Aviva 2009 Annual Report Download - page 122

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Aviva plc Additional information for Shareholders continued
Annual Report and Accounts 2009
procedures, including the possibility of human error and the
circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their control
objectives. Based upon Aviva’s evaluation, the Group Chief
Executive and Group Chief Financial Officer concluded that as of
31 December 2009 Aviva’s disclosure controls and procedures
were effective to provide reasonable assurance that information
required to be disclosed by Aviva in the reports Aviva files and
submits under the Securities Exchange Act is recorded,
processed, summarised and reported, within the time periods
specified in the applicable rules and forms and that it is
accumulated and communicated to Aviva’s management,
including the Group Chief Executive and Group Chief Financial
Officer, as appropriate to allow timely decisions regarding
required disclosure.
Management’s annual report on internal control over
financial reporting
This Annual Report does not include a report of management’s
assessment regarding internal control over financial reporting
or an attestation report of the company’s registered public
accounting firm due to a transition period established by rules
of the Securities and Exchange Commission for newly public
companies.
Audit committee financial expert
The Board has determined that Russell Walls, Richard Goeltz
and Euleen Goh all qualify as audit committee financial experts
within the meaning of Item 16A of Form 20-F, and that Russell
Walls, Richard Goeltz and Euleen Goh are all independent as
defined by the New York Stock Exchange Corporate
Governance Standards.
Code of ethics
The company has adopted a code of ethics for its group chief
executive, chief financial officer, general auditor and group chief
accounting officer as required by the provisions of Section 406
of the Sarbanes-Oxley Act of 2002 and the rules issued by the
SEC. There have been no amendments to, or waivers from,
the code of ethics relating to any of those officers. The code
of ethics was filed on 7 October 2009 as an exhibit to our Form
20-F registration document.
Regulation
Compliance
In our insurance business, matters may arise as a result of
industry-wide issues, inspection visits or other regulatory activity
requiring discussion and resolution with insurance industry
regulators. As a result of these matters, we ensure that
procedures are in place to address regulatory concerns and that
such procedures are properly planned, managed and resourced.
We pursue corrective action when necessary and report
progress to the regulatory bodies in a timely manner.
Overview of regulation as it affects our business
Our principal insurance and investment operations are in the
United Kingdom, Europe, North America and the Asia Pacific
region. We are therefore subject to financial services regulation
in these regions, which is discussed below.
United Kingdom
The Financial Services Authority
In the UK, the Financial Services Authority (the FSA) is the single
regulator for all authorised persons with respect to regulated
activities in the financial services sector. In this regard, the FSA
is authorised to make rules and issue guidance in relation to a
wide sphere of activity encompassing the governance of the
conduct of business by, and the prudential supervision of
persons which the FSA has authorised to conduct such business
(“Authorised Persons” or “Authorised Firms”).
Under the Financial Services and Markets Act 2000
(“FSMA”), no person may carry on or purport to carry on a
regulated activity by way of business in the UK unless he is an
Authorised Person or an exempt person. A firm which is granted
permission by the FSA to carry on regulated activities becomes
an Authorised Person for the purposes of FSMA. “Regulated
activities” are prescribed in the Financial Services and Markets
Act 2000 (Regulated Activities) Order 2001 and include
banking, insurance and investment business, stakeholder
pension schemes, insurance mediation and certain mortgage
mediation and lending activities.
Authorised Firms must at all times meet certain threshold
conditions, which include having adequate resources for the
carrying on of its business and being a fit and proper person,
having regard to all the circumstances. Authorised Firms must
also comply with the FSA’s Principles for Business, which are 11
high level principles for conducting financial services business in
the UK. These include the maintenance of adequate systems
and controls, treating customers fairly and communicating with
customers in a manner that is clear, fair and not misleading.
The FSA’s regulation of the group
A number of the Group’s UK subsidiaries are directly authorised
and regulated by the FSA. The regulated subsidiaries include our
insurance companies (eg the UK Life and UK General Insurance
companies), asset managers (Aviva Investors) and intermediaries
(UK Healthcare and RAC Motoring Services). Aviva plc, although
not directly authorised by the FSA, does itself come within the
scope of regulation by virtue of being the ultimate insurance
holding company in the Group. In line with requirements under
the Insurance Groups Directive, Group solvency returns are
required to be prepared at Aviva plc level.
The FSA regime is built on the basic principle that a firm
should have systems and controls, including risk management,
which are appropriate to the size, complexity and diversity of
its business.
Approved persons and controllers
The FSA regime is also predicated on the principle of senior
management responsibility. The directors and senior managers
holding positions of significant influence of each of the Group’s
regulated entities are individually registered with the FSA under
the “Approved Person” regime, and can be held directly
accountable to the FSA for control failings in those firms.
A number of senior managers at Group level have also been
registered as Approved Persons for the regulated subsidiaries,
even though they are neither directors nor senior managers of
these firms. This recognises that these managers exert
significant influence over the regulated subsidiaries, because
they are responsible for key parts of the Group’s control
framework on which the regulated subsidiaries place reliance.
The FSA regulates from a legal entity perspective, even
though we tend to operate within Regions by Business Unit.