Guidance on Rule 7.8: Formation of a Subsidiary or Branch

Guidance on rule 7.8 May 2010 Formation of a subsidiary or branch – Rule 7.8 The Commission would expect the licenceholder to supply supporting and background information as set out below: Corporate governance i. A proposed updated structure chart for the group, showing a proposed subsidiary* ii. A proposed management and staff plan for the subsidiary or branch iii. Proposals for management controls (rule 8.4) iv. Identified risks and proposals for risk management (rule 8.6) Financial and business planning v. The proposed product offering of the subsidiary or branch under rule 8.10 vi. An updated business plan for the licenceholder under rule 8.9, taking account of the subsidiary or branch vii. Projected P&L and balance sheet for a subsidiary as at the end of the first and second years of trading* viii. Projected financial resources calculations for the licenceholder in the format set out in Schedule 2.3 of the Rule Book, for the same dates ix. Proposed arrangements for the subsidiary to be audited in accordance with rule 2.15* x. Arrangements for the extension of PII cover to the subsidiary or branch AML-CFT xi. Proposals for the achievement of equivalent AML-CFT standards (paragraph 14 of the CJML Code 2008 refers) Outsourcing or insourcing xii. Arrangements for any outsourcing or insourcing under rule 8.13 Overseas regulation xiii. Plans for any application to an overseas regulator, which would be notifiable under rule 8.17(2)(f). The Commission will contact the regulator under statutory gateways.

• Asterisked items would be applicable to a subsidiary but not a branch.