1. (1)

   Section 55C of the Financial Services Act 2012 (Power to amend Schedule 6) gave HM Treasury the power to amend Schedule 6 of the Act. HM Treasury exercised this power by making The Financial Services and Markets Act 2000 (Threshold Conditions) Order 2013 which entered into force on 1 April 2013 (the "TC Order"). The TC Order's main result is the creation of four sets of threshold conditions, namely:

   1. (i)

      conditions for firms authorised and regulated by the FCA only (paragraphs 2B to 2F of Schedule 6 to the Act)

   2. (ii)

      FCA specific conditions for firms authorised by the PRA and subject to dual regulation (paragraphs 3B to 3E of Schedule 6 to the Act);

   3. (iii)

      PRA-specific conditions for insurers (paragraphs 4A to 4F of Schedule 6 to the Act); and

   4. (iv)

      PRA-specific conditions for other PRA-authorised persons (paragraphs 5A to 5F of Schedule 6 to the Act).

2. (2)

   The guidance in COND is only applicable to the threshold conditions listed in COND 1.1A.1G(1)(i) and (ii), above. These are the threshold conditions stated in paragraphs 2A and 3A of Schedule 6 to the Act as being relevant to the discharge by the FCA of its functions under the Act.

3. (3)

   In respect of a person which does not carry on, or seek to carry on, any PRA-regulated activities, the threshold conditions that are relevant to the discharge by the FCA of its functions under the Act are those set out in paragraphs 2B to 2F of Schedule 6 to the Act, subject to COND 1.1A.4G (1), below.

4. (4)

   In respect of a firm which does carry on, or seeks to carry on, a PRA-regulated activity, the threshold conditions that are relevant to the discharge by the FCA of its functions under the Act are those set out in paragraphs 3B to 3E of Schedule 6 to the Act, subject to COND 1.1A.4G (2), below.

5. (5)

   A reference to "FCAthreshold conditions" in COND means a reference to the threshold conditions referred to in (3) and (4) that apply to a particular firm.

1. (1)

   COND applies to all firms, except where stated otherwise in this guidance.

2. (2)

   In COND, 'firm' includes an applicant for Part 4A permission unless the context otherwise requires.

1. (1)

   As a result of the new legal framework for threshold conditions described in COND 1.1A.1G (1), PRA-authorised persons and firms seeking to become PRA-authorised persons are subject to two sets of threshold conditions:

   1. (i)

      the FCA-specific conditions referred to in COND 1.1A.1G (1)(ii)and

   2. (ii)

      one of the two PRA-specific conditions referred to in COND 1.1A.1G (1)(iii) or (iv), depending on the PRA-regulated activities which the PRA-authorised person or firm carries on, or is seeking to carry on.

   The FCAthreshold conditions set out in paragraphs 3B to 3E of the Act seek to reflect this. In particular, these threshold conditions do not contain a condition relating to adequate financial resources. This is a matter that falls to be considered by the PRA under its threshold conditions.

2. (2)

   The majority of the guidance in COND is intended to assist all firms to understand how the FCA will approach its assessment of the applicable FCAthreshold conditions, regardless of whether or not a firm is, or is seeking to become, a PRA-authorised person. This is because the FCAthreshold conditions which apply to PRA-authorised persons and those which apply to firms authorised by the FCA only are, for the most part, the same.

3. (3)

   However, where guidance in COND refers to an assessment of a firm's financial position or its compliance with prudential regulatory requirements, it is not intended to assist firms which are, or are seeking to become, PRA-authorised persons. This is because these are matters that are not covered by the FCA'sthreshold conditions, but rather fall to be considered by the PRA under its threshold conditions.

4. (4)

   Although some of the PRAthreshold conditions and FCAthreshold conditions that apply to firms which are, or are seeking to become, PRA-authorised persons may appear to address similar subject matter, the FCA will approach the assessment of its threshold conditions with its unique statutory objectives in mind and in the light of the functions which the FCA is required to discharge in relation to them.

5. (5)

   For the avoidance of doubt, the guidance in COND is not intended to apply to the PRA's assessment of its own threshold conditions in respect of a PRA-authorised person. This is a matter for the PRA alone.

