CONRED 3.3 Asset restriction

1A firm must not in any way dispose of, withdraw, transfer, deal with or diminish the value of any of its own assets (whether in the United Kingdom or elsewhere), unless:

1. (1)

   the relevant transaction occurs in the ordinary course of business of the firm; or

2. (2)

   the firm satisfies all of the following conditions:

   1. (a)

      the firm has previously notified the FCA under CONRED 3.2.7R that it is able to meet claims for unsuitable BSPS advice under its financial resilience assessment under CONRED 3.2.2R;

   2. (b)

      since the notification in (a) was submitted, the firm has not subsequently notified the FCA under CONRED 3.2.7R that it is not able to meet claims for unsuitable BSPS advice under its financial resilience assessment under CONRED 3.2.2R; and

   3. (c)

      the firm has calculated, in accordance with CONRED 3.2.2R, that it will continue to be able to meet claims for unsuitable BSPS advice immediately after the relevant transaction.

1. (1)

   1The following is a non-exhaustive list of transactions that a firm may treat as occurring in the ordinary course of business for the purposes of CONRED 3.3.3R(1):

   1. (a)

      transactions giving effect to instructions initiated by customers;

   2. (b)

      payments to or other transactions with the firm’s counterparties in the ordinary course of operating the firm’s business and in satisfaction of the firm’s contractual obligations;

   3. (c)

      usual and proper contractual salary payments and proper payments made in connection with obligations owed to employee pension schemes;

   4. (d)

      payment of dividends or drawings that have been approved by the FCA in accordance with CONRED 3.3.6R;

   5. (e)

      payments connected to reasonable legal expenses and other reasonable expenses incurred in relation to obtaining accounting or audit advice; and

   6. (f)

      payments connected to the firm’s tax or regulatory obligations, including any payments of redress to consumers.

2. (2)

   Where a firm intends to undertake a transaction that the firm considers is in the ordinary course of business, but which is not a type of transaction listed in (1), the firm must notify the FCA in advance under CONRED 3.3.10R.

1. (1)

   1A firm may treat a dividend as being paid in the ordinary course of business for the purposes of CONRED 3.3.3R(1) if the firm has obtained prior express consent from the FCA.

2. (2)

   To obtain the consent in (1), a firm must:

   1. (a)

      notify the FCA by email to BSPSredress@fca.org.uk, including the following information:

      1. (i)

         the value of the proposed dividend(s);

      2. (ii)

         the date on which the firm intends to pay the proposed dividend(s);

      3. (iii)

         the recipients of the proposed dividend(s);

      4. (iv)

         a clear statement of the quantified effect of the payment of the proposed dividend(s) on the firm’s regulatory capital position;

      5. (v)

         a copy of the firm’s latest management accounts; and

      6. (vi)

         an express confirmation that the payment of the proposed dividend(s) is lawful under applicable company or partnership law and insolvency law; and

   2. (b)

      as part of the notification in (1), demonstrate both of the following to the reasonable satisfaction of the FCA:

      1. (i)

         the dividend(s) will be paid in connection with services provided for or on behalf of the firm by a natural person; and

      2. (ii)

         the timing of the proposed payment and the value of the dividend(s) are consistent with the historical pattern of the payment of dividends for equivalent purposes over the immediately preceding 12 months.

3. (3)

   For the purposes of this rule, a reference to a ‘dividend’ includes drawings paid to a member of a limited liability partnership.

1The following transactions must not be regarded as occurring in the ordinary course of business:

1. (1)

   payments to any connected person, except to the extent that they fall within a category of transaction listed in CONRED 3.3.5R;

2. (2)

   the making of any capital distributions, dividend payments or payment of drawings, except to the extent expressly permitted by the FCA under CONRED 3.3.5R(1)(d) and CONRED 3.3.6R;

3. (3)

   the making of any gift or loan;

4. (4)

   any payments or transfers made as part of any financial restructuring or reorganisation of the firm’s business (whether share or asset based) or the acquisition by the firm of part or all of another business; and

5. (5)

   the disposal to another person of some or all of the firm’s client files or ongoing income from the client bank.

1. (1)

   1Except where (2) applies, a firm that has not assessed that it is able to meet all BSPS claims under its financial resilience assessment under CONRED 3.2.2R must notify the FCA at least 15 business days in advance of:

   1. (a)

      undertaking any transaction that the firm considers is in the ordinary course of business, but which is not listed in CONRED 3.3.5R; or

   2. (b)

      any change to its contracts with connected persons (including both variation of existing contracts and entry into new or replacement contracts) which could result in new or increased payments above the de minimis threshold specified in CONRED 3.3.12R.

2. (2)

   If a firm needs to undertake a transaction that falls within (1)(a) in an urgent situation, the firm must still notify the FCA in advance by giving as much notice as possible, but the 15-business day period in (1) does not apply.

1. (1)

   1The de minimis threshold in CONRED 3.3.10R is a percentage amount equal to the latest Consumer Price Index annual rate published by the Office for National Statistics at the time at which the change in contract is proposed to occur.

2. (2)

   In calculating whether the de minimis threshold has been exceeded, a firm must aggregate all connected payments.

1The notification in CONRED 3.3.10R must:

1. (1)

   be made to BSPSredress@fca.org.uk; and

2. (2)

   contain the following information;

   1. (a)

      an explanation of the transaction or contract change;

   2. (b)

      an explanation of the quantifiable impact on the firm’s financial resilience assessment under CONRED 3.2.2R;

   3. (c)

      an explanation of why the firm considers that the transaction or contract change occurs in the ordinary course of business and is therefore permitted;

   4. (d)

      reference to any comparable historic payments or contract changes which support the firm’s view that this occurs in the ordinary course of business; and

   5. (e)

      in the case of a notification on an urgent basis under CONRED 3.3.10R(2), an explanation of the nature of the urgency and why it has not been possible to comply with the normal 15-business day notification requirement in CONRED 3.3.10R(1).