qualify for a lower position risk adjustment under this table. Any 12% Note: The question of what a corporate is and of what category a debt security falls into must be decided under the rules relating to the standardised approach to credit risk. [Note: CAD Annex I point 14 Table 1] … Definition of a qualifying debt security
7.2.49 R A debt security is a qualifying debt security if:
…
(4) it is a debt security issued by an institution subject to the capital adequacy requirements set out in the EU UK CRR or, as may be applicable, the Banking Consolidation Directive GENPRU and BIPRU, that satisfies the following conditions:
(a) it is considered by the firm to be sufficiently liquid; (b) its investment quality is, according to the firm’s own discretion, at least equivalent to that of the assets referred to under (1) above; or (5) it is a debt security issued by an institution that is deemed to be of equivalent or higher credit quality than that associated with credit

FCA 201X/XX quality step 2 under the standardised approach to credit risk and that is subject to supervision and regulatory arrangements comparable to those under the Capital Adequacy Directive GENPRU and BIPRU. …
7.7 Position risk requirements for collective investment undertakings
…
Look through methods: General criteria
…
7.7.7 R The general eligibility criteria for using the methods in BIPRU 7.7.4R and
BIPRU 7.7.9R - BIPRU 7.7.11R, for CIUs issued by companies supervised or incorporated within the EEA UK are that:
…
…
7.9 Use of a CAD 1 model
Introduction
…
7.9.5 G Waivers permitting the use of models in the calculation of PRR will not be
granted if that would be contrary to the CAD BIPRU. Any waiver which is granted will only be granted on terms that are compatible with the CAD. When granting any waiver the FCA will have regard to the CAD. Accordingly, the only waivers permitting the use of models in calculating PRR that the appropriate regulator is likely to grant are CAD 1 model waivers and VaR model permissions. …
7.10 Use of a Value at Risk Model
…
Introduction and purpose
…
7.10.3 G The models described in BIPRU 7.10 are described as VaR models in
order to distinguish them from CAD 1 models, which are dealt with in BIPRU 7.9 (Use of a CAD 1 model). A VaR model is a risk management model which uses a statistical measure to predict profit and loss movement ranges with a confidence interval. From these results PRR

FCA 201X/XX charges can be calculated. The standards described in BIPRU 7.10, and which will be applied by the appropriate regulator, are based on and implement Annex V of the Capital Adequacy Directive. … Conditions for granting a VaR model permission
7.10.7 G A waiver or other permission allowing the use of models in the calculation
of PRR will not be granted if that would be contrary to the Capital Adequacy Directive be considered with regards to CAD and any VaR model permission which is granted will only be granted on terms that are compatible with the Capital Adequacy Directive be considered with regards to CAD. Accordingly, the appropriate regulator is likely only to grant a waiver or other permission allowing the use of models in the calculation of PRR if it is a VaR model permission or a CAD 1 model waiver. …
7.10.9 G The appropriate regulator recognises that the nature of VaR models will
vary between firms. The scope of and the requirements and conditions set out in a VaR model permission may therefore differ in substance or detail from BIPRU 7.10 in order to address individual circumstances adequately. However any differences will only be allowed if they are compliant with the Capital Adequacy Directive. The FCA will consider any differences by having regard to the CAD. A VaR model permission will implement any such variation by modifying BIPRU 7.10. A VaR model permission may also include additional conditions to meet the particular circumstances of the firm or the model. … 8 Group risk consolidation
8.1 Application
8.1.1 R This chapter applies to:
(1) a BIPRU firm that is a member of UK consolidation group; (2) a BIPRU firm that is a member of a non-EEA sub-group non-UK sub-group; and (3) [deleted] (4) a firm that is not a BIPRU firm and is a parent financial holding company in a Member State the UK in a UK consolidation group.
8.1.2 R This chapter does not apply to a firm in BIPRU 8.1.1R(1) to BIPRU
8.1.1R(3) which is a member of the UK consolidation group or non-EEA sub-group non-UK sub-group if the interest of the relevant UK

FCA 201X/XX consolidation group or non-EEA sub-group non-UK sub-group in that firm is no more than a participation. 8.1.2A R A firm is not subject to consolidated supervision under BIPRU 8 where any of the following conditions are fulfilled:
(1) the firm is included in the supervision on a consolidated basis of the group of which it is a member by the FCA or PRA under the EU UK CRR; or (2) the firm is included in the supervision on a consolidated basis of the group of which it is a member by a competent authority other than the FCA under the EU CRR as implemented by that competent authority. [deleted] 8.1.2B R Where a group includes one or more BIPRU firms and one or more IFPRU investment firms which has permission under article 19 of the EU UK CRR (Exclusion from the scope of prudential consolidation) from the FCA not to be included in the supervision on a consolidated basis of the group of which it is a member, consolidated supervision under BIPRU 8 applies to those IFPRU investment firms and the BIPRU firms. Purpose
8.1.3 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, this
chapter implements applies provisions corresponding to articles 71, 73(1)
and (2), 125, 126, 127(1), 133 and 134 of the Banking Consolidation Directive and articles 2 (in part), 22-27 and 37(1) (in part) of the Capital Adequacy Directive. How this chapter is organised …
8.1.5 G BIPRU 8.3 sets out the definition of a non-EEA sub-group non-UK subgroup and the basic requirement to apply financial resources and
concentration risk requirements to that group on a consolidated basis. … Consolidation requirements for BIPRU firms elsewhere in the Handbook …
8.1.16 G GENPRU 3.2 (Prudential rules for third country groups) deals, amongst
other things, with banking and investment services groups headed by a parent undertaking outside the EEA UK.
8.2 Scope and basic consolidation requirements for UK consolidation groups

FCA 201X/XX
Main consolidation rule for UK consolidation groups
8.2.1 R A firm that is a member of a UK consolidation group must comply, to the
extent and in the manner prescribed in BIPRU 8.5, with the obligations laid down in GENPRU 1.2 (Adequacy of financial resources) and the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) on the basis of the consolidated financial position of:
(1) where either Test 1A or Test 1B in BIPRU 8 Annex 1 (Decision tree identifying a UK consolidation group) apply, the parent institution in a Member State the UK in the UK consolidation group; or (2) where either Test 1C or Test 1D in BIPRU 8 Annex 1 apply, the parent financial holding company in a Member State the UK or the parent mixed financial holding company in a Member State the UK. … Definition of UK consolidation group
8.2.4 R A firm’s UK consolidation group means a group that is identified as a UK
consolidation group in accordance with the decision tree in BIPRU 8
Annex 1R (Decision tree identifying a UK consolidation group); the
members of that group are:
(1) where either Test 1A or Test 1B in BIPRU 8 Annex 1R apply, the members of the consolidation group made up of the sub-group of the parent institution in a Member State the UK identified in BIPRU 8 Annex 1R together with any other person who is a member of that consolidation group because of a consolidation
Article 12(1) relationship or an Article 134 relationship; or
(2) where either Test 1C or Test 1D in BIPRU 8 Annex 1R apply, the members of the consolidation group made up of the sub-group of the parent financial holding company in a Member State the UK or the parent mixed financial holding company in a Member State the UK identified in BIPRU 8 Annex 1R together with any other person who is a member of that consolidation group because of a consolidation Article 12(1) relationship or an Article 134 relationship; in each case only persons included under BIPRU 8.5 (Basis of consolidation) are included in the UK consolidation group. …
8.2.7 G BIPRU 8 Annex 1 (Decision tree identifying a UK consolidation group)
shows that Articles 125 and 126 of the Banking Consolidation Directive are important in deciding whether the appropriate regulator is obliged to

FCA 201X/XX supervise a group or part of a group and hence whether that group or part of a group is a UK consolidation group. BIPRU 8 Annex 4 (Text of Articles 125 and 126 of the Banking Consolidation Directive) sets out these articles together with an explanation of how those articles should be read in the case of a group which also contains CAD investment firms. [deleted]
8.3 Scope and basic consolidation requirements for non-EEA sub-groups nonUK sub-groups
Main consolidation rule for non-EEA sub-group non-UK sub-groups
8.3.1 (1) A BIPRU firm that is a subsidiary undertaking of a BIPRU firm or of a
financial holding company or of a mixed financial holding company must apply the requirements laid down in GENPRU 1.2 (Adequacy of financial resources) and the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) on a sub-consolidated basis if the BIPRU firm, or the parent undertaking where it is a financial holding company or a mixed financial holding company, have a third country investment services undertaking third country investment services undertaking as a subsidiary undertaking or hold a participation in such an undertaking. (2) (1) only applies if the appropriate regulator is required by the Banking Consolidation Directive or the Capital Adequacy Directive to supervise the group established under (1) under Article 73(2) of the Banking Consolidation Directive (Non-EEA sub-groups). [deleted]
8.3.2 R Further to BIPRU 8.3.1R, a firm that is a member of a non-EEA sub-group
non-UK sub-group must at all times ensure that the consolidated capital resources of that non-EEA sub-group non-UK sub-group are equal to or exceed its consolidated capital resources requirement. …
8.3.4 G The sub-group identified in BIPRU 8.3.1R is called a non-EEA sub-group
non-UK sub-group.
How to identify a non-EEA sub-group non-UK sub-group
8.3.6 G The remainder of this section sets out a process for identifying a non-EEA
sub-group non-UK sub-group in straightforward cases.
8.3.7 G A firm will not be a member of a non-EEA sub-group non-UK sub-group
unless it is also a member of a UK consolidation group. So the first step is to identify each undertaking in the firm’s UK consolidation group that satisfies the following conditions:

FCA 201X/XX
(1) it is a CAD investment firm, financial institution or asset management company whose head office is outside the EEA UK (a third country investment services undertaking); (2) one of the following applies:
(a) it is a subsidiary undertaking of a BIPRU firm in that UK consolidation group; or (b) a BIPRU firm in that UK consolidation group holds a participation in it; and (3) that BIPRU firm is not a parent institution in a Member State the UK.
8.3.8 G The sub-group of the BIPRU firm identified in BIPRU 8.3.7G(2)(a) or
BIPRU 8.3.7G(2)(b) is a potential non-EEA sub-group non-UK sub-group.
8.3.9 G If more than one BIPRU firm is a direct or indirect parent undertaking in
accordance with BIPRU 8.3.7G(2)(a) then the sub-groups of each of them are all non-EEA sub-group non-UK sub-groups.
8.3.10 G Similarly if there is more than one BIPRU firm that holds a participation
in the third country investment services undertaking in accordance with BIPRU 8.3.7G(2)(b) then the sub-group of each such BIPRU firm is a potential non-EEA sub-group non-UK sub-group.
8.3.11 G The effect of BIPRU 8.3.7G(3) is that a non-EEA sub-group non-UK subgroup cannot be headed by a parent institution in a Member State the UK.
8.3.12 G The firm should then identify each undertaking in the firm’s UK
consolidation group that satisfies the following conditions:
(1) it is a CAD investment firm, financial institution or asset management company whose head office is outside the EEA UK (a third country investment services undertaking); …
8.3.13 G The sub-group of the financial holding company identified in BIPRU
8.3.12G(2)(a) or BIPRU 8.3.12G(2)(b) is a potential non-EEA sub-group non-UK sub-group.
8.3.14 G The financial holding company identified in BIPRU 8.3.12G may be a
parent financial holding company in a Member State the UK.
8.3.15 G If more than one financial holding company is a direct or indirect parent
undertaking in accordance with BIPRU 8.3.12G(2)(a) then the sub-groups of each of them are all potential non-EEA sub-groups non-UK sub-groups.
8.3.16 G Similarly if there is more than one financial holding company that holds a
participation in the third country investment services undertaking in

FCA 201X/XX accordance with BIPRU 8.3.12G(2)(b) then the sub-group of each such financial holding company is a potential non-EEA sub-group non-UK subgroup.
8.3.17 G The firm should apply the process in BIPRU 8.3.12G to a third country
investment services undertaking even though it may be also be part of a potential non-EEA sub-group non-UK sub-group under BIPRU 8.3.7G.
8.3.18 G Having identified potential non-EEA sub-groups non-UK sub-groups for
each third country investment services undertaking in its UK consolidation group the firm should then eliminate overlapping potential non-EEA sub-groups non-UK sub-groups in the following way. If:
(1) one potential non-EEA sub-group non-UK sub-group is contained within a wider potential non-EEA sub-group non-UK sub-group; and (2) the third country investment services undertakings in the two potential non-EEA sub-groups non-UK sub-groups are the same; then the smaller potential non-EEA sub-group non-UK sub-group is eliminated.
8.3.19 G If there is a chain of three or more non-EEA sub-group non-UK subgroups, each with the same third country investment services
undertakings, the elimination process may remove all but the highest.
8.3.20 G Each remaining potential non-EEA sub-group non-UK sub-group is a nonEEA sub-group non-UK sub-group, even though it may be part of a wider
non-EEA sub-group non-UK sub-group.
8.3.22 G If a UK consolidation group is headed by a parent financial holding
company in a Member State the UK the result of the elimination process may be that a firm’s UK consolidation group contains only one non-EEA sub-group non-UK sub-group and that the non-EEA sub-group non-UK sub-group is the same as the UK consolidation group. In theory that means that there are two sets of consolidation requirements, one in relation to the UK consolidation group and one in relation to the non-EEA sub-group non-UK sub-group. However as the UK consolidation group and the non-EEA sub-group non-UK sub-group are the same, in practice this means that the additional non-EEA sub-group non-UK sub-group consolidation disappears.
8.3.23 G Even where the requirements for a non-EEA sub-group non-UK sub-group
are absorbed into those for the UK consolidation group a firm should still make clear in its regulatory reporting that the consolidation figures relate to a UK consolidation group and a non-EEA sub-group non-UK subgroup and that they both contain the same members.
8.3.24 G The examples in this section have so far assumed that the only EEA State
involved is the United Kingdom. If a potential non-EEA sub-group that

FCA 201X/XX would otherwise be regulated by the appropriate regulator contains a potential non-EEA sub-group in another EEA State then the United Kingdom one is eliminated if the third country investment services undertaking in the UK potential non-EEA sub-group and the potential non-EEA sub-group in the other EEA State are the same. The intention here is that the EEA competent authority closest to the third country investment services undertaking should be responsible for the non-EEA sub-group subconsolidation. Example 6 in BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group) illustrates this situation. [deleted]
8.4 CAD Article 22 groups and investment firm consolidation waiver
…
The effect of an investment firm consolidation waiver and the conditions for getting one …
8.4.3 G An investment firm consolidation waiver will waive the application of
BIPRU 8.2.1R and BIPRU 8.2.2R (if it applies with respect to a UK consolidation group) or BIPRU 8.3.1R and BIPRU 8.3.2R (if it applies with respect to a non-EEA sub-group non-UK sub-group). The effect will be to switch off this chapter with respect to the group in question apart from this section.
8.4.4 G The FCA will not grant an investment firm consolidation waiver unless:
(1) the UK consolidation group or non-EEA sub-group non-UK subgroup meets the conditions for being a CAD Article 22 group; (2) the FCA is satisfied that each BIPRU firm in the UK consolidation group or non-EEA sub-group non-UK sub-group will be able to meet its capital requirements using the calculation of capital resources in GENPRU 2 Annex 6R (Capital resources table for a BIPRU firm with a waiver from consolidated supervision); and (3) the firm demonstrates that the requirements in BIPRU 8.4.11R to BIPRU 8.4.18R will be met. … Meeting the terms of an investment firm consolidation waiver
8.4.7 R If a firm has an investment firm consolidation waiver with respect to its
UK consolidation group or non-EEA sub-group non-UK sub-group but that UK consolidation group or non-EEA sub-group non-UK sub-group ceases to meet the definition of a CAD Article 22 group the firm must

FCA 201X/XX comply with the rest of this chapter rather than this section notwithstanding the investment firm consolidation waiver.
8.4.8 G Compliance with the capital requirements set out in BIPRU 8.4.11R is a
condition under the Capital Adequacy Directive for the exemption from capital requirements as it applies in accordance with article 95(2) of the UK CRR. Thus if they are breached the FCA is likely to revoke the investment firm consolidation waiver. Definition of a CAD Article 22 group
8.4.9 R (1) A CAD Article 22 group means a UK consolidation group or nonEEA sub-group non-UK sub-group that meets the conditions in this
rule.
(2) There must be no bank, building society or credit institution in the UK consolidation group or non-EEA sub-group non-UK sub-group and any investment firm in the UK consolidation group or nonEEA sub-group non-UK sub-group must not be subject to consolidated supervision under the EU UK CRR. (3) Each CAD investment firm in the UK consolidation group or nonEEA sub-group UK sub-group which is an EEA firm must use the definition of own funds given in the CRD implementation measure of its EEA State for Article 16 of the Capital Adequacy Directive that would be at least equivalent to that which would apply under GENPRU and BIPRU. (4) Each CAD investment firm in the UK consolidation group or nonEEA sub-group non-UK sub-group must be a:
(a) limited activity firm; or
(b) limited licence firm.
(5) Each CAD investment firm in the UK consolidation group or nonEEA sub-group UK sub-group which is an EEA firm must:
(a) meet the requirements imposed by the CRD implementation measures of its EEA State for Articles 18 and Article 20 of the Capital Adequacy Directive that would be at least equivalent to those that would apply under GENPRU and BIPRU on an individual basis; and (b) deduct from its own funds any contingent liability in favour of other members of the UK consolidation group or non-EEA sub-group UK sub-group. (6) Each BIPRU firm in the UK consolidation group or non-EEA subgroup non-UK sub-group must comply with the main BIPRU firm Pillar 1 rules on an individual basis.

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8.4.10 G GENPRU 2.2 (Capital resources) says that a BIPRU firm with an
investment firm consolidation waiver should calculate its capital resources on a solo basis using GENPRU 2 Annex 6 (Capital resources table for a BIPRU firm with a waiver from consolidated supervision). GENPRU 2
Annex 6 requires a BIPRU firm to deduct contingent liabilities in favour
of other members of the UK consolidation group or non-EEA sub-group. Therefore BIPRU 8.4.9R(5)(b) only imposes the requirement to deduct them on EEA firms. [deleted] Capital adequacy obligations relating to a CAD Article 22 group: General rule
8.4.11 R If a firm has an investment firm consolidation waiver, it must ensure that
any financial holding company in the UK consolidation group or the nonEEA sub-group non-UK sub-group that is the UK parent financial holding company in in a Member State the UK of a CAD investment firm in the UK consolidation group or non-EEA sub-group non-UK sub-group has capital resources, calculated under BIPRU 8.4.12R, in excess of the sum of the following (or any higher amount specified in the investment firm consolidation waiver):
(1) the sum of the solo notional capital resources requirements for each CAD investment firm, financial institution, asset management company and ancillary services undertaking in the UK consolidation group or the non-EEA sub-group non-UK subgroup, as calculated in accordance with BIPRU 8.4.13R; and (2) the total amount of any contingent liability in favour of CAD investment firms, financial institutions, asset management companies and ancillary services undertakings in the UK consolidation group or non-EEA sub-group non-UK sub-group. Capital adequacy obligations relating to a CAD Article 22 group: Capital resources
8.4.12 R A firm must calculate the capital resources of the parent financial holding
company in a Member State the UK for the purpose of BIPRU 8.4.11R as follows:
…
…
Additional rules that apply to a firm with an investment firm consolidation waiver
8.4.18 R If a firm has an investment firm consolidation waiver, it must:
(1) ensure that each CAD investment firm in the UK consolidation group or non-EEA sub-group non-UK sub-group which is a firm or an EEA firm has in place systems to monitor and control the sources of capital and funding of all the members in the UK consolidation group or non-EEA sub-group non-UK sub-group;

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(2) notify the FCA of any serious risk that could undermine the financial stability of the UK consolidation group or non-EEA subgroup non-UK sub-group, as soon as the firm becomes aware of that risk, including those associated with the composition and sources of the capital and funding of members of the UK consolidation group or non-EEA sub-group non-UK sub-group; (3) report the amount of the consolidated capital resources and consolidated capital resources requirement of the UK consolidation group or non-EEA sub-group non-UK sub-group on a periodic basis as set out in the investment firm consolidation waiver; (4) report any large exposures risks of members of the UK consolidation group or non-EEA sub-group non-UK sub-group including any undertakings not located in an EEA State the UK on a periodic basis set out in the investment firm consolidation waiver; (5) notify the FCA immediately it becomes aware that the UK consolidation group or non-EEA sub-group non-UK sub-group has ceased to meet the conditions for being a CAD Article 22 group; and (6) notify the FCA immediately it becomes aware of any breach of BIPRU 8.4.11R.
8.4.19 G Although an investment firm consolidation waiver switches off most of
this chapter, a firm should still carry out the capital adequacy calculations in BIPRU 8.3 to BIPRU 8.8 as if those parts of this chapter still applied to the UK consolidation group or non-EEA sub-group non-UK sub-group and report these to the FCA. It should also still monitor large exposure risk on a consolidated basis.
8.5 Basis of consolidation
Undertakings to be included in consolidation
8.5.1 R A firm must include only the following types of undertaking in a UK
consolidation group or non-EEA sub-group non-UK sub-group for the purposes of this chapter:
…
8.5.2 G Although an undertaking falling outside BIPRU 8.5.1R will not be
included in a UK consolidation group or non-EEA sub-group non-UK sub-group it may be relevant in deciding whether one undertaking in the banking sector or the investment services sector is a subsidiary

FCA 201X/XX undertaking of another with the result that they should be included in the same UK consolidation group or non-EEA sub-group non-UK sub-group.
8.5.3 G An example of BIPRU 8.5.2G is as follows. Say that the undertaking at
the head of a BIPRU firm’s UK group is a parent financial holding company in a Member State the UK. One of its subsidiary undertakings is the firm. The parent financial holding company in a Member State the UK also has an insurer as a subsidiary undertaking. That insurer has several BIPRU firms as subsidiary undertakings. Say that the UK group is not a financial conglomerate. The UK consolidation group will include the parent financial holding company in a Member State the UK and the firm. It will also include the BIPRU firms that are subsidiary undertakings of the insurer. This is because the BIPRU firms are subsidiary undertakings of the parent financial holding company in a Member State the UK through the parent financial holding company in a Member State’s the UK’s holding in the insurer. However it will not include the insurer itself. Basis of inclusion of undertakings in consolidation
8.5.4 R A firm must include any subsidiary undertaking in the UK consolidation
group or non-EEA sub-group non-UK sub-group in full in the calculations in this chapter.
8.5.5 R In carrying out the calculations for the purposes of this chapter a firm must
only include the relevant proportion of an undertaking that is a member of the UK consolidation group or non-EEA sub-group non-UK sub-group:
…
8.5.6 R In BIPRU 8.5.5R, the relevant proportion is either:
(1) (in the case of a participation) the proportion of shares issued by the undertaking held by the UK consolidation group or the nonEEA sub-group non-UK sub-group; or … … Exclusion of undertakings from consolidation: Other reasons
8.5.11 R Article 73(1) of the Banking Consolidation Directive allows Article 95(2)
preserves the discretion for the appropriate regulator to decide to exclude a BIPRU firm, financial institution, asset management company or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group non-UK sub-group for the purposes of this
chapter in the following circumstances:

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(1) where the head office of the undertaking concerned is situated in a country outside the EEA UK where there are legal impediments to the transfer of the necessary information; or … … Information about excluded undertakings
8.5.14 G The appropriate regulator may require a firm to provide information
about the undertakings excluded from consolidation of the UK consolidation group or non-EEA sub-group non-UK sub-group pursuant to this section.
8.6 Consolidated capital resources
General
8.6.1 R A firm must calculate the consolidated capital resources of its UK
consolidation group or its non-EEA sub-group non-UK sub-group by applying GENPRU 2.2 (Capital resources) to its UK consolidation group or non-EEA sub-group non-UK sub-group on an accounting consolidation basis, treating the UK consolidation group or non-EEA sub-group non-UK sub-group as a single undertaking. The firm must adjust GENPRU 2.2 in accordance with this section for this purpose. Notification of issuance of capital instruments 8.6.1A R This section applies to a firm if another member of its group intends to issue a capital instrument on or after 1 March 2012 for inclusion in the firm’s capital resources or consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group. 8.6.1B R A firm must notify the appropriate regulator in writing of the intention of another member of its group which is not a firm to issue a capital instrument which the firm intends to include within its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group as soon as it becomes aware of the intention of the group undertaking to issue the capital instrument. When giving notice, a firm must:
…
…
8.6.1D R If a group undertaking proposes to establish a debt securities program for the issue of capital instruments which the firm intends to include within

FCA 201X/XX its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group, it must:
…
8.6.1E R The capital instruments to which BIPRU 8.6.1BR does not apply are:
…
(3) capital instruments which are not materially different in terms of their characteristics and eligibility for inclusion in a particular tier of capital to capital instruments previously issued by a group undertaking for inclusion in the firm’s capital resources or consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group. 8.6.1F R A firm must notify the appropriate regulator in writing, no later than the date of issue, of the intention of a group undertaking to issue a capital instrument listed in BIPRU 8.6.1ER which the firm intends to include within its capital resources or the consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group. When giving notice a firm must:
…
Limits on the use of different forms of capital
8.6.2 R The capital resources gearing rules apply for the purposes of calculating
consolidated capital resources. They apply to the UK consolidation group or non-EEA sub-group non-UK sub-group on an accounting consolidation basis, treating the UK consolidation group or non-EEA sub-group non-UK sub-group as a single undertaking.
8.6.3 R As the various components of capital differ in the degree of protection that
they offer, the capital resources gearing rules as applied on a consolidated basis place restrictions on the extent to which certain types of capital are eligible for inclusion in a UK consolidation group or non-EEA subgroup’s non-UK sub-group’s consolidated capital resources. GENPRU 2.2.25R (Limits on the use of different forms of capital: Use of higher tier capital in lower tiers) also applies. … Calculation of consolidated capital resources for a BIPRU firm group
8.6.8 R A firm must calculate the consolidated capital resources of its UK
consolidation group or non-EEA sub-group non-UK sub-group using the calculation of capital resources in GENPRU 2 Annex 4 (Capital resources
table for a BIPRU firm deducting material holdings) or GENPRU 2 Annex
5 (Capital resources table for a BIPRU firm deducting illiquid assets).

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…
Treatment of minority interests
8.6.10 R (1) This rule sets out how to determine whether minority interests in
an undertaking in a UK consolidation group or non-EEA subgroup non-UK sub-group may be included in tier one capital, tier two capital or tier three capital for the purpose of calculating consolidated capital resources (each referred to as a “tier” of capital in this rule). … Indirectly issued capital and group capital resources …
8.6.12 R Consolidated indirectly issued capital means any capital instrument
issued by a member of the UK consolidation group or non-EEA sub-group non-UK sub-group where:
(1) …
(2) any of the SPVs referred to in (1) is a member of the UK consolidation group or non-EEA sub-group non-UK sub-group or a subsidiary undertaking of any member of the UK consolidation group or non-EEA sub-group non-UK sub-group.
8.6.13 R A firm may only include consolidated indirectly issued capital in the
consolidated capital resources of its UK consolidation group or non-EEA sub-group non-UK sub-group if:
(1) it is issued by an SPV that is a member of the UK consolidation group or non-EEA sub-group non-UK sub-group to persons who are not members of the UK consolidation group or non-EEA subgroup non-UK sub-group; and …
8.6.14 R Consolidated indirectly issued capital that is eligible for inclusion in the
consolidated capital resources of a UK consolidation group non-EEA subgroup non-UK sub-group may only be included as a minority interest created by the capital instrument issued by the SPV referred to in BIPRU 8.6.13R. If it is eligible, it is innovative tier one capital.
8.6.15 R For the purposes of this section, an undertaking is an SPV if the main
activity of the SPV is to raise funds for undertakings in:
(1) (in the case of a UK consolidation group) that UK consolidation group; or

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(2) (in the case of a non-EEA sub-group non-UK sub-group) that nonEEA sub-group non-UK sub-group or any UK consolidation group of which it forms part.
8.6.16 R The SPV referred to in BIPRU 8.6.13R must satisfy the conditions in
GENPRU 2.2.127R (Conditions that an SPV has to satisfy if indirectly issued capital is to be included in capital resources on a solo basis) as modified by the following:
(1) references in GENPRU 2.2.127R(1) to being controlled by the firm are to being controlled by a member of the firm’s UK consolidation group or non-EEA sub-group non-UK sub-group as the case may be; and (2) references to the firm’s group are to the firm’s UK consolidation group or non-EEA sub-group non-UK sub-group as the case may be.
8.6.17 R The capital issued by the SPV referred to in BIPRU 8.6.13R must satisfy
the conditions in GENPRU 2.2.129R (Conditions that capital issued by an SPV has to satisfy if indirectly issued capital is to be included in capital resources on a solo basis) as modified by the following:
(1) references to the firm’s group are to the firm’s UK consolidation group or non-EEA sub-group non-UK sub-group as the case may be; (2) the substitution obligation in GENPRU 2.2.129R(2) need not be the firm’s but may apply to any member of the UK consolidation group or non-EEA sub-group non-UK sub-group as the case may be; and (3) that substitution obligation applies if the consolidated capital resources of the UK consolidation group or non-EEA sub-group non-UK sub-group, as the case may be, fall, or are likely to fall, below its consolidated capital resources requirement.
8.6.18 R The SPV referred to in BIPRU 8.6.13R must invest the funds raised from
the issue of capital by the SPV by subscribing for capital resources issued by an undertaking that is a member of the UK consolidation group or nonEEA sub-group non-UK sub-group. Those capital resources must satisfy the following conditions:
…
…
8.7 Consolidated capital resources requirements
General approach

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8.7.1 G The calculation of the consolidated capital resources requirement of a
firm’s UK consolidation group or non-EEA sub-group non-UK sub-group involves taking the individual components that make up the capital resources requirement on a solo basis and applying them on a consolidated basis. Those components are the capital charge for credit risk (the credit risk capital requirement), the capital charge for market risk (the market risk capital requirement) and the fixed overheads requirement. … Method of calculation to be used
8.7.10 R A firm must calculate the consolidated capital resources requirement of
its UK consolidation group or non-EEA sub-group non-UK sub-group as the higher of the following consolidated requirements components:
…
Calculation of the consolidated requirement components
8.7.11 R A firm must calculate a consolidated requirement component by applying
the risk capital requirement applicable to that consolidated requirement component to the UK consolidation group or non-EEA sub-group non-UK sub-group in accordance with BIPRU 8.7.13R. Except where BIPRU 8.7.34R to BIPRU 8.7.38R allow the requirements of another regulator to be used, the The risk capital requirement must be calculated in accordance with the appropriate regulator’s rules. The risk capital requirement applicable to a consolidated requirement component is the one specified in the second column of the table in BIPRU 8.7.12R. … Choice of consolidation method
8.7.13 R (1) A firm must calculate a consolidated requirement component by
using one of the methods in this rule.
(2) Under the first method a firm must:
(a) apply the risk capital requirement set out in BIPRU 8.7.12R to each undertaking in the UK consolidation group or non-EEA sub-group non-UK sub-group; and (b) add the risk capital requirements together. (3) Under the second method a firm must:
(a) treat the whole UK consolidation group or non-EEA subgroup non-UK sub-group as a single undertaking; and

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(b) apply the risk capital requirement set out in BIPRU 8.7.12R to the group on an accounting consolidation basis. (4) The third method is a mixture of methods one and two. Under the third method a firm must:
(a) treat one or more parts of the UK consolidation group or non-EEA sub-group non-UK sub-group as separate single undertakings; (b) apply the risk capital requirement set out in BIPRU 8.7.12R to each such part of the group on an accounting consolidation basis; (c) apply the risk capital requirement set out in BIPRU 8.7.12R to each of the remaining undertakings in the UK consolidation group or non-EEA sub-group non-UK subgroup (if any); and (d) add the risk capital requirements together. (5) A firm may use different methods for different consolidated requirement components. … Notifying the appropriate regulator of the choice of consolidation technique
8.7.16 R A firm must notify the appropriate regulator which method under BIPRU
8.7.13R it applies for which consolidated requirement component and to which parts of the UK consolidation group or non-EEA sub-group nonUK sub-group it is applying an aggregation approach and to which parts it is applying an accounting consolidation approach. Special rules for the consolidated credit risk requirement …
8.7.20 R A firm may use a combination of the CCR standardised method, the CCR
mark to market method and the CCR internal model method on a permanent basis with respect to the firm’s UK consolidation group or nonEEA sub-group non-UK sub-group for the purposes of calculating the consolidated credit risk requirement. In particular, where the firm is permitted to apply the CCR internal model method on a consolidated basis with respect to its UK consolidation group or non-EEA sub-group non-UK sub-group, it may combine the use of CCR standardised method and CCR mark to market method on a permanent basis for financial derivative instruments and long settlement transaction not covered by its CCR internal model method permission.

