This section and SUP 1 apply to all credit unions.

This section is a summary of SUP 1.

The Act requires the FSA to "maintain arrangements designed to enable it to determine whether persons on whom requirements are imposed by or under this Act ... 1are complying with them" (paragraph 6(1) of Schedule 1 to the Act).

The design of these arrangements is shaped by the regulatory objectives. These are set out in section 2 of the Act (The Authority's general duties) and are:

1. (1)

   maintaining confidence in the UK financial system;2

   2
2. (1A)

   2contributing to the protection and enhancement of the stability of the UK financial system;

3. (2)

   promoting public understanding of the UK financial system;2

   2
4. (3)

   securing the appropriate degree of protection for consumers; and

5. (4)

   reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.

In designing its approach to supervision, the FSA has had regard to the principles of good regulation set out in section 2(3) of the Act. In particular, the FSA's regulatory approach aims to focus and reinforce the responsibility of the management of each credit union to ensure that it takes reasonable care to organise and control the affairs of the credit union responsibly and effectively, and develops and maintains adequate risk management systems. It is the responsibility of management to ensure that the credit union acts in compliance with its regulatory requirements. The FSA will have regard to the principle that a burden or restriction should be proportionate to the benefits which are expected to result from it.

The purpose of taking a risk-based approach to supervision is to focus the FSA's resources on the mitigation of risks to its regulatory objectives, and to have regard to the need to use the FSA's resources in the most efficient and economic way. The approach to risk assessment of credit unions is based on both the impact of such risks were they to crystallise and the probability of their doing so.

In order to meet the regulatory objectives and address identified risks to those objectives, the FSA has a range of supervisory tools available to it.

The FSA classifies these tools under four headings:

1. (1)

   diagnostic: designed to identify, assess and measure risks;

2. (2)

   monitoring: to track the development of identified risks, wherever these arise;

3. (3)

   preventative: to limit or reduce identified risks and so prevent them crystallising or increasing; and

4. (4)

   remedial: to respond to risks when they have crystallised.

The FSA uses a variety of tools to monitor whether a credit union remains in compliance with regulatory requirements. These tools include:

1. (1)

   desk-based reviews;

2. (2)

   liaison with other agencies or regulators;

3. (3)

   meetings with management and other representatives of a credit union;

4. (4)

   on-site inspections;

5. (5)

   reviews and analysis of periodic returns and notifications;

6. (6)

   reviews of past business;

7. (7)

   use of auditors;

8. (8)

   use of skilled persons.

The FSA also uses a variety of tools to address specific risks identified in credit unions. These tools include:

1. (1)

   making recommendations for preventative or remedial action;

2. (2)

   setting individual requirements;

3. (3)

   giving individual guidance to a credit union;

4. (4)

   varying a credit union's permission.

For further discussion of the FSA's regulatory approach, see Publications on the FSA website: in particular, "A new regulator for the new millennium" and "Building the new regulator progress report 1".

This section and SUP 2 apply to all credit unions.

The section is a summary of SUP 2.

Achieving its regulatory objectives involves the FSA informing itself of developments in credit unions. The Act requires the FSA to monitor a credit union's compliance with requirements imposed by or under the Act. For this purpose, the FSA needs to have access to a broad range of information about a credit union's business.

The FSA receives information through a variety of means, including regular reporting by credit unions. This section is concerned with the methods of information gathering that the FSA may use on its own initiative.

SUP 2.1.5 G states that the FSA has statutory powers, including:

1. (1)

   to require the provision of information;

2. (2)

   to require reports from skilled persons;

3. (3)

   to appoint investigators; and

4. (4)

   to apply for a warrant to enter premises.

The FSA prefers to discharge its supervisory functions by working in an open and cooperative relationship with credit unions. The FSA will look to obtain information in that way unless this will not achieve the necessary results, in which case it will use its statutory powers.

SUP 2.2.1 G states that failure to cooperate with the FSA makes a credit union liable to regulatory sanctions, including discipline under the Act. But this:

1. (1)

   is not a criminal offence;

2. (2)

   cannot lead to a person being treated as if in contempt of court.

When the FSA obtains confidential information using the methods of information gathering described in SUP 2, it is obliged to treat that information as confidential and will not disclose it without lawful authority, for example the consent of the person from whom that information was received.

SUP 2.3.1 G sets out the various methods of information gathering that the FSA will use on its own initiative which require the cooperation of credit unions:

1. (1)

   supervision visits on a regular or sample basis;

2. (2)

   meetings at the FSA's offices or elsewhere;

3. (3)

   provision of information or documents.

