SYSC Senior Management Arrangements, Systems and Controls

The Senior Management Arrangements, Systems and Control sourcebook is one of the core building blocks of the FCA handbook. It sets out a framework within which a business should be managed and controlled.

The main purposes of SYSC are to:

1. Encourage Directors and Senior Managers to take responsibility for a firm’s arrangements on matters likely to be of interest to the FCA.
2. Ensure that firms are clear on how they need to organise and control their affairs responsibly and effectively, with adequate risk management systems.
3. Encourage firms to allocate responsibility for effective and responsible organisation to specific directors and senior managers.

This sourcebook promotes Principle 3, “a firm must take reasonable care to organise and control its affairs’ responsibly and effectively, with adequate risk management systems”.

Responsibility for compliance is on a top-down basis and the FCA are quite clearly giving responsibility for the organisation of the firm and its compliance with regulations to the senior managers. The senior managers need to recognise and understand their responsibilities and these need to be confirmed on a formal written basis.

This sourcebook looks at the way a firm organises itself and the systems and controls which need to be established in the following areas:

• governance and organisational structure;
• monitoring of systems and controls;
• compliance/internal audit/financial crime;
• risk control;
• management information;
• employees and remuneration;
• knowledge, ability and good repute;
• outsourcing;
• conflicts of interest;
• business planning/business continuity;
• whistleblowing;
• records.

The FCA would expect the firm to have considered the following issues in establishing and maintaining their systems and controls:

• the size of the firm;
• the scale and complexity of the business (small firms are not expected to have the full range of procedures and systems that a well-run large firm requires);
• the need to counter the risk that the firm might be used to further financial crime;
• the diversity of operations; and
• the volume and size of transactions.

(Financial crime is defined as any offence involving fraud, dishonesty, misconduct in, or misuse of, information relating to any financial market or handling directly or indirectly the proceeds of crime and is covered in a later section)

It is important, however, that whatever the size of the firm it should be able to demonstrate that it has considered which systems and controls are relevant to its business. As well as clear documentation of procedures, firms need to ensure that they can clearly evidence how procedures have been complied with throughout the organisation. It is vitally important therefore, that such information should be kept both up to date and communicated to all members of staff.