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8.7.21 R BIPRU 9.4.1R (Minimum requirements for recognition of significant
credit risk transfer) as applied on a consolidated basis requires the transfer to be to a person outside the UK consolidation group or non-EEA subgroup non-UK sub-group.
8.7.22 R A firm must not use both the financial collateral simple method and the
financial collateral comprehensive method with respect to its UK consolidation group or non-EEA sub-group non-UK sub-group.
8.7.23 R (1) A firm may only treat an exposure as exempt under BIPRU
3.2.25R (Zero risk-weighting for intra-group exposures) as applied on a consolidated basis if the member of the UK consolidation group or non-EEA sub-group non-UK sub-group that has the exposure:
…
…
Special rules for the consolidated market risk requirement
8.7.24 R For the purposes of calculating the consolidated market risk requirement
of a UK consolidation group or non-EEA sub-group non-UK sub-group, a firm must apply BIPRU 1.2.3R (Definition of the trading book) and BIPRU 1.2.17R (Size thresholds for the purposes of the definition of the trading book) to the whole UK consolidation group or non-EEA sub-group non-UK sub-group as if the group were a single undertaking.
8.7.25 R A firm may not apply the second method in BIPRU 8.7.13R(3)(accounting
consolidation for the whole group) or apply accounting consolidation to parts of its UK consolidation group or non-EEA sub-group non-UK subgroup under method three as described in BIPRU 8.7.13R(4)(a) for the purposes of the calculation of the consolidated market risk requirement unless the group or sub-group and the undertakings in that group or subgroup satisfy the conditions in this rule. Instead the firm must use the aggregation approach described in BIPRU 8.7.13R(2) (method one) or BIPRU 8.7.13R(4)(c). Those conditions are as follows:
(1) each of the undertakings in that group or sub-group is an institution that is:
(a) a BIPRU firm; or
(b) an EEA firm that is a CAD investment firm; or [deleted] (c) a recognised third country investment firm; (2) each of the undertakings referred to in (1) that is a BIPRU firm has capital resources that are equal to or in excess of its capital resources requirement;

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(3) each of the undertakings referred to in (1) that is an EEA firm complies with the CRD implementation measures in its EEA State that correspond to the requirements in (2); [deleted] (4) each of the undertakings referred to in (1) that is a recognised third country investment firm complies with laws in the state or territory in which it has its head office that are equivalent to the requirements of the Banking Consolidation Directive or Capital Adequacy Directive GENPRU and BIPRU relating to capital adequacy; … Special rules for calculating specific consolidated requirement components
8.7.28 G BIPRU 8.7.21R to BIPRU 8.7.26R are generally examples of the
application of the general principles in BIPRU 8.2.1R (Main consolidation rule for UK consolidation groups) and BIPRU 8.3.1R (Main consolidation rule for non-EEA sub-groups non-UK sub-groups). BIPRU 8.7.20R and BIPRU 8.7.25R are exceptions to those principles. Elimination of intra-group transactions
8.7.29 R In accordance with BIPRU 8.2.1R and BIPRU 8.3.1R (The basic
consolidation rules for a UK consolidation group or non-EEA sub-groups non-UK sub-groups), a firm may exclude that part of the risk capital requirement that arises as a result of:
(1) (in respect of the consolidated credit risk requirement) intra-group balances; or (2) (in respect of the consolidated fixed overheads requirement) intragroup transactions; with other undertakings in the UK consolidation group or non-EEA subgroup non-UK sub-group. … Use of the solo requirements of another EEA competent authority
8.7.34 R A firm may calculate the risk capital requirement for an institution in the
firm’s UK consolidation group or non-EEA sub-group that is an EEA firm in accordance with the CRD implementation measures in the EEA firm’s EEA State that correspond to the appropriate regulator’s rules that would otherwise apply under this section if the institution is subject to those CRD implementation measures. [deleted] Use of the consolidated requirements of another EEA competent authority
8.7.37 R (1) This rule applies if:

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(a) a firm is applying an accounting consolidation approach to
part of its UK consolidation group or non-EEA sub-group
under method three as described in BIPRU 8.7.13R(4)(a); and (b) the part of the group in (a) constitutes the whole of a group subject to the consolidated capital requirements of a competent authority under the CRD implementation measures relating to consolidation under the Banking Consolidation Directive or the Capital Adequacy Directive. (2) If the conditions in this rule are satisfied, a firm may apply the consolidated capital requirement in (1)(b) as the risk capital requirement for the group identified in (1)(a) so far as that consolidated capital requirement corresponds to the appropriate regulator’s rules that would otherwise apply under this section. [deleted] Prohibition on using the standardised rules of a regulator outside the EEA UK 8.7.38A R (1) This rule applies to a firm if:
(a) an institution in its UK consolidation group or non-EEA sub-group non-UK sub-group is subject to any of the rules or requirements of, or administered by, a third-country competent authority applicable to its financial sector that correspond to the sectoral rules applicable to that financial sector (“corresponding sectoral rules”); or (b) a part of its UK consolidation group or non-EEA subgroup non-UK sub-group constitutes the whole of a group subject to the consolidated capital requirements of a thirdcountry competent authority under the corresponding sectoral rules applicable to the banking sector or the investment services sector for a state or territory outside the EEA UK. (2) A firm may not use the requirements under any of the corresponding sectoral rules of a state or territory outside the EEA UK in order to calculate the consolidated capital resources requirement of its UK consolidation group or non-EEA sub-group non-UK sub-group for the purpose of this chapter. …
8.8 Advanced prudential calculation approaches
…
Prohibition on using the rules of an overseas regulator

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8.8.3 R Even if a firm has an advanced prudential calculation approach
permission that allows it to use an advanced prudential calculation approach for the purposes of this chapter, the firm may not use the requirements of another state or territory to the extent they provide for that advanced prudential calculation approach. Therefore a firm may not use BIPRU 8.7.34R and BIPRU 8.7.37R (Use of the capital requirements of another EEA competent authority) if that would involve using an advanced prudential calculation approach. Special provisions relating to the internal ratings based approach
8.8.4 R The conditions in BIPRU 4.2.26R (Combined use of methodologies under
the IRB approach) apply to a firm’s UK consolidation group or non-EEA sub-group non-UK sub-group as if that group were a single undertaking. … Corporate governance arrangement for the IRB approach and the AMA
8.8.9 G The governance arrangements that apply to the governing body, the senior
management and any designated committee of a firm in relation to the IRB approach also apply to the body or persons with equivalent powers with respect to the UK consolidation group or non-EEA sub-group non-UK sub-group. Where the parent undertaking and its subsidiary undertakings use rating systems on a unified basis, the approval and reporting process described in BIPRU 4.3.12G (Approval and reporting arrangements for the IRB approach where rating systems are used on a unified group basis) apply for the purpose of this paragraph too. … The current decision tree (diagram) in BIPRU 8 Annex 1 is deleted and is replaced by the one below. The new decision tree (diagram) below is not underlined.

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8 Annex
1R
Decision tree identifying a UK consolidation group

Test 1A: Is the firm a parent institution in the UK? (PIUK) Test 1B: Is the firm a subsidiary undertaking of a parent institution in the UK? Test 1C: Is the firm a parent financial holding company in the UK (PFHC UK)? Test 1D: Is the firm a subsidiary undertaking of a parent financial UK CONSOLIDATION holding company in the UK? GROUP is the PIUK or PFHC UK and its group NOT A UK CONSOLIDATION GROUP Yes No

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BIPRU 8 Annex 4 is deleted in its entirety. The deleted text of the Annex is not shown but it is marked as [deleted] as shown below. 8 Annex 4G Text of Articles 125 and 126 of the Banking Consolidation Directive [deleted] Amend the following as shown. 8 Annex 6R Non–EEA Non-UK regulators’ requirements deemed CRD-equivalent for individual risks Regime regulators Market risk Credit risk Operational risk
Part 1 (Non–
EEA NonUK banking regulators’ requirements deemed CRDequivalent for individual risks) … Regime regulators Market risk Credit risk Operational risk
Part 2 (Non–
EEA NonUK investment firm regulators’ requirements deemed CRDequivalent for individual risks)

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9 Securitisation
9.1 Application and purpose
…
Purpose
9.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, the
purpose of BIPRU 9 is to implement apply requirements that correspond to:
…
…
11 Disclosure (Pillar 3)
11.1 Application and purpose
…
Purpose
11.1.2 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, the
purpose of BIPRU 11 is to implement apply requirements that correspond to:
…
11.2 Basis of disclosures
Disclosure on an individual basis
11.2.1 R The following must comply with the obligations laid down in BIPRU 11.3
on an individual basis:
(1) a firm which is neither a parent undertaking nor a subsidiary undertaking; (2) a firm which is excluded from a UK consolidation group or nonEEA sub-group non-UK sub-group pursuant to BIPRU 8.5; and [Note: BCD Article 68(3)] (3) a firm which is part of a group which has been granted an investment firm consolidation waiver under BIPRU 8.4; …

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[Note: CAD Article 23]
EEA parent Parent institutions in the UK
11.2.2 R A firm which is an EEA parent institution a parent institution in the UK
must comply with the obligations laid down in BIPRU 11.3 on the basis of its consolidated financial situation. [Note: BCD Article 72(1)]
11.2.3 R A firm which is a significant subsidiary of an EEA parent institution a
parent institution in the UK must disclose the information specified in BIPRU 11.4.5R on an individual or sub-consolidated basis. Firms controlled by an EEA a parent financial holding company in the UK
11.2.4 R A firm controlled by an EEA parent financial holding company a parent
financial holding company in the UK or an EEA parent mixed financial holding company a parent mixed financial holding company in the UK must comply with the obligations laid down in BIPRU 11.3 on the basis of the consolidated financial situation of that EEA parent financial holding company parent financial holding company in the UK or EEA parent mixed financial holding company parent financial holding company in the UK. [Note: BCD Article 72(2)]
11.2.5 R A firm which is a significant subsidiary of an EEA parent financial holding
company a parent financial holding company in the UK or an EEA parent mixed financial holding company a parent financial holding company in the UK must disclose the information specified in BIPRU 11.4.5R on an individual or sub-consolidated basis. Waiver: Comparable disclosures provided on a consolidated basis by a parent undertaking established in a third country
11.2.6 G A firm which is included within comparable disclosures provided on a
consolidated basis by a parent undertaking whose head office is not in an EEA State the UK may apply for a waiver from the relevant disclosure requirements in BIPRU 11.2.2R - BIPRU 11.2.5R. The appropriate regulator’s approach to granting waivers is set out in the Supervision manual (see SUP 8). [Note: BCD Article 72(3)]
11.2.7 G A firm applying for a waiver from one or more of the disclosure
requirements in BIPRU 11.2.2R - BIPRU 11.2.5R will need to:
(1) satisfy the appropriate regulator that it is included within comparable disclosures provided on a consolidated basis by a parent undertaking whose head office is not in an EEA State the UK; and

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(2) notify the appropriate regulator of the location where the comparable disclosures are provided. …
11.4 Technical criteria on disclosure: General
…
Disclosures: Significant subsidiaries
11.4.5 R A firm which is a significant subsidiary of:
(1) an EEA parent institution a parent institution in the UK; or (2) an EEA parent financial holding company a parent financial holding company in the UK; or (3) an EEA parent mixed financial holding company a parent mixed financial holding company in the UK; must disclose the information specified in BIPRU 11.5.3R to BIPRU 11.5.4R on an individual or sub-consolidated basis. [Note: BCD Annex XII Part 1 point 5]
11.5 Technical criteria on disclosure: General requirements
…
Disclosure: Scope of application of directive requirements
11.5.2 R A firm must disclose the following information regarding the scope of
application of the requirements of the Banking Consolidation Directive GENPRU and BIPRU:
…
…
Disclosures: remuneration
…
11.5.19 G The appropriate regulator would normally consider the requirements to
publish disclosures in accordance with BIPRU 11.3.8R and 11.3.9R in respect of BIPRU 11.5 as a whole to meet the requirement in paragraph 15 of Annex XII to the Banking Consolidation Directive to publish “regular, at least annual, updates” (as implemented in BIPRU 11.5.18R).

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11.5.20 R (1) A firm that is significant in terms of its size, internal organisation
and the nature, scope and the complexity of its activities must also disclose the quantitative information referred to in BIPRU 11.5.18R at the level of senior personnel. (2) Firms must comply with the requirements set out in BIPRU 11.5.18R in a manner that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities and without prejudice to the General Data Protection Regulation. UK or other national transposition of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. [Note: Paragraph 15 of Annex XII to the Banking Consolidation Directive.] [Note: The appropriate regulator has given guidance for the purpose of providing a framework for complying with the disclosure requirements of BIPRU 11.5.18R in accordance with the proportionality test set out in BIPRU 11.5.20R(2).] … 12 Liquidity standards
12.1 Application
…
12.1.7 R In relation to an incoming EEA firm or a third country BIPRU firm, this
chapter applies only with respect to the activities of the firm’s UK branch.
[deleted]
12.2 Adequacy of liquidity resources
The overall liquidity adequacy rule
12.2.1 R …
(2) For the purpose of (1):
…
(b) an incoming EEA firm or a third country BIPRU firm may not, in relation to its UK branch, include liquidity resources other than those which satisfy the conditions in BIPRU 12.2.3R; [deleted] …

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…
Branch liquidity resources
12.2.3 R The conditions to which BIPRU 12.2.1R(2)(b) refers are that the firm’s
liquidity resources are:
(1) under the day-to-day control of the UK branch’s senior management; (2) held in an account with one or more custodians in the sole name of the UK branch; (3) unencumbered; and (4) for the purpose of the overall liquidity adequacy rule only, attributed to the balance sheet of the UK branch. [deleted]
12.2.4 G The effect of BIPRU 12.2.1R(2)(b) and BIPRU 12.2.3R is to require an
incoming EEA firm or a third country BIPRU firm to maintain a local operational liquidity reserve in relation to the activities of its UK branch. BIPRU 12.9 contains further guidance on this point. [deleted] Liquidity resources: general …
12.2.6 G The overall liquidity adequacy rule is expressed to apply to each firm on a
solo basis. Each firm must be able to satisfy that rule relying solely on its own liquidity resources. Where the firm is an incoming EEA firm or a third country BIPRU firm, compliance with the overall liquidity adequacy rule with respect to the UK branch must be achieved relying solely on liquidity resources that satisfy the conditions in BIPRU 12.2.3R.
12.2.7 G The starting point, therefore, is that each firm, or where relevant its UK
branch, must be self-sufficient in terms of its own liquidity adequacy. The appropriate regulator does, however, recognise that there are circumstances in which it may be appropriate for a firm or branch to rely on liquidity support provided by other entities in its group or from elsewhere within the firm. A firm wishing to rely on support of this kind, whether for itself or for its UK branch, may only do so with the consent of the appropriate regulator, given by way of a waiver under section 138A (Modification or waiver of rules) of the Act to the overall liquidity adequacy rule. …
12.3 Liquidity risk management
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Overarching liquidity systems and controls requirements

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…
12.3.5 R The strategies, policies, processes and systems referred to in BIPRU
12.3.4R must be proportionate to the complexity, risk profile and scope of operation of the firm, and the liquidity risk tolerance set by the firm’s governing body in accordance with BIPRU 12.3.8R, and must reflect the firm’s importance in each EEA State, in which it carries on business. [Note: article 86(2) (part) of the CRD] … Management of collateral … 12.3.22B R A firm must also have regard to existing legal, regulatory and operational limitations to potential transfers of liquidity and unencumbered assets amongst entities, both within and outside the EEA UK. [Note: article 86(6) of the CRD] …
12.4 Stress testing and contingency funding
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Contingency funding plans
…
12.4.11 R A firm must have in place liquidity recovery plans setting out adequate
strategies and proper implementation measures in order to address possible liquidity shortfalls, including in relation to branches established in another EEA State. Those plans must be tested at least annually, updated on the basis of the outcome of the alternative scenarios set out in BIPRU 12.4.-1R, and be reported to and approved by the firm’s governing body, so that internal policies and processes can be adjusted accordingly. A firm must take the necessary operational steps in advance to ensure that liquidity recovery plans can be implemented immediately. [Note: article 86(11) (part) of the CRD] …
12.5 Individual Liquidity Adequacy Standards
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Wholesale secured and unsecured funding risk …

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12.5.18 G In the appropriate regulator’s view, Type A wholesale funding is likely to
include at least funding which:
…
(5) is accepted from overseas counterparties (other than those in the country or territory of incorporation of a firm’s parent undertaking or, in the case of a UK branch, of the firm of which it forms part); or … … Intra-group liquidity risk …
12.5.38 R In relation to an incoming EEA firm or third country BIPRU firm which
does not have a whole-firm liquidity modification, that firm must assess the risk that its UK branch may be exposed to calls on liquidity under its control from its head office:
(1) in normal financial conditions; and
(2) under the liquidity stresses required by BIPRU 12.5.6R. [deleted]
12.5.39 R In complying with BIPRU 12.5.38R a firm is therefore assessing its
exposure to inter-office liquidity risk, rather than intra-group liquidity risk. It is the appropriate regulator’s assessment of the firm’s inter-office liquidity risk that is one of the factors that will inform the appropriate regulator’s decision as to the appropriate size for the firm’s local operational liquidity reserve (as described in BIPRU 12.2). [deleted] …
12.7 Liquid assets buffer
…
12.7.5 R Subject to BIPRU 12.7.6R, for the purpose of BIPRU 12.7.2R(3) a firm
may include reserves in the form of sight deposits held by the firm with the central bank of a third country.:
(1) an EEA State; or
(2) Canada, the Commonwealth of Australia, Japan, Switzerland or the United states of America.
12.7.6 R For the purpose of BIPRU 12.7.5R, a firm may not include reserves held at
a central bank unless:

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(1) the central bank in question has been assessed by at least two eligible ECAIs as having a credit rating associated with credit quality step 1 in the table set out in BIPRU 12 Annex 1R (Mapping of credit assessments of ECAIs to credit quality steps); and (2) those reserves are denominated in the domestic currency of the central bank in question; and (3) there are no legal or practical impediments to the firm using or withdrawing those reserves. …
12.8 Cross-border and intra-group management of liquidity
12.8.1 R Every firm subject to BIPRU 12 is subject to the overall liquidity adequacy
rule. The effect of that rule is that every firm is required to be selfsufficient in terms of liquidity adequacy and to be able to satisfy that rule relying on its own liquidity resources. Where the firm is an incoming EEA firm or third country BIPRU firm compliance with the overall liquidity adequacy rule with respect to the UK branch must be achieved relying solely on liquidity resources that satisfy the conditions in BIPRU 12.2.3R.
12.8.2 G However, the appropriate regulator recognises that there may be
circumstances in which it would be appropriate for a firm to rely on liquidity resources which can be made available to it by other members of its group, or for a firm to rely on liquidity resources elsewhere in the firm for the purposes of ensuring that its UK branch has adequate liquidity resources in respect of the activities carried on from the branch. Where the appropriate regulator is satisfied that the statutory tests in section 138A (Modification or waiver of rules) of the Act are met, the appropriate regulator will consider modifying the overall liquidity adequacy rule to permit reliance on liquidity support of this kind.
12.8.3 G BIPRU 12.8 provides guidance on two types a type of modification to the
overall liquidity adequacy rule and to other rules in BIPRU 12 for which the appropriate regulator considers a firm may wish to apply, namely:
(1) an intra-group liquidity modification.; and (2) a whole-firm liquidity modification. [deleted]
12.8.4 G In considering whether the statutory tests in section 138A of the Act have
been met, the appropriate regulator will, amongst others, have regard to the factors detailed below in relation to an intra-group liquidity modification (of the kind permitting the inclusion in a firm’s liquidity resources of parent undertaking liquidity support) and a whole-firm liquidity modification. In practice it is likely that the appropriate regulator will view these as preconditions to the grant of an intra-group liquidity modification of that type or a whole-firm liquidity modification and will therefore ordinarily need to be satisfied fully that each has been adequately

FCA 201X/XX addressed. They include matters on which the appropriate regulator will need to reach agreement with the Home State regulator, third country competent authority, or other another relevant supervisor, and also matters which it will need to agree directly with a firm or the parent undertaking of a firm. It is likely that a number of these matters will be reflected as requirements or conditions in the modification.
12.8.5 G This section represents merely an indication of the matters to which the
appropriate regulator will have regard in considering an application for a whole-firm liquidity modification or an intra-group liquidity modification. In considering such an application, the appropriate regulator will always take into account anything that it reasonably considers to be relevant for the purposes of assessing whether the statutory tests in section 138A of the Act are met. In doing so, it will have regard to the role and importance of a firm or UK branch in the UK financial system. … Whole-firm liquidity modification: general
12.8.22 G In relation to an incoming EEA firm or third country BIPRU firm, the
overall liquidity adequacy rule provides that, for the purpose of complying with that rule, a firm may not, in relation to its UK branch, include liquidity resources other than those which satisfy the conditions in BIPRU 12.2.3R. Those conditions seek to ensure that a firm of this kind has a reserve of liquidity for operational purposes that is under the control of, and available for use by, that firm’s UK branch. Further guidance is given in BIPRU 12.5.39G in relation to the local operational liquidity reserve. In addition, BIPRU 12.9.10G explains how the appropriate regulator will approach the giving of individual liquidity guidance to an incoming EEA firm or third country BIPRU firm. The appropriate regulator does, however, recognise that there are circumstances in which it may be appropriate for a UK branch to rely on the availability of liquidity resources from elsewhere within the firm. A firm wishing to rely on support of this kind for its UK branch may apply for a modification to the overall liquidity adequacy rule where it considers that the statutory tests in section 138A of the Act are met. [deleted]
12.8.23 G Although an incoming EEA firm or third country BIPRU firm may apply to
modify the overall liquidity adequacy rule and other rules in BIPRU 12, in relation to its UK branch, the appropriate regulator anticipates that many such firms will wish to apply for a modification in the form which the appropriate regulator defines as a whole-firm liquidity modification. In the appropriate regulator’s view, a modification to the overall liquidity adequacy rule for a firm of this kind will tend to be appropriate where an applicant firm manages its liquidity on an integrated, whole-firm basis. Where that is the case, and having regard to the matters outlined in the guidance in this section, the appropriate regulator is likely to consider it more appropriate for the UK branch to be subject, in large part, to the same regulatory liquidity regime which applies to the rest of the firm. In granting a whole-firm liquidity modification the appropriate regulator therefore

FCA 201X/XX recognises that in certain circumstances a UK branch can have adequate liquidity resources in circumstances where the liquidity resources upon which the firm seeks to rely do not meet the criteria set out in BIPRU 12.2.3R. [deleted]
12.8.24 G Accordingly, a whole-firm liquidity modification envisages:
(1) a modification to the overall liquidity adequacy rule so as to permit reliance by the firm, in relation to its UK branch, on liquidity resources wherever held in the firm for the purposes of meeting that rule; and (2) a waiver of the remainder of the substantive rules in BIPRU 12, with the effect that the UK branch of the applicant firm becomes subject for the purpose of day-to-day liquidity supervision to the liquidity regime of the Home State regulator or third country competent authority in question. [deleted]
12.8.25 R The effect of a whole-firm liquidity modification is that the appropriate
regulator will in its supervision of the liquidity of the UK branch place reliance on the liquidity regime of the Home State regulator or third country competent authority in question. The appropriate regulator will wish to ensure that it has adequate data at the time of consideration of the whole-firm liquidity modification application and, if the application is granted, on a continuing basis thereafter, about the liquidity position of the firm as a whole. It is therefore likely that an applicant firm will be asked to provide as part of its application relevant liquidity data items covering the liquidity position of the firm as a whole. It is also likely that an applicant firm will be asked, as part of its application, to provide an appropriately detailed account as to the activities conducted by its UK branch as at the date of the application. In addition, the appropriate regulator anticipates that an applicant firm will be asked to ensure as a condition of the modification, if granted, that it provides relevant data items, covering the whole-firm liquidity position, to the appropriate regulator on a continuing basis at a frequency to be determined as part of the appropriate regulator’s consideration of the applicant firm’s case but in any event likely to be reflective of the appropriate regulator’s assessment of the liquidity risk profile of the firm. [deleted] Consideration of an application for a whole-firm liquidity modification
12.8.26 G In relation to the Home State regulator’s or third country competent
authority’s regime of liquidity regulation, the appropriate regulator will, before granting a whole-firm liquidity modification, ordinarily expect to be satisfied that:
(1) the regime in question delivers outcomes as regards the regulation of the applicant firm’s liquidity risk that are broadly equivalent to those intended by this chapter; and

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(2) there is clarity as to any legal constraints imposed by the Home State regulator or third country competent authority on the provision of liquidity by a firm to its UK branch, as well as the potential for such restrictions to be imposed in the future. [deleted]
12.8.27 G In relation to the applicant firm in question, the appropriate regulator will,
before granting a whole-firm liquidity modification, ordinarily expect to have reached agreement with the Home State regulator or third country competent authority in a number of areas, including agreement that:
(1) it will notify the appropriate regulator promptly of any material or persistent breaches by that firm of its liquidity rules, or of risks that such breaches are imminent; (2) it is satisfied with the adequacy of the arrangements in place for firm-wide liquidity risk management; (3) it is satisfied as to the adequacy of that firm’s liquidity resources including the size and quality of its liquid assets buffer; (4) it does not object to any undertakings given by that firm in respect of its UK branch to ensure that the branch has adequate liquidity resources; and (5) it will have due regard to the views of the appropriate regulator in its supervision of that firm’s liquidity position. [deleted]
12.8.28 G In relation to the applicant firm in question, the appropriate regulator will,
before granting a whole-firm liquidity modification, ordinarily expect to have reached agreement with that firm in a number of areas, including agreement that:
(1) it will make available liquidity resources at all times to its UKbranch if needed; (2) it will make available to the appropriate regulator information in an appropriate format on firm-wide liquidity; (3) it will notify the appropriate regulator at the same time as it notifies the Home State regulator or third country competent authority of any issues relevant to the liquidity position of its UK branch or compliance with the rules to which it is subject in respect of its liquidity (including with the terms of its whole-firm liquidity modification); (4) its UK branch will continue to be fully integrated with the rest of the firm for liquidity risk management purposes; (5) it will participate in the appropriate regulator’s thematic supervisory work in relation to liquidity when requested to do so by the appropriate regulator. [deleted]

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Ongoing requirements
12.8.29 G The appropriate regulator also anticipates that a whole-firm liquidity
modification would be made subject to a number of ongoing conditions and requirements. These are likely to include:
(1) the appropriate regulator receiving annual confirmation from the Home State regulator or third country competent authority that it remains satisfied with the arrangements in respect of that firm for liquidity supervision and their operation; (2) an annual meeting with the Home State regulator or third country competent authority to discuss liquidity supervision of that firm; (3) the appropriate regulator receiving annual confirmation from the firm, approved by its governing body, that it remains in full compliance with the terms of its whole-firm liquidity modification; and (4) as at the first anniversary of the grant of the whole-firm liquidity modification and on each anniversary thereafter, the appropriate regulator receiving from the firm:
(a) an appropriate account of the activities conducted by the UK branch over the previous year; and (b) a copy of the firm’s latest business plan where this differs from that previously sent to the appropriate regulator after grant of its whole-firm liquidity modification. [deleted]
12.8.30 G In determining the appropriate duration of a whole-firm liquidity
modification, the appropriate regulator will have regard to the role and importance of the UK branch in question in the UK financial system. In some cases, the appropriate regulator may take the view that a whole-firm liquidity modification, covering a UK branch whose role and importance in the UK financial system are significant, ought to be reviewed more regularly than one granted in respect of a less systemically significant branch. The appropriate regulator will consider this issue in determining the appropriate duration of such a modification. The appropriate regulator is also likely to consider it appropriate in modifications other than those of short duration to reflect in the terms of the modification representations made either in an applicant firm’s business plan or direct to the appropriate regulator as part of the application process, but in either case as to the expected nature and size of the UK branch’s activities over the course of the duration of the modification. Where requirements are included in a modification in relation to these matters, a firm that anticipates that it will breach those requirements will need to apply in advance of any such event for a variation to its then existing whole-firm liquidity modification. In considering an application to vary, the appropriate regulator will consider afresh whether the tests in section 138A of the Act continue to be met for

FCA 201X/XX the grant of a whole-firm liquidity modification to the firm in question. [deleted] …
12.9 Individual liquidity guidance and regulatory intervention points
…
Additional guidance for branches
12.9.10 G In relation to an incoming EEA firm or third country BIPRU firm, where
the appropriate regulator gives that firm individual liquidity guidance in relation to its UK branch, it will have regard to the liquidity risk profile of the branch. In the absence of a whole-firm liquidity modification, the effect of BIPRU 12.2.1R(2)(b) and BIPRU 12.2.3R is to require the firm to hold a liquid assets buffer of the amount identified as appropriate in its individual liquidity guidance (or in the case of a simplified ILAS BIPRU firm, the amount of its simplified buffer requirement unless this has been superseded by the appropriate regulator issuing individual liquidity guidance to the firm in question) in the form of a local operational liquidity reserve. Further guidance is given in BIPRU 12.5.39G in relation to the local operational liquidity reserve. In determining the appropriate size of such a firm’s liquid assets buffer the appropriate regulator will have regard to all relevant factors, including the extent to which the appropriate regulator has adequate data to enable it to assess accurately the liquidity risk elsewhere in the firm beyond its UK branch. [deleted] … 13 The calculation of counterparty risk exposure values for financial derivatives, securities financing transactions and long settlement transactions
13.1 Application and Purpose
…
Purpose
13.1.4 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, BIPRU
13 implements applies requirements that correspond to:
…
…
13.3 Calculation of exposure values for financial derivatives and long settlement
transactions: General provisions
…

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Definition of financial derivative instrument
13.3.3 R Each of the following is a financial derivative instrument:
…
(3) a contract of a nature similar to those in 1(a) to (e) and 2(a) to (d) concerning other reference items or indices, including as a minimum all instruments specified in points paragraphs 4 to 7, 9 and 10 of
Section C of Annex I to the MIFID Part 1 of Schedule 2 to the
Regulated Activities Order not otherwise included in (1) or (2). [Note: BCD Annex IV] …
13.6 CCR internal model method
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Use of other models
13.6.9 G Point 2 of Part 6 of Annex III of the Banking Consolidation Directive
provides that a A firm using the CCR internal model method may use a type of model other than the type set out in BIPRU 13.6. If the appropriate regulator agrees to this the details of the model and the necessary calculations will be set out in the CCR internal model method permission, which will modify BIPRU 13.6 to the extent necessary. The appropriate regulator would not expect to agree to such a request unless the firm was able to satisfy the appropriate regulator that the method was at least as conservative as the method set out in BIPRU 13.6 and in particular that, for every counterparty, any method was more conservative than alpha multiplied by effective EPE calculated according to the equation in BIPRU 13.6.27R. [Note: BCD Annex III Part 6 point 2 (second sentence) and point 11] … 14 Capital requirements for settlement and counterparty risk
14.1 Application and purpose
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Purpose
14.1.3 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, BIPRU
14 implements applies requirements that correspond to:
…
…

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TP 2 Capital floors for a firm using the IRB approach … Purpose
2.3 G Pursuant to the third paragraph of article 95(2) of the EU UK CRR, this
section in part implements applies requirements that correspond to Articles
152(1) - (7) of the Banking Consolidation Directive and Article 43 of the Capital Adequacy Directive.
2.4 G The purpose of this section is to limit the amount of capital reduction arising
from the implementation application of the requirements that correspond to the Banking Consolidation Directive and the Capital Adequacy Directive compared with the requirements arising from the previous versions of those Directives. As such it is effectively a comparison of the capital resource requirements arising from BIPRU with those arising from the appropriate IPRU sourcebook that would have applied as at 31 December 2006. However the effect of changes to the market risk requirements is removed by requiring BIPRU 7 (Market risk) to be used for both sides of the comparison. How to apply the capital floors …
2.6 G The Directive provisions on which this section is based are written as a floor
on a firm’s capital resources requirement. This section is intended as a floor on the firm’s capital resources. This section however is also written as a second capital resources requirement that sits beside the general capital resources requirements of BIPRU and GENPRU. The reason for this is that a firm should meet the general capital resources requirements of BIPRU and GENPRU using capital resources calculated under GENPRU 2.2 (Capital resources). On the other hand a firm should meet the capital resources requirements of this section (which are based on IPRU) using the relevant IPRU definition. In practice the two sets of definitions of capital resources are similar apart from the provisions about expected loss. Therefore as shown by the example in BIPRU TP 2.12G and BIPRU TP 2.13G, in practice a firm is subject to a single capital resources requirement. … Waiver from IPRU capital resources requirement 2.11A G Article 152(5d) and (5e) of the Banking Consolidation Directive allows the The appropriate regulator to may waive the capital floor calculation based on the IPRU capital resources requirement in BIPRU TP 2.8R(3) on a caseby-case basis only if a firm started to use the IRB approach on or after 1 January 2010. The appropriate regulator will consider an application for such a waiver in the light of the criteria in section 138A of the Act (Modification or waiver of rules).