The FSA expects to be able to give reasonable notice to a credit union when it seeks information, documents, meetings or access to business premises. On rare occasions, however, the FSA may make unannounced visits.

SUP 2.3.3 G - SUP 2.3.4 G state how the FSA considers that a credit union should cooperate in providing access to its documents and personnel:

1. (1)

   make itself readily available for meetings as reasonably requested;

2. (2)

   give access to any records, files, tapes or computer systems which are within its possession or control, and provide any facilities that are reasonably required;

3. (3)

   produce specified documents, files, tapes, computer data;

4. (4)

   print information which is held on computer or microfilm or otherwise convert it into a readily legible document;

5. (5)

   permit copying of documents or other material on its premises at its reasonable expense;

6. (6)

   answer truthfully, fully and promptly all questions which are reasonably put to it.

SUP 2.3.5 R states that a credit union must permit access, with or without notice, during reasonable business hours to its business premises in relation to the discharge of the FSA's functions under the Act. It must also take reasonable steps to ensure that others, such as agents and suppliers under material outsourcing arrangements permit such access to their business premises.

Representatives or appointees of the FSA (which may include individuals engaged by a market research firm) may approach a credit union in the role of potential members. This is known as "mystery shopping". The FSA expects that any "mystery shopping" it arranges will be conducted in accordance with the Market Research Society Code of Practice. The FSA may use the information it obtains from mystery shopping in support of both its supervisory functions and its enforcement functions. This includes sharing any information so obtained with firms and approved persons.1 (See SUP 2.4.1 G - 1SUP 2.4.5 G).

This section and SUP 3 apply to all credit unions and their external auditors appointed under SUP 3.3.

This section is a summary of SUP 3, and sets out guidance on the role auditors play in the FSA's monitoring of credit unions' compliance with the requirements and standards under the regulatory system.

SUP 3.3.2 R states that a credit union must:

1. (1)

   appoint an auditor to undertake the duties and responsibilities set out in SUP 3.8 (summarised in CRED 14.3.22 GCRED 14.3.31 G);

2. (2)

   notify the FSA, without delay, when it is aware that a vacancy in the office of auditor will arise or has arisen, giving the reason for the vacancy;

3. (3)

   appoint an auditor to fill any vacancy in the office of auditor which has arisen;

4. (4)

   ensure that the replacement auditor can take up office at the time the vacancy arises or as soon as is reasonably practicable after that; and

5. (5)

   notify the FSA of the appointment of an auditor, advising the FSA of the name and business address of the auditor appointed and the date from which the appointment has effect.

A credit union is also under an obligation to appoint an auditor under the Friendly and Industrial and Provident Societies Act 1968, but a single auditor may be appointed for both purposes (See CRED 14 Annex 1 G). 1

SUP 3.4 sets out rules and guidance aimed at ensuring that the auditor of a credit union has the necessary skill and experience.

SUP 3.4.2 R states that before a credit union appoints an auditor, it must take reasonable steps to ensure that the auditor has the required skill, resources and experience to perform his functions under the regulatory system and that the auditor is eligible under Friendly and Industrial and Provident Societies Act 1968.

SUP 3.4.5 R states that a credit union should have regard to whether its proposed auditor has expertise in the relevant requirements and standards, and possesses or has access to appropriate specialist skill. The credit union should seek confirmation of this from the auditor concerned.

A credit union must not appoint as auditor a person who is disqualified by the FSA under section 345 of the Act (Disqualification) from acting as an auditor either for that credit union or credit unions in general.

If it appears to the FSA that the auditor of a credit union has failed to comply with a duty imposed on him under the Act, it may disqualify him under section 345 of the Act.

SUP 3.4.7 R states that a credit union must take reasonable steps to ensure that an auditor, which it is planning to appoint or has appointed, provides information to the FSA about the auditor's qualifications, skills, experience and independence in accordance with the reasonable requests of the FSA.

To enable it to assess the ability of an auditor to audit a credit union, the FSA may seek information about the auditor's relevant experience and skill.

If an auditor is to carry out his duties properly, he needs to be independent of the credit union he is auditing, so that he is not subject to conflicts of interest.

SUP 3.5.2 R requires a credit union to take reasonable steps to ensure that the auditor it appoints is independent of the credit union.

