Financial services outsourcing

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Financial services outsourcing
  • Outsourcing rules applying to UK financial services firms
  • Application of outsourcing rules
  • What is outsourcing?
  • Critical outsourcing
  • General requirement to have effective processes
  • Regulatory conditions for outsourcing
  • Avoidance of undue additional operational risk
  • Responsibility
  • Skill, care and diligence
  • More...

Financial services outsourcing

This Practice Note examines the outsourcing requirements which apply to firms as set out in:

  1. Commission Delegated Retained Regulation (EU) 2017/565 (the UK MiFID II Organisational Regulation), a Level 2 measure under Retained Directive 2014/65/EU (UK MiFID II), and

  2. the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) in the Financial Conduct Authority (FCA) Handbook, and the Prudential Regulation Authority (PRA) Rulebook

UK MiFID II and the the UK MiFID II Organisational Regulation apply in the UK as of IP completion day (31 December 2020).

In addition, the data protection regime set out in Retained Regulation (EU) 2016/679 (UK GDPR) contains provisions which apply to outsourcing. For information, see Practice Notes:

  1. Introduction to the EU GDPR and UK GDPR

  2. GDPR for financial services firms—one minute guide

  3. EU data protection reform—timeline [Archived]

  4. The Data Protection Act 2018

  5. Key definitions under data protection law

  6. Data protection principles

  7. Outsourcing and data protection, and

  8. Supply chains under data protection law—arrangements between controllers and processors

Outsourcing rules applying to UK financial services firms

The outsourcing rules which apply to UK financial services firms are set out in:

  1. Articles 30 to 32 of the UK MiFID II Organisational Regulation

  2. the general requirement to have effective processes in SYSC 4.1.1R, and

  3. SYSC 8

Dual regulated firms should also take note of the parallel rules in the following Parts of the PRA Rulebook:

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