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[Note: BCD Annex VII part 1 point 152]
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Capital floors: consolidation
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2.32 R The scope of the consolidation under BIPRU TP 2.30R and any exemption
from consolidation is determined in accordance with BIPRU 8 (Group risk - consolidation) rather than IPRU. In particular, the following adjustments apply:
(1) if a firm is a member of a UK consolidation group and applies the IRB approach with respect to that UK consolidation group, BIPRU TP 2.30R applies with respect to that UK consolidation group; and (2) if a firm is a member of a non-EEA sub-group non-UK sub-group and applies the IRB approach with respect to that non-EEA sub-group nonUK sub-group, BIPRU TP 2.30R applies with respect to that non-EEA sub-group non-UK sub-group.
2.33 G If for example the consolidation rules that apply for the purposes of this
section are those in chapter 14 of IPRU(INV) (Consolidated supervision of
investment firms) then IPRU(INV) 14.1 (Application) and 14.2 (Scope of consolidation) do not apply. BIPRU 8.2 (Scope and basic consolidation requirements for UK consolidation groups), BIPRU 8.3 (Scope and basic consolidation requirements for non-EEA sub-groups non-UK sub-groups), BIPRU 8.4 (CAD Article 22 groups and investment firm consolidation waiver) and BIPRU 8.5 (Basis of consolidation) apply instead. … TP 15 Commodities firm transitionals: Exemption from capital requirements Application
15.1 R Subject to BIPRU TP 15.2R, BIPRU TP 15 applies to a BIPRU firm:
(1) whose main business consists exclusively of the provision of investment services or investment activities in relation to the financial instruments set out in points paragraphs 5, 6, 7, 9 and 10 of Section C of Annex I to the MIFID Part 1 of Schedule 2 to the Regulated Activities Order; and … … Purpose

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15.3 G BIPRU TP 15 implements applies requirements that correspond to Article
48(1) of the Capital Adequacy Directive as applied pursuant to the discretion in the third paragraph of article 95(2) of the EU UK CRR. … Consolidation
15.13 R BIPRU TP 15 does not apply for the purposes of BIPRU 8 with respect to a
firm’s UK consolidation group or, as the case may be, non-EEA UK subgroup unless the following conditions are satisfied:
(1) there is no credit institution in that group; (2) each CAD investment firm in the group meets the conditions in BIPRU TP 15.1R(1); and (3) each CAD investment firm whose head office is in an EEA State satisfies the conditions in BIPRU TP 15.1R(2); and [deleted] (4) any CAD investment firm whose head office is outside the EEA UK would have fallen into BIPRU TP 15.1R(2) if:
(a) its head office had been in an EEA State the UK; and (b) it had carried on all its business in the EEA UK and had obtained whatever authorisations for doing so were required under the ISD in the form that Directive was in on 31 December 2006. …

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Annex C
Amendments to the Prudential sourcebook for Investment Firms (IFPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application
1.1 Application and Purpose
…
Exclusion of certain types of firms
1.1.5 R None of the following is an IFPRU investment firm:
(1) an incoming EEA firm [deleted];
(2) an incoming Treaty firm [deleted];
(3) any other an overseas firm;
…
…
Meaning of dealing on own account
1.1.1
2
R (1) For the purpose of IFPRU and the EU UK CRR, dealing on own account means the service of dealing in any financial instruments for own account as referred to in point paragraph 3 of Section A of
Annex I to MiFID Part 3 of Schedule 2 to the Regulated Activities
Order, subject to (2) and (3).
(2) In accordance with article 29(2) of CRD (Definition of dealing on own account), an An investment firm that executes investors’ orders for financial instruments and holds such financial instruments for its own account does not, for that reason, deal on own account if the following conditions are met:
…
(c) (for an investment firm that is an IFPRU investment firm or an EEA firm) it complies with the requirements in articles 92 to 95 (Own funds requirements for investment firms with limited authorisation to provide investment services) and Part Four (Large exposures) of the EU UK CRR; …

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(3) In accordance with article 29(4) of CRD, the The holding on nontrading book positions in financial instruments in order to invest in own funds is not dealing on own account for the purposes of IFPRU 1.1.9R (Types of IFPRU investment firm: IFPRU 125K firm) and IFPRU 1.1.10R (Types of IFPRU investment firm: IFPRU 50K firm). [Note: CRD article 29(4)] Interpretation of the definition of types of firm and undertaking 1.1.1 3 G A firm whose head office is not in an EEA State the UK is an investment firm if it would have been subject to the requirements imposed by MiFID (but it is not a bank, building society, credit institution, local firm, exempt CAD firm and BIPRU firm) if:
(1) its head office had been in an EEA State the UK; and (2) it had carried on all its business in an EEA State the UK and had obtained whatever authorisations for doing so as are required under the UK legislation that implemented MiFID. … 1.1.1 5 G For the purposes of the definitions in IFPRU and Part Three, Title I, Chapter 1, Section 2 of the EU UK CRR (Own funds requirements for investment firms with limited authorisation to provide investment services), a person does any of the activities referred to in IFPRU and the EU UK CRR if:
…
(3) (for an EEA firm) it is authorised by its Home State regulator to do that activity; or [deleted] (4) (if the carrying on of that activity is prohibited in a state or territory without an authorisation in that state or territory) that firm has such an authorisation. …
1.2 Significant IFPRU firm
Purpose
1.2.1 G Throughout CRD and the EU UK CRR there are various policies which have
restricted application based on a firm’s scope, nature, scale, internal organisation and complexity. These policies are provided in the UK legislation related to the following:
(1) article 76 of CRD on the establishment of an independent risk committee;

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(2) article 88 of CRD on the establishment of an independent nominations committee; (3) article 91 of CRD on the limitations on the number of directorships an individual may hold; (4) article 95 of CRD on the establishment of an independent remuneration committee; (5) article 100 of CRD on supervisory stress testing to facilitate the SREP under article 97 of CRD; (6) articles 129 and 130 of CRD on applicability of the capital conservation buffer and the countercyclical capital buffer (provided that an exemption from the application of these articles does not threaten the stability of the financial system of the EEA State UK); (7) article 6(4) of the EU UK CRR on the scope of liquidity reporting on an individual basis; (8) article 11(3) of the EU UK CRR on the scope of liquidity reporting on a consolidated basis; and (9) article 450 of the EU UK CRR on disclosure on remuneration. …
1.3 Supervisory benchmarking of internal approaches for calculating own funds
requirements
…
1.3.2 G A firm must submit the results of the calculations referred to in IFPRU
1.3.1R(1), in line with the template set out in the Commission Regulation adopted under article 78(8) of CRD, to the FCA and to EBA CRD ITS on templates, definitions and IT-solutions.
1.3.3 R Where the FCA has chosen to develop specific portfolios in accordance with
article 78(2) of CRD, a firm must report the results of the calculations
separately from the results of the calculations for EBA portfolios referred to in IFPRU 1.3.1R. [Note: article 78(2) of CRD] …
1.5 Notification of FINREP reporting
…

FCA 201X/XX
1.5.2 R A firm must notify the FCA if it adjusts its firm’s accounting reference date
under the Commission Regulation made under article 99 of the EU CRR CRR ITS on supervisory reporting. … 2 Supervisory processes and governance
2.1 Application and purpose
[Note: On 19 December 2014, the EBA published guidelines “Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP)”, EBA/GL/2014/13. The FCA has confirmed its intention to make every effort to comply with these guidelines that can be found at:
http://www.eba.europa.eu/documents/10180/935249/EBA-GL-2014- 13+%28Guidelines+on+SREP+methodologies+and+processes%29.pdf/.] … Level of application: ICAAP rules … 2.2.4 7 R A firm which is a UK parent institution in a Member State must comply with the ICAAP rules on a consolidated basis. [Note: article 108(2) of CRD] 2.2.4 8 R A firm controlled by a UK parent financial holding company in a Member State or a UK parent mixed financial holding company in a Member State must comply with the ICAAP rules on the basis of the consolidated situation of that holding company, if the FCA is responsible for supervision of the firm on a consolidated basis under article 111 of CRD regulation 20 of the Capital Requirements Regulation 2013. [Note: article 108(3) of CRD] 2.2.4 9 R A firm that is a subsidiary must apply the ICAAP rules on a sub-consolidated basis if the firm, or the parent undertaking where it is a financial holding company or mixed financial holding company, have an institution or financial institution or an asset management company as a subsidiary in a third country or hold a participation in such an undertaking as members of a non-EEA subgroup non-UK sub-group. [Note: article 108(4) of CRD] … Level of application: risk control rules …

FCA 201X/XX
2.2.5
9
R Where a firm is a member of a FCA consolidation group or a non-EEA subgroup non-UK sub-group, the firm must ensure that the risk management processes and internal control mechanisms at those levels comply with the obligations set out in the risk control rules on a consolidated basis (or a subconsolidated basis). [Note: article 109(2) of CRD] 2.2.6 0 R Compliance with the obligations in IFPRU 2.2.59R must enable the FCA consolidation group or the non-EEA sub-group non-UK sub-group to have arrangements, processes and mechanisms that are consistent, well integrated and ensure that data relevant to the purpose of supervision can be produced. [Note: article 109(2) of CRD] … Group risk … 2.2.8 6 G A firm should include in the written record in IFPRU 2.2.43R (Documentation of risk assessments) a description of the broad business strategy of the FCA consolidation group or the non-EEA sub-group non-UK sub-group of which it is a member, the group’s view of its principal risks and its approach to measuring, managing and controlling the risks. This description should include the role of stress testing, scenario analysis and contingency planning in managing risk on an individual basis and consolidated basis. 2.2.8 7 G A firm should satisfy itself that the systems (including IT) of the FCA consolidation group or the non-EEA sub-group non-UK sub-group of which it is a member are sufficiently sound to support the effective management and, where applicable, the quantification of the risks that could affect the FCA consolidation group or the non-EEA sub-group non-UK sub-group, as the case may be. …
2.3 Supervisory review and evaluation process: internal capital adequacy
standards
[Note: On 19 December 2014, the EBA published guidelines “Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP)”, EBA/GL/2014/13. The FCA has confirmed its intention to make every effort to comply with these guidelines that can be found at:
http://www.eba.europa.eu/documents/10180/935249/EBA-GL-2014- 13+%28Guidelines+on+SREP+methodologies+and+processes%29.pdf/.] …

FCA 201X/XX
The ICAAP and the SREP: the SREP
…
2.3.1
2
G (1) …
(2) In making these assessments, the FCA will have regard to the nature, scale and complexity of a firm’s business and of the major sources of risks relevant to such business as referred to in the general stress and scenario testing rule and SYSC 20 (Reverse stress testing), and the extent to which the firm has used any of the capital buffers that are required of it under the UK legislation that implemented the CRD, as applicable. … Business risk: stress tests for firms using the IRB approach … 2.3.5 2 R If IFPRU 2.3.50R applies to a firm on a consolidated basis, the following adjustments are made to IFPRU 2.3.50R in accordance with the general principles of Part One, Title II, Chapter 2 of the EU UK CRR (Prudential consolidation):
(1) references to own funds are to the consolidated own funds of the firm’s FCA consolidation group or, as the case may be, its non-EEA sub-group non-UK sub-group; and (2) references to the capital requirements in Part Three of the EU UK CRR (Capital requirements) are to the consolidated capital requirements with respect to the firm’s FCA consolidation group or, as the case may be, its non-EEA sub-group non-UK sub-group under
Part One, Title II, Chapter 2 of the EU UK CRR (Prudential
consolidation).
…
3 Own funds
3.1 Base own funds requirement
…
3.3 Basel 1 floor
…
Permission not to apply the Basel 1 floor

FCA 201X/XX
3.3.1 G The FCA does not expect that it will waive the application of the Basel 1
floor as contemplated in article 500(2) of the EU CRR. [deleted] … 4 Credit risk …
4.2 Standardised approach
…
Retail exposures
4.2.6 G Where an exposure is denominated in a currency other than the euro, the
FCA expects a firm to use appropriate and consistent exchange rates to determine compliance with relevant thresholds in the EU UK CRR. Accordingly, a firm should calculate the euro equivalent value of the exposure for the purposes of establishing compliance with the aggregate monetary limit of €1 million for retail exposures using a set of exchange rates the firm considers to be appropriate. The FCA expects a firm’s choice of exchange rate to have no obvious bias and to be derived on the basis of a consistent approach (see article 123(c) of the EU UK CRR). … Mapping of ECAIs credit assessments
4.2.12 G Until such time as the European Commission adopts implementing technical
standards drafted by the European Supervisory Authorities Joint Committee to specify for all ECAIs the relevant credit assessments of the ECAI that correspond to credit quality steps, the FCA expects a firm to continue to have regard to the table mapping the credit assessments of certain ECAIs to credit quality steps produced in accordance with regulation 22(3) of the Capital Requirements Regulations 2006. For mapping of the credit quality step to the credit assessments of eligible ECAIs, refer to:
http://www.fca.org.uk. [deleted]
4.3 Guidance on internal ratings based approach: high level material
…
Application of requirements to EEA groups applying the IRB approach on a unified basis
4.3.4 G Article 20(6) of the EU UK CRR states that, where the IRB approach is used
on a unified basis by those entities which fall within the scope of article 20(6) (EEA group), the FCA is required to permit certain IRB requirements to be met on a collective basis by members of that group. In particular, the

FCA 201X/XX
FCA considers that, where a firm is reliant upon a rating system or data provided by another member of its group, it will not meet the condition that it is using the IRB approach on a unified basis unless:
(1) the firm only does so to the extent that it is appropriate, given the nature and scale of the firm’s business and portfolios and the firm’s position within the group; (2) the integrity of the firm’s systems and controls is not adversely affected; (3) the outsourcing of these functions meets the requirements of SYSC; and (4) the abilities of the FCA and the consolidating supervisor of the group to carry out their responsibilities under the EU UK CRR are not adversely affected. … Corporate governance
4.3.8 G (1) Where the firm’s rating systems are used on a unified basis under
article 20(6) of the EU UK CRR, the FCA considers that the
governance requirements in article 189 of the EU UK CRR can only be met if the subsidiaries have delegated to the governing body or designated committee of the EEA parent institution UK parent institution, EEA parent financial holding company UK parent financial holding company or EEA parent mixed financial holding company UK parent mixed financial holding company responsibility for approval of the firm’s rating systems. (2) The FCA expects an appropriate individual in a significant-influence function role to provide to the FCA on an annual basis written attestation that the rating system permissions required by the EU UK CRR have been carried out appropriately. [Note: see articles 189 and 20(6) of the EU UK CRR and article 3(1)(7) of CRD] … Permanent partial use: non-significant business units and immaterial exposure classes and types …
4.3.12 G The following points set out the level at which the FCA expects the 15% test
to be applied for a firm that is a member of a group:

FCA 201X/XX
(1) if a firm is part of a group subject to consolidated supervision in the EEA UK and for which the FCA is the consolidating supervisor, the calculations in (1) are carried out with respect to the wider group; (2) if a firm is part of a group subject to consolidated supervision in the EEA UK and for which the FCA is not the consolidating supervisor the calculation in (1) would not apply but the requirements of the consolidating supervisor relating to materiality will need to be met for the wider group; (3) if the firm is part of a sub-group subject to consolidated supervision in the EEA UK and part of a wider third-country group subject to equivalent supervision by a regulatory authority outside of the EEA UK, the calculation in (1) would not apply but the requirements of the consolidating or lead regulator relating to materiality would need to be met for both the sub-group and the wider group; and (4) if the firm is part of a sub-group subject to consolidated supervision in the EEA UK and is part of a wider third-country group that is not subject to equivalent supervision by a regulatory authority outside of the EEA UK, then the calculation in (1) would apply for the wider group if supervision by analogy is applied and for the sub-group if other alternative supervisory techniques are applied.
4.3.13 G Whether a third-country group is subject to equivalent supervision, whether
it is subject to supervision by analogy or whether other alternative supervisory techniques apply, is decided in accordance with article 127 of CRD (Assessment of equivalence of third countries' consolidated supervision) GENPRU 3.2 (Third-country groups). (See article 150(1)(c) of the EU UK CRR.) … 7 Liquidity
7.1 Application
…
Application of BIPRU 12 (Liquidity standards)
7.1.3 G The FCA’s liquidity regime and liquidity reporting in BIPRU 12 (Liquidity
standards) and SUP 16 (Reporting requirements) continue to apply applies to an IFPRU investment firm until the liquidity coverage requirement in article 412 of the EU CRR becomes applicable in 2015.
7.1.4 Pending specification of a uniform definition under article 460 of the EU
CRR (Liquidity) of high and extremely high liquidity and credit quality, a A firm should be guided by BIPRU 12 (Liquidity standards) when complying with article 416 of the EU CRR (Reporting on liquid assets).

FCA 201X/XX
…
8 Prudential consolidation and large exposures
8.1 Prudential consolidation
Application
8.1.1 R (1) This section applies to an IFPRU investment firm.
(2) This section does not apply to an exempt IFPRU commodities firm if the conditions in (2) are met. (3) The conditions are:
(a) article 498 of the EU UK CRR (Exemptions for commodities dealers) applies to it; (b) the exempt IFPRU commodities firm is not a member of a FCA consolidation group consolidation group or non-EEA sub-group non-UK sub-group; (c) each investment firm in the group that the exempt IFPRU commodities firm belongs to meets the conditions in article 498 of the EU UK CRR; and (d) any investment firm in the group that the exempt IFPRU commodities firm belongs to whose head office is outside the EEA UK would have been a firm to whom article 498 would have applied if its head office had been in an EEA State the UK. …
8.2 Large exposures
…
Intra-group exposures: non-core large exposures group …
8.2.5 G The FCA expects that applications for exemptions under article 400(2)(c) of
the EU UK CRR will be for firms established in the UK where the intragroup undertakings to which they have exposures meet the criteria for the core UK group in article 113(6) of the EU UK CRR, except for article 113(6)(d) (established in the same EEA State UK).
8.2.6 R A firm with a non-core large exposures group permission may (in line with
that permission) exempt, from the application of article 395(1) of the EU

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CRR (Limits to large exposures), exposures, including participations or other kinds of holdings, incurred by a firm to:
… in so far as those undertakings are covered by the supervision on a consolidated basis to which the firm itself is subject, in accordance with the EU CRR, Directive 2002/87/EC regarding the supplementary supervision of financial entities in a financial conglomerate the UK legislation that implemented the Financial Groups Directive or with equivalent standards in force in a third country; exposures that do not meet these criteria, whether or not exempted from article 395(1), shall be treated as exposures to a third party. [Note: article 400(2) of the EU CRR] … Conditions for exemptions
8.2.13 R A firm may only make use of the exemptions provided in this section where
the following conditions are met:
(1) the specific nature of the exposure, the counterparty or the relationship between the firm and the counterparty eliminate or reduce the risk of the exposure; and (2) any remaining concentration risk can be addressed by other equally effective means, such as the arrangements, processes and mechanisms in article 81 of CRD IFPRU 2.2.22R (Concentration risk). [Note: article 400(3) of the EU CRR] … 10 Capital buffers …
10.3 Countercyclical capital buffer
…
Calculation of countercyclical capital buffer rates
10.3.2 R (1) To calculate the weighted average in IFPRU 10.3.1R, a firm must
apply to each applicable countercyclical buffer rate its total own funds requirements for credit risk, specific risk, incremental default and migration risk that relates to the relevant credit exposures in the jurisdiction in question, divided by its total own funds requirements for credit risk that relates to all of its relevant credit exposures.

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(2) For the purposes of (1), a firm must calculate its total own funds requirement for credit risk, specific risk, incremental default and migration risk in accordance with Part Three, Titles II (Capital requirements for credit risk) and IV (Own funds requirements for market risk) of the EU UK CRR. (3) The countercyclical buffer rate for an exposure located in the UK is the rate set by the UK countercyclical buffer authority for the UK. (4) The countercyclical buffer rate for an exposure located in an EEA State other than the UK is:
(a) the rate set by the EEA countercyclical buffer authority for that jurisdiction; or (b) if that rate exceeds 2.5% of total risk exposure amount and has not been recognised by the UK countercyclical buffer authority, 2.5% [deleted] (5) The countercyclical buffer rate for an exposure located in a third country is the rate set by the UK countercyclical buffer authority for that jurisdiction. (6) If the UK countercyclical buffer authority has not set a rate for a third country, the countercyclical buffer rate for an exposure located in that jurisdiction is:
(a) the rate set by the third country countercyclical buffer authority for that jurisdiction; or (b) if that rate exceeds 2.5% and has not been recognised by the UK countercyclical buffer authority, 2.5%. (7) If the UK countercyclical buffer authority has not set a rate for a third country and either there is no third-country countercyclical buffer authority for that country or the authority has not set a rate for that jurisdiction, the countercyclical buffer rate for an exposure located in that jurisdiction is zero. (8) If the countercyclical buffer rate for the UK is increased, that increase takes effect from the date specified by the UK countercyclical buffer authority. (9) If the countercyclical buffer rate for an EEA State other than the UK is increased, subject to (4)(b), that increase takes effect from:
(a) the date specified by the EEA countercyclical buffer authority for that jurisdiction, if the rate applied under this
chapter does not exceed 2.5%; or

FCA 201X/XX
(b) the date specified by the UK countercyclical buffer authority if the rate applied under this chapter exceeds 2.5%. [deleted] (10) If the countercyclical buffer rate for a third country is increased by the UK countercyclical buffer authority, that increase takes effect from the date specified by the UK countercyclical buffer authority. (11) If the UK countercyclical buffer authority does not set a countercyclical buffer rate for a third country and that rate is increased by the third-country countercyclical buffer authority for that jurisdiction, subject to 6(b), that increase takes effect from:
(a) the date 12 months after the date on which the increase was published by the third-country countercyclical buffer authority in accordance with the relevant law of the third country, if the rate applied under this chapter does not exceed 2.5%; or (b) the date specified by the UK countercyclical buffer authority if the rate applied under this chapter exceeds 2.5%. (12) If a countercyclical buffer rate is reduced, that reduction takes effect immediately. [Note: articles 136(4) (part), 139(2) to (5) (part) and 140(1) to (4) and (6) (part) of CRD] Location of exposures
10.3.3 G A firm must identify the geographical location of a relevant credit exposure
in accordance with the regulatory technical standards adopted under article 140(7) of CRD CRD RTS on the identification of the geographical location of credit exposures for calculating institution-specific countercyclical capital buffer rates. …
10.6 Application on an individual and consolidated basis
…
Application on a consolidated basis
10.6.2 R A firm that is a UK parent institution in a Member State must comply with
this chapter on the basis of its consolidated situation.
10.6.3 R A firm controlled by a UK parent financial holding company in a Member
State or a UK parent mixed financial holding company in a Member State

FCA 201X/XX must comply with this chapter on the basis of the consolidated situation of that holding company in the FCA consolidation group. …
10.7 Exemption
…
10.7.2 R (1) The condition referred to in IFPRU 10.7.1R is that the firm is a small
and medium-sized SME (as defined in article 4(1)(131) of the UK CRR) investment firm. (2) For this purpose, a firm is categorised as small and medium-sized in accordance with the European Commission Recommendation 2003/361/EC concerning the definition of micro, small and mediumsized enterprises. [deleted] [Note: articles 129(4) and 130(4) of CRD] … IFPRU TP 3 (Gains and losses) is deleted in its entirety. The deleted text of the TP is not shown but it is marked as [deleted] as shown below. TP 3 Gains and losses [deleted] Amend the following as shown. TP 4 Deductions from own funds Application
4.1 R IFPRU TP 4 applies to an IFPRU investment firm, unless it is an exempt
IFPRU commodities firm.
Purpose
4.2 G IFPRU TP 4 contains the rules that exercise the discretion afforded to the
FCA as competent authority under articles 469, 474 and 477 of the EU UK

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CRR. The applicable percentages in IFPRU TP 4 apply instead of articles 36(1), 56 (1)(c) and 66 of the EU UK CRR for the duration of the transitional. Duration of transitional
4.3 R IFPRU TP 4 applies until 31 December 2023.
Deduction from common equity tier 1
4.4 R For the purposes of article 469(1)(a) of the EU CRR, as it applies to the items
in points (b), (d), (f), (g) and (h) of article 36(1) of the EU CRR (Deductions from Common Equity Tier 1 items), the applicable percentages are:
(1) 20% during the period from 1 January 2014 to 31 December 2014; (2) 40% during the period from 1 January 2015 to 31 December 2015; (3) 60% during the period from 1 January 2016 to 31 December 2016; and (4) 80% for the period from 1 January 2017 to 31 December 2017. [expired]
4.5 R For the purposes of article 469(1)(a) of the EU CRR as it applies to the items
in points (a), (e) and (i) of article 36(1) ) of the EU CRR (Deductions from Common Equity Tier 1 items), the applicable percentages are:
(1) 100% during the period from 1 January 2014 to 31 December 2014; (2) 100% during the period from 1 January 2015 to 31 December 2015; (3) 100% during the period from 1 January 2016 to 31 December 2016; and (4) 100% for the period from 1 January 2017 to 31 December 2017. [expired]
4.6 R For the purposes of article 469(1)(c) of the EU CRR, as it applies to the items
in point (c) of article 36(1)) of the EU UK CRR (Deductions from Common Equity Tier 1 items) that existed prior to 1 January 2014, the applicable percentages are:
(1) 0% for the period from 1 January 2014 to 31 December 2014; (2) 10% for the period from 1 January 2015 to 31 December 2015;

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(3) 20% for the period from 1 January 2016 to 31 December 2016; (4) 30% for the period from 1 January 2017 to 31 December 2017; (5) 40% for the period from 1 January 2018 to 31 December 2018; (6) 50% for the period from 1 January 2019 to 31 December 2019; (7) 60% for the period from 1 January 2020 to 31 December 2020; (8) 70% for the period from 1 January 2021 to 31 December 2021; (9) 80% for the period from 1 January 2022 to 31 December 2022; and (10 ) 90% for the period from 1 January 2023 to 31 December 2023.
4.7 R For the purposes of article 469(1)(c) of the EU CRR, as it applies to the items
in point (c) of article 36(1)) of the EU CRR (Deductions from Common Equity Tier 1 items) that did not exist prior to 1 January 2014, the applicable percentages are:
(1) 20% during the period from 1 January 2014 to 31 December 2014; (2) 40% during the period from 1 January 2015 to 31 December 2015; (3) 60% during the period from 1 January 2016 to 31 December 2016; and (4) 80% for the period from 1 January 2017 to 31 December 2017. [expired] Deductions from additional tier 1 items
4.8 R For the purposes of article 474(a) of the EU CRR, the applicable percentages
are:
(1) 20% during the period from 1 January 2014 to 31 December 2014; (2) 40% during the period from 1 January 2015 to 31 December 2015; (3) 60% during the period from 1 January 2016 to 31 December 2016; and

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(4) 80% for the period from 1 January 2017 to 31 December 2017. [expired] Deductions from tier 2 items
4.9 R For the purposes of article 476(a) of the EU CRR, the applicable percentages
are:
(1) 20% during the period from 1 January 2014 to 31 December 2014; (2) 40% during the period from 1 January 2015 to 31 December 2015; (3) 60% during the period from 1 January 2016 to 31 December 2016; and (4) 80% for the period from 1 January 2017 to 31 December 2017. [expired] TP 5 Own funds: other transitionals Application
5.1 R IFPRU TP 5 applies to an IFPRU investment firm, unless it is an exempt
IFPRU commodities firm.
Purpose
5.2 G IFPRU TP 5 contains the rules that exercise the discretion afforded to the FCA
as competent authority under articles 479 to 480 484 to 486 of the EU UK CRR. The applicable percentages in IFPRU TP 5 apply for the duration of the transitional. Duration of transitional
5.3 R IFPRU TP 5 applies until 31 December 2021.
Recognition of instruments and items not qualifying as minority interests
5.4 R For the purposes of article 479(2) of the EU CRR, the applicable percentages
are:

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(1) 0% during the period from 1 January 2014 to 31 December 2014; (2) 0% during the period from 1 January 2015 to 31 December 2015; (3) 0% during the period from 1 January 2016 to 31 December 2016; and (4) 0% for the period from 1 January 2017 to 31 December 2017. [expired] Recognition of minority interests and qualifying additional tier 1 and tier 2 capital
5.5 R For the purposes of article 480(1) of the EU CRR, the applicable factors are:
(1) 0.2 during the period from 1 January 2014 to 31 December 2014; (2) 0.4 during the period from 1 January 2015 to 31 December 2015; (3) 0.6 during the period from 1 January 2016 to 31 December 2016; and (4) 0.8 for the period from 1 January 2017 to 31 December 2017. [expired] Additional filters and deductions
5.6 R For the purposes of article 481(1) of the EU CRR, the applicable percentages
are:
(1) 0% during the period from 1 January 2014 to 31 December 2014; (2) 0% during the period from 1 January 2015 to 31 December 2015; (3) 0% during the period from 1 January 2016 to 31 December 2016; and (4) 0% for the period from 1 January 2017 to 31 December 2017. [expired] Limits on grandfathering
5.7 R For the purposes of article 486 of the EU UK CRR the applicable factors are:
(1) 80% during the period from 1 January 2014 to 31 December 2014; (2) 70% during the period from 1 January 2015 to 31 December 2015;