If a credit union becomes aware at any time that its auditor is not independent of the credit union, it must take reasonable steps to ensure that it has an auditor independent of the credit union. The credit union must notify the FSA if independence is not achieved within a reasonable time.

The FSA will regard an auditor as independent if his appointment or retention does not breach the ethical guidance in current issue from the auditor's recognised supervisory body on the appointment of an auditor in circumstances which could give rise to conflicts of interest.

SUP 3.6.1 R states that a credit union must cooperate with its auditor in the discharge of his duties under that chapter.

In complying with SUP 3.6.1 R, a credit union should include giving a right of access at all times to the credit union's accounting and other records, in whatever form they are held, and documents relating to its business. A credit union should allow its auditor to copy documents or other material on the premises of the credit union and to remove copies or hold them elsewhere, or give him such copies on request.

Section 341 of the Act (Access to Books etc) provides that an auditor of a credit union appointed under SUP 3.3.2 R:

1. (1)

   has a right of access at all times to the credit union's books, accounts and vouchers; and

2. (2)

   is entitled to require from the credit union's officers such information and explanation as he reasonably considers necessary for the performance of his duties as auditor.

Credit unions and their officers and managers are reminded that, under section 346 of the Act (Provision of false or misleading information to auditor or Actuary), knowingly or recklessly giving false information to an auditor appointed under SUP 3.3.2 R constitutes an offence in certain circumstances, which could render them liable to prosecution. This applies regardless of whether an auditor is also appointed under the Friendly and Industrial and Provident Societies Act 1968.

A credit union should consider whether it should notify the FSA in accordance with CRED 14.9.3 G if it expects or knows its auditor will qualify its report on the audited financial statements or add an explanatory paragraph.

A credit union should consider whether it should notify the FSA in accordance with CRED 14.9.3 G if it receives a written communication from its auditor commenting on internal controls.

The auditor of a credit union has various rights and duties to obtain information from the credit union.

SUP 3.8.2 R states that an auditor of a credit union must cooperate with the FSA in the discharge of its functions under the Act.

The FSA may ask the auditor to attend meetings and to supply it with information about the credit union.

SUP 3.8.4 R states that an auditor of a credit union must give any skilled person appointed by the credit union all assistance that that person reasonably requires.

SUP 3.8.5 R states that the auditor must be independent of a credit union in performing his duties in respect of that credit union.

SUP 3.8.6 R states the auditor must take reasonable steps to satisfy himself that he is free from any conflict of interest from which bias may reasonably be inferred. He must take appropriate action where this is not the case.

Within the legal constraints that apply, the FSA may pass on to an auditor any information which it considers relevant to his function. An auditor is bound by the confidentiality provisions set out in Part XIII of the Act (Public record, disclosure of information and cooperation) in respect of confidential information he receives from a credit union or other person. An auditor may not pass on confidential information without lawful authority.

Auditors are subject to regulations made by the Treasury obliging them to report certain matters to the FSA. An auditor does not contravene any duty by giving information or expressing an opinion to the FSA, if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any function of the FSA. These provisions continue to have effect after the end of the auditor's term of appointment.

SUP 3.8.11 R states that an auditor must notify the FSA without delay if he:

1. (1)

   is removed from office by a credit union; or

2. (2)

   resigns before his term of office expires; or

3. (3)

   is not re-appointed by a credit union.

SUP 3.8.12 R states that if an auditor ceases to be, or is formally notified that he will cease to be, the auditor of a credit union, he must notify the FSA without delay:

1. (1)

   of any matter connected with his ceasing which he thinks ought to be drawn to the FSA's attention; or

2. (2)

   that there is no such matter.

This section and SUP 5 apply to all credit unions.

The purpose of this section is to summarise SUP 5, which gives guidance on the FSA's use of the power in section 166 of the Act (Reports by skilled persons).

SUP 5.2 explains that the FSA may, by giving written notice, require a credit union to provide it with a report by a skilled person.

SUP 5.3 explains the FSA's policy on the use of skilled persons. The FSA will have regard to all relevant factors, including the circumstances of the credit union, the availability of alternative tools and the cost implications for the credit union (which would have to pay for the services of the skilled person).

SUP 5.4 explains the appointment and reporting process. The FSA will send to a credit union a notice requiring it to provide a report by a skilled person, and give written notification of the report's purpose, scope, and timetable. The FSA will normally seek to agree with the credit union in advance which skilled person (whether accountant, lawyer or other person with relevant skills) will make the report.

SUP 5.5.1 R and SUP 5.5.5 R set out what is required in the contract between the credit union and the skilled person.

