Prudential Regulation Authority Rulebook

5.1

A firm must ensure that the management body defines, oversees and is accountable for the implementation of governance arrangements that ensure effective and prudent management of the firm, including the segregation of duties in the organisation and the prevention of conflicts of interest. The firm must ensure that the management body:

1. (1) has overall responsibility for the firm;
2. (2) approves and oversees implementation of the firm’s strategic objectives, risk strategy and internal governance;
3. (3) ensures the integrity of the firm’s accounting and financial reporting systems, including financial and operational controls and compliance with the regulatory system;
4. (4) oversees the process of disclosure and communications;
5. (5) has responsibility for providing effective oversight of senior management; and
6. (6) monitors and periodically assesses the effectiveness of the firm’s governance arrangements and takes appropriate steps to address any deficiencies.

[Note: Art. 88(1) of the CRD]

5.2

A firm must ensure that the members of the management body of the firm:

1. (1) are of sufficiently good repute;
2. (2) possess sufficient knowledge, skills and experience to perform their duties;
3. (3) possess adequate collective knowledge, skills and experience to understand the firm’s activities, including the main risks;
4. (4) reflect an adequately broad range of experiences;
5. (5) commit sufficient time to perform their functions in the firm; and
6. (6) act with honesty, integrity and independence of mind to effectively assess and challenge the decisions of senior management where necessary and to effectively oversee and monitor management decision-making.

[Note: Art. 91(1)-(2) and (7)-(8) of the CRD]

5.3

A firm must devote adequate human and financial resources to the induction and training of members of the management body.

[Note: Art. 91(9) of the CRD]

5.4

A firm must ensure that the members of the management body of the firm do not hold more directorships than is appropriate taking into account individual circumstances and the nature, scale and complexity of the firm’s activities.

[Note: Art. 91(3) of the CRD]

5.5

1. (1) A firm that is significant must ensure that the members of the management body of the firm do not hold more than one of the following combinations of directorship in any organisation at the same time:
1. (a) one executive directorship with two non-executive directorships; and
2. (b) four non-executive directorships.
2. (2) Paragraph (1) does not apply to members of the management body that represent the UK.

[Note: Art. 91(3) of the CRD]

5.6

For the purposes of 5.4 and 5.5:

1. (1) directorships in organisations which do not pursue predominantly commercial objectives shall not count; and
2. (2) the following shall count as a single directorship:
1. (a) executive or non-executive directorships held within the same group; or
2. (b) executive or non-executive directorships held within:
1. (i) firms that are members of the same institutional protection scheme provided that the conditions set out in Article 113(7) of the CRR are fulfilled; or
2. (ii) undertakings (including non-financial entities) in which the firm holds a qualifying holding.

[Note: Art. 91(4) and (5) of the CRD]

5.7

5.8

A firm that maintains a website must explain on the website how it complies with the requirements of this Chapter and Senior Management Functions 8.2.

[Note: Art. 96 of the CRD]