United KingdomFundamental Rule 5: effective risk strategies and risk management systems
PRA Rulebook, Fundamental Rule 5
In force since .
An AI sector rules rule binding private bodies.
- Criminal exposure
- No
- Enforcement body
- Prudential Regulation 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 to which the Fundamental Rules Part of the PRA Rulebook applies. The Part applies to all firms unless otherwise stated, and the Fundamental Rules apply with respect to the carrying on of regulated activities, dealing in investments as principal and ancillary activities in relation to PRA-regulated activities, wherever those activities are carried on. Fundamental Rule 5 also applies to unregulated activities, but only in a prudential context, and takes into account any activity of other members of a group of which the firm is a member.
- A firm must have effective risk strategies and risk management systems (Fundamental Rule 5).
What this law does
Fundamental Rule 5 in the Fundamental Rules Part of the PRA Rulebook requires a firm to have effective risk strategies and risk management systems. The Part applies to all firms unless otherwise stated. The Fundamental Rules apply with respect to the carrying on of regulated activities, dealing in investments as principal and ancillary activities in relation to PRA-regulated activities. Fundamental Rule 5 also applies to unregulated activities, but only in a prudential context.
The Fundamental Rules apply with respect to activities wherever they are carried on. The Prudential Regulation Authority made the Part in the exercise of section 137G of the Financial Services and Markets Act 2000. The instrument that made the Part came into force on . Section 137G of the Financial Services and Markets Act 2000 lets the PRA make rules applying to PRA-authorised persons.
Section 206 of the Financial Services and Markets Act 2000 lets the appropriate regulator impose on an authorised person that has contravened a relevant requirement a penalty of such amount as it considers appropriate. The PRA is the appropriate regulator for a contravention of a requirement that is imposed under any provision of that Act by the PRA.
Section 138D of the Financial Services and Markets Act 2000 provides that a rule made by the PRA may provide that its contravention is actionable at the suit of a private person who suffers loss. Section 138E of the Financial Services and Markets Act 2000 provides that a person is not guilty of an offence by reason of a contravention of a rule made by either regulator.
Guidance on this law
How the bodies that enforce this law read it. Guidance binds nobody by itself, so LexLint never raises a finding from it; the duty is this law's.
- Model risk management principles for banks, the Prudential Regulation Authority
When LexLint raises it
When your app profile says your app provides financial services.