SUP 5.5.11 G states that a credit union must provide all reasonable assistance to the skilled person.

SUP 5.6 explains what confidentiality provisions apply when the FSA passes on relevant information to a skilled person.

This section and SUP 6 apply to all credit unions with a Part IV permission that wish to;

1. (1)

   vary their Part IV permission; or

2. (2)

   cancel their Part IV permission and end their authorisation.

This section is a summary of SUP 6.

This section explains:

1. (1)

   how a credit union can apply to vary or cancel its Part IV permission;

2. (2)

   the additional procedures that apply to a credit union that needs to wind down its business over a long time period (usually more than six months);

3. (3)

   how the FSA assesses those applications.

A version 1 credit union that wishes to become a version 2 credit union will need to apply to vary it's Part IV permission.

A credit union authorised under Part IV of the Act (Permission to carry on regulated activities) has a single permission granted by the FSA, which contains a description of the activities the credit union may carry on, including any limitations.

A credit union may apply to the FSA to vary its Part IV permission.

SUP 6.3.15 D states that the application must be in writing and addressed and delivered in the way set out in SUP 15.7.4 R - SUP 15.7.6 G (summarised in CRED 14.9.19 G).

A credit union is advised to discuss its application with the Credit Union team at the FSA before submission, particularly if it is seeking a variation of permission within a short time scale. It is also advised to include as much detail as possible with its application. A version 1 credit union that wishes to become a version 2 credit union will typically need to supply information on the matters referred to in CRED 13.6.2 G.

The FSA, as soon as possible after receipt of an application, will advise the credit union of any additional information which is required as part of its application. The amount of information that the FSA will require will vary depending on the nature of the variation.

The FSA may refuse the application if it appears that the interests of members would be adversely affected if the application were to be granted.

The FSA may vary or impose limitations or requirements on a credit union's permission.

The FSA has six months to consider a completed application, or 12 months if the application in incomplete.

Within these time limits, however, the length of the process will vary according to the complexity of the variation requested.

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

If a credit union with a Part IV permission applies to the FSA, the FSA may cancel its permission.

The FSA may refuse such an application if it appears that:

1. (1)

   the interests of members, or potential members, would be adversely affected; and

2. (2)

   it is desirable in the interests of members or potential members for the application to be refused.

SUP 6.4.5 D states that if a credit union wishes to cancel its permission, it must write to the FSA giving the reasons and the date on which the credit union has ceased or expects to cease carrying on regulated activities. The credit union must explain the full circumstances of its application.

SUP 6.4.5 D states that a credit union's application for cancellation of its permission must be given to a member of, or addressed for the attention of, the Corporate Authorisation Resignation team at the FSA.

The credit union's usual supervisory contact at the FSA will, however, be responsible for all day-to-day contact with the credit union and for assessing the application.

When it receives this application, the Corporate Authorisation Resignation team will send the credit union a written acknowledgement. This acknowledgement will explain the cancellation process and detail the information required as part of the application.

The FSA may request confirmation from the credit union that there are no unresolved, unsatisfied or undischarged complaints against the credit union from a member.

SUP 6.4.14 G states that it is an offence for a person knowingly or recklessly to give the FSA information that is false or misleading. If necessary a credit union should take appropriate professional advice when supplying information required by the FSA.

The FSA may require additional information, including professional advice where it considers this appropriate.

The FSA will usually not cancel a credit union's permission until the credit union can demonstrate that it has:

1. (1)

   ceased carrying on regulated activities;

2. (2)

   repaid all shares and deposits;

3. (3)

   discharged, satisfied or resolved complaints against the credit union.

In deciding whether to cancel a credit union'spermission, the FSA will take into account all relevant factors in relation to business carried on under that permission, including those set out in SUP 6.4.22 G.

If the FSA has granted an application for cancellation of permission and withdrawn a credit union's status as an authorised person, it will retain certain investigative and enforcement powers in relation to the credit union, including those set out in SUP 6.4.23.

The FSA has six months to consider a completed application or 12 months if the application is incomplete.

Within these time limits, however, the length of the process will vary according to the complexity of the circumstances.

If the FSA cancels a credit union'spermission, leaving it without permission to carry out a regulated activity, the FSA is required to withdraw the credit union'sauthorisation.

SUP 6 Annex 4 provides additional guidance for a credit union winding down (running off) its business.

If a credit union requires a long term period (usually in excess of six months) in which to wind down (run off) its business, it will usually be appropriate for it to apply for a variation in its permission.

