United KingdomOutsourcing by a firm other than a common platform firm: remaining fully responsible for outsourced critical or important operational functions
In force since .
An AI sector rules rule binding private bodies.
- Criminal exposure
- No
- Enforcement body
- Financial Conduct Authority
- Instrument type
- a regulation made under an act
- Obligation class
- Governance
- Audit expectation
- none
As of .
What it requires
- It reaches you if you are a firm other than a common platform firm, apart from an insurer, a UK ISPV, a managing agent, the Society, a full-scope UK AIFM of an unauthorized AIF, a MiFID optional exemption firm or a third country firm (SYSC 1 Annex 1 3.3R).
- If you are a firm other than a common platform firm and you outsource critical or important operational functions or any relevant services and activities, remain fully responsible for discharging all of your obligations under the regulatory system, and comply with the conditions that the outsourcing must not result in the delegation by senior personnel of their responsibility, must not alter your relationship and obligations towards clients, must not undermine the conditions with which you must comply in order to be authorized and to remain so, and must not remove or modify any other condition subject to which your authorization was granted (SYSC 8.1.6R).
These lines are LexLint's reading of the law's text, as of .
What this law does
SYSC 8.1.6R requires a firm other than a common platform firm that outsources critical or important operational functions or any relevant services and activities to remain fully responsible for discharging all of its obligations under the regulatory system, and to see that the outsourcing does not result in the delegation by senior personnel of their responsibility, does not alter the firm's relationship and obligations towards its clients, does not undermine the conditions with which it must comply in order to be authorized and to remain so, and does not remove or modify any other condition subject to which its authorization was granted.
Other firms should take account of the outsourcing rule in SYSC 8.1.1R as if it were guidance, as SYSC 1 Annex 1 3.3R(1) explains. For SYSC 8, outsourcing means an arrangement of any form between a firm and a service provider by which that service provider performs a process, a service or an activity which would otherwise be undertaken by the firm itself.
Because that definition covers an arrangement of any form, a firm's use of a third party's model or AI service that performs a process, a service or an activity the firm would otherwise undertake itself is outsourcing for SYSC 8. SYSC 8.1.6R took effect on . A contravention of a rule in the common platform requirements does not give rise to a right of action by a private person under section 138D of the Financial Services and Markets Act 2000.
SYSC Schedule 5 records that the FCA has removed the right of action under section 138D of the Financial Services and Markets Act 2000 for SYSC 4 to SYSC 10A, with a reference to SYSC 1 Annex 1 2.19R. If the appropriate regulator considers that an authorised person has contravened a relevant requirement imposed on the person, section 206 of the Financial Services and Markets Act 2000 lets it impose a penalty of such amount as it considers appropriate.
When LexLint raises it
When your app profile says your app provides financial services.