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REC 2.4A Management body

03/01/2018UK

Schedule to the Recognition Requirements Regulations, paragraph 2A

(1)The composition of the management body of a [UK RIE] must reflect an adequately broad range of experience.
(2)The management body must possess adequate collective knowledge, skills and experience in order to understand the [UK RIE’s] activities and main risks.
(3)Members of the management body must -
 (a)commit sufficient time to perform their functions on the management body;
 (b)act with honesty, integrity and independence of mind; and
 (c)effectively -
  (i)assess and challenge, where necessary, the decisions of the senior management; and
  (ii)oversee and monitor decision making.
(4)The management body must -
 (a)define and oversee the implementation of governance arrangements that ensure the effective and prudent management of the [UK RIE] in a manner which promotes the integrity of the market, which at least must include the -
  (i)the segregation of duties in the organisation; and
  (ii)the prevention of conflicts of interest;
 (b)monitor and periodically assess the effectiveness of the [UK RIE’s] governance arrangements; and
 (c)take appropriate steps to address any deficiencies found as a result of the monitoring under paragraph (b).
(5)A [UK RIE] must -
 (a)devote adequate human and financial resources to the induction and training of members of the management body;
 (b)ensure that the management body has access to the information and documents it requires to oversee and monitor management decision-making; and
 (c)notify the FCA of the identity of all the members of its management body.
(6)A [UK RIE] and, if it has a nomination committee, its nomination committee must engage a broad set of qualities and competences when recruiting persons to the management body, and for that purpose have a policy promoting diversity on the management body.
(7)The number of directorships a member of the management body can hold at the same time must take into account individual circumstances and the nature, scale and complexity of the [UK RIE’s] activities.
01/01/2021UK

Schedule to the Recognition Requirements Regulations, paragraph 2B

(1)If the [UK RIE] is significant the following requirements apply to the management body -
 (a)members of the management body must not at the same time hold positions exceeding more than one of the following combinations –
  (i)one executive directorship with two non-executive directorships (or where so authorised by the FCA under regulation 44(1) [of the MiFI Regulations], three non-executive directorships); or
  (ii)four non-executive directorships (or where so authorised by the FCA under regulation 44(1) [of the MiFI Regulations], five non-executive directorships); and
 (b)the management body must have a nomination committee unless it is prevented by law from selecting and appointing its own members.
(2)For the purposes of sub-paragraph (1)(a) -
 (a)any directorship in which the person represents the United Kingdom is not counted;
 (b)executive or non-executive directorships -
  (i)held within the same group, or
  (ii)held within the same undertaking where the [UK RIE] holds a qualifying holding,
  shall be counted as a single directorship; and
 (c)any directorship in an organisation which does not pursue predominantly commercial objectives is not counted.
(3)The nomination committee referred to in sub-paragraph (1)(b) must -
 (a)be composed of members of the management body who do not perform an executive function in the [UK RIE];
 (b)identify and recommend to the [UK RIE] persons to fill management body vacancies;
 (c)at least annually assess the structure, size, composition and performance of the management body and make recommendations to the management body;
 (d)at least annually assess the knowledge, skills and experience of individual members of the management body and of the management body collectively and report to the management body accordingly; and
 (e)periodically review the policy of the management body for the selection and appointment of senior management and make recommendations to the management body; and
 (f)be able to use any forms of resource it deems appropriate, including external advice.
(4)In performing its functions under sub-paragraph (3), the nomination committee must take account of the need to ensure that the management body’s decision making is not dominated by-
 (a)any one individual; or
 (b)a small group of individuals,
 in a manner that is detrimental to the interests of the [UK RIE] as a whole.
(5)In performing its function under sub-paragraph 3(b) the nomination committee must -
 (a)evaluate the balance of knowledge, skills, diversity and experience of the management body;
 (b)prepare a description of the roles, capabilities and expected time commitment for any particular appointment;
 (c)decide on a target for the representation of the underrepresented gender in the management body and prepare a policy on how to meet that target;
 (d)engage a broad set of qualities and competences, and for that purpose have a policy promoting diversity on the management body.
(6)In sub-paragraph (1), “significant” in relation to a [UK RIE] means significant in terms of the size and internal organisation of the [UK RIE] and the nature, scale and complexity of the [UK RIE’s] activities.
(7)

In sub-paragraph (2)(b)(ii)—

“qualifying holding” means a direct or indirect holding in an investment firm which represents 10% or more of the capital or of the voting rights, as set out in Articles 9 and 10 of Directive 2004/109/EC, taking into account the conditions regarding aggregation thereof laid down in Article 12(4) and (5) of that Directive, or which makes it possible to exercise a significant influence over the management of the investment firm in which that holding subsists;

“Directive 2004/109/EC” means Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market.

03/01/2018G

The FCA will assess an application under section 299AB of the Act for a person on a management body to hold an additional non-executive directorship on a case-by-case basis, having regard to the person’s ability to commit sufficient time to perform their functions on the management body and the complexity, nature and scale of operations of the UK RIE.