A credit union should discuss its plans with its usual supervisory contact at the FSA.

The FSA may vary a credit union's permission to impose a limitation on accepting new deposits.

The annexes to CRED 15 provide tables setting out the FSA's enforcement powers, including those to cancel or suspend registration, vary or cancel permission and withdraw authorisation.

This section and SUP 7 apply to all credit unions.

This section is a summary of SUP 7.

The FSA's Handbook primarily contains provisions that apply to all credit unions. However, the FSA may judge it necessary or desirable to impose additional requirements on a credit union or amend the activities it has permission to undertake. Doing so enables the FSA to take account of a credit union's individual circumstances and assists the FSA in meeting its regulatory objectives.

The FSA may vary a credit union'sPart IV permission on its own initiative where:

1. (1)

   one or more of the threshold conditions is, or is likely to be, no longer satisfied;

2. (2)

   it is desirable in order to protect members;1

3. (3)

   1it is otherwise desirable in order to meet any of the FSA'sregulatory objectives.

If the FSA exercises its powers, it will do so by issuing a supervisory notice.

A credit union may refer this decision to the Financial Services and Markets Tribunal.

The FSA expects to maintain a close working relationship with credit unions and expects that routine supervisory matters can be resolved by issuing guidance. However, the FSA may seek to vary a credit union'spermission:

1. (1)

   if it is appropriate to act formally so that enforcement action can be taken if necessary;

2. (2)

   so that a credit union can comply without breaking agreements with third parties.

The FSA may seek to vary on its own initiative a permission if risks are presented by:

1. (1)

   a credit union's management, business or internal controls;

2. (2)

   its involvement in new products or selling practices;

3. (3)

   a change in its structure, activities or strategy.

The following are some of the requirements or limitations that may be imposed:

1. (1)

   submission of reports;

2. (2)

   maintenance of prudential limits;

3. (3)

   submission of business plan;

4. (4)

   limitation of activities;

5. (5)

   maintenance of financial resources.

The FSA will seek to give reasonable notice of intent to vary a permission and to agree an appropriate time scale with the credit union. However, the FSA may act immediately if that is necessary to protect members.

This section and SUP 8 apply to all credit unions that wish to apply for, or to consent to, or have been given a modification of or waiver of the FSA's rules.

This section is a summary of SUP 8, and explains how the regime for the waiver or modification of rules works.

The FSA may, on the application or with the consent of a credit union, direct that its2rules:

1. (1)

   are not to apply to the credit union; or

2. (2)

   are to apply to the credit union with such modifications as may be specified.

SUP 8.3.1 states that the FSA may not give a waiver unless it is satisfied that:

1. (1)

   compliance would be unduly burdensome or would not achieve the purpose for which the rules were made;

2. (2)

   the waiver would not result in undue risk to persons whose interests the rules are intended to protect.

SUP 8.3.3 states that if a credit union wishes to apply for a waiver, it must do so to its usual supervisory contact at the FSA using the form in SUP 8 Annex 2 (Application for a waiver or modification).

1. (1)

   [Deleted]

2. (2)

   [Deleted]

3. (3)

   [Deleted]

4. (4)

   [Deleted]

5. (5)

   [Deleted]

6. (6)

   [Deleted]

7. (7)

   [Deleted]1

The FSA will acknowledge applications and seek to reply within 20 working days, though this may take longer if further information is required.

The FSA may impose conditions on a waiver including extra reporting requirements.

If the FSA decides against the waiver, it will give its reasons.

If the FSA considers that the waiver should apply to a number of credit unions, it will inform them that the waiver is available. To take advantage of the waiver, they will only have to give their written consent rather than making a formal application.

SUP 8.5.10R states that if a credit union becomes aware that a waiver is no longer relevant or appropriate, it must notify the FSA immediately.

The FSA is bound to publish a waiver, unless it is inappropriate or unnecessary. If the FSA publishes a waiver, it will not publish details of why a waiver was required or any of the supporting information given in a waiver application.

In deciding whether or not to publish, the FSA will take into account whether:

1. (1)

   it will be prejudicial to the commercial interests of the credit union;

2. (2)

   it relates to a minor matter that does not affect a third party and is unlikely to be of interest to other credit unions.

If the FSA decides upon publication, it will give the credit union the opportunity of avoiding this by withdrawing its application.

If a credit union wishes the FSA to vary a waiver, it should follow the procedures in SUP 8.3.3 (summarised in CRED 14.7.6 G).