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(3) 60% during the period from 1 January 2016 to 31 December 2016; (4) 50% during the period from 1 January 2017 to 31 December 2017; (5) 40% during the period from 1 January 2018 to 31 December 2018; (6) 30% during the period from 1 January 2019 to 31 December 2019; (7) 20% during the period from 1 January 2020 to 31 December 2020; and (8) 10% during the period from 1 January 2021 to 31 December 2021. IFPRU TP 6 (Leverage) and IFPRU TP 7 (Capital conservation buffer: transitional) are deleted in their entirety. The deleted text of the TPs is not shown but they are marked as [deleted] as shown below. TP 6 Leverage [deleted] TP 7 Capital conversation buffer: transitional [deleted] Amend the following as shown. Sch 1 Record-keeping requirements … (3) Table Handbook reference Subject of record Contents of record When record must be made Retention period … IFPRU 4.3.17G Documents relating to rating systems All documentation relating to a firm’s rating systems (including any document referenced in IFPRU 4 or Not specified At least three years

FCA 201X/XX required by the EU UK CRR that relate to the IRB approach) Sch 2 Notification and reporting requirements … (3) Table Handbook reference Matter to be notified Contents of notification Trigger event Time allowed … IFPRU 3.2.17R Intention by firm or member of its group member to reduce own funds or consolidated own funds Actions described in
article 77 of the EU UK
CRR
Intention to carry out the actions described in
article 77 of
the EU UK
CRR
As soon as intention is formed
IFPRU
4.12.1R
Reliance on deemed transfer of significant risk under articles 243(2) and 244(2) of the EU UK CRR, including for the purposes of article 337(5) of the EU UK CRR Sufficient information to allow the FCA to assess whether the possible reduction in risk-weighted exposure amounts achieved by the securitisation is justified by a commensurate transfer of credit risk to third parties Intention to rely on deemed transfer of significant risk Within a reasonable period before or after a relevant transfer, not being later than one month after the date of transfer …

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Annex D
Amendments to the Prudential sourcebook for Insurers (INSPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Capital resources requirements and technical provisions for insurance business
1.1 Application
1.1.1 R INSPRU 1.1 applies to an insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or [deleted]
(3) an incoming Treaty firm; or [deleted] (4) a Solvency II firm. …
1.1.3 R For a non-EEA an insurer with a branch in the United Kingdom whose
insurance business in the United Kingdom is not restricted to reinsurance (other than an EEA-deposit insurer, a Swiss general insurer or a UKdeposit insurer) INSPRU 1.1.27R applies separately in respect of its worldwide activities and its activities carried on from a branch in the United Kingdom.
1.1.4 R For an EEA-deposit insurer or a Swiss general insurer INSPRU 1.1.27R
applies in respect of the activities carried on from a branch in the United Kingdom. [deleted]
1.1.5 R For a UK-deposit insurer INSPRU 1.1.27R applies separately in respect of
its world-wide activities and its activities carried on from a branch in the EEA. [deleted]
1.1.6 G This section may apply in cases where a firm has its head office in another
EEA State but is neither an incoming EEA firm nor an incoming Treaty firm. [deleted] …
1.2 Mathematical reserves
Application

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1.2.1 R INSPRU 1.2 applies to a long-term insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or [deleted]
(3) an incoming Treaty firm; or [deleted] (4) a Solvency II firm. …
1.5 Internal-contagion risk
Application
1.5.1 R INSPRU 1.5 applies to an insurer except any insurer in (1) to (3):
(1) (a) non-directive friendly societies; or (b) Solvency II firms; (2) none of the provisions, apart from INSPRU 1.5.33R (payment of financial penalties), apply to firms which qualify for authorisation under Schedule 4 of the Act; [deleted] … … 1.5.5A R In the application of this section to activities carried on by a non-EEA insurer a firm with its head office outside the United Kingdom:
(1) …
(2) all other provisions of this section apply only in relation to:
(a) in the case of any UK-deposit insurer, activities carried on from branches in any EEA State; and (b) in any other case, activities carried on from a branch in the United Kingdom. …
1.5.12 G Finally, the section sets out requirements to protect policyholders of the
United Kingdom branches of non-EEA firms firms with their head office outside the United Kingdom where these are supervised by the appropriate regulator. These apply only to a non-EEA firm that has established a branch in the United Kingdom. …

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3 Market risk
3.1 Market risk insurance
3.1.1 R INSPRU 3.1 applies to an insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or [deleted]
(3) an incoming Treaty firm; or [deleted] (4) a Solvency II firm. …
3.2 Derivatives in insurance
Application
3.2.1 R This section applies to an insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or [deleted]
(3) an incoming Treaty firm; or [deleted] (4) …..
…
TP Transitional Provisions
Application
1.1
[FCA]
[PRA]
R INSPRU TP 1 applies to an insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or [deleted]
(3) an incoming Treaty firm; or [deleted] (4) a Solvency II firm. …
1.6 R INSPRU TP 1.4 does not have effect if, and to the extent that, it would be
inconsistent with any EU law obligation of the United Kingdom. [deleted]

FCA 201X/XX
[FCA]
[PRA]
…
PRU waivers
Application
3.1
[FCA]
[PRA]
R INSPRU TP 3 applies to an insurer unless it is:
(1) a non-directive friendly society; or
(2) an incoming EEA firm; or [deleted]
(3) an incoming Treaty firm; or [deleted] (4) a Solvency II firm. … 3.6 [FCA] [PRA] R INSPRU TP 3.4 does not have effect if, and to the extent that, it would be inconsistent with any EU law obligation of the United Kingdom. [deleted]

FCA 201X/XX
Annex E
Amendments to the Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 4 Capital resources
4.1 Application and purpose
Application
…
4.1.2 G As this chapter applies only to a firm with Part 4A permission, it does
not apply to an incoming EEA firm (unless it has a top-up permission). An incoming EEA firm includes a firm which is passporting into the United Kingdom under the Insurance Mediation Directive. [deleted] … 4.2F Exposures and risk weights … Treatment of secured and unsecured portions of residential mortgages … 4.2F.36 R Exposures to residential property situated in an EEA State or a thirdcountry must be assigned a risk weight of 75% up to a limit of 100% of the value of the property. …
4.4 Calculation of capital resources
…
Reversion providers: additional requirement for instalment reversions
4.4.10 R (1) If the reversion provider agrees under the terms of an instalment
reversion plan to pay the reversion occupier for the qualifying interest in land over a period of time, then the provider must:
(a) take out and maintain adequate insurance from an insurance undertaking authorised in the EEA UK or a person of equivalent status in:

FCA 201X/XX
…
…

FCA 201X/XX
Annex F
Amendments to the Interim Prudential sourcebook for Friendly Societies (IPRU(FSOC)) In this Annex, underlining indicates new text and striking through indicates deleted text. GUIDANCE: THE PURPOSE OF THE PRUDENTIAL RULES FOR FRIENDLY SOCIETIES AND AN OVERALL DESCRIPTION … 7A Directive friendly societies should also refer to the PRA Rulebook: Solvency II firms: Conditions Governing Business and the Solvency II Regulation of (EU) 2015/35 of 10 October 2014 which contain systems and control requirements, and the FCA will take these into account. … LEGAL COMPLIANCE 2.1 [FCA] [PRA] A friendly society must take reasonable steps to ensure that:
…
(b) …
(ii) any requirement (whether of the law of any part of the United Kingdom or of the law of another EEA State) which gives effect to the insurance Directives implemented the Solvency II Directive or is otherwise applicable to the insurance activities of the friendly society. …

FCA 201X/XX
Annex G
Amendments to the Interim Prudential sourcebook for Insurance Businesses (IPRU(INS)) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Chapter 1: Application Rule APPLICATION Insurers 1.1 [FCA] [PRA] An insurer must comply with IPRU (INS) unless it is – … (b) an EEA insurer or an EEA pure reinsurer qualifying for authorisation under Schedules 3 or 4 to the Act; or [deleted] … 8 Chapter 8: Non-UK Insurers … 8.3 [FCA] [PRA] An insurer which has its head office outside the United Kingdom (other than a pure reinsurer which has a Treaty right under Schedule 4 to the Act, or a Swiss general insurer) must appoint and maintain the appointment of a chief executive (who alone or jointly with one or more others, is responsible for the conduct of its business through an establishment in the United Kingdom).

FCA 201X/XX
Annex H
Amendments to the Interim Prudential sourcebook for Investment Businesses (IPRU(INV)) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application and General provisions …
1.2 Application
…
1.2.3 G For the avoidance of doubt, IPRU-INV does not apply to any of the
following:
…
(e) an incoming EEA firm or an incoming Treaty firm which does not have a top up permission; or [deleted] (f) an insurer.; or (g) a UCITS qualifier. [deleted] … 2 Authorised professional firms
2.1 Application
…
2.1.7 G The activities that a full-scope UK AIFM and a UCITS management
company are allowed to perform are restricted by article 6 of AIFMD and
article 6 of the UCITS Directive to the management of AIFs and/or
UCITS and the additional investment activities permitted by article 6(4) of AIFMD and article 6(3) of the UCITS Directive COLL 6.9.9R and FUND 1.4.3R (as applicable). As such, an authorised professional firm cannot be a collective portfolio management firm or a collective portfolio management investment firm. … 3 Financial resources for Securities and Futures Firms which are not MiFID Investment Firms or which are Exempt BIPRU Commodities Firms or Exempt IFPRU Commodities Firms

FCA 201X/XX
…
Appendix 1- Glossary terms for IPRU(INV) 3
… approved bank
(in relation to a bank account opened by a firm) means:
…
(b) if the account is opened elsewhere:
…
(ii) a credit institution established in an EEA State other than the United Kingdom and duly authorised by the relevant Home State regulator; or [deleted] … … … 3- 182(5)R … Consolidated Supervision Under the Financial Conglomerates and Other Financial Groups Instrument 2004, the rules in Chapter 14 shall (with respect to a particular firm, group or financial conglomerate) apply from the first day of its financial year beginning in 2005 in place of rules 3-190(1) to 3-195. [deleted] … 5 Financial resources
5.1 Application
5.1.1 G (1)
( a
)
This chapter applies to an investment management firm, other than:
(i) an incoming EEA firm unless it has a top-up permission for acting as trustee or depositary of a UCITS; or [deleted] … …

FCA 201X/XX
5.1.3 R An incoming EEA firm with a top-up permission for acting as trustee or
depositary of a UCITS must comply with:
(a) IPRU-INV 5.2.1R;
(b) IPRU-INV 5.2.2R;
(c) IPRU-INV 5.2.3R;
(d) IPRU-INV 5.3.2R;
(e) IPRU-INV 5.4.4R; and
(f) IPRU-INV 5.4.8R. [deleted]
…
5.2 General requirement
…
Financial resources
5.2.3 R A firm’s financial resources means:
(a) its own funds, if the firm is subject to an own funds requirement under IPRU-INV 5.4.2R or IPRU-INV 5.4.4R; or (b) its liquid capital, if the firm is subject to a liquid capital requirement under IPRU-INV 5.4.1R. …
5.4 Financial resources requirement
Determination of requirement
5.4.1 R The financial resources requirement for a firm is a liquid capital
requirement, determined in accordance with IPRU-INV 5.4.10R:
(i) unless the firm falls within any of the exceptions in IPRU-INV 5.4.2R.; or (ii) the firm is an incoming EEA firm with a top-up permission of acting as trustee or depositary of a UCITS. [deleted] Exceptions from the liquid capital requirement
5.4.2 R The financial resources requirement is an own funds requirement
determined in accordance with IPRU-INV 5.4.3R for a firm if its permitted business does not include establishing, operating or winding up a personal pension scheme and which:

FCA 201X/XX
…
(ii) is not an exempt CAD firm if:
…
(c) the firm is a trustee of an authorised unit trust scheme whose permitted business consists only of trustee activities and does not include any other activity constituting specified trustee business or the firm is a depositary of an ICVC or ACS or a depositary appointed in line with FUND 3.11.12R (Eligible depositaries for UK AIFs) or a UK depositary of a non-EEA UK AIF whose permitted business consists only of depositary activities. … Own funds requirement
5.4.3 R The own funds requirement for a firm subject to IPRU-INV 5.4.2R is
the higher of:
(i) £4 million for a firm which is a depositary of an authorised fund, if the authorised fund is an AIF; (ia) €125,000 for a firm which is a depositary appointed in line with FUND 3.11.12R (Eligible depositaries for UK AIFs) or a UK depositary of a non-EEA UK AIF; (ib) for a firm which is a depositary of a UCITS scheme, the higher of:
(A) the requirement calculated depending on the selected approach in accordance with articles 315 or 317 of the EU UK CRR; and (B) £4 million; and (ii) £5,000 for any other firm.
5.4.4 R The financial resources requirement for an incoming EEA firm with a
top-up permission for acting as trustee or depositary of a UCITS is the own funds requirement in IPRU-INV 5.4.3R(ib). [deleted]
5.4.5 G In accordance with IPRU-INV 5.4.3R(ib)(A) and IPRU-INV 5.4.4R, a
firm which is a depositary of a UCITS scheme has a choice between:
(a) the basic indicator approach in article 315 of the EU UK CRR; and

FCA 201X/XX
(b) the standardised approach in article 317 of the EU UK CRR. …
5.4.7 G The effect of IPRU-INV 5.4.4R is to apply the financial resources
requirement to an incoming EEA firm with a top-up permission for acting as trustee or depositary of a UCITS in relation to its activity in the UK of acting as trustee or depositary of a UCITS. [deleted] … 5 App 1 Appendix 5(1): Glossary of terms for IPRU-INV 5 5 App 1.1G … Term Meaning … qualifying capital item means that part of a firm’s capital which has the following characteristics:
…
Note: Verification by internal auditors will suffice until such time as EU provisions making external auditing mandatory have been implemented. … specified trustee business …
2. For the purpose of this definition of “specified trustee
business”:
…
(e) government, local authority or international organisation means:
…
(iii) an international organisation the members of which include the United Kingdom or another EEA State. … …

FCA 201X/XX
…
9 Financial resources requirements for an exempt CAD firm …
9.2 General requirements
…
Initial capital and professional indemnity insurance requirements - exempt CAD firms that are not IMD insurance intermediaries
9.2.4 R (1) An exempt CAD firm which is not an IMD insurance
intermediary must have:
…
(b) professional indemnity insurance covering the whole territory of the EEA UK or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 1,000,000 applying to each claim and in aggregate EUR 1,500,000 per year for all claims; or … … Initial capital and professional indemnity insurance requirements – exempt CAD firms that are also IMD insurance intermediaries … 9.2.5A G Article 4(7) of the Insurance Mediation Directive requires the limits of indemnity to be reviewed every five years to take into account movements in European consumer prices. These limits will therefore be subject to further adjustments on the basis of index movements advised by the European Commission. [deleted]
9.2.6 G A trade-off between initial capital and professional indemnity insurance
is appropriate such that EUR 1 of initial capital is the equivalent of professional indemnity insurance cover of EUR 20 for a single claim against the firm and EUR 30 in aggregate. …
9.4 Policy terms for professional indemnity insurance
Insurers whose professional indemnity insurance policies can be used by an exempt CAD firm

FCA 201X/XX
9.4.1 R An exempt CAD firm that has professional indemnity insurance in
accordance with this chapter must take out and maintain professional indemnity insurance that is at least equal to the requirements of the rule below from:
(1) an insurance undertaking which is authorised to transact professional indemnity insurance in the EEA UK; or … …
11.1 INTRODUCTION
…
Purpose
11.1.4 R … for an incoming EEA firm or an incoming Treaty firm which does
not carry on any PRA-regulated activities, FCA threshold conditions 2C to 2F apply; and (2) This original purpose of this chapter also was to implement implement relevant requirements of AIFMD and the UCITS Directive, which includes included imposing capital and professional indemnity insurance requirements on a full-scope UK AIFM and a UCITS management company. AIFMD and the UCITS Directive incorporate references to provisions of the Banking Consolidation Directive and the Capital Adequacy Directive in relation to initial capital, own funds and fixed overheads. However, in line with article 163 of the CRD, the Banking Consolidation Directive and the Capital Adequacy Directive are were repealed from 1 January 2014 and references to these directives are were replaced with references to the CRD and the EU CRR in line with the correlation table set out in
Annex II to the CRD and in Annex IV to the EU CRR.
…
11.2 MAIN REQUIREMENTS
11.2.1 R A firm must:
…
(2) at all times, maintain own funds which equal or exceed:
(a) the higher of:
(i) the funds under management requirement (in line with IPRU-INV 11.3.2R); and

FCA 201X/XX
(ii) the amount specified in article 97 of the EU UK CRR (Own funds based on fixed overheads) (as replicated in IPRU-INV 11.3.3AEUUK)); plus … (3) at all times, hold liquid assets (in line with IPRU-INV 11.3.17R) which equal or exceed (a) the higher of:
(i) the funds under management requirement (in line with IPRU-INV 11.3.2R) less the base own funds requirement (in line with IPRU-INV 11.3.1R); and (ii) the amount specified in article 97 of the EU UK CRR (Own funds based on fixed overheads); plus …
11.3 DETAIL OF MAIN REQUIREMENTS
…
Own Funds based on Fixed Overheads
11.3.3A EU
UK
(1) In accordance with Articles 95 and 96, an investment firm and firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in the UK legislation that implemented points (2) and (4) of Section A of Annex I to Directive 2004/39/EC shall hold eligible capital of at least one quarter of the fixed overheads of the preceding year. … … Professional negligence
11.3.11 G A full-scope UK AIFM should:
(1) cover the professional liability risks set out in article 12 of the AIFMD level 2 regulation (professional liability risks) (as replicated in IPRU-INV 11.3.12EUUK) by either:
(a) maintaining an amount of own funds in line with article 14 of the AIFMD level 2 regulation (additional own funds) (as replicated in IPRU-INV 11.3.14EUUK) (the professional negligence capital requirement); or (b) holding professional indemnity insurance and maintaining an amount of own funds to meet the PII capital requirement

FCA 201X/XX under article 15 of the AIFMD level 2 regulation (professional indemnity insurance) (as replicated in IPRUINV 11.3.15EUUK) and IPRU-INV 11.3.16R; and (2) comply with the qualitative requirements addressing professional liability risks in article 13 of the AIFMD level 2 regulation (qualitative requirements addressing professional liability risks) (as replicated in IPRU-INV 11.3.13EUUK). Professional liability risks
11.3.12 EU
UK
(1) The professional liability risks to be covered pursuant to the UK legislation that implemented Article 9(7) of Directive 2011/61/EU shall be risks of loss or damage caused by a relevant person through the negligent performance of activities for which the AIFM has legal responsibility. … Qualitative requirements addressing professional liability risks
11.3.13 EU
UK
Additional own funds
11.3.14 EU
UK
…
(4) The competent authority of the home Member State of the AIFM FCA may authorise the AIFM to provide additional own funds lower than the amount referred to in paragraph 2 only if it is satisfied - on the basis of the historical loss data of the AIFM as recorded over an observation period of at least three years prior to the assessment - that the AIFM provides sufficient additional own funds to appropriately cover professional liability risks. The authorised lower amount of additional own funds shall be not less than 0,008 % of the value of the portfolios of AIFs managed by the AIFM. (5) The competent authority of the home Member State of the AIFM FCA may request the AIFM to provide additional own funds higher than the amount referred to in paragraph 2 if it is not satisfied that the AIFM has sufficient additional own funds to appropriately cover professional liability risks. The competent authority shall give reasons why it considers that the AIFM's additional own funds are insufficient. … Professional indemnity insurance

FCA 201X/XX
11.3.15 EU
UK
…
(2) An AIFM shall take out and maintain at all times professional indemnity insurance that:
…
Any agreed defined excess shall be fully covered by own funds which are in addition to the own funds to be provided in accordance with the UK legislation that implemented Article 9(1) and (3) of Directive 2011/61/EU. …
11.6 ADDITIONAL REQUIREMENTS FOR COLLECTIVE PORTFOLIO
MANAGEMENT INVESTMENT FIRMS
…
11.6.2 G …
(2) Subject to the conditions that the firm is not authorised to provide safekeeping and administration in relation to shares or units of collective investment undertakings and is not permitted to hold client money or client assets in relation to its MiFID business (and for that reason may not place itself in debt with those clients) competent authorities may allow the firm to stay on the capital requirements that would be binding on that firm as at 31 December 2013 under the UK legislation that implemented the Banking Consolidation Directive and the Capital Adequacy Directive (in line with article 95(2) of the EU UK CRR). The FCA has exercised this derogation and, as such, a firm meeting those conditions is a BIPRU firm. If the above conditions are not met, a collective portfolio management investment firm is an IFPRU investment firm. … 12 Financial resources requirements for operators of electronic systems in relation to lending …
12.2 Financial resources requirements
…
Financial resources requirement: firms carrying on other regulated activities

FCA 201X/XX
12.2.3 R The financial resources requirement for a firm carrying on one or
more regulated activities in addition to operating an electronic system in relation to lending, is the higher of:
…
(2) the financial resources or own funds requirement which is applied by another rule or by directly applicable legislation of the EU UK to the firm. … 13 Financial Resources Requirements for Personal Investment Firms
13.1 Application, general requirements and professional indemnity insurance
requirements
…
Purpose
…
13.1.3 G Although financial resources and appropriate systems and controls can
generally mitigate operational risk, professional indemnity insurance has a role in mitigating the risks a firm faces in its day-to-day operations, including those arising from not meeting the legally required standard of care when advising on investments. The purpose of the rules in this
section is also to ensure that a firm has in place the type, and level, of
professional indemnity insurance necessary to mitigate these risks. This includes, in the case of a UK firm exercising an EEA right, cover for breaches of obligations imposed by or under laws, or provisions having the force of law, in each EEA State in which the firm carries on business. … Requirement to hold professional indemnity insurance
13.1.5 R A firm must take out and maintain at all times professional indemnity
insurance that is at least equal to the requirements in this section from:
(1) an insurance undertaking which is authorised to transact professional indemnity insurance in the EEA UK; or … … Limits of indemnity …

FCA 201X/XX
13.1.14 G Article 4(7) of the Insurance Mediation Directive requires the limits of
indemnity to be reviewed every five years to take into account movements in European consumer prices. These limits will therefore be subject to further adjustments on the basis of index movements advised by the European Commission. [deleted]
13.1.15 G If a policy is denominated in any currency other than euros, a firm must
take reasonable steps to ensure that the limits of indemnity are, when the policy is effected (i.e. agreed) and at renewal, at least equivalent to those denominated in euros. …
Annex A Limited liability partnerships: Eligible members’ capital
Annex A
1
Introduction
…
Purpose
Annex A
1.4
G The purpose of this annex is to amplify Principle 8 (Financial resources) which requires a firm to maintain adequate financial resources to meet its investment business commitments and to withstand the risks to which its business is subject. This annex imposes various conditions that must be satisfied for members’ capital to count as “Tier 1” or equivalent grade capital in meeting the limited liability partnership's financial resources requirement. These conditions are made up of conditions specific to limited liability partnerships and general conditions based for the most
part on those set out in article 57 of the Banking Consolidation
Directive. This assists in the achievement of the statutory objective of consumer protection. [Note: BCD Annex V Part 2 point 57] … TP 1 Table: Transitional provisions applying to IPRU(INV) (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitio nal provision : dates in force (6) Handbook provision: coming into force …

FCA 201X/XX
3 IPRU-INV 9.2.5R and IPRU-INV
13.1.4(2)R(b)
R The new limits of indemnity apply to a professional indemnity policy or a comparable guarantee commenced, renewed or extended with effect from or after 1 March 2009. Any other existing nonannual arrangements must be aligned with the new limits of indemnity before 1 March 2010 [expired] 1 March 2009 to 28 February 2010 1 March 2009 4 13.1.21 and 13.1.23 R The requirement to hold additional capital resources where a policy excludes business or activities that have been carried out by the firm in the past or will be carried out by the firm only apply to a professional indemnity policy taken out, renewed or extended with effect from 31 December 2009. [expired] 31 December 2009 to 31 December 2010 31 December 2009 … 7 IPRU-INV 11 R Where a firm falls within regulation 74(1) or 75(1) of the AIFMD UK regulation it need not include AIFs managed by it that From 22 July 2013 22 July 2013

FCA 201X/XX fall within those regulations in the calculation of its funds under management requirement, professional negligence capital requirement or PII excess capital requirement. [expired] … 10 IPRU(INV) 12 R IPRU(INV) 12 does not apply to a firm with an interim permission [expired] Indefinite ly 1 April 2014 11 IPRU(INV) 12.2.6R(1) R The amount is replaced with £20,000 [expired] From 1 April 2014 to 31 March 2017 From 1 April 2014 12 IPRU(INV) 12.3.5R R b = items 1,4 and 5 in the Table of items which must be deducted in arriving at a firm’s financial resources (see IPRU(INV) 12.3.3R) [expired] 1 April 2014 to 31 March 2017 1 April 2014 13 IPRU-INV 13.1A.3R(2) R A firm applying (b) or (c) above must have initial capital of at least £15,000. [expired] From 30 June 2016 to 29 June 2017 30 June 2016 14 IPRU-INV 13.1A.4R(2) R A firm applying (b) or (c) above must have initial capital From 30 June 2016 30 June 2016

FCA 201X/XX of at least £15,000.
[expired] to 29 June
2017
15 IPRU-INV
13.13.2R(2)(a)
R The firm must calculate its capital resources requirement as the higher of:
(a) £15,000.
[expired]
From 30
June 2016 to 29 June
2017
30 June 2016
16 IPRU-INV
13.13.3R(2)(a)
R The firm must calculate its capital resources requirement as the higher of:
(a) £15,000.
[expired]
From 30
June 2016 to 29 June
2017
30 June 2016
17 IPRU-INV
13.15.9R and
IPRU-INV
13.15.10R
R These rules do not apply to a category
B3 firm which is not a network, has fewer than 26 financial advisers or representatives and is not permitted to:
(a) carry on discretionary portfolio management; (b) establish, operate or wind up a personal pension scheme; or (c) delegate the activities in (a) or (b) to an investment firm. [expired] From 30 June 2016 to 29 June 2017 30 June 2016

FCA 201X/XX
18 IPRU(INV)
5.4.3R(i)(ib)
R A depositary of a
UCITS scheme appointed before 18
March 2016 need not calculate its own funds requirement under articles 315 or 317 of the EU CRR. [expired] From 18 March 2016 until 18 March 2018 18 March 2016 19 IPRU(INV) 5.4.8R R A depositary of a UCITS scheme appointed before 18 March 2016 need not comply with IPRU(INV) 5.4.8R. [expired] From 18 March 2016 to 18 March 2018 18 March 2016

FCA 201X/XX
EXITING THE EUROPEAN UNION: BUSINESS STANDARDS SOURCEBOOKS (AMENDMENTS) INSTRUMENT 201[X] Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of:
(1) regulation 3 of the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018; and (2) section 139A (Power of the FCA to give guidance) of the Financial Services and Markets Act 2000. Commencement B. This instrument comes into force on [29 March 2019 at 11 p.m]. Amendments to the FCA Handbook
C. The Conduct of Business sourcebook (COBS) is amended in accordance with Annex
A to this instrument.
D. The Market Conduct sourcebook (MAR) is amended in accordance with Annex B to this instrument. Citation E. This instrument may be cited as the Exiting the European Union: Business Standards Sourcebooks (Amendments) Instrument 201[X]. By order of the Board [date]

FCA 201X/XX
Editor’s notes

(1) The amendments proposed in this instrument relate to the statutory instruments set out in
Annex 2 of the accompanying consultation paper and other matters arising from the UK’s
withdrawal from the EU. We will set out our approach in due course for any additional amendments which are required to these provisions as a result of the publication of further statutory instruments. (2) The text in this instrument may also need to be amended at the time of the final instrument if there are further changes to the content of the statutory instruments set out in Annex 2 of the consultation paper. (3) The amendments in this instrument are based on the text of the Handbook in force on 1 July 2018. If amendments are made to the relevant text between 1 July 2018 and exit day, we will consider whether these give rise to further deficiencies or have a material impact on the proposed amendments set out in this instrument. Unless this is the case, we intend to proceed in the final instrument with deleting or amending the relevant provision based on the text of the Handbook in force immediately before exit day, rather than the text of the Handbook in force on 1 July 2018. (4) The consultation is based on the assumption that the Financial Conduct Authority will have the power under the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018 to make the proposed rule changes.

FCA 201X/XX
Annex A
Amendments to the Conduct of Business sourcebook (COBS) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application
1.1 General application
…
Deposits (including structured deposits)
1.1.1A R This sourcebook applies to a firm with respect to activities carried on in relation to deposits from an establishment maintained by it, or its appointed representative, in the United Kingdom only as follows:
Section / chapter Application in relation to deposits
(1) Rules in this sourcebook which implement implemented articles 24, 25, 26, 28 and 30 of MiFID (and related provisions of the MiFID Delegated Directive) (see COBS 1.1.1ADG). A MiFID investment firm, a third country investment firm and a MiFID optional exemption firm when selling, or advising a client in relation to, a structured deposit. … … 1.1.1A B EU UK
Article 1(2) of the MiFID Org Regulation specifies how its provisions
should be read where they apply to firms selling, or advising on, structured deposits. 1(2) References to investment firms shall encompass credit institutions and references to financial instruments shall encompass structured deposits in relation to all the requirements referred to in Article 1(3) and 1(4) of Directive 2014/65/EU and their implementing provisions as set out under (so far as relevant) in Chapters II to IV of this Regulation. 1.1.1A C R A third country investment firm and a MiFID optional exemption firm must also comply with the provisions of the MiFID Org Regulation which relate to the rules which implemented the articles of MiFID referred to in COBS 1.1.1AR(1), as modified by article 1(2) of the MiFID Org Regulation, when selling, or advising a client in relation to, a structured deposit.

