CRED 13.6 Process for Part IV permission

The nature of the information and documents requested by the FSA for a Part IV permission, in the application pack, or in subsequent requests, will be proportional to the risks posed by firms. For instance, in the case of credit unions, the risks posed by an applicant seeking permission to carry out the activities of a version 2 credit union will normally be greater than those of an applicant seeking to become a version 1 credit union. Similarly, the risks will be greater for an applicant with a widely-drawn common bond.2

The FSA will typically require the following information from all applicants as a minimum:

1. (1)

   a business plan which describes the regulated activities and any unregulated activities which the applicant proposes to carry on, the management and organisational structure of the applicant and details of any proposed outsourcing arrangements;

2. (2)

   appropriately analysed financial budget and projections which demonstrate that the applicant expects to comply with the relevant financial resources requirements applicable to credit unions (see CRED 5.2.1 G (4), CRED 8 and CRED 9);

3. (3)

   details of the systems to be used, and the controls to be put in place, for the running of the credit union (see CRED 4.3);

4. (4)

   details of the individuals to be involved in the running of the credit union, particularly those performing one or more controlled functions for whom approved persons status will be required (see CRED 6.3);1

5. (5)

   a statement from two directors of the applicant's committee of management confirming, to the best of their knowledge, the completeness and accuracy of the information supplied; and1

6. (6)

   confirmation of insurance against fraud or other dishonesty (see CRED 7A.4.1 RCRED 7A.4.3 R).1

The FSA will begin its formal process of consideration once it has received an application made using the application pack. During this process, the FSA may consider it appropriate to ask for additional information, undertake additional lines of enquiry or seek verification from third parties of the information provided to it by the applicant. The FSA will normally want to meet with the applicant's management team, in their own area, to discuss their application. As part of its assessment, 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.

As part of its application for Part IV permission, an applicant may wish to apply for certain limitations or requirements (see AUTH 3.6, AUTH 3.7 and the application pack). Applicants applying to be a version 1 credit union will need to apply for the appropriate requirement to define the scope of its Part IV permission (details of which are given in the application pack).

The FSA may decide to grant an application for Part IV permission subject to limitations or requirements. For example, the FSA:

1. (1)

   can impose limitations, for example, to limit the number of customers from whom the credit union can accept deposits during an initial period of operation; this might be used where, for example, a credit union's systems are not yet adequate to be able to process a high volume of transactions; and

2. (2)

   the FSA can impose requirements, for example, to restrict the scope of a credit union'sPart IV permission to carry on regulated activities or require a credit union to submit financial returns more frequently than normal (see AUTH 3.7).

Where the FSA decides to impose limitations or requirements not requested by the applicant, these will be discussed with the applicant, and the applicant will be informed in writing and given the opportunity to make representations before the FSA reaches a final decision.

An applicant which has been granted a Part IV permission by the FSA is authorised. The FSA will inform the applicant, in writing, of the effective date of the authorisation. A credit union should not commence its regulated activities before receiving this written notice. When a credit union is authorised, a general description of the activities it has been authorised to carry on will be recorded in the FSA Register which will be accessible by the public.

If a Part IV permission is given, the FSA will expect the credit union to operate in accordance with its business plan. Credit unions are advised to discuss any problems with commencing a regulated activity with their usual supervisory contact at the FSA. If the FSA consider it appropriate to vary or cancel a credit union's Part IV permission (see ENF 3 and ENF 5), it will discuss the proposed action with the credit union and ascertain its reasons for not commencing or carrying out the regulated activity, or activities, concerned as described in its application.

The FSA has six months from the date of receipt of a completed application to make its determination about whether to grant a Part IV permission. However, where the FSA receives an application in respect of a Part IV permission which is incomplete, it has up to 12 months to make its determination. This provides time for the applicant to provide the FSA with the information required to complete the application.