The FSA may revoke a waiver if it is no longer appropriate. This may take effect immediately, if that is necessary to prevent undue risk to members.

Where revocation is not immediate, the FSA will give written notice, with a reasonable period (usually 28 days) in which to make representations. After considering any representations the FSA will give written confirmation of its decision.

Where the revocation is immediate, the FSA will also give the credit union the opportunity to make representations. After considering these, it will either confirm the revocation or seek the credit union's consent to a new waiver.

The waivers regime will be overseen by a staff committee of the FSA.

This section and SUP 9 apply to all credit unions and persons generally.

This section is a summary of SUP 9.

This section explains how a particular person may seek from the FSA guidance that relates to its own particular circumstances or plans.

Requests may be either oral or written.

Requests for individual guidance should be directed to the credit unions usual supervisory contact at FSA in the first instance. A written request will be necessary where the issue is complex or significant. A credit union should have taken reasonable steps to analyse the issue before approaching the FSA.

The FSA will aim to respond quickly and fully to reasonable requests, but complex or novel issues may take more time. Credit unions should try to make allowance for this.

The FSA may issue individual guidance to credit unions on its own initiative where it is appropriate to do so.

An example of this is where general guidance in the Handbook does not fit the credit union's particular circumstances or more detailed guidance is required.

SUP 9.4 explains what reliance can be placed on individual guidance.

If a person acts in accordance with current individual written guidance in the circumstances contemplated by that guidance, then the FSA will proceed on the footing that the person has complied with the aspects of the rule or other requirement to which the guidance relates.

Rights conferred on third parties cannot be affected by guidance given by the FSA. Guidance on rules, the Act or other legislation represents the FSA's view, and does not bind the courts; a person may need to seek his own legal advice.

The extent to which a person can rely on individual guidance to him will depend on many factors. These could include, for example, the degree of formality of the original query and the guidance given, and whether all relevant information was submitted with the request. Individual guidance is usually given in relation to a set of particular circumstances which exist when the guidance is given. If the circumstances later change, for example, because of a change in the circumstances of the person or a change in the underlying rule or other requirement, and the premises upon which individual guidance was given no longer apply, the guidance will cease to be effective.

If the circumstances relating to individual guidance change it will be open to a person to ask for further guidance.

This section and SUP 15 apply to all credit unions in relation to both regulated activities and unregulated activities.

This section is a summary of SUP 15, which sets out:

1. (1)

   guidance on the type of event or change in condition which a credit union should consider notifying to the FSA;

2. (2)

   rules on events and changes that a credit union must notify;

3. (3)

   rules on the core information that a credit union must provide;

4. (4)

   rules requiring a credit union to ensure that information provided to the FSA is accurate and complete.

SUP 15.3.1 R states that a credit union must notify the FSA immediately it becomes aware, or has information which reasonably suggests, that any of the following has occurred, may have occurred or may occur in the foreseeable future:

1. (1)

   the credit union failing to satisfy one or more of the threshold conditions; or

2. (2)

   any matter which could have a serious adverse impact on the credit union's reputation; or

3. (3)

   any matter which could affect the credit union's ability to continue to provide adequate services to its members and which could result in serious detriment to a member; or

4. (4)

   any matter in respect of the credit union which could result in serious financial consequences to the UK financial system2 or to other firms.

   2

Principle 11 requires a credit union to deal with the FSA in an open and cooperative way and to disclose what the FSA would normally expect to be disclosed.

Compliance with Principle 11 includes giving notice of:

1. (1)

   any proposed restructuring, reorganisation or expansion which would have a significant impact on the risks run by the credit union;

2. (2)

   any significant failure in the credit union's systems or controls, including those reported by the credit union's auditor;

3. (3)

   any proposed action that could result in a material change to a credit union's capital adequacy or solvency.

The period of notice given depends on the event, although the FSA expects a credit union to discuss relevant matters with it at an early stage before making commitments.

SUP 15.3.11 R states that a credit union must notify the FSA of the following immediately:

1. (1)

   a significant breach of rule or Principle;

2. (2)

   breach of requirement imposed by the Act, regulations or order;

3. (3)

   the bringing of a prosecution for, or a conviction of, any offence under the Act involving the credit union, members of its committee of management, officers, employees or approved persons.

