CP13/6 - CRD IV for Investment Firms - Financial Conduct Authority

CRD IV for Investment Firms
CP13/6
Table 7: Technical amendments in the Directive
Directive
Art. Area
28 to 31 Initial capital for investment firms and other firms that carry out certain
MIFID activities
71(3) A firm must have in place appropriate procedures for its employees to
report breaches internally through a specific, independent and autonomous
channel. (The transposition of this provision is subject to agreement with the
Treasury, so depending upon the subsequent legal mechanism chosen by
the Treasury for that purpose, we may need to consult further later in 2013).
74 to 88 /
90 to 96
Changes in governance aimed at increasing the effectiveness of risk
oversight by Boards, improving the status of the risk management
function and ensuring effective monitoring by supervisors of risk
governance. For example:
Directive requirements relating to management bodies include:
• The management body must commit sufficient time and possess
adequate knowledge, skills and experience to be able to understand
the business of the firm and its main risk exposures. Limits are placed
on the number of directorships and non-executive directorships a
member of the management body can hold.
• All members of the management body should be of sufficiently good
repute, possess sufficient knowledge, skills and experience and commit
sufficient time to perform their duties and functions as specified by the
Directive.
• The roles of chairman and chief executive should not be combined,
unless justified by the firm and authorised by the regulator.
• Firms that are significant must establish a nomination committee of
non-executive directors. The nomination committee will have various
duties regarding the composition and functioning of the management
body individually and collectively, including selection planning and the
qualities, competences and other factors to be taken into account when
identifying and recommending candidates; and deciding on a target for
the representation of the underrepresented gender on the management
body and how to meet it.
Directive requirements relating to risk management arrangements include:
• The management body has overall responsibility for the firm’s overall risk
strategy and for the adequacy of the firm’s risk management system.
• The management body in its supervisory function must establish a
separate risk committee to deal specifically with risk issues. The risk
committee should assist the management body in its risk oversight role
but the management body will remain ultimately accountable for the
firm’s risk strategy. Firms that are not significant may, with supervisory
approval, combine their risk and audit committees, provided members
of the combined committee have the relevant knowledge, skills and
expertise for both.
• Firms must have an independent risk management function, where
this is proportionate, depending on the nature, scale and complexity of
its business. The function is responsible for assessing all material risks,
with direct access to the management body. It is also to be involved in
elaborating the firm’s risk strategy and in all material risk management
decisions.
Impact of
the changes
No impact
due to no
substantive
change.
No impact
due to no
substantive
change.
Most of
these items
are already
covered
in SYSC
while the
proportionate
nature of
most of them
is likely to
have minimal
impact for
firms (see
Chapter 5 on
definition of
‘significant’
firm).
Financial Conduct Authority July 2013
29