AUTH 3.9 Procedures in relation to applications for Part IV permission

All applicants for Part IV permission are encouraged to contact the Authorisation and Approvals Department of the FSA to discuss their application before they send in an application form.2

1. (1)

   If an applicant's plans are complex (for example, including insurance business or accepting deposits and some designated investment business), high risk or innovative (for example, raising new or unusual issues), the FSA will expect the applicant to discuss its plans with them before submitting an application for Part IV permission.

2. (2)

   FSA staff will be available to attend a pre-application meeting with such applicants to discuss the application and any issues or problem areas. If appropriate, for example in the case of an application to carry on insurance business or accepting deposits, FSA staff may, by agreement with the applicant discuss aspects of the application during its preparation, for example, the applicant's draft business plan or other relevant documentation. If relevant, FSA staff will discuss likely capital and, where relevant, liquidity ratios with the applicant to enable the applicant to prepare capital adequacy projections.

3. (3)

   Applicants should note that:

   1. (a)

      a pre-application meeting is not a substitute for an applicant obtaining any professional assistance;

   2. (b)

      a pre-application meeting is to give informal assistance to applicants (as set out in AUTH 3.9.2 G). A meeting might, for example, be used to help an applicant prepare its formal application for Part IV permission and to identify and address issues or problem areas at an early stage before time and costs are incurred in preparing a complete application. This assistance is not part of the application process outlined in the rest of AUTH 3.9.

   3. (c)

      the submission of an incomplete application will start the formal application process, including the time limits for determination of incomplete applications (see AUTH 3.9.31 G) and the requirements for a fee (see AUTH 3.9.4 G (1)).

1. (1)

   An application should be accompanied by the application fee set by the FSA (see AUTH 4 (Authorisation Fees)).1

2. (2)

   The application pack and accompanying guidance notes are available on www.fsa.gov.uk or from the Authorisation and Approvals Department of the FSA. To contact the Authorisation and Approvals Department:

   1. (a)

      telephone on 020 7066 3954; or

   2. (b)

      write to the Authorisation and Approvals Department at the address in AUTH 3.9.3 D (4); or

   3. (c)

      email corporate.authorisation@fsa.gov.uk.2

The application pack is made up of several sections and the ones which need to be completed will depend on the category of applicant. For example, the insurance sections will contain different application questions according to the type of applicant (for example, matters needing to be addressed vary for overseas applicants and Swiss general insurance companies). In addition, applicants will need to submit forms for approved persons (see AUTH 6 (Approved persons)) and controllers as part of the pack (see AUTH 3.9.24 G).

Under section 51(1)(b) of the Act, an application for Part IV permission must give an address in the United Kingdom for service of any document required by the Act.

The application forms ask for general information about the applicant, its intended activities and any proposed or current unregulated activities. They also ask for details of how the applicant plans to comply with the FSA's regulatory obligations relating to the activities it seeks Part IV permission to carry on. The forms contain notes on completion and details of how the FSA can help.

In addition to the information in the application pack, the FSA may require the applicant to provide such further information as it reasonably considers necessary to enable it to determine the application, and to verify it as the FSA directs. This may include the provision of documents. The FSA may request such additional information during a pre-application meeting or after reviewing a submitted application pack. Should the FSA require further information on reviewing an application pack, the applicant will be advised in writing as early as possible.

The FSA will assess the applicant having regard to the regulatory objectives and will, therefore, be proportional in its procedures, including in the information which it seeks from applicants (see AUTH 1.4.4 G). Thus the nature of the information and documents requested by the FSA, either in the application pack or subsequently, will be proportional to the nature of the business the applicant intends to carry on. For example, a small company seeking to carry on low risk business will be required to submit a business plan and other information relevant to its size and the scope of the proposed business. Information which is requested from applicants as part of the application pack includes but is not limited to the following.

1. (1)

   A business plan which describes the regulated activities and any unregulated activities (except where not permitted, for example see AUTH 3.12.2 G) which the applicant proposes to carry on, the management and organisational structure of the applicant and details of any proposed outsourcing arrangements. The level of detail required in the business plan will be appropriate to the risks to consumers arising from the proposed regulated and unregulated activities. For an applicant seeking to carry on insurance business, the business plan should include a scheme of operations in accordance with SUP App 2 (Insurer and friendly societies: schemes of operation).