FCA 201X/XX
1.1.1A
D
G The rules which implemented the provisions of MiFID and the MiFID Delegated Directive referred to in COBS 1.1.1AR(1) can be found in the chapters of COBS in the following table and are followed by a ‘Note:’. … …
1.1.5 G PERG 13 contains general guidance on the persons and businesses to
which the UK provisions which implemented MiFID apply.
1.1.6 G PERG 16 contains general guidance on the businesses to which the UK
provisions which implemented AIFMD apply. FUND 1 contains guidance on the types of AIFM.
1.2 Markets in Financial Instruments Directive
References in COBS to the MiFID Org Regulation
1.2.1 G (1) This sourcebook contains a number of provisions which transpose
transposed MiFID. A rule transposed a provision of MiFID if it is followed by a ‘Note:’ indicating the article of MiFID or the MiFID Delegated Directive which it transposed. (2) In order to help firms which are subject to the those requirements of which implemented MiFID to understand the full extent of those requirements, this sourcebook also reproduces a number of provisions of the directly applicable MiFID Org Regulation, marked with the status letters “EU” “UK”. The authentic provisions of the MiFID Org Regulation are directly applicable to firms in relation to their MiFID business. (3) This sourcebook does not reproduce the MiFID Org Regulation in its entirety. A firm to which provisions of the MiFID Org Regulation applies should refer to the electronic version of the Official Journal of the European Union for: MiFID Org Regulation. (a) the authentic version of the applicable articles of the MiFID Org Regulation; and (b) a comprehensive statement of its obligations under the MiFID Org Regulation. …
1.2.3 R …
(2) In this sourcebook, a word or phrase found in a provision marked “EU” “UK” and referred to in column (1) of the table below has

FCA 201X/XX the meaning indicated in the corresponding row of column (2) of the table. (1) (2) … “derivative” as defined in article 4(1)(49) of MiFID those financial instruments referred to in paragraphs 4 to 10 of Part 1 of
Schedule 2 to the Regulated
Activities Order
…
“group” as defined in article 4(1)(34) of MiFID section 421 of the Act … “professional client covered by
Section 1 of Annex II to
Directive 2014/65/EU Part 2 of
Schedule 1 to Regulation (EU)
No 600/2014” per se professional client
“professional client in accordance with Section 2 of
Annex II to Directive
2014/65/EU Part 3 of Schedule
1 to Regulation (EU) No
600/2014” elective professional client
…
…
1.2.4 G Firms to which provisions of the MiFID Org Regulation are applied as if
they were rules should use the text of any preamble to the relevant provision marked “EU” “UK” to assist in interpreting any such references or cross-references. Interpretation – “in good time”
1.2.5 G (1) Certain of the provisions in this sourcebook which implement
implemented MiFID require firms to provide clients with information “in good time”. …

FCA 201X/XX
ESMA Guidelines
[Note: ESMA has issued a number of guidelines under article 16(3) of the ESMA Regulation in relation to certain aspects of MiFID. These include:
guidelines on certain aspects of the MiFID suitability requirements which also include guidelines on conduct of business obligations, 21 August 2012/ESMA/2012/387 (EN); . See [https://www.esma.europa.eu/sites/default/files/library/2015/11/2012- 387_en.pdf]; guidelines on cross-selling practices, 11 July 2016/ESMA/2016/574 (EN) . See [https://www.esma.europa.eu/sites/default/files/library/2016- 574_en_guidelines_on_cross-selling_practices.pdf ]; and guidelines on complex debt instruments and structured deposits, 4 February 2016/ESMA/2015/1787 (EN) . See [https://www.esma.europa.eu/sites/default/files/library/2015-1787_- _guidelines_on_complex_debt_instruments_and_structured_deposits.pdf ]. 1
Annex
1
Application (see COBS 1.1.2R)
Part 1: What?
Modifications to the general application of COBS according to activities

Eligible counterparty business
1.1 R The COBS provisions shown below do not apply to eligible
counterparty business.
COBS provision Description
…
COBS 4 (other than COBS 4.2, COBS
4.4.1R, COBS 4.5A.9EU 4.5A.9UK and COBS 4.7.-1AEU 4.7.-1AUK) Communicating with clients including financial promotions … COBS 8A (other than COBS 8A.1.5EU 8A.1.5UK to COBS 8A.1.8G) Client agreements (MiFID provisions) … COBS 12.2.18EU 12.2.18UK Labelling of nonindependent research

FCA 201X/XX
…
…
5. Consumer credit products
5.1 R If a firm, in relation to its MiFID business, offers an investment
service as part of a financial product that is subject to other provisions of EU EU-derived law related to credit institutions and consumer credits with respect to information requirements, that service is not subject to the rules in this sourcebook that implement implemented articles 24(3), (4) and (5) of MiFID. [Note: article 24(6) of MiFID] … 5A. Mortgages and mortgage bonds 5A. 1 R The rule in paragraph 5A.2R applies in relation to an MCD credit agreement with a consumer which is subject to the provisions concerning the creditworthiness assessment of consumers in
Chapter 6 of the MCD (as which were transposed in MCOB 11 and
MCOB 11A).
5A.
2
R If an agreement with a consumer within paragraph 5A.1R has as a pre-requisite the provision to that same consumer of an investment service in relation to mortgage bonds satisfying the conditions in paragraph 5A.3R in order for the loan to be payable, refinanced or redeemed, that investment service is not subject to the rules in this sourcebook which implement implemented article 25 of MiFID. …
Part 2: Where?
Modifications to the general application according to location

EEA territorial scope rule: compatibility with European law
1.1 R (1) The territorial scope of this sourcebook is modified to the
extent necessary to be compatible with European law (see
Part 3 for guidance on this).
(2) This rule overrides every other rule in this sourcebook.
[deleted]
1.2 R …
Business with UK clients from overseas establishments

FCA 201X/XX
…
2.2 G One of the effects of the EEA territorial scope rule is to override
the application of this sourcebook to the overseas establishments of EEA firms in a number of cases, including circumstances covered by MiFID, the Distance Marketing Directive or the Electronic Commerce Directive. See Part 3 for guidance on this. [deleted]
Part 3: Guidance

The main extensions, modifications and restrictions to the general
application
…
1.2 G The provisions of the Single Market Directives and other
directives also extensively modify the general application of this sourcebook, particularly in relation to territorial scope. [deleted] …
1.4 G COBS 18 (Specialist regimes) contains specialist regimes which
modify the application of the provisions in this sourcebook for particular types of firm and business. To the extent that they are in conflict, the rules in COBS 18 on the application of the provisions in this sourcebook should be understood as overriding any other provision (whether in COBS 1 or an individual chapter) on the application of COBS. For the avoidance of doubt, nothing in COBS 18 modifies the effect of the EEA territorial scope rule.
The Single Market Directives and other directives [deleted]
2.1 G This guidance provides a general overview only and is not
comprehensive.
2.2 G When considering the impact of a directive on the territorial
application of a rule, a firm will first need to consider whether the relevant situation involves a non-UK element. The EEA territorial scope rule is unlikely to apply if a UK firm is doing business in a UK establishment for a client located in the United Kingdom in relation to a United Kingdom product. However, if there is a nonUK element, the firm should consider whether:
(1) it is subject to the directive (in general, directives only apply to UK firms and EEA firms, but the implementing provisions may not treat non-EEA firms more favourably than EEA firms); (2) the business it is performing is subject to the directive; and

FCA 201X/XX
(3) the particular rule is within the scope of the directive. If the answer to all three questions is ‘yes’, the EEA territorial scope rule may change the general application of this sourcebook.
2.3 G When considering a particular situation, a firm should also
consider whether two or more directives apply.
3. MiFID: effect on territorial scope [deleted]
3.1 G PERG 13 contains general guidance on the persons and businesses
to which MiFID applies.
3.2 G This guidance concerns the rules within the scope of MiFID
including those rules which are in the same subject area as the implementing rules. A rule is within the scope of MiFID if it is followed by a ‘Note:’ indicating the article of MiFID or the MiFID Delegated Directive which it implements.
3.3 G For a UK MiFID investment firm, rules in this sourcebook that are
within the scope of MiFID generally apply to its MiFID business carried on from an establishment in the United Kingdom. They also generally apply to its MiFID business carried on from an establishment in another EEA State, but only where that business is not carried on within the territory of that State. (See articles 34(1), 35(1) and 35(8) of MiFID)
3.4 G For an EEA MiFID investment firm, rules in this sourcebook that
are within the scope of MiFID generally apply only to its MiFID business if that business is carried on from an establishment in, and within the territory of, the United Kingdom. (See article 35(1) and 35(8) of MiFID)
3.5 G However, the rules on investment research and non-independent
research (COBS 12.2, except for COBS 12.2.18EU) and the rules on personal transactions (COBS 11.7A) apply on a “home state” basis. This means that they apply to the establishments of a UK MiFID investment firm in the United Kingdom and another EEA State and do not apply to an EEA MiFID investment firm.
3.6 G Firms to which MiFID applies or which are subject to
requirements in MiFID (including MiFID optional exemption firms) should also have regard to the rules and guidance in COBS 1.2.
4. Insurance Mediation Directive: effect on territorial scope [deleted]
4.1 G The Insurance Mediation Directive’s scope covers most firms
carrying on most types of insurance mediation. The rules in this sourcebook within the Directive’s scope are those relating to life policies that require the provision of pre-contract information or

FCA 201X/XX the provision of advice on the basis of a fair analysis. The rules implementing the minimum information and other requirements in articles 12 and 13 of the Directive are set out in COBS 7 (Insurance mediation) and COBS 9 (Suitability (including basic advice)).
4.2 G In the FCA’s view, the responsibility for these minimum
requirements rests with the Home State, but a Host State is entitled to impose additional requirements within the Directive's scope in the ‘general good’. Accordingly, the general rules on territorial scope are modified so that:
(1) for a UK firm providing passported activities through a branch in another EEA State under the Directive, the rules implementing the Directive’s minimum requirements apply but the territorial scope of the additional rules within the Directive’s scope is not modified; (2) for an EEA firm providing passported activities under the Directive in the United Kingdom, the rules implementing the Directive’s minimum requirements do not apply, but the additional rules within the Directive's scope have their unmodified territorial scope unless the Home State imposes measures of like effect. (See recital 19 and article 12(5) of the Insurance Mediation Directive)
5. Solvency II Directive: effect on territorial scope [deleted]
5.1 G The Solvency II Directive’s scope covers long-term insurers. The
rules in this sourcebook within the Directive’s scope are the cancellation rules (COBS 15) and those rules requiring the provision of pre-contract information or information during the term of the contract concerning the insurer or the contract of insurance. The Directive specifies minimum information and cancellation requirements and permits EEA States to adopt additional information requirements that are necessary for a proper understanding by the policyholder of the essential elements of the commitment.
5.2 G If the State of the commitment is an EEA State, the Directive
provides that the applicable information rules and cancellation rules shall be laid down by that state. Accordingly, if the State of the commitment is the United Kingdom, the relevant rules in this sourcebook apply. Those rules do not apply if the State of the commitment is another EEA State. The territorial scope of other rules, in particular the financial promotion rules, is not affected since the Directive explicitly permits EEA States to apply rules, including advertising rules, in the ‘general good’. (See articles 156, 180, 185 and 186 of the Solvency II Directive)

FCA 201X/XX
6. Distance Marketing Directive: effect on territorial scope [deleted]
6.1 G In broad terms, a firm is within the Distance Marketing Directive’s
scope when conducting an activity relating to a distance contract with a consumer. The rules in this sourcebook within the Directive’s scope are those requiring the provision of pre-contract information, the cancellation rules (COBS 15) and the other specific rules implementing the Directive contained in COBS 5 (Distance communications).
6.2 G In the FCA’s view, the Directive places responsibility for
requirements within the Directive’s scope on the Home State except in relation to business conducted through a branch, in which case the responsibility rests with the EEA State in which the branch is located (this is sometimes referred to as a ‘country of origin’ or ‘country of establishment’ basis). (See article 16 of the Distance Marketing Directive)
6.3 G This means that relevant rules in this sourcebook will, in general,
apply to a firm conducting business within the Directive’s scope from an establishment in the United Kingdom (whether the firm is a national of the UK or of any other EEA or non-EEA state).
6.4 G Conversely, the territorial scope of the relevant rules in this
sourcebook is modified as necessary so that they do not apply to a firm conducting business within the Directive’s scope from an establishment in another EEA state if the firm is a national of the United Kingdom or of any other EEA state.
6.5 G In the FCA’s view:
(1) the ‘country of origin’ basis of the Directive is in line with that of the Electronic Commerce Directive; (See recital 6 of the Distance Marketing Directive) (2) for business within the scope of both the Distance Marketing Directive and the Solvency II Directive, the territorial application of the Distance Marketing Directive takes precedence; in other words, the rules requiring precontract information and cancellation rules (COBS 15) derived from the Solvency II Directive apply on a ‘country of origin’ basis rather than being based on the State of the commitment; (See articles 4(1) and 16 of the Distance Marketing Directive) (3) for business within the scope of both the Distance Marketing Directive and the Insurance Mediation Directive, the minimum information and other requirements in the Insurance Mediation Directive continue to be those applied by the ‘Home State’, but the

FCA 201X/XX minimum requirements in the Distance Marketing Directive and any additional pre-contract information requirements are applied on a ‘country of origin’ basis. (The basis for this is that the Insurance Mediation Directive was adopted after the Distance Marketing Directive and is not expressed to be subject to it.)
7. Electronic Commerce Directive: effect on territorial scope [deleted]
7.1 G The Electronic Commerce Directive’s scope covers every firm
carrying on an electronic commerce activity. Every rule in this sourcebook is within the Directive’s scope.
7.2 G A key element of the Directive is the ability of a person from one
EEA state to carry on an electronic commerce activity freely into another EEA state. Accordingly, the territorial application of the rules in this sourcebook is modified so that they apply at least to a firm carrying on an electronic commerce activity from an establishment in the United Kingdom with or for a person in the United Kingdom or another EEA state. Conversely, a firm that is a national of the UK or another EEA State, carrying on an electronic commerce activity from an establishment in another EEA State with or for a person in the United Kingdom need not comply with the rules in this sourcebook. (See article 3(1) and (2) of the Electronic Commerce Directive)
7.3 G The effect of the Directive on this sourcebook is subject to the
‘insurance derogation’, which is the only ‘derogation’ in the Directive that the FCA has adopted for this sourcebook. The derogation applies to an insurer that is authorised under and carrying on an electronic commerce activity within the scope of the Solvency II Directive and permits EEA States to continue to apply their advertising rules in the ‘general good’. Where the derogation applies, the financial promotion rules continue to apply for incoming electronic commerce activities (unless the firm’s ‘country of origin’ applies rules of like effect) but do not apply for outgoing electronic commerce activities. (See article 3(3) and
Annex, fourth indent of the Electronic Commerce Directive;
Annex to European Commission Discussion Paper
MARKT/2541/03)
7.4 G In the FCA’s view, the Directive’s effect on the territorial scope of
this sourcebook (including the use of the ‘insurance derogation’):
(1) is in line with the Distance Marketing Directive; and (2) overrides that of any other Directive discussed in this
Annex to the extent that it is incompatible.
7.5 G The ‘derogations’ in the Directive may enable other EEA States to
adopt a different approach to the United Kingdom in certain fields.

FCA 201X/XX
(See recital 19 of the Insurance Mediation Directive, recital 6 of the Distance Marketing Directive, article 3 and Annex of the Electronic Commerce Directive)
8. Investor Compensation Directive [deleted]
8.1 G (1) The Investor Compensation Directive generally requires
MiFID investment firms to belong to a compensation scheme established in accordance with the Directive. The rules in this sourcebook that implement the Directive are those (i) requiring MiFID investment firms, including their branches, to make available specified information about the compensation scheme to which they belong and specifying the language in which such information must be provided (COBS 6.1.16 R) and (ii) restricting mention of the compensation scheme in advertising to factual references (COBS 4.2.5G). (2) In the FCA’s view, these matters are a Home State responsibility although a Host State may continue to apply its own rules in the ‘general good’. Accordingly, these rules apply to the establishments of a UK MiFID investment firm in the United Kingdom and another EEA State but also apply in accordance with their standard territorial scope to an EEA MiFID investment firm providing services in the UK unless its Home State applies rules of like effect.
9. UCITS Directive: effect on territorial scope [deleted]
9.1 G The UCITS Directive covers undertakings for collective
investment in transferable securities (UCITS) meeting the requirements of the Directive, and their management companies and depositaries. The rules in this sourcebook within the Directive’s scope (all of which will apply to a management company) are those in:
(1) COBS 2.1 (Acting honestly, fairly and professionally); (2) COBS 2.3 (Inducements); (3) COBS 4.2.1R (The fair, clear and not misleading rule); (4) COBS 4.3.1R (Financial promotions to be identifiable as such); (5) COBS 4.13 (UCITS); (6) COBS 11.2B (Best execution for UCITS management companies);

FCA 201X/XX
(7) COBS 11.3 (Client order handling);
(8) COBS 11.7 (Personal account dealing); (9) COBS 14 (Providing product information to clients) relating to the provision of key investor information by the management company (in addition to applying to a management company, COBS 14.2 also applies to an ICVC that is a UCITS scheme); and (10) COBS 16.2 (Occasional reporting). 9.1 A G The majority of the COBS rules referred to in paragraph 9.1 are rules of conduct which each EEA State must draw up under article
14.1 of the UCITS Directive which management companies
authorised in that State must observe at all times. The exceptions are COBS 4 and COBS 14 in so far as they relate to a UCITS scheme, which form part of the FCA’s fund application rules and which are the responsibility of the UCITS Home State (for a UCITS scheme, the FCA - see COLL 12.3.5R (COLL fund rules under the management company passport: the fund application rules) and article 19 of the UCITS Directive). 9.1B G Where a management company is providing collective portfolio management services for a UCITS established in a different EEA State, responsibility for its compliance with the applicable rules of conduct drawn up under article 14 will generally be for the management company’s Home State, but when a branch is established it will be the responsibility of the Host Member State (UCITS Home State) (see articles 17(4) and 17(5) of the UCITS Directive). 9.1C G Under the UCITS Directive certain Host State marketing and MiFID-specific rules might also apply to a management company providing collective portfolio management services for a UCITS established in a different EEA State. Consequently, an EEA UCITS management company should note that, under COBS, certain of the FCA’s rules apply to it, including the financial promotion rules. COBS 4.13 (UCITS) is concerned with marketing communications for UCITS schemes and EEA UCITS schemes. 9.1 D G EEA UCITS management companies should be aware that there is a special narrower application of COBS for scheme management activity provided for by COBS 18.5B (UCITS management companies).
9.2 G [deleted]

FCA 201X/XX
9.3 G The Directive does not affect the territorial scope of rules as they
apply to an intermediary (that is not a management company) selling units of a UCITS. [Note: articles 12, 14, 17, 18, 19 and 94 of the UCITS Directive]
10. AIFMD: effect on territorial scope [deleted]
10.1 G PERG 16 contains general guidance on the businesses to which
AIFMD applies. FUND 1 contains guidance on the types of AIFM.
10.2 G The only rule in this sourcebook which implements AIFMD is
COBS 2.1.4R, which applies to:
(1) a full-scope UK AIFM operating from an establishment in the UK or a branch in another EEA State; and (2) an Incoming EEA AIFM branch.
10.3 G The other rules in COBS which apply to a full-scope UK AIFM or
incoming EEA AIFM (including an AIFM qualifier) fall outside the scope of AIFMD and are, therefore, not affected by its territorial scope.
10.4 G Incoming EEA AIFM branches should be aware that there is a
special narrower application of COBS for AIFM investment management functions provided for by COBS 18.5A (Full-scope UK AIFMs and incoming EEA AIFM branches). 2 Conduct of business obligations
2.1 Acting honestly, fairly and professionally
The client’s best interests rule
2.1.1 R …
(3) For a management company, this rule applies in relation to any UCITS scheme or EEA UCITS scheme the firm manages. [Note: article 24(1) of MiFID and article 14(1)(a) and (b) of the UCITS Directive] … AIFMs’ best interests rules
2.1.4 R A full-scope UK AIFM and an incoming EEA AIFM branch must, for all
AIFs it manages:

FCA 201X/XX
…
[Note: article 12(1)(a), (b) and (f) and article 12(1) last paragraph of AIFMD] …
2.3 Inducements relating to business other than MiFID, equivalent third country
or optional exemption business
…
Rule on inducements
2.3.1 R A firm must not pay or accept any fee or commission, or provide or receive
any non-monetary benefit, in relation to designated investment business carried on for a client other than:
…
(2) a fee, commission or non-monetary benefit paid or provided to or by a third party or a person acting on behalf of a third party, if:
…
(b) the existence, nature and amount of the fee, commission or benefit, or, where the amount cannot be ascertained, the method of calculating that amount, is clearly disclosed to the client, in a manner that is comprehensive, accurate and understandable, before the provision of the service; (i) this requirement only applies to business other than the carrying on by a UK UCITS management company or EEA UCITS management company of the collective portfolio management activities of investment management and administration for the relevant scheme if it includes:
…
(ii) where this requirement applies to business other than the carrying on by a UK UCITS management company or EEA UCITS management company of the collective portfolio management activities of investment management and administration for the relevant scheme, a firm is not required to make a disclosure to the client in relation to a nonmonetary benefit permitted under (a) and which falls within the table of reasonable non-

FCA 201X/XX monetary benefits in COBS 2.3.15G as though that table were part of this rule for this purpose only; … (c) in relation to the carrying on by a UK UCITS management company or EEA UCITS management company of the collective portfolio management activities of investment management and administration for the relevant scheme or when carrying on a regulated activity in relation to a retail investment product, or when advising on P2P agreements, the payment of the fee or commission, or the provision of the non-monetary benefit is designed to enhance the quality of the service to the client; or … [Note: articles 29(1) and 29(2) of the UCITS implementing Directive] 2.3.1A R COBS 2.3.1R applies to a UK UCITS management company and EEA UCITS management company when providing collective portfolio management services, as if references to a client, were references to any UCITS it manages. [Note: article 29(1) of the UCITS implementing Directive] … 2.3.2A R COBS 2.3.2R applies to a UK UCITS management company and EEA UCITS management company when providing collective portfolio management services, as if references to a client were references to a Unitholder of the scheme. [Note: article 29(2) of the UCITS implementing Directive] … 2.3A Inducements relating to MiFID, equivalent third country or optional exemption business … 2.3A.1 3 R In implementing the requirements of COBS 2.3A.10R to COBS 2.3A.12R, a firm must take into account the costs and charges rules set out in article 24(4)(c) of MiFID COBS 6.1ZA.11R and COBS 6.1ZA.12R and article 50 of the MiFID Org Regulation (see COBS 6.1ZA.11R to COBS 6.1ZA.13R and COBS 6.1ZA.14EU 6.1ZA.14UK). [Note: article 11(5) of the MiFID Delegated Directive] …

FCA 201X/XX
Acceptable minor non-monetary benefits
2.3A.1
9
R An acceptable minor non-monetary benefit is one which:
(1) is clearly disclosed prior to the provision of the relevant service to the client, which the firm may describe in a generic way (where applicable, in accordance with article 11(5)(a) of the MiFID Delegated Directive (see COBS 2.3A.10R)); … … 2.3C Research and execution services Application 2.3C.1 R This section applies to an investment firm providing execution services to:
…
(2) an investment firm authorised under the UK provisions which implemented MiFID that is not within (1); or … (7) an incoming EEA AIFM branch; or [deleted] … …
2.4 Agent as client and reliance on others
…
2.4.2 G This section is not relevant to, nor does it affect:
…
(3) any obligation imposed on a firm by article 26 of MiFIR or RTS 22 MiFID RTS 22. … Reliance on other investment firms: MiFID and equivalent business
2.4.4 R (1) This rule applies if a firm (F1), in the course of performing MiFID
or equivalent third country business, receives an instruction to

FCA 201X/XX provide an investment or ancillary service on behalf of a client (C) through another firm (F2), if F2 is:
…
(b) an investment firm that is:
(i) a firm or authorised in another EEA State; and (ii) subject to equivalent relevant requirements. …
2.4.5 G (1) If F1 is required to perform a suitability assessment or an
appropriateness assessment under COBS 9A or COBS 10A, it may rely upon a suitability assessment performed by F2, if F2 was subject to the requirements for assessing suitability in COBS 9A (excluding the basic advice rules) or equivalent requirements in another EEA State in performing that assessment. (2) If F1 is required to perform an appropriateness assessment under COBS 10A, it may rely upon an appropriateness assessment performed by F2, if F2 was subject to the requirements for assessing appropriateness in COBS 10A.2, or equivalent requirements in another EEA State in performing that assessment. … 3 Client categorisation
3.1 Application
…
3.1.2A R Subject to COBS 3.1.3R and COBS 3.6.4CR, in this chapter provisions marked “EU” “UK” apply to a firm’s business other than MiFID business as if they were rules. …
3.2 Clients
General definition
3.2.1 R …
(4) A client of an appointed representative or, if applicable, a tied agent is a “client” of the firm for whom that appointed representative, or tied agent, acts or intends to act in the course of business for which that firm has accepted responsibility under the Act or MiFID (see sections 39 and 39A of the Act and SUP 12.3.5R).

FCA 201X/XX
…
…
3.3 General notifications
3.3.1A EU
UK
Articles 45(1) and (2) of the MiFID Org Regulation require firms to provide clients with specified information concerning client categorisation. 45(1) Investment firms shall notify new clients, and existing clients that the investment firm has newly categorised as required by Directive 2014/65/EU UK law on markets in financial instruments, of their categorisation as a retail client, a professional client or an eligible counterparty in accordance with that Directive. … 3.3.1B R The information referred to in article 45(2) of the MiFID Org Regulation (as reproduced at COBS 3.3.1AEU 3.3.1AUK) must be provided to clients prior to any provision of services. [Note: paragraph 2 of section I of annex II to MiFID] …
3.5 Professional clients
…
Per se professional clients
3.5.2 R Each of the following is a per se professional client unless and to the extent
it is an eligible counterparty or is given a different categorisation under this
chapter:
(1) an entity required to be authorised or regulated to operate in the financial markets. The following list includes all authorised entities carrying out the characteristic activities of the entities mentioned, whether authorised by an EEA State in the UK or a third country and whether or not authorised by reference to a directive:
…
…
3.5.3E R (1) A firm may treat a non-UK local public authority or municipality as an elective professional client if it complies with COBS 3.5.3R(1) and COBS 3.5.3R(3) and, in addition, applies the relevant “quantitative test” under paragraph (2) that is applied in relation to MiFID or equivalent third country business under COBS 3.5.3R(2).

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(2) The relevant “quantitative test” under this rule is either:
(a) where the local public authority or municipality is established in an EEA State and the EEA State has adopted alternative or additional criteria to those listed in the fifth paragraph to section II.1 of annex II to MiFID, those criteria as set out in the law or measures of that EEA State; or (b) in any other case the same “quantitative test” that is applied in relation to MiFID or equivalent third country business under COBS 3.5.3R(2). [deleted] …
3.5.5 G The fitness test applied to managers and directors of entities licensed under
directives in the financial field relevant firms is an example of the assessment of expertise and knowledge involved in the qualitative test. [Note: fourth paragraph of section II.1 of annex II to MiFID] …
3.6 Eligible counterparties
…
Per se eligible counterparties
3.6.2 R Each of the following is a per se eligible counterparty (including an entity
that is not from an EEA State the UK that is equivalent to any of the following) unless and to the extent it is given a different categorisation under this chapter:
…
(4) a collective investment scheme authorised under the UK provisions which implemented the UCITS Directive or its management company; … (6) another financial institution authorised or regulated under EU legislation or the national law of an EEA State under the law of the United Kingdom; … … Elective eligible counterparties

FCA 201X/XX
3.6.4 R A firm may treat a client as an elective eligible counterparty in relation to
business other than MiFID or equivalent third country business if:
…
(2) the firm adheres to the procedure set out at COBS 3.6.4BEU 3.6.4BUK. 3.6.4A R Provided that it adheres to the procedure set out at COBS 3.6.4BEU 3.6.4BUK, a firm may treat a client as an elective eligible counterparty in relation to MiFID or equivalent third country business if the client:
…
3.6.4B EU
UK
Article 71(5) of the MiFID Org Regulation sets out the procedure to be
followed where a client requests to be treated as an eligible counterparty. 71(5) Where a client requests to be treated as an eligible counterparty, in accordance with Article 30(3) of Directive 2014/65/EU [COBS 3.6.4AR], the following procedure shall be followed:
…
3.6.5 G The categories of elective eligible counterparties include an equivalent
undertaking that is not from an EEA State the United Kingdom provided the above conditions and requirements are satisfied. … Client and firm located in different jurisdictions
3.6.7 R In the case of MiFID or equivalent third country business, in the event of a
transaction where the prospective counterparties are located in different EEA States, the firm shall defer to the status of the other undertaking as determined by the law or measures of the EEA State in which that undertaking is established. [deleted] [Note: first paragraph of article 30(3) of MiFID]
3.7 Providing clients with a higher level of protection
…
3.7.3A EU
UK
Article 45(3) of the MiFID Org Regulation sets out provisions in respect of
giving clients a higher level of protection.
45(3) Investment firms may, either on their own initiative or at the request of the client concerned treat a client in the following manner:

FCA 201X/XX
(a) as a professional or retail client where that client might otherwise be classified as an eligible counterparty pursuant to Article 30(2) of Directive 2014/65/EU [COBS 3.6.2R]; (b) a retail client where that client that is considered a professional client pursuant to Section I of Annex II to Directive 2014/65/EU
Part 2 of Schedule 1 to Regulation (EU) No 600/2014.
3.7.3B EU
UK
Article 71(2) to (4) of the MiFID Org Regulation sets out provisions
applying to eligible counterparties requesting a higher level of protection. 71(2) Where, pursuant to the second subparagraph of Article 30(2) of that Directive 2014/65/EU [COBS 3.7.1R], an eligible counterparty requests treatment as a client whose business with an investment firm is subject to Articles 24, 25, 27 and 28 of that Directive rules in the Conduct of Business; Market Conduct; Senior Management Arrangements, Systems and Controls and the Product Intervention and Product Governance sourcebooks which were relied on immediately before exit day to implement Articles 24, 25, 27 and 28 of Directive 2014/65/EU (“the relevant rules”), the request should be made in writing, and shall indicate whether the treatment as retail client or professional client refers to one or more investment services or transactions, or one or more types of transaction or product. (3) Where an eligible counterparty requests treatment as a client whose business with an investment firm is subject to Articles 24, 25, 27 and 28 of Directive 2014/65/EU the relevant rules, but does not expressly request treatment as a retail client, the firm shall treat that eligible counterparty as a professional client. (4) Where the eligible counterparty expressly requests treatment as a retail client, the investment firm shall treat the eligible counterparty as a retail client, applying the provisions in respect of requests of non-professional treatment specified in the second, third and fourth sub-paragraphs of Section I of Annex II to Directive 2014/65/EU paragraph 3(b), (c), (d) and 4 of Schedule 1 to Regulation (EU) No 600/2014. … 4 Communicating with clients, including financial promotions
4.1 Application
…
Where? Modifications to comply with EU law
4.1.9 G (1) The EEA territorial scope rule modifies the general territorial scope
of the rules in this chapter to the extent necessary to be compatible

FCA 201X/XX with European law. This means that in a number of cases, the rules in this chapter will apply to communications made by UK firms to persons located outside the United Kingdom and will not apply to communications made to persons inside the United Kingdom by EEA firms. Further guidance on this is located in COBS 1 Annex 1. (2) One effect of the EEA territorial scope rule is that the rules in this
chapter will not generally apply to an EEA key investor information
document but will, for example, apply to a firm (including an EEA UCITS management company) when marketing in the United Kingdom the units of an EEA UCITS scheme that is a recognised scheme. (3) The financial promotion rules do not apply to incoming communications in relation to the MiFID business of an investment firm from another EEA State that are, in its home member state, regulated under MiFID other than to the extent COBS 4.12 (Restrictions on the promotion of non-mainstream pooled investments) applies. [deleted] … 4.5A Communicating with clients (including past, simulated past and future performance) (MiFID provisions) … 4.5A.2 R Provisions in this section marked “EU” “UK” apply in relation to MiFID optional exemption business as if they were rules (see COBS 1.2.2G). 4.5A.2 A G The effect of GEN 2.2.22AR is that provisions in this section marked “EU” “UK” also apply in relation to the equivalent business of a third country investment firm as if they were rules. General requirements 4.5A.3 EU UK … … Comparative information 4.5A.7 EU UK … Referring to tax 4.5A.8 EU UK …

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Consistent financial promotions
4.5A.9 EU
UK
…
Past performance
4.5A.1
0
EU
UK
44(4) Where the information contains an indication of past performance of a financial instrument, a financial index or an investment service, investment firms shall ensure that the following conditions are satisfied:
(a) that indication is not the most prominent feature of the communication; (b) the information must include appropriate performance information which covers the preceding 5 years, or the whole period for which the financial instrument has been offered, the financial index has been established, or the investment service has been provided where less than five years, or such longer period as the firm may decide, and in every case that performance information is based on complete 12-month periods; (c) the reference period and the source of information is clearly stated; (d) the information contains a prominent warning that the figures refer to the past and that past performance is not a reliable indicator of future results; (e) where the indication relies on figures denominated in a currency other than that of the Member State in which the retail client or potential retail client is resident pounds sterling, the currency is clearly stated, together with a warning that the return may increase or decrease as a result of currency fluctuations; (f) where the indication is based on gross performance, the effect of commissions, fees or other charges are disclosed. [Note: article 44(4) of the MiFID Org Regulation] … Simulated past performance 4.5A.1 2 EU UK …