SUP 15.3.15 R states that a credit union must also notify the FSA immediately of the following:

1. (1)

   civil proceedings against the credit union where the claim is significant to its resources or reputation;

2. (2)

   action against the credit union under section 71 or 150 of the Act (actions for damages);

3. (3)

   the credit union is prosecuted for, or convicted of, any offence involving fraud or dishonesty or any penalties are imposed upon it for tax evasion.

Notification should include details of the matter and an estimate of the likely financial consequences.

SUP 15.3.17 R states that a credit union must notify the FSA immediately of the following events, if significant:

1. (1)

   fraud by an officer against members;

2. (2)

   fraud committed against the credit union;

3. (3)

   irregularities in accounting or other records;

4. (4)

   serious misconduct by officers concerning honesty or integrity.

In determining whether a matter is significant, a credit union should have regard to:

1. (1)

   the size of any monetary loss;

2. (2)

   reputational loss to the credit union;

3. (3)

   weaknesses in the credit union's internal controls.

SUP 15.3.21 R states that a credit union must notify the FSA of any legal steps involving the insolvency, bankruptcy or winding up of the credit union.

SUP 15.5.1 R , SUP 15.5.4 R and SUP 15.5.6 G state that a credit union must provide the FSA with notice of:

1. (1)

   change in name;

2. (2)

   change in address;

3. (3)

   change in legal structure.

Similar obligations to those in CRED 14.9.13 G are imposed by existing credit union legislation.

SUP 15.6.1 R states that a credit union must take reasonable steps to make sure that information given to the FSA is factually accurate and complete.

SUP 15.6.4 R states that a credit union must notify the FSA if it realises that information already provided may be false, misleading, incomplete or inaccurate.

SUP 15.6.7 G states that it is an offence to provide such information knowingly or recklessly.

SUP 15.7.1 R states that a credit union should provide notification in written English, preceded by oral notification if the matter is urgent or significant.

SUP 15.7.4 R and SUP 15.7.5 R state that the notification should be addressed to the credit union's usual supervisory contact at the FSA using one of these methods:

1. (1)

   by post to the FSA's address;

2. (2)

   self delivery to FSA's address (and obtaining a dated receipt);1

3. (3)

   electronic mail to an address for the credit union's usual supervisory contact at the FSA and obtaining an electronic confirmation of receipt;1

4. (4)

   hand delivery to the credit union's usual supervisory contact at the FSA;

5. (5)

   fax number to the credit union's usual supervisory contact at the FSA, followed by submission by one of the methods in CRED 14.9.19 G (1) - CRED 14.9.19 G (4).

SUP 15.7.10 R states that notification should be within the period specified by the particular rule. If no period is specified, the credit union should act reasonably in deciding when to notify.

This section and SUP 16.12.1 G - SUP 16.12.4 R6 apply to all credit unions.

This section is a summary of those parts of SUP that apply to every credit union.

In order to discharge its functions under the Act, the FSA needs timely and accurate information about credit unions on a regular basis. The provision of this information enables the FSA to build up over time a picture of credit unions' circumstances and behaviour.4

SUP 16.3.6 -SUP 16.3.13 state that a report must:

1. (1)

   be in writing;

2. (2)

   give the credit union's FSA reference number;

3. (3)

   be given to or addressed for the attention of the credit union's usual supervisory contact at the FSA;

4. (4)

   be delivered to the FSA by one of the following methods:1

   1. (a)

      by post to The Financial Services Authority, PO Box 35747, London E14 SWP;1

   2. (b)

      self delivery to The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS (and obtaining a dated receipt);1

   3. (c)

      electronic mail to an address for the credit union's usual supervisory contact at the FSA and obtaining an electronic confirmation of receipt;1

   4. (d)

      hand delivery to the credit union's usual supervisory contact at the FSA and obtaining a date receipt;1

   5. (e)

      fax to the number notified by the credit union's usual supervisory contact at the FSA, followed by one of the methods in (a) - (d) within five business days after the date of the faxed submission.1

3 SUP 16.3.11 states that a credit union must submit reports to the FSA containing all the information required.

3 SUP 15.6 refers to and contains requirements regarding the steps that credit unions must take to ensure that information provided to the FSA is accurate and complete. Those requirements apply to reports required to be submitted under SUP 16 (Reporting requirements).

1. (1)

   3SUP 16.3.13 states that a credit union must submit a report in the frequency, and so as to be received by the FSA no later than the due date, specified for that report.

2. (2)

   SUP 16.3.13 states that if the due date for submission of a report required by SUP 16 falls on a day which is not a business day the report must be submitted so as to be received by the FSA no later than the first business day after the due date.