COND applies to incoming EEA firms and incoming Treaty firms as set out below:

1. (1)

   for an incoming EEA firm or an incoming Treaty firm which does not carry on any PRA-regulated activities, FCAthreshold conditions 2C to 2F apply; and

2. (2)

   for an incoming EEA firm or an incoming Treaty firm which carries on a PRA-regulated activity, FCAthreshold conditions 3B to 3E apply.

FCA threshold conditions apply to incoming EEA firms and incoming Treaty firms only in as far as relevant to the discharge by the FCA of its relevant functions in relation to an application for, or the exercise of its own-initiative powers in relation to, a top-up permission or the functions relating to the FCA's consent or consultation rights relating to the exercise by the PRA of its powers in relation to an application for, or use of its own-initiative powers relating to, a top-up permission.

FCA threshold conditions 3B, 3C and 3E apply to Swiss General Insurance Companies.

Subject to the limitations referred to above, COND applies in relation to all of the regulated activities for which a firm has, or will have, permission.

COND applies in relation to all of the regulated activities wherever they are carried on, except as stated in COND 1.1A.4 G.

COND gives guidance on the threshold conditions. The FCA3threshold conditions represent the minimum conditions for which the FCA is responsible,3 which a firm is required to satisfy, and continue to satisfy, in order to be given and to retainPart 4A permission. A PRA-authorised person or, as appropriate, a firm seeking to become a PRA-authorised person must also satisfy, and continue to satisfy, the threshold conditions for which the PRA is responsible in order to be given and to retain Part 4A permission (these threshold conditions are not the subject of the guidance in COND).3

3 3

1. (1)

   Under section 55B(3) of the Act3, in giving or varying a Part 4A permission,3 imposing or varying any requirement or giving consent3, the FCA3 must ensure that the firm concerned will satisfy, and continue to satisfy, the FCA3threshold conditions in relation to all of the regulated activities for which it has or will have permission.

2. (2)

   If, however, the applicant for permission is an incoming firm seeking top-up permission, or variation of top-up permission, under Part 4A3 of the Act (Permission to carry on regulated activities), then under paragraphs 6A and 7A3 of Schedule 6 to the Act (Threshold conditions)3, the FCA will have regard only to satisfaction of the FCA3threshold conditions specified as applicable in COND 1.1A.4 G3, as relevant to the regulated activities for which the applicant has, or will have, Part 4A permission3.

   3

1. (1)

   If, among other things, a firm is failing to satisfy any of the FCA3threshold conditions, or is likely to fail to do so, the FCA3 may exercise its own-initiative powers under either section 55J (Variation or cancellation on initiative of regulator) or section 55L (Imposition of requirements by FCA) of the Act3. Use of the FCA's own-initiative powers3 is explained in SUP 7 (Individual requirements), and EG 8 (Variation and cancellation of permission on the FCA's3 own initiative and intervention against incoming firms)1.

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2. (2)

   If, when exercising its own-initiative powers3 under section 55J or section 55L3 of the Act, the FCA3 varies a firm'spermission, or imposes or varies a requirement, then, under section 55B(3)3 of the Act, the FCA3 must ensure that the firm concerned will satisfy, and continue to satisfy, the FCA3threshold conditions in relation to all of the relevant3regulated activities for which it has or will have permission. However, section 55B(4)3 of the Act states that the duty imposed by section 55B(3)3 of the Act does not prevent the FCA3 taking such steps as it considers necessary in relation to a particular firm in order to advance any of its operational objectives.3

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3. (3)

   The FCA3 can also exercise its own-initiative powers3 under section 55J or section 55L3 of the Act in relation to the top-up permission of an incoming firm. But this is only on the grounds that the incoming firm is failing, or likely to fail, to satisfy the FCA3threshold conditions specified as applying to incoming firms under COND 1.1A.4 G.3

1. (1)

   Under section 185 of the Act (Assessment: general) the FCA may, subject to consultation with the PRA where the conditions in section 187B of the Act are satisfied, object to an acquisition of an FCA-authorised person if there are reasonable grounds to do so on the basis of the matters set out in section 186 of the Act (Assessment: criteria) or if the information provided by the section 178 notice giver is incomplete. Section 186(d) of the Act (Assessment: criteria) specifies one such criteria as whether an FCA-authorised person will be able to comply with its prudential requirements (including the threshold conditions in relation to all of the regulated activities for which it has, or will have, permission.)