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4.5A.1
3
G For the purposes of COBS 4.5A.12EU 4.5A.12UK, the conditions referred to in article 44(5)(b) can be found reproduced in COBS 4.5A.10EU 4.5A.10UK. Future performance 4.5A.1 4 EU UK … 4.5A.1 5 G A firm should not provide information on future performance if it is not able to obtain the objective data needed to comply with the requirements regarding information on the future performance in COBS 4.5A.14EU 4.5A.14UK. For example, objective data in relation to EIS shares may be difficult to obtain. Information that uses the name of any competent authority 4.5A.1 6 EU UK …
4.6 Past, simulated past and future performance (non-MiFID provisions)
…
Past performance
4.6.2 R A firm must ensure that information that contains an indication of past
performance of relevant business, a relevant investment or a financial index, satisfies the following conditions:
…
(5) if the indication relies on figures denominated in a currency other than that of the EEA State in which the retail client is resident pounds sterling, the currency is clearly stated, together with a warning that the return may increase or decrease as a result of currency fluctuations; … …
4.7 Direct offer financial promotions
Application
4.7.-1 G (1) COBS 4.7.-1AEU 4.7.-1AUK to COBS 4.7.1R contain provisions on the communication of direct offer financial promotions. (2) In broad terms:

FCA 201X/XX
(a) COBS 4.7.-1AEU 4.7.-1AUK is relevant to a firm communicating a direct offer financial promotion in relation to its MiFID, equivalent third country or optional exemption business; and (b) … (3) However, a MiFID investment firm, third country investment firm or MiFID optional exemption firm which is subject to the requirements in COBS 4.7.-1AEU 4.7.-1AUK may be subject to the rule in COBS 4.7.1R to the extent that it communicates a direct offer financial promotion:
…
Direct offer financial promotions relating to MiFID, equivalent third country or optional exemption business 4.7.- 1A EU UK 46(6) … Effect of provisions marked “EU” UK for third country investment firms and MiFID optional exemptions firms 4.7.-1B R Provisions in this section marked “EU” “UK” apply in relation to MiFID optional exemption business as if they were rules (see COBS 1.2.2G). 4.7.-1C G The effect of GEN 2.2.22AR is that provisions in this section marked “EU” “UK” also apply in relation to the equivalent business of a third country investment firm as if they were rules. 4.7.- 1D G For the purposes of COBS 4.7.-1AEU 4.7.-1AUK, the provisions of articles 47 to 50 of the MiFID Org Regulation can be found reproduced in COBS 6.1ZA and COBS 14.3A. … 4.7.5A G COBS 4.13.2R (Marketing communications relating to UCITS schemes or EEA UCITS schemes) and COBS 4.13.3R (Marketing communications relating to feeder UCITS) contain additional disclosure requirements for firms in relation to marketing communications (other than key investor information) that concern particular investment strategies of a UCITS scheme or EEA UCITS scheme. …
4.13 UCITS
Application

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4.13.1 R (1) This section applies to a firm in relation to a communication to a
client, including an excluded communication, that is a marketing communication within the meaning of the UCITS Directive. (2) This section does not apply to:
(a) image advertising; or
(b) the instrument constituting the fund, the prospectus, the key investor information or the periodic reports and accounts of either a UCITS scheme or an EEA UCITS scheme. … Marketing communications relating to UCITS schemes or EEA UCITS schemes
4.13.2 R (1) A firm must ensure that a marketing communication that comprises
an invitation to purchase units in a UCITS scheme or EEA UCITS scheme and that contains specific information about the scheme:
(a) makes no statement that contradicts or diminishes the significance of the information contained in the prospectus and the key investor information document or EEA key investor information document for the scheme; (b) indicates that a prospectus exists for the scheme and that the key investor information document or EEA key investor information document is available; and (c) specifies where and in which language such information or documents may be obtained by investors or potential investors or how they may obtain access to them. (2) Where a UCITS scheme or an EEA UCITS scheme may invest more than 35% of its scheme property in transferable securities and money market instruments issued or guaranteed by the United Kingdom or an EEA State, one or more of its local authorities, a third country or a public international body to which the United Kingdom or one or more EEA States belong, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to the investment policy and indicating the particular EEA States countries , local authorities, third countries or public international bodies in the securities of which the scheme intends to invest or has invested more than 35% of its scheme property. (3) Where a UCITS scheme or EEA UCITS scheme invests principally in units in collective investment schemes, deposits or derivatives, or replicates a stock or debt securities index in accordance with COLL 5.2.31R (Schemes replicating an index) or equivalent national measures implementing article 53 of the UCITS Directive, the firm

FCA 201X/XX must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to the investment policy. (4) Where the net asset value of a UCITS scheme or EEA UCITS scheme has, or is likely to have, high volatility owing to its portfolio composition or the portfolio management techniques that are or may be used, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to that characteristic. [Note: articles 54(3), 70(2), 70(3) and 77 of the UCITS Directive] Marketing communications relating to a feeder UCITS
4.13.3 R A firm must ensure that a marketing communication (other than a key
investor information document or EEA key investor information document) relating to a feeder UCITS contains a statement that the feeder UCITS permanently invests at least 85% in value of its assets in units of its master UCITS. [Note: article 63(4) of the UCITS Directive] … 6 Information about the firm, its services and remuneration
6.1 Information about the firm and compensation information (non-MiFID
provisions)
…
Information about a firm and its services
6.1.4 R A firm must provide a client with the following general information, if
relevant:
…
(4) a statement of the fact that the firm is authorised and the name of the competent authority that has authorised it by the FCA or the PRA, as applicable; … … Information concerning safeguarding of designated investments belonging to clients and client money

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6.1.7 R (1) A firm that holds designated investments or client money for a
client subject to the custody chapter or the client money chapter must provide that client with the following information:
…
(d) if applicable, that accounts that contain designated investments or client money belonging to that client are or will be subject to the law of a jurisdiction other than that of a EEA State the United Kingdom, an indication that the rights of the client relating to those instruments or money may differ accordingly; (e) … … … 6.1ZA Information about the firm and compensation information (MiFID provisions) … Effect of provisions marked “EU” “UK” for third country investment firms and MiFID optional exemption firms 6.1ZA. 3 R Provisions in this section marked “EU” “UK” apply in relation to MiFID optional exemption business as if they were rules (see COBS 1.2.2G). 6.1ZA. 4 G The effect of GEN 2.2.22AR is that provisions in this section marked “EU” “UK” also apply in relation to the equivalent business of a third country investment firm as if they were rules. [Note: ESMA has issued guidelines under article 16(3) of the ESMA Regulation on cross-selling practices, 11 July 2016/ESMA/2016/574 (EN). See https://www.esma.europa.eu/sites/default/files/library/2016- 574_en_guidelines_on_cross-selling_practices.pdf] Information about a firm and its services 6.1ZA. 5 EU UK 47(1) Investment firms shall provide clients or potential clients with the following general information, where relevant:
…
(e) where the investment firm is acting through a tied agent, a statement of this fact specifying the Member State in which that agent is registered; (f) the nature, frequency and timing of the reports on the performance of the service to be provided by the investment

FCA 201X/XX firm to the client in accordance with Article 25(6) of Directive 2014/65/EU [COBS 9A.3.2R and COBS 16A.2.1R]; (g) where the investment firm holds client financial instruments or client funds, a summary description of the steps which it takes to ensure their protection, including summary details of any relevant investor compensation or deposit guarantee scheme which applies to the firm by virtue of its activities in a Member State the United Kingdom; … 6.1ZA. 6 G Reference in COBS 6.1ZA.5EU to “Article 25(6) of Directive 2014/65/EU” is to the requirements in COBS 16A.2.1R. [deleted] … Information about a firm’s portfolio management service 6.1ZA. 8 EU UK … Information concerning safeguarding of financial instruments belonging to clients and client money 6.1ZA. 9 EU UK … 49(5) The investment firm shall inform the client or potential client where accounts that contain financial instruments or funds belonging to that client or potential client are or will be subject to the law of a jurisdiction other than that of a Member State the United Kingdom and shall indicate that the rights of the client or potential client relating to those financial instruments or funds may differ accordingly. … … Information about costs and associated charges 6.1ZA. 14 EU UK 50(1) For the purposes of providing information to clients on all costs and charges pursuant to Article 24(4) of Directive 2014/65/EU [COBS 6.1ZA.11R] (“the relevant rule”), investment firms shall comply with the detailed requirements in paragraphs 2 to 10. Without prejudice to the obligations set out in Article 24(4) of Directive 2014/65/EU the relevant rule, investment firms providing investment services to professional clients shall have the right to

FCA 201X/XX agree to a limited application of the detailed requirements set out in this Article with these clients. Investment firms shall not be allowed to agree such limitations when the services of investment advice or portfolio management are provided or when, irrespective of the investment service provided, the financial instruments concerned embed a derivative. Without prejudice to the obligations set out in Article 24(4) of Directive 2014/65/EU the relevant rule, investment firms providing investment services to eligible counterparties shall have the right to agree to a limited application of the detailed requirements set out in this Article, except when, irrespective of the investment service provided, the financial instruments concerned embed a derivative and the eligible counterparty intends to offer them to its clients. … … 50(5) The obligation to provide in good time a full ex-ante disclosure of information about the aggregated costs and charges related to the financial instrument and to the investment or ancillary service provided shall apply to investment firms in the following situations:
(a) …
(b) where the investment firm providing any investment services is required to provide clients with a UCITS KIID or PRIIPs KID in relation to the relevant financial instruments, in accordance with relevant Union legislation. 50(6) Investment firms that do not recommend or market a financial instrument to the client or are not obliged to provide the client with a KID/KIID in accordance with relevant Union legislation shall inform their clients about all costs and charges relating to the investment and/or ancillary service provided. … … Timing of disclosure 6.1ZA. 17 EU UK … 6.1ZA. 18 G The following provisions of COBS reproduce the information requirements contained in Articles 47 to 50 of the MiFID Org Regulation: COBS 6.1ZA.5EU 6.1ZA.5UK, COBS 6.1ZA.8EU 6.1ZA.8UK, COBS 6.1ZA.9EU 6.1ZA.9UK, COBS 6.1ZA.2.14EU 6.1ZA.14UK, and COBS 14.3A.5EU 14.3A.5UK.

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Medium of disclosure
6.1ZA.
19
EU
UK
…
Keeping the client up to date
6.1ZA.
20
EU
UK
…
…
6.2B Describing advice services
…
Introduction
6.2B.5 G This section transposes transposed provisions in MiFID on describing advice services relating to financial instruments and structured deposits for all clients and reproduces a number of provisions of the directly applicable MiFID Org Regulation as explained in COBS 1.2. The requirements apply in relation to MiFID, equivalent third country or optional exemption business. The requirements are extended to apply to other investment advice and cover other retail investment products when the client is a retail client in the United Kingdom. … Interpretation of EU provisions marked “UK”: MiFID business 6.2B.7 R A firm must treat obligations in relation to financial instruments as extending to other retail investment products when complying with the provisions in this section marked “EU” “UK” in the course of MiFID business with a retail client in the United Kingdom. 6.2B.8 G References to financial instruments include structured deposits (but not other retail investment products) when a firm is complying with the provisions in this section marked “EU” “UK” in the course of MiFID business with a retail client outside the United Kingdom or with a professional client. … Interpretation of EU provisions marked “UK”: non-MiFID business 6.2B.9 R In relation to business that is not MiFID business, a firm must comply with provisions in this section marked “EU” “UK” as if they were rules but:
(1) …

FCA 201X/XX
(2) (for business that is not equivalent business of a third country investment firm or MiFID optional exemption business) the firm need not comply with the following provisions of the MiFID Org Regulation:
(a) the requirement in paragraph 2 of article 52(1) of the MiFID Org Regulation (reproduced in COBS 6.2B.32EU 6.2B.32UK) not to give undue prominence to their independent advice services; (b) the requirement in article 52(4) of the MiFID Org Regulation (reproduced in COBS 6.2B.36EU 6.2B.36UK) to distinguish the range of financial instruments issued or provided by entities not being closely linked with the firm; and (c) the requirement in article 53(3)(c) of the MiFID Org Regulation (reproduced in COBS 6.2B.29EU 6.2B.29UK) that a firm does not allow a natural person to provide both independent advice and restricted advice. … 6.2B.1 5 EU UK … 6.2B.1 6 G (1) COBS 6.2B.15EU 6.2B.15UK means that a firm providing independent advice need not provide advice on all relevant products. A firm may market itself as, for example, an independent stockbroker that provides independent advice on shares only. A firm might alternatively market itself on the basis of providing independent advice on a particular product market such as ethical and socially responsible investments. The requirements in COBS 6.2B.15EU 6.2B.15UK apply to ensure that clients of a firm that provides independent advice on a focused basis properly understand the nature of the advice that they will receive and that the service is appropriate. … Sufficient range 6.2B.1 7 G The extent of the assessment which a firm is required to undertake in order to meet the requirement to assess a sufficient range of relevant products will depend on:
(1) the nature of the independent advice service provided by the firm (general or focused) for the purposes of COBS 6.2B.15EU 6.2B.15UK.

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…
6.2B.1
8
EU
UK
53(1) Investment firms providing investment advice on an independent basis shall define and implement a selection process to assess and compare a sufficient range of financial instruments available on the market in accordance with Article 24(7)(a) of Directive 2014/65/EU [COBS 6.2B.11R]. The selection process shall include the following elements:
…
6.2B.1
9
G (1) …
(2) Notwithstanding (1), since the assessment conducted by the firm must be such as to ensure the client’s investment objectives can be suitably met, a firm providing independent advice should be in a position to advise on all types of relevant product within the scope of the market (for the purposes of COBS 6.2B.15EU 6.2B.15UK) on which it provides advice. When the client is a retail client in the United Kingdom, this means being in a position to advise on all types of financial instrument, structured deposit and other retail investment products. … … 6.2B.2 2 G The fact that a firm is owned by, or owns, in whole or in part, the issuer or provider of relevant products does not prevent that firm from providing independent advice, provided that the firm’s assessment of relevant products is:
…
(3) not biased (COBS 6.2B.18EU 6.2B.18UK).
…
Requirements for firms providing both independent and restricted advice 6.2B.2 9 EU UK 53(3) An investment firm offering investment advice on both an independent basis and on a non-independent basis shall comply with the following obligations:
(a) in good time before the provision of its services, the investment firm has informed its clients, in a durable medium, whether the advice will be independent or non-independent in accordance with
Article 24(4)(a) of Directive 2014/65/EU [COBS 6.2B.33R] and the
relevant implementing measures;

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…
…
6.2B.3
2
EU
UK
…
…
6.2B.3
5
EU
UK
…
6.2B.3
6
EU
UK
…
…
6.4 Disclosure of charges, remuneration and commission
…
6.4.2 G Under the territorial application rules in COBS 1, the rules in this section
apply to:
(1) a UK firm’s business carried on from an establishment in an EEA State other than the United Kingdom for a retail client in the United Kingdom unless, if the office from which the activity is carried on were a separate person, the activity:
(a) would fall within the overseas persons exclusion in article 72 of the Regulated Activities Order; or (b) would not be regarded as carried on in the United Kingdom. (2) a firm’s business carried on from an establishment in the United Kingdom carried on for a client in an other EEA State. [deleted] Disclosure of commission (or equivalent) for packaged products
6.4.3 R …
(4) This rule does not apply if:
…
(b) the retail client is not present in the EEA United Kingdom at the time of the transaction; or … …

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…
8A Client agreements (MiFID provisions)
8A.1 Client agreements (MiFID, equivalent third country or optional exemption business) Application and purpose provisions … 8A.1.2 R Provisions in this chapter marked “EU” “UK” apply to MiFID optional exemption firms as if they were rules. … Providing a client agreement: retail and professional clients 8A.1.4 EU UK 58 Investment firms providing any investment service or the ancillary service referred to in Section B(1) of Annex I to Directive 2014/65/EC paragraph 1 of Part 3A of Schedule 2 to the Regulated Activities Order to a client after the date of application of this Regulation shall enter into a written basic agreement with the client, in paper or another durable medium, with the client setting out the essential rights and obligations of the firm and the client. Investment firms providing investment advice shall comply with this obligation only where a periodic assessment of the suitability of the financial instruments or services recommended is performed. … (c) a description of the main features of any services referred to in
Section B(1) of Annex I to Directive 2014/65/EC paragraph 1 of
Part 3A of Schedule 2 to the Regulated Activities Order to be
provided, including where applicable the role of the firm with respect to corporate actions relating to client instruments and the terms on which securities financing transactions involving client securities will generate a return for the client. [Note: article 58 of the MiFID Org Regulation] General requirement for information to clients 8A.1.5 EU UK … 8A.1.6 EU UK … 8A.1.7 EU …

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UK
…
8A.1.1
0
EU
UK
…
…
9 Suitability (including basic advice) (non-MiFID provisions) …
9.4 Suitability reports
…
9.4.3 R The obligation to provide a suitability report does not apply:
(1) …
(2) if the client is habitually resident outside the EEA United Kingdom and the client is not present in the United Kingdom at the time of acknowledging consent to the proposal form to which the personal recommendation relates; … … 9A Suitability (MiFID provisions) 9A.1 Application and purpose Note: ESMA has also issued guidelines under article 16(3) of the ESMA Regulation on certain aspects of the MiFID suitability requirements, 21 August 2012/ESMA/2012/387 (EN). See https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-387_en.pdf. … Effect of provisions marked “EU” “UK” for third country investment firms and MiFID optional exemption firms 9A.1.2 R Provisions in this chapter marked “EU” “UK” apply in relation to MiFID optional exemption business as if they were rules. 9A.1.3 G The effect of GEN 2.2.22AR is that provisions in this chapter marked “EU” “UK” also apply in relation to the equivalent business of a third country investment firm as if they were rules. 9A.2 Assessing suitability: the obligations

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…
Assessing the extent of the information required 9A.2.4 EU UK … Professional clients 9A.2.5 EU UK 54(3) … Where that investment service consists in the provision of investment advice to a professional client covered by Section 1 of
Annex II to Directive 2014/65/EU Part 2 of Schedule 1 to
Regulation (EU) No 600/2014), the investment firm shall be entitled to assume for the purposes of point (b) of paragraph 2 that the client is able financially to bear any related investment risks consistent with the investment objectives of that client. [Note: article 54(3) of the MiFID Org Regulation] Obtaining information about knowledge and experience 9A.2.6 EU UK … Obtaining information about a client’s financial situation 9A.2.7 EU UK … Obtaining information about a client’s investment objectives 9A.2.8 EU UK … Reliability of information 9A.2.9 EU UK … Maintaining adequate and up-to-date information 9A.2.1 0 EU UK … Discouraging the provision of information

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9A.2.1
1
EU
UK
55(2) An investment firm shall not discourage a client or potential client from providing information required for the purposes of Article 25(2) and (3) of Directive 2014/65/EU [COBS 9A.2.1R and COBS 10A.2.1R]. Reliance on information 9A.2.1 2 EU UK … Insufficient information 9A.2.1 3 EU UK 54(8) Where, when providing the investment service of investment advice or portfolio management, an investment firm does not obtain the information required under Article 25(2) of Directive 2014/65/EU [COBS 9A.2.1R], the firm shall not recommend investment services or financial instruments to the client or potential client. [Note: article 54(8) of the MiFID Org Regulation] … Identifying the subject of a suitability assessment 9A.2.1 5 EU UK 54(6) … Where a natural person is represented by another natural person or where a legal person having requested treatment as professional client in accordance with Section 2 of Annex II to Directive 2014/65/EU Part 3 of Schedule 1 to Regulation (EU) No 600/2014 is to be considered for the suitability assessment, the financial situation and investment objectives shall be those of the legal person or, in relation to the natural person, the underlying client rather than of the representative. The knowledge and experience shall be that of the representative of the natural person or the person authorised to carry out transactions on behalf of the underlying client. [Note: article 54(6) of the MiFID Org Regulation] … Switching 9A.2.1 8 EU UK … Adequate policies and procedures 9A.2.1 9 EU …

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UK
Unsuitability
9A.2.2
0
EU
UK
…
…
Automated or semi-automated systems
9A.2.2
3
EU
UK
…
9A.3 Information to be provided to the client Explaining the reasons for assessing suitability 9A.3.1 EU UK 54(1) Investment firms shall not create any ambiguity or confusion about their responsibilities in the process when assessing the suitability of investment services or financial instruments in accordance with
Article 25(2) of Directive 2014/65/EU [COBS 9A.2.1R]. When
undertaking the suitability assessment, the firm shall inform clients or potential clients, clearly and simply, that the reason for assessing suitability is to enable the firm to act in the client’s best interest. [Note: first paragraph of article 54(1) of the MiFID Org Regulation] … Providing a suitability report 9A.3.3 EU UK … … 9A.3.8 EU UK … 9A.3.9 EU UK … … 10 Appropriateness (for non-MiFID non-advised services) (non-MiFID provisions) …

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10.5 Assessing appropriateness: guidance
…
Independent valuation systems
10.5.5 G The circumstances in which valuation systems will be independent of the
issuer (see COBS 10.4.1R(3)(b)) include where they are overseen by a depositary that is regulated as a provider of depositary services in a EEA State the United Kingdom. … 10A Appropriateness (for non-advised services) (MiFID provisions) 10A.1 Application [Note: ESMA has also issued guidelines under article 16(3) of the ESMA Regulation on complex debt instruments and structured deposits, 4 February 2016/ESMA/2015/1787 (EN).] See [https://www.esma.europa.eu/sites/default/files/library/2015-1787_- _guidelines_on_complex_debt_instruments_and_structured_deposits.pdf] … Effect of provisions marked EU “UK” 10A.1. 3 R The effect of GEN 2.2.22AR is that provisions in this chapter marked “EU” “UK” also apply in relation to the equivalent business of a third country investment firm as if they were rules. 10A.2 Assessing appropriateness: the obligations … Assessing a client’s knowledge and experience 10A.2. 3 EU UK 56(1) Investment firms, shall determine whether that client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or investment service offered or demanded when assessing whether an investment service as referred to in Article 25(3) of Directive 2014/65/EU [COBS 10A.1.1R] is appropriate for a client. … Information regarding a client’s knowledge and experience 10A.2. 4 EU UK … Discouraging the provision of information

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10A.2.
5
EU
UK
55(2) An investment firm shall not discourage a client or potential client from providing information required for the purposes of Article 25(2) and (3) of Directive 2014/65/EU [COBS 9A.2.1R and COBS 10A.2.1R]. Reliance on information 10A.2. 6 EU UK … … 10A.4 Assessing appropriateness: when it need not be done … Non-complex financial instruments 10A.4. 2 EU UK 57 A financial instrument which is not explicitly specified in Article 25(4)(a) of Directive 2014/65/EU [COBS 10A.4.1R(2)]shall be considered as non-complex for the purposes of Article 25(4)(a)(vi) of Directive 2014/65/EU paragraph (2)(f) of that rule if it satisfies the following criteria:
(a) it does not fall within Article 4(1)(44)(c) of, or points (4) to (11) of Section C of Annex I to Directive 2014/65/EU it does not fall within Article 2(1)(24)(c) of Regulation (EU) No 600/2014 or paragraphs 4 to 11 of Part 1 of Schedule 2 to the Regulated Activities Order; … … 10A.7 Record keeping and retention periods for appropriateness records … 10A.7. 2 EU UK … … 11 Dealing and managing
11.1 Application
General application
…

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11.1.2 R Save as may be provided in the relevant sections, in this chapter,
provisions marked “EU” “UK” apply to a firm which is not a MiFID investment firm as if they were rules. …
11.1.5 G The EEA territorial scope rule modifies the default territorial scope of
the section on personal account dealing (see COBS 11.7 and COBS 11.7A) to the extent necessary to be compatible with European law (see paragraph 1.1G5 of Part 3 of COBS 1 Annex 1). This means that the
section on personal account dealing also applies to passported activities
carried on by a UK MiFID investment firm or a UK UCITS management company from a branch in another EEA state, but does not apply to the UK branch of an EEA MiFID investment firm in relation to its MiFID business or of an EEA UCITS management company in relation to activities it is entitled to carry on in the United Kingdom under the UCITS Directive. [deleted] …
11.2 Best execution for AIFMs and residual CIS operators
Application
11.2-7 G This section applies to:
(1) a small authorised UK AIFM and a residual CIS operator in accordance with COBS 18.5.2R; and (2) a full-scope UK AIFM and an incoming EEA AIFM branch, in accordance with COBS 18.5A.3R. … 11.2-5 G In accordance with COBS 18.5A.8R, only the following provisions of this
section apply to a full-scope UK AIFM and an incoming EEA AIFM
branch:
…
Obligation to execute orders on terms most favourable to the client
11.2.1 R A firm must take all reasonable steps to obtain, when executing orders,
the best possible result for its clients taking into account the execution factors. [Note: The Committee of European Securities Regulators (CESR) has issued a Question and Answer paper on best execution under the first Markets in Financial Instruments Directive (MiFID I, 2004/39/EU). This paper also incorporates the European Commission’s response to CESR’s questions regarding the scope of the best execution obligations under

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MiFID I. The paper can be found at:
https://www.esma.europa.eu/sites/default/files/library/2015/11/07_320.p df See ‘CESR Questions & Answers: Best Execution under MiFID’, May 2007, Ref: CESR/07-320] … 11.2.23A R A full-scope UK AIFM and an incoming EEA AIFM branch must make available appropriate information on its execution policy required under
article 27(3) of the AIFMD level 2 regulation (Execution of decisions to
deal on behalf of the managed AIF) and on any material changes to that policy to the investors in of each AIF it manages. … 11.2A Best execution – MiFID provisions 11.2A.1 R (1) Subject to (2) to (4), the following provisions apply to a firm’s business other than MiFID business as if they were rules:
(a) provisions within this chapter marked “EU” “UK”; and (b) COBS 11 Annex 1EU COBS 11 Annex 1UK (Regulatory Technical Standard (RTS 28)). (2) The following provisions do not apply to MiFID optional exemption firm’s business:
(a) the part of the first sub-paragraph of article 65(6) to the MiFID Org Regulation (reproduced at COBS 11.2A.34EU COBS 11.2A.34UK) that reads:
“In particular, when the investment firm select other firms to provide order execution services, it shall summarise and make public, on an annual basis, for each class of financial instruments, the top five investment firms in terms of trading volumes where it transmitted or placed client orders for execution in the preceding year and information on the quality of execution obtained. The information shall be consistent with the information published in accordance with the technical standards developed under Article 27(10)(b) of Directive 2014/65/EU Commission Delegated Regulation (EU) 2017/576 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution, or any technical standards made by the Financial Conduct Authority under paragraph 27(b) of Schedule 1 to Regulation (EU) 2014/600.”; and

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(b) COBS 11 Annex 1EU COBS 11 Annex 1UK (Regulatory Technical Standard (RTS 28). (3) This chapter does not apply (but COBS 11.2B applies) to UCITS management companies when carrying on scheme management activity. (4) This chapter does not apply (but COBS 11.2 applies) to AIFMs when carrying on AIFM investment management functions and residual CIS operators. … Best execution criteria 11.2A.8 EU UK
Article 64 of the MiFID Org Regulation sets out best execution criteria.
64 (1) When executing client orders, investment firms shall take into account the following criteria for determining the relative importance of the factors referred to in Article 27(1) of Directive 2014/65/EU [COBS 11.2A.2R]:
…
(2) An investment firm satisfies its obligation under Article 27(1) of Directive 2014/65/EU [COBS 11.2A.2R, COBS 11.2A.3G, COBS 11.2A.9R, COBS 11.2A.12R and COBS 11.2A.15R] to take all sufficient steps to obtain the best possible result for a client to the extent that it executes an order or a specific aspect of an order following specific instructions from the client relating to the order or the specific aspect of the order. … Execution policies 11.2A.25 EU UK
Article 66 of the MiFID Org Regulation sets out requirements concerning
execution policies.
66 (1) Investment firms shall review, at least on an annual basis execution policy established pursuant to Article 27(4) of Directive 2014/65/EU [COBS 11.2A.20R], as well as their order execution arrangements. … (3) Investment firms shall provide clients with the following details on their execution policy in good time prior to the provision of the service:
(a) an account of the relative importance the investment firm assigns, in accordance with the criteria specified in Article 59(1), to the factors referred to in Article 27(1) of Directive 2014/65/EU [COBS 11.2A.2R], or the process by which the firm determines the relative importance of those factors.