3. (3)

   SUP 16.3.13 states that if the due date for submission of a report required by SUP 16 is a set period of time after the quarter end, the quarter ends will be the following dates, unless another rule or the reporting form states otherwise:

   1. (a)

      the 'credit union'saccounting reference date;

   2. (b)

      3 months after the credit union'saccounting reference date;

   3. (c)

      6 months after the credit union'saccounting reference date; and

   4. (d)

      9 months after the credit union'saccounting reference date.

3If a credit union fails to submit a complete annual report by the date on which it is due in accordance with the rules in SUP 16.126 and any prescribed submission procedures, the credit union must pay an administrative fee of £250 (see SUP 16.3.14 R).7 Failure to submit a report in accordance with the rules in SUP 16.126 may also7 lead to the imposition of a financial penalty and other disciplinary sanctions (see DEPP8).

3The FSA may from time to time send reminders to credit unions when reports are overdue. Credit unions should not, however, assume that the FSA has received a report merely because they have not received a reminder.

3The credit union is responsible for ensuring delivery of the required report at the FSA's offices by the due date. If a report is received by the FSA after the due date and the credit union believes its delivery arrangements were adequate, it may be required to provide proof of those arrangements. Examples of such proof would be:

1. (1)

   "proof of posting" receipts from a UK post office or overseas equivalent which demonstrate that the report was posted early enough to allow delivery by the due date in accordance with the delivery service standards prescribed by the relevant postal authority; or

2. (2)

   recorded postal delivery receipts showing delivery on the required day; or

3. (3)

   records of a courier service provider showing delivery on the required day.

1. (1)

   3SUP 16.3.17 states that a credit union must notify the FSA if it changes its accounting reference date.

2. (2)

   When a credit union extends its accounting period, it must make the notification in (1) before the previous accounting reference date.

3. (3)

   When a credit union shortens its accounting period, it must make the notification in (1) before the new accounting reference date.

4 CRED 14.10.3 G emphasises the importance to the FSA of timely and accurate information. The extension of a credit union's accounting period (as a result of a change of accounting reference date) to more than 15 months may hinder the timely provision of relevant and important information to the FSA, or its regularity. This is because some due dates for reporting to the FSA are linked to credit union'saccounting reference dates. If the extension of a credit union's accounting period appears likely to impair the effectiveness of the FSA's supervisory work, the FSA may take action to ensure that it continues to receive the information it requires on a timely basis. This may include the use of any of the tools of supervision set out in CRED 14.1.9 G.

SUP 16.12.5 R states6 that a credit union must submit a quarterly return.

SUP 16.12.5 R 6states that a credit union must submit an annual return.

The form may be updated from time to time. Credit unions should use the form in force at the end of the financial year on which they are reporting.5

2 Credit unions are required by the Friendly and Industrial and Provident Societies Act 1968 to publish audited accounts. CRED 14 Annex 1 G contains further information about these requirements.

1. (1)

   4Financial penalties may be imposed for the late submission of:

   1. (a)

      the quarterly and annual returns referred to in CRED 14.10.5 G and CRED 14.10.7 G; and

   2. (b)

      the audited accounts referred to in CRED 14.10.10 R.

2. (2)

   Details of the FSA's policy and procedures on financial penalties are given in CRED 15.5 (Financial penalties for late submission of reports) and CRED 15 Annex 3 G.

1. (1)

   Credit unions are subject to the requirements of the Act and SUP 11 on controllers and close links, and are bound to notify the FSA of changes. In practice, however, credit unions cannot develop such relationships, because:5

   1. (a)

      only individuals may be members of a credit union (section 5(1) of the Credit Unions Act 1979);5

   2. (b)

      every member is entitled to vote and has one vote only (section 5(9) of the Credit Unions Act 1979);5

   3. (c)

      the minimum number of members of a credit union is 21 (section 6(1) of the Credit Unions Act 1979) and its registration may be cancelled if membership falls below that number (section 16(1)(a)(i) of the Industrial and Provident Societies Act 1968 and section 20(1)(a) of the Credit Unions Act 1979); and5

   4. (d)

      a credit union may not have a subsidiary (section 26 of the Credit Unions Act 1979).5

2. (2)

   Credit unions are therefore exempted from the requirement to submit annual reports of controllers and close links (SUP 16.1.1, SUP 16.1.3, SUP 16.4.1G(-1)(-1) and SUP 16.5.1G(-1)).5