2. (2)

   Under section 191A of the Act (Objection to control), subject to consultation with the PRA in the circumstances specified in that provision, the FCA may object to a person's existing control of an FCA-authorised person on the grounds specified under section 186 of the Act.

The guidance in COND 2 explains each FCA1threshold condition in Schedule 6 (threshold conditions) to the Act and indicates1 how the FCA1 will interpret it in practice. This guidance is not, however, exhaustive and is written in very general terms. A firm will need to have regard to the obligation placed upon the FCA1 under section 55B (The threshold conditions) of the Act; that is, the FCA1 must ensure that the firm will satisfy, and continue to satisfy, the FCA1threshold conditions in relation to each regulated activity for which it has, or will have, permission.

1 1 1 1 1

1. (1)

   The FCA1 will consider whether a firm satisfies, and will continue to satisfy, the FCA1threshold conditions in the context of the size, nature, scale and complexity of the business which the firm carries on or will carry on if the relevant application is granted.

   1
2. (2)

   In relation to threshold conditions set out in paragraphs 2D to 2F of Schedule 6 to the Act in respect of firms which are not PRA-authorised persons and paragraphs 3C to 3E of Schedule 6 to the Act in respect of firms which are PRA-authorised persons1, the FCA1 will consider whether a firm is ready, willing and organised to comply, on a continuing basis, with the requirements and standards under the regulatory system which apply to the firm, or will apply to the firm, and for which the FCA is responsible,1 if it is granted Part 4A permission1, or a variation of its permission. These matters will also be considered if the FCA1 is exercising its own-initiative powers1 (see COND 1.2.3 G). Guidance to firms on the implications of this is given under each of those threshold conditions.

   11111

Although the FCA1 may consider that a matter is relevant to its assessment of a firm, the fact that a matter is disclosed to the FCA1, for example in an application, does not necessarily mean that the firm will fail to satisfy the FCA1threshold conditions. The FCA1 will consider each matter in relation to the regulated activities for which the firm has, or will have, permission, having regard to its statutory objectives1. A firm should disclose each relevant matter but, if it is appropriate to do so, it is encouraged to discuss it with the FCA1. This will enable the FCA1 to consider fully how material or significant the matter is and how it affects the ability of the firm to satisfy, and continue to satisfy, the FCA1threshold conditions.

1 1 1 1 1 1 1

1In determining the weight to be given to any relevant matter, the FCA will consider its significance in relation to the regulated activities for which the firm has, or will have, permission, in the context of its ability to supervise the firm adequately, having regard to the FCA'sstatutory objectives. In this context, a series of matters may be significant when taken together, even though each of them in isolation might not give serious cause for concern.

1In determining whether the firm will satisfy, and continue to satisfy, the FCAthreshold conditions, the FCA will have regard to all relevant matters, whether arising in the United Kingdom or elsewhere.

1When assessing the FCAthreshold conditions, the FCA may have regard to any person appearing to be, or likely to be, in a relevant relationship with the firm, in accordance with section 55R of the Act (Persons connected with an applicant). For example, a firm'scontrollers, its directors or partners, other persons with close links to the firm (see COND 2.3), and other persons that exert influence on the firm which might pose a risk to the firm's satisfaction of the FCAthreshold conditions, would be in a relevant relationship with the firm.

1In making its assessment, the FCA will consider the individual circumstances of each firm on a case-by-case basis.

1Notes on the contents of a business plan are given in the business plan section of the application pack for Part 4A permission on the FCA's website.

1. (1)

   For ease of reference, the FCA1threshold conditions in or under Schedule 6 to the Act have been quoted in full in COND 2.

2. (1A)

   1Paragraphs 2A and 3A of Schedule 6 of the Act have not been quoted. These set out the application of the FCAthreshold conditions to firms which do not carry on, or are not seeking to carry on, a PRAregulated activity and firms which carry on, or are seeking to carry on, a PRAregulated activity respectively. This application is summarised in COND 1.1A.

3. (2)

   As the FCAthreshold conditions1 impose obligations, they are printed in bold type. The use of bold type is not intended to indicate that these quotations are rules made by the FCA1.

   11
4. (3)

   [deleted]1

   1
5. (4)

   Paragraph 1A of Schedule 6 of the Act sets out interpretative provisions that apply to the threshold conditions. These are repeated in COND 1.3.5 G below for ease of reference.