2. (2)

   Appropriately analysed financial budget and projections which demonstrate that the applicant expects to comply with the relevant financial resources requirements appropriate to the applicant's prudential category (and in some cases sub-category).

3. (3)

   Details of systems to be used (which do not have to be in place at the time of initial application), compliance procedures and documentation.

4. (4)

   Details of the individuals to be involved in running the proposed business (such as directors, partners and members of the governing body, all of whom will be performing controlled functions) and any connected persons (see AUTH 3.9.23 G). AUTH 6 gives guidance on the approved person regime and the procedures for approval.

1. (1)

   The application pack should be accompanied by such other information as the applicant reasonably considers the FSA should be aware of for the purposes of determining the application. Any relevant supporting documentation should also be enclosed. The guidance notes to the application pack give further details about information to be provided by applicants, to enable them to answer the questions.

2. (2)

   In certain circumstances, the interests of the customers of an applicant would be significantly affected by the death or incapacity of an individual within the applicant. If this is the case, the applicant will be required to provide information on its arrangements to protect the interests of customers in that event. Examples include arrangements to enable urgent transactions to be carried out and unfinished transactions to be completed. The information should include the name and address, and such other details as the FSA may reasonably require, of an authorised person with whom arrangements have been made for the protection of customers. The guidance notes to the application pack give further details.

The application forms also require a statement from one or more members of the applicant's governing body confirming, to the best of their knowledge, the completeness and accuracy of information supplied.

Applicants should be aware that there may be a delay in processing applications if the information given to the FSA is inaccurate or incomplete; for example, if the business plan for an applicant does not describe in adequate detail the regulated activities for which the applicant seeks Part IV permission. Applicants should discuss any problems with the Enquiries and Applications Department (Applications team) before submitting the application or, if necessary, consider seeking appropriate professional advice.2

At any time after receiving an application and before determining it, the FSA may give notice to the applicant to require it to provide additional information or documents. The circumstances of each application will determine what additional information or procedures are appropriate.

While applicants will often wish to discuss applications with the Enquiries and Applications Department (Applications team) during the application process; similarly, the FSA will often need to discuss and clarify information that has been submitted within the application pack. The exchange of information during the application process is viewed as important by the FSA, since the final decision about an application needs to be based on as complete a picture of the application as possible.2

In addition, in considering the application, the FSA may:

1. (1)

   carry out any enquiries which it considers appropriate, for example, discussions with other regulators or exchanges;

2. (2)

   ask the applicant, or any specified representative of the applicant, to attend meetings at the FSA to give further information and explain any matter the FSA considers relevant to the application;

3. (3)

   require any information given by the applicant to be verified in such a way as the FSA may specify (for example, see AUTH 3.9.16 G);

4. (4)

   take into account any information which it considers appropriate in relation to the application, for example any unregulated activities which the applicant carries on or proposes to carry on;

5. (5)

   visit the premises which the applicant intends to use as its place of business.

Under section 51(6) of the Act, the FSA may require the applicant to verify information provided in such a way as the FSA directs. Thus, as part of the application, the FSA may require the applicant to provide, at its own expense, a report by an auditor, reporting accountant, actuary or other qualified person approved by the FSA. The report may be on such aspects of the information provided, or to be provided, by the applicant as the FSA may specify.

Applicants seeking to carry on long-term insurance business are also required to provide a certificate from an actuary confirming the appropriateness of the projections for the long-term insurance business and, in particular, the adequacy of premium rates and technical provisions and margin of solvency and how quickly capital strains from effecting new business will be overcome.

Occasionally, the FSA may identify a need for an independent report on specific areas of an application; for example, a report from the auditors of an applicant seeking to carry on regulated activities which include accepting deposits where the applicant's business plan is innovative, complex or raises concerns as a result of matrix management. Such reports will usually be discussed and agreed with the applicant as part of the pre-application meeting (see AUTH 3.9.2 G).

