EG 19.9 1Electronic commerce activity directions: the FCA’s policy

1The FCA will exercise the power to make an electronic commerce activity direction on a case-by-case basis. When deciding whether to make a direction, the FCA will undertake an assessment of whether the circumstances of the particular case meet the policy conditions set out in regulation 6.

1On obtaining information concerning possible financial crime facilitated through or involving an incoming ECA provider, or detriment to UK markets or UK ECA recipients caused by the activities of an incoming ECA provider, the FCA will contact the relevant EEA regulator of the incoming ECA provider. The FCA would expect the relevant EEA regulator to consider the matter, investigate it where appropriate and keep the FCA informed about what action, if any, was being taken. The FCA may not need to be involved further if the action by the relevant EEA regulator addresses the FCA's concerns.

1However, there are likely to be circumstances in which the FCA will need to use the electronic commerce activity direction power. Examples could include where it was necessary to stop the behaviour complained of, or to make the continued provision of services by the incoming ECA provider conditional upon compliance with specified requirements. Overall, the FCA may use the direction power:

1. (1)

   where:

   1. (a)

      the behaviour complained of was causing, or had the potential to cause, major detriment to consumers in the United Kingdom; or

   2. (b)

      the incoming ECA provider's activities have been used, or have the potential to be used, to facilitate serious financial crime or to launder the proceeds of a crime; or

   3. (c)

      the making of the direction is considered to be necessary for other reasons of public policy relevant to the regulatory objectives; and

2. (2)

   either:

   1. (a)

      the relevant EEA regulator is unable to take action, or has not within a reasonable time taken action which appears to the FCA to be adequate; or

   2. (b)

      the relevant EEA regulator and the FCA agree that, having regard to the circumstances of the particular case, action against the wrong-doing would be taken more effectively by the FCA.

1The question of whether the FCA decides to prevent or prohibit the incoming electronic commerce activity, or to make it subject to certain requirements (for example, compliance with specified rules), will depend on the overall circumstance of the case. A relevant consideration will be whether the FCA is satisfied that its concerns over the incoming electronic commerce activity can be adequately addressed through the imposition of a requirement, rather than a complete prohibition on the activity. Set out below is a list of factors the FCA may consider. The list is not exhaustive.

1. (1)

   The extent of any loss, or risk of loss, or other adverse effect on UK ECA recipients: The more serious the loss or potential loss or other adverse effect on them, the more likely it is to be appropriate for the FCA to use its powers to prohibit the activity altogether, to protect the interests of UK ECA recipients.

2. (2)

   The extent to which customer assets appear to be at risk.

3. (3)

   The risk that the incoming ECA provider's activities may be used or have been used to facilitate financial crime or to launder the proceeds of a crime: Information available to the FCA, including information supplied by other law enforcement agencies, may suggest that the incoming ECA provider is being used for, or is itself involved in, financial crime. Where this appears to be the case, a direction that the incoming electronic commerce activity should cease may be appropriate.

4. (4)

   The risk that the incoming ECA provider's activities present to the financial system and to confidence in the financial system.

5. (5)

   The impact that a complete prohibition on the activity would have on UK ECA recipients.

1The FCA may consider that a case is urgent, in particular, where:

1. (1)

   the information available to it indicates serious concerns about the incoming electronic commerce activity that need to be addressed immediately; and

2. (2)

   circumstances indicate that it is appropriate to use the direction power immediately to prohibit the incoming electronic commerce activity, or to make the carrying on of the activity subject to specified requirements.

1The FCA will consider the full circumstances of the case when deciding whether exercising the direction power, without first taking the procedural steps set out in regulation 6, is an appropriate response to such concerns. The factors the FCA may consider include those listed in paragraph 19.9.4 of this guide. There may be other relevant factors.

1The FCA's decision to make, revoke or vary an electronic commerce activity direction will generally be taken by the RDC Chairman. However, this is subject to two exceptions.

1. (1)

   In an urgent case and if the Chairman is not available, the decision will be taken by an RDC Deputy Chairman and where possible, but subject to the need to act swiftly, one other RDC member.

2. (2)

   If a provider who has been notified of the FCA's intention to make a direction or to vary a direction on its own initiative makes representations within the period and in the manner required by the FCA, then those representations will be considered by the RDC, rather than by the RDC Chairman alone. Having taken into account the provider's representations, the RDC will then decide whether to make the direction, or to vary the existing direction.

1Where a provider must be given the opportunity to make representations in relation to a proposed direction or variation of a direction, the RDC Chairman will determine in each case the manner and the period within which those representations should be made. If the FCA decides to issue a direction or vary it at its own initiative, or if the FCA refuses an application to vary or revoke a direction, the person to whom the direction applies may refer the matter to the Tribunal.

1Regulation 10(8) of the ECD Regulations provides that if the FCA makes a direction, it may publish, in such manner as it considers appropriate, such information about the matter to which the direction relates as it considers appropriate in furtherance of any of the objectives referred to in paragraph of this guide. However, under Regulation 10(9), the FCA may not publish information relating to a direction if publication would, in the FCA's opinion, be unfair to the provider to whom the direction applies or prejudicial to the interests of consumers.

1When deciding what information, if any, to publish and the appropriate manner of publication, the FCA will consider the full circumstances of each case. The FCA anticipates that it will generally be appropriate to publish relevant details of a direction, in order to protect and inform consumers. However, in accordance with the Regulation 10(9) prohibition, it will not publish information if it considers that publication would be unfair to the provider or prejudicial to the interests of consumers.