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…
(6) Investment firms shall only receive third-party payments that comply with Article 24(9) of Directive 2014/65/EU [COBS 2.3A.5R, COBS 2.3A.6R and COBS 2.3A.7E] and shall inform clients about the inducements that the firm may receive from the execution venues. The information shall specify the fees charged by the investment firm to all counterparties involved in the transaction, and where the fees vary depending on the client, the information shall indicate the maximum fees or range of the fees that may be payable. (7) Where an investment firm charges more than one participant in a transaction, in compliance with Article 24(9) of Directive 2014/65/EU and its implementing measures [COBS 2.3A.5R, COBS 2.3A.6R and COBS 2.3A.7E], the firm shall inform its client of the value of any monetary or non-monetary benefits received by the firm. … (9) Where an investment firm executes orders for retail clients, it shall provide those clients with a summary of the relevant policy, focused on the total cost they incur. The summary shall also provide a link to the most recent execution quality data published in accordance with Article 27(3) of Directive 2014/65/EU [COBS 11.2C.1R, MAR 5.3.1AR(5), MAR 5A.4.2R(3) and MAR 6.3A.1R] and paragraph 4C of the Schedule to the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories) Regulations 2001 for each execution venue listed by the investment firm in its execution policy. … 11.2A.33 G In order to obtain the best execution for a client, a firm should compare and analyse relevant data, including that made public in accordance with COBS 11.2A.38G, COBS 11.2C and article 27(3) of MiFID and respective implementing measures. … Duty of portfolio managers, receivers and transmitters to act in client’s best interest 11.2A.34 EU UK
Article 65 of the MiFID Org Regulation sets out the duty of firms
carrying out certain activities to act in the best interests of the client. 65 (1) Investment firms, when providing portfolio management, shall comply with the obligation under Article 24(1) of Directive 2014/65/EU [COBS 2.1.1R] to act in accordance with the best interests of their clients when placing orders with other entities for execution that result from decisions by the investment firm to deal in financial instruments on behalf of its client. (2) Investment firms, when providing the service of reception and transmission of orders, shall comply with the obligation under Article 24(1) of Directive 2014/65/EU [COBS 2.1.1R] to act in accordance with

FCA 201X/XX the best interests of their clients when transmitting client orders to other entities for execution. … (6) Investment firms shall provide information to their clients on the policy established in accordance with paragraph 5 and paragraphs 2 to 9 of Article 66. Investment firms shall provide clients with appropriate information about the firm and its services and the entities chosen for execution. In particular, when the investment firm select other firms to provide order execution services, it shall summarise and make public, on an annual basis, for each class of financial instruments, the top five investment firms in terms of trading volumes where it transmitted or placed client orders for execution in the preceding year and information on the quality of execution obtained. The information shall be consistent with the information published in accordance with the technical standards developed under Article 27(10)(b) of Directive 2014/65/EU Commission Delegated Regulation (EU) 2017/576 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution, or any technical standards made by the Financial Conduct Authority under paragraph 20(b) of Schedule 3 to Regulation (EU) 600/2014. … (8) This Article shall not apply where the investment firm that provides the service of portfolio management or reception and transmission of orders also executes the orders received or the decisions to deal on behalf of its client’s portfolio. In those cases, Article 27 of Directive 2014/65/EU Articles 64 and 66 of this Regulation, technical standards made under Article 27(10) of Directive 2014/65/EC and rules in [COBS] which were relied on immediately before exit to implement Article 27 of Directive 2014/65/EU shall apply. … 11.2B Best execution for UCITS management companies … 11.2B.3 G References in this chapter to a scheme are to a UCITS scheme or an EEA UCITS scheme. … 11.2B.26 R (1) A management company of an ICVC that is a UCITS scheme, or an EEA UCITS scheme that is structured as an investment company, must obtain the prior consent of the ICVC or investment company to the execution policy. …

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…
11.2B.36 R …
(2) The information must be consistent with the information published in accordance with COBS 11 Annex 1EU COBS 11 Annex 1UK (Regulatory technical standard 28) (which applies as rules in accordance with COBS 18.5B.2R). … 11.2C Quality of execution … 11.2C.2 R … [Note: article 27(3) of MiFID and MiFID RTS 27] …
11.3 Client order handling
General principles
11.3.1 R …
(3) A UCITS management company providing collective portfolio management services, must establish and implement procedures and arrangements in respect of all client orders it carries out which provide for the prompt, fair and expeditious execution of portfolio transactions on behalf of the UCITS scheme or EEA UCITS scheme it manages. … 11.3.1A R (1) Subject to (2) and (3) in this chapter provisions marked “EU” “UK” apply to a firm’s business other than MiFID business as if they were rules. (2) Provisions marked “EU” which derive from recitals to MiFID or the MiFID Org Regulation apply to all firms as guidance. (3) COBS 11.3.4AEU COBS 11.3.4AUK, which reproduces article 67(2) of the MiFID Org Regulation, does not apply to a UCITS management company. … Carrying out client orders

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11.3.2A EU
UK
Article 67(1) of the MiFID Org Regulation requires firms to satisfy
conditions when carrying out client orders.
…
…
Settlement of executed orders
11.3.4A EU
UK
Article 67(2) of the MiFID Org Regulation places requirements on firms
which are responsible for overseeing and arranging the settlement of an executed order. … … Use of information relating to pending client orders 11.3.5A EU UK
Article 67(3) of the MiFID Org Regulation sets out requirements
concerning the use of information relating to pending client orders. … … Aggregation and allocation of orders … 11.3.7A EU UK
Article 68(1) of the MiFID Org Regulation sets out requirements to be
met where a firm carries out a client order or a transaction for own account in aggregation with another client order. … 11.3.7B R A management company must ensure that the order allocation policy referred to in article 68(1)(c) of the MiFID Org Regulation, reproduced at COBS 11.3.7AEU COBS 11.3.7AUK, is in sufficiently precise terms. … Partial execution of aggregated client orders 11.3.8A EU UK
Article 68(2) of the MiFID Org Regulation sets out requirements
concerning partial execution of aggregated client orders.
…
Aggregation and allocation of transactions for own account …

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11.3.9A EU
UK
Article 69(1) of the MiFID Org Regulation sets out requirements
concerning aggregated transactions.
…
…
11.3.10A EU
UK
Article 69(2) of the MiFID Org Regulation sets out allocation priorities
where a firm aggregates a client order in accordance with its allocation policy referred to in article 68(1)(c) (see COBS 11.3.7AEU). … … 11.3.11A EU UK
Article 69(3) of the MiFID Org Regulation introduces requirements for
order allocation policy, referred to in article 68(1)(c) (see COBS 11.3.7AEU), where transactions for own account are executed in combination with client orders. … … Provisions which implemented the Transposition of client order handling provisions in the UCITS Implementing Directive
11.3.14 G …
(3) Some of these provisions have been were used to transpose provisions of the UCITS implementing Directive, as set out in the
table below:
MiFID Org
Regulation
Provision
COBS 11.3 provision UCITS implementing
Directive transposition
article 67(1) COBS 11.3.2AEU
COBS 11.3.2AUK
article 27(1)
second paragraph
article 67(3) COBS 11.3.5AEU
COBS 11.3.5AUK
article 27(2)
article 68(1) COBS 11.3.7AEU
COBS 11.3.7AUK, as modified by COBS
11.3.7BR
article 28(1)
article 68(2) COBS 11.3.8AEU
COBS 11.3.8AUK
article 28(2)

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article 69(1) COBS 11.3.9AEU
COBS 11.3.9AUK
article 28(3)
article 69(2) COBS 11.3.10AEU
COBS 11.3.10AUK
article 28(4)
11.4 Client limit orders
Obligation to make unexecuted client limit orders public 11.4-1 R In this chapter provisions marked “EU” “UK” apply to a firm’s business other than MiFID business as if they were rules. … How client limit orders may be made public 11.4.3A EU UK
Article 70(1) of the MiFID Org Regulation provides when client limit
orders shall be considered as being available to the public.
70 (1) A client limit order in respect of shares admitted to trading on a regulated market or traded on a trading venue which have not been immediately executed under prevailing market condition as referred to in
Article 28(2) of Directive 2014/65/EU [COBS 11.4.1R] shall be
considered available to the public when the investment firm has submitted the order for execution to a regulated market or a MTF or the order has been published by a data reporting services provider located in one Member State a person authorised to provide data reporting services under the Data Reporting Services Regulations 2017 and can be easily executed as soon as market conditions allow. … Orders that are large in scale
11.4.5 R The obligation in COBS 11.4.1R to make public a limit order is
disapplied in respect of transactions that are large in scale compared with normal market as determined under article 4 of MiFIR. … … 11.5A Record keeping: client orders and transactions 11.5A.1 R (1) Subject to (2), in this chapter provisions marked “EU” “UK” apply to a firm’s business other than MiFID business as if they were rules. (2) Provisions in this chapter which are marked “EU” “UK” do not apply to corporate finance business carried on by a firm which is not a MiFID investment firm.

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Recording initial orders received from clients 11.5A.2 EU UK
Article 74 of the MiFID Org Regulation, together with Section 1 of
Annex IV to that Regulation which is reproduced at COBS 11.5A.4EU ,
makes provision for record keeping of initial orders from clients. 74 An investment firm shall, in relation to every initial order received from a client and in relation to every initial decision to deal taken, immediately record and keep at the disposal of the competent authority at least the details set out in Section 1 of Annex IV [reproduced below at COBS 11.5A.4EU COBS 11.5A.4UK] to this Regulation to the extent they are applicable to the order or decision to deal in question. Where the details set out in Section 1 of Annex IV to this Regulation are also prescribed under Articles 25 and 26 of Regulation No (EU) 600/2014, these details should be maintained in a consistent way and according to the same standards prescribed under Articles 25 and 26 of Regulation No (EU) 600/2014. Record keeping in relation to transactions and order processing 11.5A.3 EU UK
Article 75 of the MiFID Org Regulation, together with Section 2 of
Annex IV to that Regulation which is reproduced at COBS 11.5A.5EU ,
makes provision for record keeping in relation to transactions and order processing. 75 Investment firms shall, immediately after receiving a client order or making a decision to deal to the extent they are applicable to the order or decision to deal in question, record and keep at the disposal of the competent authority at least the details set out in Section 2 of Annex IV [reproduced below at COBS 11.5A.5EU COBS 11.5A.5UK]. Where the details set out in Section 2 of Annex IV are also prescribed under Articles 25 and 26 of Regulation No (EU) 600/2014, they shall be maintained in a consistent way and according to the same standards prescribed under Articles 25 and 26 of Regulation (EU) No 600/2014. Minimum details to be recorded in relation to client orders and decisions to deal 11.5A.4 EU UK
Annex IV Section 1 of the MiFID Org Regulation makes provision for
record keeping of client orders and decisions to deal.
…
16. The date and exact time of the receipt of the order or the date and
exact time of when the decision to deal was made. The exact time must be measured according to the methodology prescribed under the standards on clock synchronisation under Article 50(2) Directive 2014/65/EU in Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks or in technical

FCA 201X/XX standards made by the Financial Conduct Authority under paragraph 33 of Schedule 1. Minimum details to be recorded in relation to transactions and order processing 11.5A.5 EU UK
Annex IV Section 2 of the MiFID Org Regulation makes provision for
record keeping of transactions and order processing.
…
32. The date and exact time of submission of the order or decision to
deal. The exact time must be measured according to the methodology prescribed under the standards on clock synchronisation under Article 50(2) of Directive 2014/65/EU in Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks or in technical standards made by the Financial Conduct Authority under paragraph 26 of Schedule 3. …
34. The date and exact time any message that is transmitted to and
received from another investment firm in relation to events affecting an order. The exact time must be measured according to the methodology prescribed under the standards on clock synchronisation under Article 50(2) of Directive 2014/65/EU in Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks or in technical standards made by the Financial Conduct Authority under paragraph 26 of Schedule 3. …
11.7 Personal account dealing
…
Rule on personal account dealing
11.7.1 R
…
11.7.3 G For the purposes of COBS 11.7.1R (1)(c), any other obligation of the firm
under the UK provisions which implemented MiFID refers to a firm’s obligations under the regulatory system that are not owed to a customer and any of the firm’s obligations under another EEA States’ implementation of MiFID where it operates a branch in the EEA.

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Disapplication of rule on personal account dealing
11.7.5 R
…
11.7A Personal account dealing relating to MiFID, equivalent third country or optional exemption business … 11.7A.2 R (1) Subject to (2), in this chapter provisions marked “EU” “UK” apply to a firm in relation to its equivalent third country or optional exemption business as if they were rules. (2) In this chapter, provisions marked “EU” which derive from recitals to MiFID or the MiFID Org Regulation apply to a firm in relation to its business which is the equivalent business of a third country investment firm or MiFID optional exemption business as guidance. … Scope of personal transactions 11.7A.4 EU UK EU Article 28 of the MiFID Org Regulation sets out the scope of personal transactions. … Requirements relating to personal transactions 11.7A.5 EU UK
Article 29 of the MiFID Org Regulation sets out detailed provision
concerning personal transactions.
…
(2) Investment firms shall ensure that relevant persons do not enter into a personal transaction which meets at least one of the following criteria:
(a) that person is prohibited from entering into it under Regulation (EU) No 596/2014; (b) it involves the misuse or improper disclosure of that confidential information; (c) it conflicts or is likely to conflict with an obligation of the investment firm under Directive 2014/65/EU UK law on markets in financial instruments. … (6) Paragraphs 1 to 5 shall not apply to the following personal transactions:
…

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(b) personal transactions in undertakings for collective investments in transferable securities (UCITS) or AIFs that are subject to supervision under the law of a Member State the United Kingdom which requires an equivalent level of risk spreading in their assets, where the relevant person and any other person for whose account the transactions are effected are not involved in the management of that undertaking. … 11
Annex
1
EU
UK
Regulatory Technical Standard 28 (RTS 28) COMMISSION DELEGATED REGULATION (EU) … 2017/… 576 of 8.6. June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution (Text with EEA relevance) … HAS ADOPTED THIS REGULATION
Article -2 Application
This Regulation applies to:
a MiFID investment firm and a UK RIE and ‘MiFID investment firm’ and ‘UK RIE’ are defined in accordance with the Glossary to the Handbook of Rules and Guidance published by the Financial Conduct Authority.
Article -1 Interpretation
(1) Where a term is defined in Article 4 of Directive 2014/65/EU, the same definition applies for this Regulation except where it is defined in Article 2 Regulation 600/2014/EU, as amended by the [Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018], in which case that definition applies; (2) Article 2(1)(57) and (58) of Regulation 600/2014/EU apply for the purposes of this Regulation; and (3) References to tick size bands are to those in Commission Delegated Regulation 2017/588, as amended by FCA Instrument [ ]. …
Article 3 Information on the top five execution venues and quality of

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3. Investment firms shall publish for each class of financial
instruments, a summary of the analysis and conclusions they draw from their detailed monitoring of the quality of execution venues where they executed all client orders in the previous year. The information shall include:
…
(h) where applicable, an explanation of how the investment firm has used output of a consolidated tape provider established under Article 65 of Directive 2014/65/EU authorised in accordance with the Data Reporting Services Regulations 2017. … … 11A Underwriting and placing 11A.1 Underwriting and placing General application 11A.1.1 R (1) This chapter applies only to MiFID or equivalent third country business. (2) Subject to (3), in this chapter provisions marked “EU” “UK” apply to the equivalent business of a third country investment as if they were rules. (3) In this chapter, provisions marked “EU” which derive from recitals to MiFID or the MiFID Org Regulation apply to the equivalent business of a third country investment firm as guidance. Requirements to provide specific information to issuer clients 11A.1.2 EU UK
Article 38(1) of the MiFID Org Regulation sets out requirements for firms
to provide specified information to issuer clients before accepting a mandate to manage an offering. 38 (1) Investment firms which provide advice on corporate finance strategy, as set out in Section B(3) of Annex I Paragraph 3 of Part 3A of
Schedule 2 to the Regulated Activities Order, and provide the service of
underwriting or placing of financial instruments, shall, before accepting a mandate to manage the offering, have arrangements in place to inform the issuer client of the following:
…
Requirements to identify underwriting and placing operations and to ensure that adequate controls are in place to manage conflicts of interest

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11A.1.3 EU
UK
Article 38(2) and (3) of the MiFID Org Regulation sets out requirements
to identify all underwriting and placing operations of a firm and to ensure that adequate controls are in place to manage any potential conflicts of interest. … Additional requirements in relation to pricings of offerings in relation to the issuance of financial instruments 11A.1.4 EU UK
Article 39(1) of the MiFID Org Regulation sets out additional
requirements in relation to pricing of offerings in relation to issuance of financial instruments. … … Further requirements concerning the provision of information 11A.1.5 EU UK
Article 39(2) of the MiFID Org Regulation sets out additional
requirements concerning the provision of information.
…
Further requirements in relation to placing 11A.1.6 EU UK
Article 40 of the MiFID Org Regulation sets out additional requirements
in relation to placing.
…
(3) Investment firms shall not accept any third-party payments or benefits unless such payments or benefits comply with the inducements requirements rules made by the Financial Conduct Authority under the Financial Services and Markets Act 2000 which were relied on before exit day to implement requirements laid down in Article 24 of Directive 2014/65/EU. In particular, the following practices shall be considered not compliant with those requirements and shall therefore be considered not acceptable:
…
Further requirements in relation to advice, distribution and self-placement 11A.1.7 EU UK
Article 41 of the MiFID Org Regulation sets out additional requirements
in relation to advice, distribution and self-placement.
41 (1) Investment firms shall have in place systems, controls and procedures to identify and manage the conflicts of interest that arise when providing investment service to an investment client to participate in a new issue, where the investment firm receives commissions, fees or any monetary or non-monetary benefits in relation to arranging the issuance. Any commissions, fees or monetary or non-monetary benefits shall comply with the requirements in Article 24(7), 24(8) and 24(9) of

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Directive 2014/65/EU [COBS 2.3A.5R to COBS 2.3A.7E, COBS 2.3A.15R, COBS 2.3A.16R, COBS 2.3A.19R and COBS 6.2B.11R] and be documented in the investment firm’s conflicts of interest policies and reflected in the firm’s inducements arrangements. … (4) Investment firms which offer financial instruments issued that are by themselves or other group entities to their clients and that are included in the calculation of prudential requirements specified in Regulation (EU) No 575/2013 of the European Parliament and of the Council¹, the law of the United Kingdom or any part of the United Kingdom (“UK law”) which was relied on before exit day to implement Directive 2013/36/EU of the European Parliament and of the Council² or Directive 2014/59/EU of the European Parliament and of the Council³, shall provide those clients with additional information explaining the differences between the financial instrument and bank deposits in terms of yield, risk, liquidity and any protection provided in accordance with UK law which was relied on before exit day to implement Directive 2014/49/EU of the European Parliament and of the Council. … Further requirements in relation to lending on provision of credit in the context of underwriting or placement 11A.1.8 EU UK
Article 42 of the MiFID Org Regulation sets out additional requirements
in relation to lending on provision of credit in the context of underwriting or placement. … Record keeping requirements in relation to underwriting or placing 11A.1.9 EU UK
Article 43 of the MiFID Org Regulation sets out record keeping
requirements in relation to underwriting or placing.
…
12 Investment research
12.1 Purpose and application
…
Application: Where?
12.1.3 G The EEA territorial scope rule modifies the general rule of application to
the extent necessary to be compatible with European law (see paragraph
1.1 of Part 2 of COBS 1 Annex 1). This means that COBS 12.2 also
applies to passported activities carried on by a UK MiFID investment firm from a branch in another EEA state, but does not apply to the United Kingdom branch of an EEA MiFID investment firm in relation to its MiFID business. [deleted]

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12.2 Investment research and non-independent research
…
12.2.15 R Where this section applies to a firm in relation to business other than its
MiFID business, provisions in this section marked “EU” section marked “UK” shall apply as if they were rules, other than those that copy out recitals, which shall apply as if they were guidance. … Investment research and non-independent research
12.2.17 EU
UK
Article 36(1) of the MiFID Org Regulation defines investment research.
36(1) For the purposes of Article 37 investment research shall be research or other information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers of financial instruments, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public, and in relation to which the following conditions are met:
…
(b) if the recommendation in question were made by an investment firm to a client, it would not constitute the provision of investment advice for the purposes of Directive 2014/65/EU UK law on markets in financial instruments. Non-independent research with reference to investment recommendations as defined in the Market Abuse Regulation
12.2.18 EU
UK
Article 36(2) of the MiFID Org Regulation deals with the treatment of
non-independent research with reference to investment recommendations as defined in the Market Abuse Regulation (see COBS 12.4) and in contrast to investment research as defined in article 36(1) (see COBS 12.2.17EU). 36(2) A recommendation of the type covered by point (35) of Article 3(1) of Regulation (EU) 596/2014 that does not meet the conditions set out in paragraph 1 shall be treated as a marketing communication for the purposes of Directive 2014/65/EU UK law on markets in financial instruments and investment firms that produce or disseminate that recommendation shall ensure that it is clearly identified as such. … Conflicts of interest

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12.2.19 EU
UK
Article 37(1) of the MiFID Org Regulation requires firms to apply the
conflicts requirements set out in article 34(3) of the MiFID Org Regulation to persons involved in the production of investment research and non-independent research. Recitals 51, 52 and 55 to the MiFID Org Regulation relate to the required measures and arrangements. …
12.2.20 G …
(2) COBS 12.2.19EU 12.2.19UK relates to the management of conflicts of interest in relation to investment research. … Measures and arrangements required for investment research
12.2.21 EU
UK
Article 37(2) of the MiFID Org Regulation requires firms to put
arrangements in place around the production of investment research to ensure the conditions set out in that article are satisfied. Recitals 53, 54 and 56 relate to those arrangements and the article 37(2) conditions. … Recital 54 Fees, commissions, monetary or non-monetary benefits received by the firm providing investment research from any third party should only be acceptable when they are provided in accordance with requirements specified in Article 24(9) of Directive 2014/65/EU and Article 13 of Commission Delegated Directive (EU) …2017 / …593 [to be inserted before adoption] of XXX supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits. … Exemptions from article 37(1) of the MiFID Org Regulation
12.2.22 EU
UK
Article 37(3) of the MiFID Org Regulation provides for exemptions from
article 37(1) of the MiFID Org Regulation (COBS 12.2.19EU ).
37(3) Investment firms which disseminate investment research produced by another person to the public or to clients shall be exempt from complying with paragraph 1 if the following criteria are met:
…
…
12.4 Investment recommendations

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…
12.4.1A EU
UK
[article 20 of the Market Abuse Regulation] … 12.4.4A EU UK [article 20(1) of the Market Abuse Regulation] …
12.4.8 G The disclosures required under article 20(3) of the Market Abuse
Regulation may, if the person so chooses, be made by graphical means (for example by use of a line graph). … 16 Reporting information to clients (non-MiFID provisions) …
16.2 Occasional reporting
Execution of orders other than when managing investments
16.2.1 R …
(6) In relation to subscription and redemption orders for units in a UCITS scheme or EEA UCITS scheme executed by an authorised fund manager, paragraphs (1), (3) and (5) of this rule apply as if references to:
(a) a client and to a retail client were references to a Unitholder in the scheme; and (b) trade confirmation information in paragraphs (1)(b) and (5)(b) were to the information in paragraph (7). (7) The notice referred to in paragraph (1)(b) must, where applicable, for subscription and redemption orders for units in a UCITS scheme or EEA UCITS scheme executed by an authorised fund manager, include the following information:
…
(e) the identification of the UCITS scheme or EEA UCITS scheme; …

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…
…
16.6 Communication to clients – life insurance, long-term care insurance and
income withdrawals
Disclosure for life insurance contracts: information to be provided during the term of the contract
16.6.1 R (1) This section applies to a long-term insurer, unless, at the time of
application, the client, other than an EEA ECA recipient, was habitually resident:
(a) in an EEA State other than the United Kingdom; or (b) outside the EEA and he was not present in the United Kingdom. (2) In addition, COBS 16.6.8R applies to an operator of a personal pension scheme or stakeholder pension scheme in relation to a retail client who elects to make income withdrawals. … 16A Reporting information to clients (MiFID provisions) 16A.1 Application … Effect of provisions marked “EU” “UK” for third country investment firms and MiFID optional exemption firms 16A.1.2 R Provisions in this chapter marked “EU” “UK” apply in relation to MiFID optional exemption business as if they were rules (see COBS 1.2.2G). 16A.1.2 A G The effect of GEN 2.2.22AR is that provisions in this chapter marked “EU” “UK” also apply in relation to the equivalent business of a third country investment firm as if they were rules. … 16A.3 Occasional reporting Execution of orders other than when undertaking portfolio management 16A.3.1 EU UK … …

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Reporting obligations in respect of eligible counterparties 16A.3.5 EU UK … 16A.4 Periodic reporting Provision by a firm and contents 16A.4.1 EU UK … 60(3) … The exception provided for in point (b) shall not apply in the case of transactions in financial instruments covered by
Article 4(1)(44)(c) of, or any of points 4 to 11 of Section C in
Annex I to Directive 2014/65/EU Article 2(1)(24)(c) of
Regulation (EU) No 600/2014 or paragraphs 4 to 11 of Part 1 of Schedule 2 to the Regulated Activities Order. … 16A.4.2 G In accordance with COBS 2.4.9R, a firm may dispatch a periodic statement (as required by article 60(1) of the MiFID Org Regulation, see COBS 16A.4.1EU 16A.4.1UK to an agent, other than the firm or an associate of the firm, nominated by the client in writing. Additional reporting obligations for portfolio management or contingent liability transactions 16A.4.3 EU UK … … 16A.5 Statements of client financial instruments or clients funds 16A.5.1 EU UK 63(1) Investment firms that hold client financial instruments or client funds shall send at least on a quarterly basis, to each client for whom they hold financial instruments or funds, a statement in a durable medium of those financial instruments or funds unless such a statement has been provided in any other periodic statement. Upon client request, firms shall provide such statement more frequently at a commercial cost. The first subparagraph shall not apply to a credit institution authorised under Directive 2000/12/EC of the European Parliament and of the Council that is a CRR firm as defined in
Article 4(1)(2A) of Regulation (EU) No 575/2013 of the
European Parliament and of the Council on prudential

FCA 201X/XX requirements for credit institutions and investment firms in respect of deposits within the meaning of that Directive
Article 2(1)(23A) of Regulation (EU) No 600/2014 held by
that institution.
63(2) The statement of client assets referred to in paragraph 1 shall include the following information:
…
(d) a clear indication of the assets or funds which are subject to the rules of Directive 2014/65/EU and its implementing measures UK law on markets in financial instruments and those that are not, such as those that are subject to Title Transfer Collateral Agreement; … … … 18 Specialist Regimes … 18.8A OPS firms … Interpretation and general modifications 18.8A.2 R Where a COBS rule specified in this section applies to an OPS firm, the following modifications apply:
…
(3) subject to the modifications in COBS 18.8A.6R, COBS 18.8A.15R(4) and COBS 18.8A.16R(4), COBS 1.2.3R (References in COBS to the MiFID Org Regulation) applies where a COBS provision marked “EU” “UK” applies to an OPS firm. …

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18.8A.1
4
R The provisions in COBS 11.2A (Best execution – MiFID provisions) marked “EU” “UK” and COBS 11 Annex 1EU UK (Regulatory Technical Standard 28) apply to an OPS firm to which (1) applies as if they were rules. Modification of best execution rules 18.8A.1 5 R … (2) The requirement in COBS 11.2A.34EU 11.2A.34UK (see article 65(6) of the MiFID Org Regulation) to make public for each class of financial instruments:
…
…
(4) In COBS 11.2A, a reference to:
…
(b) “portfolio management” in COBS 11.2A.34EU 11.2A.34UK (see article 65(1) of the MiFID Org Regulation) is to be construed as a reference to OPS activity falling within the scope of COBS 18.8A.13R and which involves the OPS firm placing orders with other entities for execution that result from decisions by the OPS firm to deal in financial instruments on behalf of its client; and … Client order handling 18.8A.1 6 R … (2) The provisions in COBS 11.3 (Client order handling) marked “EU” “UK” apply to an OPS firm as if they were rules. … … 20 With-profits
20.1 Application
…
20.1.3 R For an EEA insurer:

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(1)
(a) the rules and guidance on the with-profits fund (COBS 20.1A), on treating with-profits policyholders fairly (COBS 20.2.1G to COBS 20.2.41G and COBS 20.2.53R to COBS 20.2.60G), and the governance provisions in COBS 20.5. apply only in so far as responsibility for the matter in question has not been reserved to the firm’s Home State regulator by an EU instrument; notwithstanding the above:
(b) COBS 20.2.26AR (financial penalties and the with-profits fund) applies; (c) the rules and guidance on the notification of policyholders where there is a change in the percentage allocation of distributions (COBS 20.2.19AR to COBS 20.2.19CG) apply but only to the extent that the UK is the State of the commitment; (2) COBS 20.3 (Principles and Practices of Financial Management) does not apply; (3) the rule on providing information to with-profits policyholders where the United Kingdom is the State of the commitment (COBS 20.4.4R) applies, but the rest of COBS 20.4 (Communications with with-profits policyholders) does not; and (4) [deleted] (5) references in COBS 20 to a with-profits fund or to terms derived from the Solvency II Directive requiring transposition in the Home State, apply as if they were references to the relevant fund or terms established in accordance with the requirements of the Home State. [deleted] …
20.4 Communications with with-profits policyholders
…
Requirements on EEA insurers
20.4.4 R In relation to any with-profits policyholder where the state of the
commitment is the United Kingdom, an EEA insurer must:
(1) provide the information necessary to enable that policyholder properly to understand the insurer’s commitment under the policy;

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(2) ensure that the information provided is not narrower in scope or less detailed in content than the information required to be provided in the PPFM produced by a firm subject to COBS 20.3; and (3) send the policyholder who is affected by any information being changed written notice, setting out:
(a) any proposed changes to information that is equivalent to the with-profits principles, three months in advance of the effective date; and (b) any changes to information that is equivalent to the withprofits practices, within a reasonable time. [deleted] … 21 Permitted Links
21.1 Application
21.1.1 R The rules in this section apply on an ongoing basis to insurers who effect
linked long-term contracts. that are effected by:
(1) insurers other than EEA insurers; and (2) EEA insurers in the United Kingdom. …
21.2 Rules for firms engaged in linked long-term insurance business
…
21.2.1B R Insurers other than EEA insurers effecting linked long-term contracts of insurance are obliged to comply with the requirements on investments in the PRA Rulebook Solvency II Firms Investments. …
21.3 Further rules for firms engaged in linked long-term insurance business
…
21.3.8 G A firm should assess the liquidity of a money-market instrument in
accordance with CESR’s UCITS eligible assets guidelines, with respect to UK provisions which implemented article 4(1) of the UCITS eligible assets Directive. … Stock lending: requirements

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21.3.11 R (1) The stock lending arrangement is of the kind described in section
263B of the Taxation of Chargeable Gains Act 1992 (without extension by section 263C), and:
(a) all the terms of the agreement under which securities are to be reacquired by the firm for the account of the unit-linked fund are in a form which is acceptable to the firm and in accordance with good market practice; (b) the counterparty is:
(i) an authorised person; or
(ii) a person authorised by a Home State regulator in an EEA State; or … … 22 Restrictions on the distribution of certain regulatory capital instruments …
22.2 Restrictions on the retail distribution of mutual society shares
22.2.1 R (1) The requirements in this section apply to a firm when dealing in or
arranging a deal in a mutual society share with or for a retail client in the EEA United Kingdom where the retail client is to enter into the deal as buyer. …
22.2.4 R …
Title Type of retail client Additional conditions Certified high net worth investor … (b) an individual in an EEA State other than the UK who meets requirements which are broadly equivalent to those set out in COBS 4.12.6R; or (c) (b) a person (or persons) legally empowered to make investment decisions on behalf of an individual who meets the …

FCA 201X/XX earnings or net asset requirements in (a) or (b) above. Certified sophisticated investor … (b) an individual in an EEA State other than the UK who meets requirements which are broadly equivalent to those set out in COBS 4.12.7R; or (c) (b) an individual who meets the requirements for either (a) or (b) above and who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm’s client. … Self-certified sophisticated investor … (b) an individual in an EEA State other than the UK who meets requirements which are broadly equivalent to those set out in COBS 4.12.8R; or (c) (b) an individual who meets the requirements for either (a) or (b) above and who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm’s client. … …
22.3 Restrictions on the retail distribution of contingent convertible instruments
and CoCo funds
Restrictions
22.3.1 R (1) …
(2) A firm must not:
(a) sell an investment to a retail client in the EEA United Kingdom; or (b) communicate or approve an invitation or inducement to participate in, acquire or underwrite an investment where that invitation or

FCA 201X/XX inducement is addressed to or disseminated in such a way that it is likely to be received by a retail client in the EEA United Kingdom. … Exemptions
22.3.2 R …
Title Type of retail client Additional conditions Certified high net worth investor … (b) an individual in an EEA State other than the UK who meets requirements which are broadly equivalent to those set out in COBS 4.12.6R; or (c) (b) a person (or persons) legally empowered to make investment decisions on behalf of an individual who meets the earnings or net asset requirements in (a) or (b) above. … Certified sophisticated investor … (b) an individual in an EEA State other than the UK who meets requirements which are broadly equivalent to those set out in COBS 4.12.7R; or (c) (b) an individual who meets the requirements for either (a) or (b) above and who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm’s client. … Self-certified sophisticated investor … (b) an individual in an EEA State other than the UK who meets requirements which are broadly equivalent to those set out in COBS 4.12.8R; or (c) (b) an individual who meets the requirements for either (a) …

FCA 201X/XX or (b) above and who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm’s client. … … Sch 1 Record keeping requirements … Sch 1.3 G Handbook reference Subject of record Content of record When record must be made Rete ntion perio d … COBS 10A.7.2EU 10A.7.2UK … COBS 11.5A.4EU 11.5A.4UK … COBS 11.5A.5EU 11.5A.5UK … … COBS 11.7A.5EU 11.7A.5UK … … COBS 11A.1.9EU 11A.1.9UK … … COBS 16A.3.1EU 16A.3.1UK …

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COBS
16A.4.1EU
16A.4.1UK
…
…
…