In addition to applying to the FSA for Part IV permission:

1. (1)

   an applicant which will need permission from the Council of the Society of Lloyd's to conduct business as underwriting agents should apply for that permission at the same time as its application to the FSA; and

2. (2)

   an applicant should also determine whether it needs to apply to any other bodies, for example, to any exchanges or to other bodies for membership, the Office of Fair Trading for a consumer credit licence or to court for licences such as a gaming licence; the applicant should check when any such applications should be made.

1. (1)

   Under section 49 of the Act (Persons connected with an application), in considering an application for Part IV permission, the FSA may have regard to any person appearing to it to be, or likely to be, in a relationship with the applicant which is relevant.

2. (1A)

   The Financial Groups Directive Regulations make special provision where the FSA is exercising its functions under Part IV of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary provision. Broadly, where the FSA, in the course of carrying on supplementary supervision, is considering varying the Part IV permission of a person who is a member of a group which is a financial conglomerate, the consultation provision in section 49(2) of the Act are disapplied. In their place, the regulations impose special obligations, linked to the Financial Groups Directive, to obtain the consent of the relevant competent authorities, to consult those authorities and to consult with the group itself.3

3. (2)

   A person in, or likely to be in, a relationship with an applicant which is relevant is known as a connected person. The FSA will assess whether a particular relationship is relevant in the light of the particular circumstances of each application. Examples of persons who might be considered connected with an applicant include, but are not limited to:

   1. (a)

      a controller of the applicant; or

   2. (b)

      an applicant's directors, partners or members of its governing body; or

   3. (c)

      a company in the same group as the applicant; or

   4. (d)

      a person with whom the applicant intends to enter into a material outsourcing agreement; or

   5. (e)

      any other person who may exert influence on the applicant which might pose a risk to the applicant satisfying or continuing to satisfy the threshold conditions.

As a result, as part of the application process, the FSA may request information about any other person who the FSA determines is in a relationship with an applicant which is relevant. The FSA may request information from the applicant on persons who are connected persons or are likely to become connected persons under any proposed transactions or relationships.

1. (1)

   As part of the application process, the FSA may request information on an applicant's controllers, directors, partners or members of its governing body. The FSA will assess whether:

   1. (a)

      the applicant's controller is a fit and proper person to have control over the firm;

   2. (b)

      the applicant's directors, partners and members of the governing body who will be performing controlled functions are fit and proper persons to be granted approval under the approved persons regime (see AUTH 6).

2. (2)

   An applicant (other than a Swiss general insurance company seeking to establish an agency or branch in the United Kingdom or an EEA firm, or a Treaty firmin the circumstances set out in AUTH 3.1.1 G (2) and in AUTH 3.1.1 G (3)) will be required to provide the following information about its controllers:

   1. (a)

      in the case of a controller who is not an authorised person, the information required in Controllers Form A SUP 11 Annex 4) and one or more of Controllers Form B SUP 11 Annex 5) in accordance with SUP 11.3.8 D and SUP 11.3.9 D; or

   2. (b)

      in all other cases, the information required in Controllers Form A, sections 1, 5 and 6 SUP 11 Annex 4).

1. (1)

   If Part IV permission is given, the FSA will expect a firm to commence its regulated activity in line with its current business plan. Applicants should take this into consideration when determining when to make an application to the FSA.

2. (2)

   Applicants should be aware that the FSA may exercise its own-initiative powers to vary or cancel a Part IV permission once granted if they do not:

   1. (a)

      commence a regulated activity for which they have Part IV permission within a period of at least twelve months from the date the permission was given; or

   2. (b)

      carry on a regulated activity for which they have Part IV permission for a period of at least twelve months (irrespective of the date of the grant of permission).

3. (3)

   If FSA considers that it may be appropriate to exercise its own-initiative powers to vary or cancel a firm's Part IV permission, FSA staff will discuss the proposed action with the firm and ascertain the firm's reasons for not commencing or carrying on the regulated activities concerned. Applicants are advised to discuss any problems about commencing a regulated activity with the Enquiries and Applications Department (Applications team).2

1. (1)

   The FSA will assess the information provided in the application process. As noted in AUTH 3.8.1 G, the FSA is required, by section 41(2) of the Act, to ensure that an applicant will satisfy, and continue to satisfy, the threshold conditions in relation to all the regulated activities for which the applicant is seeking Part IV permission. However, section 41(3) of the Act states that the FSA's duty under section 41(2) of the Act does not prevent it, having regard to that duty, from taking such steps as it considers necessary in relation to a particular applicant, to secure the consumer protection objective.

