5.2.1. Responsibility for compliance

An Authorised Person which outsources any of its functions or activities directly related to Regulated Activities or Market Activities to a service provider (including a service provider within its Group) is not relieved of its regulatory obligations and remains responsible for compliance with the Framework Regulations and Rules.

5.2.2. Outsourced function deemed to be carried on by Authorised Person

The outsourced function under GEN 5.2.1 shall be deemed to be carried out by the Authorised Person itself.

5.2.3. Due diligence and supervision

An Authorised Person which uses a service provider as referred to in GEN 5.2.1 must ensure that it:

• (a) has undertaken due diligence in choosing a suitable service provider;
• (b) effectively supervises the outsourced functions or activities; and
• (c) deals effectively with any act or failure to act by the service provider that leads, or might lead, to a breach of any Regulations or Rules.

5.2.4. Notification of AFSA of material outsourcing arrangements

An Authorised Person must inform the AFSA about any material outsourcing arrangements.

Guidance: material outsourcing arrangement An outsourcing arrangement will be considered to be material if it is a service of such importance that weakness or failure of that service would cast serious doubt on the Authorised Person's continuing ability to remain fit and proper or to comply with the Framework Regulations and Rules administered by the AFSA.

5.2.5. Material outsourcing arrangements

An Authorised Person which has a material outsourcing arrangement must:

• (a) establish and maintain comprehensive outsourcing policies, contingency plans and outsourcing risk management programmes;
• (b) enter into an appropriate and written outsourcing contract; and
• (c) ensure that the outsourcing arrangements neither reduce its ability to fulfil its obligations to Clients and the AFSA, nor hinder supervision of the Authorised Person by the AFSA.

5.2.6. Terms of outsourcing contracts

An Authorised Person must ensure that the terms of its outsourcing contract with each service provider under a material outsourcing arrangement require the service provider to:

1. (a) provide information and documents where required by the AFSA under section 96 of the Framework Regulations; and
2. (b) deal in an open and co‐operative way with the AFSA.