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Annex B
Amendments to the Market Conduct sourcebook (MAR) In this Annex, underlining indicates new text and striking through indicates deleted text. 5 Multilateral trading facilities (MTFs) … 5.3A Systems and controls for algorithmic trading … 5.3A.8 R A firm must have systems and procedures to notify the FCA if:
(1) an MTF operated by the firm is material in terms of the liquidity of trading of a financial instrument in the EEA; and … Direct electronic access 5.3A.9 R A firm which permits direct electronic access to an MTF it operates must:
(1) not permit members or participants of the MTF to provide such services unless they are:
(a) MiFID investment firms authorised under MiFID; or … (g) firms that come within article 2.1(a), (e), (i), or (j) of MiFID regulation 30(1A) of the MiFI Regulations and have a Part 4A permission relating to investment services or activities; … … 5.3A.14 R A firm must adopt tick size regimes in:
…
(2) any other financial instrument which is traded on that trading venue, as required by a regulatory technical standard made under article
49.3 or 49.4 of MiFID powers conferred by MiFIR.
…
…

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5.3A.16 G Nothing in MAR 5.3A.14R or MAR 5.3A.15R requires a firm to act inconsistently with MiFID RTS 11 or any regulatory technical standards made under article 49.3 or 49.4 of MiFID powers conferred byMiFIR. … … 5.3A.18 G For the purpose of MAR 5.3A.17R, the regulatory technical standards made under article 50 of MiFID MiFID RTS 25 provide provides further requirements. …
5.7 Pre- and post-trade transparency requirements for equity and non-equity
instruments: form of waiver and deferral
5.7.1B G According to article 4(7) of MiFIR, waivers granted by competent authorities in accordance with articles 29(2) and 44(2) of Directive 2004/39/EC and articles 18, 19 and 20 of Regulation (EC) No 1287/2006 before 3 January 2018 shall be reviewed by ESMA by 3 January 2020. ESMA shall issue an opinion to the competent authority, assessing the continued compatibility of those waivers with the requirements established in MiFIR and any regulations made pursuant to it. The FCA will cooperate with ESMA in relation to the continued effect of existing waivers. [deleted] … 5A Organised trading facilities (OTFs) … 5A.3 Specific requirements for OTFs … 5A.3.2 R The discretion which the firm must exercise in executing a client order must be either, or both, of the following:
…
(2) the second discretion is whether to match a specific client order with other orders available on the OTF at a given time, provided the exercise of such discretion is in compliance with specific instructions received from the client and in accordance with the firm’s obligations under article 27 of MiFID COBS 11.2A (Best execution – MiFID provisions). …

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…
5A.5 Systems and controls for algorithmic trading … 5A.5.8 R A firm must have systems and procedures to notify the FCA if:
(1) an OTF operated by it is material in terms of the liquidity of trading of a financial instrument in the EEA; and … Direct electronic access 5A.5.9 R A firm which permits direct electronic access to an OTF it operates must:
(1) not permit members or participants of the OTF to provide such services unless they are:
(a) MiFID investment firms authorised under MiFID; or … … … 5A.5.14 R The firm must adopt tick size regimes for financial instruments as required by a regulatory technical standard made under article 49.3 or 49.4 of MiFID powers conferred by MiFIR. … … 5A.5.16 G Nothing in MAR 5A.5.14R or MAR 5A.5.15R requires a firm to act inconsistently with any regulatory technical standards made under article
49.3 or 49.4 of MiFID powers conferred byMiFIR.
…
…
5A.5.18 R For the purpose of MAR 5A.5.17R, the regulatory technical standards made under article 50 of MiFID MiFID RTS 25 provide provides further requirements. … 7A Algorithmic trading

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…
7A.3 Requirements for algorithmic trading … Notifications 7A.3.6 R A firm which is a member or participant of a trading venue must immediately notify the following FCA if it is engaging in algorithmic trading in the UK or in an EEA State.:
(1) the FCA; and
(2) any competent authority of a trading venue in another EEA State where the firm engages in algorithmic trading. … … 7A.4 Requirements when providing direct electronic access … Notifications 7A.4.4 R A firm must immediately notify the following FCA if it is providing DEA services.:
(1) the FCA; and
(2) the competent authority of an trading venue in the EEA to which the firm provides DEA services. … … 9 Data reporting service
9.1 Application, introduction, approach and structure
Application
9.1.1 G This chapter applies to:
…
(2) A UK UK branch of a third country person seeking authorisation to provide a data reporting service;

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(3) a UK MiFID investment firm operating a trading venue seeking verification of its rights to provide a data reporting service under regulation 5(b) or (c) of the DRS Regulations; … Introduction
9.1.2 G The original purpose of this chapter was to implement Title V of MiFID
which sets out harmonised market data services authorisation and supervision requirements. These are designed to ensure a necessary level of quality of trading activity information across EU financial markets for users, and for competent authorities the regulator to receive accurate and comprehensive information on relevant transactions. These requirements provide for:
…
Approach to transposition onshoring
9.1.3 G The market data services authorisation and supervision requirements in
Title V of MiFID are implemented in the UK onshored through a combination of:
(1)
…
(b) the MiFI Regulations which set out additional provisions addressing requirements imposed by MiFIR and EU regulations onshored regulations; … (3) EU regulations onshored regulations including:
…
9.1.3A G See M2G for further guidance on how the measures referred to in MAR 9.1.13G have been amended by the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 and FCA instruments made pursuant to the Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018. …
9.2 Authorisation and verification
Application form and notification form for members of the management body
9.2.1 D (1) Each of the following must complete the forms in (2):

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…
(b) a UK MiFID investment firm operating a trading venue seeking verification of its rights to provide a data reporting service under regulation 5(b) and (c) of the DRS Regulations; and … … …
9.5 Frequently Asked Questions
9.5.1 G Q. Are there any grandfathering arrangements for ARMs or trade data
monitors operating prior to MiFID?
A. No. Persons wishing to provide a data reporting service must apply to be authorised as a data reporting services provider. [deleted]
9.5.2 G Q. We are a trading venue operator. Can you please clarify how we
can provide a data reporting service under the derogation from needing authorisation in article 59(2) of MiFID regulation 5(b) to (d) of the DRS Regulations? A. (1) The derogation (or exception) in article 59(2) of MiFID allows allowed Member States to allow a trading venue operator to provide a data reporting service without prior authorisation, if the operator has verified that they comply complied with Title V of MiFID. (2) The United Kingdom has adopted this derogation in regulation 5(b) to (d) of the DRS Regulations. …
9.5.6 G Q. Does an investment firm need to be authorised as an ARM to send
transaction reports to the FCA?
A. No. If you are a MiFID investment firm that wishes to send transaction reports to us to satisfy your own transaction reporting obligations under MiFIR or a third country investment firm subject to a similar obligation pursuant to GEN 2.2.22AR, you do not need to become authorised as an ARM. You are permitted to connect directly to us although there will be a requirement to sign a MIS confidentiality agreement with us, to satisfy connectivity requirements and to undertake testing associated with connecting to our systems. For the associated costs please see FEES 3.2.7R for relevant on-boarding costs. If you want to connect to us to send reports on behalf of other investment firms then you must become authorised as an ARM.

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9.5.7 G Q. Where can I find a list of data reporting services providers?
A. Article 59(3) of MiFID requires ESMA to establish a list of all data reporting services providers. Further, regulation Regulation 6 of the DRS Regulations requires the FCA to maintain a register of data reporting services providers. … 10 Commodity derivative position limits and controls, and position reporting
10.1 Application
Introduction
10.1.1 G …
(2) In particular, this chapter sets out the FCA’s requirements in respect of provisions derived from:
(a) articles 57(1) and 57(6) of MiFID, which require it competent authorities or central competent authorities to establish limits, on the basis of a methodology determined by ESMA, on the size of a net position which a person can hold, together with those held on the person’s behalf at an aggregate group level, at all times, in commodity derivatives traded on trading venues and economically equivalent OTC contracts to those commodity derivatives; … (d) article 58(2) of MiFID, which requires investment firms trading in commodity derivatives or emission allowances outside a trading venue to provide the competent authority or central competent authority with reports containing a complete breakdown of their positions held through such contracts traded on a trading venue and economically equivalent OTC contracts, as well as of those of their clients and the clients of those clients until the end client is reached. … Scope and territoriality
10.1.2 G …
(2) In respect of position management controls requirements:
(a) the requirements contained or referred to in MAR 10.3 apply to persons operating a trading venue which trades commodity derivatives in respect of which the FCA is the Home State competent authority; and

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…
(3) In respect of position reporting requirements:
(a) the position reporting requirements in MAR 10.4 apply to:
(i) a UK regulated market; and
…
…
10.2 Position limit requirements
Establishing, applying and resetting position limits
10.2.1 G (1) The following provisions of the MiFI Regulations regulate the
establishment, application and resetting of position limits:
…
(h) Regulation 20(2) imposes an obligation on the FCA, where it receives an ESMA opinion stating that the establishment of a position limit would be, or is, incompatible with that opinion, to modify the position limit in accordance with ESMA’s opinion or to notify ESMA as to why amendment to the limit is considered to be unnecessary; [deleted] (i) Regulation 21(1) imposes an obligation on the FCA to not establish a position limit in respect of a commodity derivative traded on trading venues in the United Kingdom, where there is a central competent authority for that commodity derivative other than the FCA; [deleted] … (k) Regulation 25(1) prohibits the FCA from establishing position limits which are more restrictive than permitted under ESMA’s methodology MiFID RTS 21, unless in exceptional cases where more restrictive position limits are objectively justified and proportionate; (l) Regulation 25(2) to Regulation 25(5) impose obligations on the FCA where it establishes position limits which are more restrictive than permitted under ESMA’s methodology MiFID RTS 21 in accordance with Regulation 25(1) of the MiFI Regulations. The obligations are that the FCA must publish that position limit on its website, and not apply that position limit for more than six months from the date of publication

FCA 201X/XX unless further subsequent six-month application periods for that limit are objectively justified and proportionate, and must notify ESMA of the position limit and the justification for establishing it; and (m) Regulation 20(5) and Regulation 25(6) impose obligations on the FCA to publish a notice on its website explaining the reasons for its decision when, under Regulation 20(2) and Regulation 25(5) of the MiFI Regulations respectively, it does not modify a position limit following an ESMA opinion incompatible with the limit; and [deleted] … … Application of position limits
10.2.2 D …
(2) A direction made under (1) applies where a commodity derivative is traded on a trading venue in the United Kingdom., provided that there is not a central competent authority established in an EEA State other than the United Kingdom. … …
10.2.5 G Where a position limit is established by a competent authority or central
competent authority other than the FCA, a non-financial entity should submit its application for exemption, in relation to the position limit, to that competent authority or central competent authority in the manner it specifies. [deleted] [Note: article 8 of MiFID RTS 21] …
10.4 Position reporting
Application
10.4.1 G The application of this section is set out in the following table:
Type of firm Applicable provisions
UK regulated market
Regulated market
MAR 10.4.2G
…

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UK MiFID investment firm
MAR 10.4.7D to MAR 10.4.9D and MAR
10.4.11G
…
EEA MiFID investment firm who is a member, participant or a client of a UK trading venue MAR 10.4.10D to MAR 10.4.11G … Position reporting by UK regulated markets
10.4.2 G A UK regulated market which trades commodity derivatives or emission
allowances must provide position reports in accordance with paragraph 7BB of the Schedule to the Recognition Requirements Regulations, as inserted by the MiFI Regulations. [Note: article 58(1) of MiFID] Position reporting by UK firms and UK branches of third country investment firms operating an MTF or OTF: Reports
10.4.3 R …
(2) A firm must make public and provide to the FCA and ESMA a weekly report with the aggregate positions held by the different categories of persons for the different commodity derivatives or emission allowances traded on the trading venue, where those instruments meet the criteria of article 83 of the MiFID Org Regulation, specifying:
…
…
[Note: article 58(1) of MiFID, MiFID ITS 4 on position reporting and MiFID ITS 5 on the format and timing of weekly position reports to ESMA] Position reporting by UK firms and UK branches of a third country investment firms operating an MTF or OTF: Procedure for reporting to the FCA
10.4.5 D …
(2) A firm shall report to the FCA:
(a) (where it meets the minimum threshold as specified in article 83 of the MiFID Org Regulation) the weekly report referred to in MAR 10.4.3R(2), by using the form set out in Annex I of

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MiFID ITS 4, and publish it on its website and provide the report to ESMA; and … Position reporting by UK firms and UK branches of a third country investment firms operating an MTF or OTF: Duplication of reporting
10.4.6 G For the purposes of making the weekly report referred to under MAR
10.4.3R(2), the FCA will accept an email containing a link to the report, as published on the firm’s website. Emails should be sent to the FCA at COT_reports@fca.org.uk. This guidance does not affect the separate obligation for a firm to make the weekly report to ESMA. Position reporting by members, participants or clients of UK trading venues:
trading venue participant reporting
10.4.7 D …
(3) Paragraph (2) above does not apply to a member, participant or a client of a trading venue that is an EEA person. [deleted] … UK MiFID investment firms and UK branches of third country investment firms:
OTC reporting to the FCA
10.4.8 D (1) This direction applies to:
(a) a UK MiFID investment firm; and
…
…
UK MiFID investment firms and UK branches of third country investment firms:
OTC reporting to EEA competent authorities other than the FCA
10.4.9 D (1) This direction applies to:
(a) a UK MiFID investment firm; and
(b) a UK branch of a third country investment firm.
(2) An investment firm in (1) trading in a commodity derivative or emission allowance outside a trading venue must, where an EEA competent authority other than the FCA is the competent authority of the trading venue where that commodity derivative or emission allowance is traded, or the central competent authority for the

FCA 201X/XX purposes of that commodity derivative, provide that EEA competent authority with a report containing a complete breakdown of:
(a) their positions taken in those commodity derivatives or emission allowances traded on a trading venue; (b) economically equivalent OTC contracts; and (c) the positions of their clients and the clients of those clients until the end client is reached, in accordance with article 26 of MiFIR. (3) The report in (2) must be submitted to the relevant EEA competent authority, for each business day, using the form set out in Annex II of MiFID ITS 4, by the time specified by that EEA competent authority. (4) The obligation in (2) does not apply where the FCA is the central competent authority for that commodity derivative. [deleted] [Note: 58(2) of MiFID, and MiFID ITS 4 on position reporting] EEA MiFID investment firms who are members, participants or clients of UK trading venues: trading venue participant reporting and OTC reporting to the FCA
10.4.10 D (1) This direction applies to an EEA MiFID investment firm which is a
member, participant or a client of a UK trading venue.
(2) MAR 10.4.7D applies to an EEA MiFID investment firm under (1), as if it were a UK MiFID investment firm. (3) MAR 10.4.8D applies to an EEA MiFID investment firm under (1), as if it were a UK MiFID investment firm, where the EEA MiFID investment firm trades in a commodity derivative or emission allowance outside a trading venue, and the FCA is the competent authority of the trading venue where that commodity derivative or emission allowance is traded, or the central competent authority for the purposes of that commodity derivative. (4) Paragraphs (2) and (3) above only apply where the EEA MiFID investment firm is not subject to a corresponding rule or other requirement imposed by its Home State competent authority. [deleted]
10.4.11 G (1) This guidance applies to persons subject to MAR 10.4.8D(2) or MAR
10.4.10D(3).
(2) A firm subject to MAR 10.4.8D(2) or MAR 10.4.10D(3) may use a third party technology provider to submit to the FCA the report referred to in MAR 10.4.8D(2) provided that it does so in a manner consistent with MiFID. It will retain responsibility for the completeness, accuracy and timely submission of the report and

FCA 201X/XX should populate field 5 of MiFID ITS 4 Annex II with its own reporting entity identification. It should be the applicant for, and should complete and sign, the FCA MDP on-boarding application form. … (4) A firm subject to MAR 10.4.8D(2) or MAR 10.4.10D(3) may arrange for the trading venue where that commodity derivative or emission allowance is traded to provide the FCA with the report provided that it does so in a manner consistent with MiFID. The firm will retain responsibility for the completeness, accuracy and timely submission of the report, submitted on its behalf. The firm should populate field 5 of MiFID ITS 4 Annex II with its own reporting entity identification.
10.5 Other reporting, notifications and information requirements
…
Power to intervene
10.5.2 G The following provisions of the MiFI Regulations regulate the power of the
FCA to intervene in respect of position limits:
(1) Regulation 28 provides that the FCA may, if it considers necessary, limit the ability of any person to enter into a contract for a commodity derivative, restrict the size of positions a person may hold in such a contract, or require any person to reduce the size of a position held, notwithstanding that the restriction or reduction would be more restrictive than the position limit established by the FCA or another competent authority in accordance with article 57 of MiFID to which the contract relates; and … … Breaches of MAR 10 by unauthorised persons
10.5.4 G (1)
...
(b) a breach of a directly applicable provision imposed by MiFIR or any EU regulation onshored regulation adopted under MiFID or MiFIR; and …

FCA 201X/XX
Breaches of MAR 10 by authorised persons
10.5.6 G …
(2) a breach of a directly applicable provision imposed by MiFIR or EU regulation onshored regulation adopted under MiFID or MiFIR; and … Territoriality
10.5.7 G The powers of the FCA referred to in MAR 10.5.1G to MAR 10.5.3G can
be applied to a person regardless of whether the person is situated or operating in the UK or abroad, where the relevant position relates to a commodity derivative or emission allowance of for which the FCA is the competent authority or central competent authority responsible for setting a position limit, or economically equivalent OTC contracts.

FCA 201X/XX
EXITING THE EUROPEAN UNION: SPECIALIST SOURCEBOOKS (AMENDMENTS) INSTRUMENT 201[X] Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of:
(1) regulation 3 of the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018; and (2) section 139A (Power of the FCA to give guidance) of the Financial Services and Markets Act 2000. Commencement B. This instrument comes into force on [29 March 2019 at 11 p.m]. Amendments to the FCA Handbook
C. The modules of the FCA’s Handbook of rules and guidance listed in column (1)
below are amended in accordance with the Annexes in this instrument listed in column (2) below. (1) (2) Collective Investment Schemes (COLL) Annex A Investment Funds sourcebook (FUND) Annex B Regulated Covered Bonds (RCB) Annex C Revocation D. The Alternative Investment Fund Managers Directive (No 2) Instrument 2013 (FCA 2013/54) is revoked. Citation E. This instrument may be cited as the Exiting the European Union: Specialist Sourcebooks (Amendments) Instrument 201[X]. By order of the Board [date]

Editor’s notes

Annex A
Amendments to the Collective Investment Schemes sourcebook (COLL) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Introduction
1.1 Applications and purpose
Application
1.1.1 G (1) This sourcebook, except for COLL 9 (Recognised schemes), applies
to:
…
(c) managers and trustees of authorised unit trust schemes (AUTs); and (cA) authorised fund managers, depositaries and nominated partners of authorised contractual schemes (ACSs).; and (d) to the extent indicated, UK UCITS management companies operating EEA UCITS schemes. [deleted] … (4) This sourcebook also applies to EEA UCITS management companies of UCITS schemes to the extent required by the UCITS Directive. [deleted] … EEA territorial scope: compatibility with European law 1.1.1B R (1) The territorial scope of this sourcebook is modified to the extent necessary to be compatible with European law. (2) This rule overrides every other rule in this sourcebook. [deleted] EEA UCITS management companies of UCITS schemes 1.1.1C G An EEA UCITS management company that is providing collective portfolio management services for a UCITS scheme from a branch in the United Kingdom, or under the freedom to provide cross border services, is advised that where it operates a UCITS scheme as its designated management company, it meets the Glossary definition of an “ACD” of an ICVC or a “manager” of an AUT or an authorised contractual scheme manager of an ACS, which in either case is a UCITS scheme. Such firms should be aware that provisions in this sourcebook that apply to an ACD, a manager or an

authorised fund manager of a UCITS scheme accordingly apply to them, unless otherwise indicated: see COLL 12.3 (EEA UCITS management companies) for further details. [deleted] Purpose
1.1.2 G …
(2) In addition, this sourcebook implements implemented part of the requirements of the UCITS Directive to meet EU law obligations relevant to authorised funds and management companies, along with other requirements implemented in other parts of the Handbook. UCITS management company and product passport 1.1.2A G COLL 12 provides for the application of COLL in relation to the management company passport under the UCITS Directive. It explains how the passporting regime applies to both UK UCITS management companies and EEA UCITS management companies when providing collective portfolio management services on a cross-border basis. It also explains how the product passport (for UCITS) operates and how UCITS schemes may be marketed in other EEA States. [deleted] …
1.2 Types of authorised fund
…
Types of authorised fund - explanation
1.2.2 G (1) UCITS schemes have to comply with the conditions necessary in
order to enjoy the rights available under the UCITS Directive. Such schemes must in particular comply with:
…
(2) (a) Non-UCITS retail schemes are schemes that do not comply with all the conditions set out in the UCITS Directive necessary to be a UCITS scheme. … (c) Under The UK may, under the legislation which implemented article 43 of AIFMD, where an AIF can be marketed to retail clients impose stricter requirements on the an AIFM or the an AIF marketed to retail clients than the requirements that apply to an AIF marketed only to professional clients. (d) This sourcebook contains the stricter requirements for an AIF which is a non-UCITS retail scheme.

….
(f) Non-UCITS retail schemes could become UCITS schemes, provided they are changed, so as to comply with the necessary conditions set out in the UCITS Directive. … … (3) … (c) Under article 43 of AIFMD, where an AIF can be marketed to retail clients, Member States may impose stricter requirements on the AIFM or the AIF than the requirements that apply to an AIF marketed only to professional clients. [deleted] (d) This sourcebook contains the stricter requirements for an AIF which is a qualified investor scheme. … … … Pension feeder funds
1.2.5 G …
(2) A pension feeder fund may not invest in units of an EEA UCITS scheme unless that scheme is a recognised scheme under section 264 of the Act (see COLL 5.6.27R and COLL 5.8.2AR). … 2 Authorised fund applications
2.1 Authorised fund applications
…
Application by an EEA UCITS management company to manage a UCITS scheme
2.1.5 G An EEA UCITS management company that proposes to act as the authorised
fund manager of an AUT, ACS or ICVC that is a UCITS scheme, should be aware that it is required under paragraph 15A(1) of Schedule 3 to the Act to apply to the appropriate regulator for approval to do so. The form that the firm must use for this purpose is set out in SUP 13A Annex 3R (EEA UCITS management companies: application for approval to manage a

UCITS scheme established in the United Kingdom). In addition, those firms are required to provide to the appropriate regulator certain fund documentation, as specified by COLL 12.3.4R (Provision of documentation to the FCA:EEA UCITS management companies). [deleted] [Note: article 20(1) of the UCITS Directive] … 4 Investor Relations …
4.2 Pre-sale notifications
…
Provision and filing of the prospectus
4.2.3 R (1) The authorised fund manager of an AUT, ACS or an ICVC must:
…
(b) file a copy of the scheme’s original prospectus, together with all revisions thereto, with the FCA and, where a UCITS scheme is managed by an EEA UCITS management company, with that company’s Home State regulator on request. … …
Table: contents of the prospectus
4.2.5 R This table belongs to COLL 4.2.2R (Publishing the prospectus).
Document status
…
Authorised fund manager
6 The following particulars of the authorised fund manager:
…
(f) if neither its registered office nor its head office is in the United Kingdom, the address of its principal place of business in the United Kingdom; [deleted] …

…
Depositary
8 The following information and particulars concerning the depositary:
…
(e) if neither its registered office nor its head office is in the United Kingdom, the address of its principal place of business in the United Kingdom; [deleted] … … Contracts and other relationships with parties 11 The following relevant details:
…
(g) a list of:
(i) the functions which the authorised fund manager has delegated in accordance with FCA rules or, for an EEA UCITS management company, in accordance with applicable Home State measures implementing article 13 of the UCITS Directive; and … … … Marketing in another EEA state 26 A prospectus of a UCITS scheme which is prepared for the purpose of marketing units in a EEA State other than the United Kingdom, must give details as to:
(a) what special arrangements have been made:
(i) for paying in that EEA State amounts distributable to unitholders resident in that EEA State; (ii) for redeeming in that EEA State the units of unitholders resident in that EEA State;

(iii) for inspecting and obtaining copies in that EEA State of the instrument constituting the fund and amendments to it, the prospectus and the annual and half-yearly long report; and (iv) for making public the price of units of each class; and (b) how the ICVC or the authorised fund manager of an AUT or ACS will publish in that EEA State notice:
(i) that the annual and half-yearly long report are available for inspection; (ii) that a distribution has been declared; (iii) of the calling of a meeting of unitholders; and (iv) of the termination of the authorised fund or the revocation of its authorisation. [deleted] … Information to be provided on securities financing transactions and total return swaps … 4.2.5B EU UK [Editor’s note: We will consider whether amendments are needed to the copy out text in this provision when the relevant statutory instrument onshoring the Securities Financing Transactions Regulations is published.] … Guidance on contents of the prospectus
4.2.6 G …
(6) The authorised fund manager of a UCITS scheme should consider the appropriateness of including additional matters in its prospectus as a result of the ESMA Guidelines on ETFs and other UCITS issues (ESMA 2012/832)., which can be found at https://www.esma.europa.eu/sites/default/files/library/2015/11/2012- 832en_guidelines_on_etfs_and_other_ucits_issues.pdf …
4.3 Approvals and notifications
…

Appointment of a new authorised fund manager 4.3.6A R (1) In the case of a UCITS scheme, the appointment of a new ACD of an ICVC under COLL 6.5.3R (Appointment of an ACD) or the replacement of the authorised fund manager of an AUT or ACS who proposes to retire under COLL 6.5.8R (Retirement of an authorised fund manager of an AUT or ACS) must, if in either case the new authorised fund manager is established in a different EEA State to the outgoing authorised fund manager, be treated as a significant change in accordance with COLL 4.3.6R. (2) Paragraph (1) does not apply:
(a) if the appointment of the new authorised fund manager is the subject of an extraordinary resolution approved by a meeting of unitholders; or (b) following the termination of the appointment of the ACD of an ICVC under COLL 6.5.4R(2) or COLL 6.5.4R(3) (Termination of appointment of an ACD), if the directors of the ICVC other than the ACD, or the depositary if there are no such directors, consider that it would be in the best interests of unitholders to appoint a new ACD without delay. [deleted] Guidance on significant changes
4.3.7 G …
(4) The requirement in COLL 4.3.6AR(1) applies in all cases where the outgoing authorised fund manager (whether established in the United Kingdom or in another EEA State) is to be replaced by an authorised fund manager established in any other EEA State (including the United Kingdom). [deleted] … Appointment of an AFM without prior written notice to Unitholders
4.3.10 R (1) In the case of a UCITS scheme, the appointment of a new authorised
fund manager as a result of:
(a) in the case of an ICVC, the termination of the appointment of the previous ACD under COLL 6.5.4R(2) or COLL 6.5.4R(3) (Termination of appointment of an ACD); or (b) in the case of an AUT or ACS, the replacement of the authorised fund manager under COLL 6.5.7R(2) (Replacement of an authorised fund manager of an AUT or ACS);

must, if the new authorised fund manager is established in a different EEA State to the outgoing authorised fund manager, be notified to unitholders. [deleted] … …
4.5 Reports and accounts
…
Information to be included in annual and half-yearly reports on securities financing transactions and total return swaps … 4.5.8AB EU UK [Editor’s note: We will consider whether amendments are needed to the copy out text in this provision when the relevant statutory instrument onshoring the Securities Financing Transactions Regulations is published.] … Publication and availability of annual and half-yearly long report
4.5.14 R …
(2) The reports referred to in (1) must:
…
(c) for a UCITS scheme, be available for inspection by the public at a place designated by the authorised fund manager in each EEA State other than the United Kingdom in which units in the authorised fund are were marketed before exit day, in English and in at least one of that other EEA State’s official languages; and (d) be sent to the FCA and, if the UCITS scheme is managed by an EEA UCITS management company, to that company's Home State regulator on request. [Note: article 74 of the UCITS Directive] …
4.7 Key investor information and marketing communications
…
Key investor information

4.7.2 R …
(8) Key investor information for a UCITS scheme must be used without alterations or supplements, except translation, in each EEA State where a UCITS marketing notification has been made so as to enable the marketing of the scheme’s units in that State. [deleted] [Note: article 78 of the UCITS Directive] Form and content of a key investor information document
4.7.3 G The KII Regulation sets out the form and content of a key investor
information document. This Regulation is directly applicable in the United Kingdom and accordingly its articles (but not the preceding recitals) are binding on all firms to which it applies. Under the Regulation an authorised fund manager must ensure that each key investor information document it produces for a UCITS scheme complies with the requirements of the Regulation. For ease of reference the Regulation is reproduced in COLL
Appendix 1EU Appendix 1UK (The KII Regulation).
…
Synthetic risk and reward indicators and ongoing charges disclosures in the KII
4.7.8 G …
(3) Firms should note that these methodologies may in due course become directly applicable obligations in the light of the European Securities and Markets Authority’s powers to develop implementing technical standards in this area. [deleted] …
4.8 Notifications for UCITS master-feeder arrangements
…
Information to be provided to Unitholders
4.8.3 R …
(2) Where a UCITS marketing notification has been was made in relation to a feeder UCITS before exit day, the authorised fund manager of the feeder UCITS must ensure that an accurate translation of the information in (1) is provided to unitholders in:
(a) the official language, or one of the official languages, of the feeder UCITS’ Host State state where the UCITS marketing notification was made; or

(b) a language approved by the Host State regulator overseas regulator in the state where the UCITS marketing notification was made. [Note: article 64 first and second paragraphs of the UCITS Directive] … 5 Investment and borrowing powers …
5.2 General investment powers and limits for UCITS schemes
Application
5.2.1 R …
(2) COLL 5.2.23CR (Valuation of OTC derivatives) also applies to a UK UCITS management company providing collective portfolio management services for an EEA UCITS scheme from a branch in another EEA State or under the freedom to provide cross border services. [deleted] … Eligible markets: requirements
5.2.10 R (1) A market is eligible for the purposes of the rules in this sourcebook
if it is:
…
(b) a market in the UK or an EEA State which is regulated, operates regularly and is open to the public; or … … … Issuers and guarantors of money-market instruments 5.2.10B R (1) A UCITS scheme may invest in an approved money-market instrument if it is:
(a) issued or guaranteed by any one of the following:
(i) a central authority of the UK or an EEA State or, if the EEA State is a federal state, one of the members making up the federation;

(ii) a regional or local authority of the UK or an EEA State; (iii) the Bank of England, the European Central Bank or a central bank of an EEA State; … (vi) a public international body to which the UK or one or more EEA States belong; or … (c) issued or guaranteed by an establishment which is:
(i) subject to prudential supervision in accordance with criteria defined by UK or EU law; or (ii) subject to and complies with prudential rules considered by the FCA to be at least as stringent as those laid down by UK or EU law. (2) An establishment shall be considered to satisfy the requirement in (1)(c)(ii) if it is subject to and complies with prudential rules, and fulfils one or more of the following criteria:
…
(d) on the basis of an in-depth analysis of the issuer, it can be demonstrated that the prudential rules applicable to that issuer are at least as stringent as those laid down by UK or EU law. [Note: article 6 of the UCITS eligible assets Directive] … Other money-market instruments with a regulated issuer 5.2.10E G (1) In addition to instruments admitted to or dealt in on an eligible market, a UCITS scheme may also with the express consent of the FCA (which takes the form of a waiver under sections 138A and 138B of the Act as applied by section 250 of the Act or regulation 7 of the OEIC Regulations) invest in an approved money-market instrument provided:
…
(c) the issuer is a company whose capital and reserves amount to at least EUR 10 million and which presents and publishes its annual accounts in accordance with the requirements of the Companies Act 2006 applicable to public companies limited

CP18/28: Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation

Lineage: In force