2. (2)

   As part of the assessment of whether an applicant satisfies and will continue to satisfy the threshold conditions, the FSA will consider whether the applicant is ready, willing and organised to comply with the regulatory requirements to which it will be subject if it is granted Part IV permission to carry on the regulated activities referred to in its application.

3. (3)

   The FSA will give Part IV permission in respect of some categories of regulated activity only if the applicant can meet specific requirements. For example, Part IV permission including advising on pension transfers and pension opt-outs and will only be granted to applicants that will have persons (or individuals) qualified to advise in this area.

As noted in AUTH 3.6 and AUTH 3.7, the FSA may decide to grant an application for Part IV permission including appropriate limitations or requirements. Where the FSA imposes limitationsor requirements on a Part IV permission that were not applied for by the applicant, their precise nature will depend on the circumstances of each application. During the application process, the FSA will discuss with applicants any limitations or requirements it is considering imposing but which they have not applied for. The applicant may ask the FSA to reconsider its preliminary views on any such limitations or requirements in the course of the application process.

In some cases, the FSA would be minded to grant an application for Part IV permission as long as certain conditions are fulfilled. As an example, the FSA may advise an applicant that it is minded to grant its application subject to the applicant providing proof that its share capital or its required financial resources are in place or that it has satisfied an outstanding element of its business plan. Part IV permission will not, however, be given until the FSA is content that its conditions have been satisfied by the applicant and, as a result, the applicant satisfies the threshold conditions. Applicants are welcome to discuss with the Enquiries and Applications Department (Applications team) the circumstances in which the FSA may be prepared to determine an application subject to such conditions being met.21

1. (1)

   In determining an application for Part IV permission, the FSA may:

   1. (a)

      specify a narrower or wider description of regulated activity than that for which Part IV permission was originally sought; or

   2. (b)

      give Part IV permission for a regulated activity which was not originally applied for.

2. (2)

   Occasionally, the FSA expects to use its power to give Part IV permission for an applicant to carry on a regulated activity for which it did not originally apply. This might happen when, as a result of correspondence and discussion with an applicant, it becomes clear that it needs Part IV permission to carry on different categories of activities or activities relating to different categories of specified investments than those it had originally applied for.

3. (3)

   The Insurance Directives set out minimum information requirements for an application for authorisation which include information on the specified investments the applicant proposes to deal in. If these requirements are not met, the FSA may not be able to use the power described in AUTH 3.9.29 G (1)(b).

1. (1)

   Under Part IV of the Act, the FSA has six months from the date of receipt of a completed application to make its determination.

2. (2)

   When the FSA receives an application which is incomplete, that is, when information or documents required to be submitted as part of the application are not provided, Part IV of the Act requires the FSA to determine that incomplete application, in any event, within twelve months of the initial receipt of the application.

3. (3)

   Within these time limits, however, the length of the process will relate directly to the complexity of the application. The FSA publishes standard response times on its web site at www.fsa.gov.uk, setting out how long the application process is expected to take in practice, and, from time to time, the FSA publishes its performance against these times.

4. (4)

   Unless it considers it is appropriate to do so, the FSA will not grant an application for Part IV permission until it has had the opportunity to review all the information and documents which it has requested in connection with the application (whether as part of the application or at a later date).

AUTH 8 (Determining applications) gives an overview of how the FSA will determine an application. The FSA's decision making procedures are in DEC and include the procedures the FSA will follow if it proposes to refuse an application for Part IV permission or grant an application subject to limitations or requirements not applied for.

An applicant may withdraw its application at any time before the application is granted or refused by giving written notice to the FSA. This written notice should be signed by a person with appropriate authority to bind the applicant.

1. (1)

   The Act states that an applicant which does not qualify for automatic authorisation by, or under, the Act, becomes authorised automatically if the FSA grants it Part IV permission.

2. (2)

   When the FSA grants an application for Part IV permission, it will inform the applicant by written notice, stating the date on which the permission takes effect.