EG 8.2 1Varying a firm’s Part 4A permission or imposing requirements on the FCA’s own initiative

1When it considers how it should deal with a concern about a firm, the FCA will have regard to its statutory objectives and the range of regulatory tools that are available to it. It will also have regard to:

1. (1)

   the responsibilities of a firm's management to deal with concerns about the firm or about the way its business is being or has been run; and

2. (2)

   the principle that a restriction imposed on a firm should be proportionate to the objectives the FCA is seeking to achieve.

1The FCA will proceed on the basis that a firm (together with its directors and senior management) is primarily responsible for ensuring the firm conducts its business in compliance with the Act, the Principles and other rules.

1In the course of its supervision and monitoring of a firm or as part of an enforcement action, the FCA may make it clear that it expects the firm to take certain steps to meet regulatory requirements. In the vast majority of cases the FCA will seek to agree with a firm those steps the firm must take to address the FCA’s concerns. However, where the FCA considers it appropriate to do so, it will exercise its formal powers under sections 55J or 55L of the Act to vary a firm's permission or to impose a requirement to ensure such requirements are met. This may include where:

1. (1)

   the FCA has serious concerns about a firm, or about the way its business is being or has been conducted;

2. (2)

   the FCA is concerned that the consequences of a firm not taking the desired steps may be serious;

3. (3)

   the imposition of a formal statutory requirement reflects the importance the FCA attaches to the need for the firm to address its concerns;

4. (4)

   the imposition of a formal statutory requirement may assist the firm to take steps which would otherwise be difficult because of legal obligations owed to third parties.

1SUP 7 provides more information about the situations in which the FCA may decide to take formal action in the context of its supervision

activities.

1Examples of circumstances in which the FCA will consider varying a firm's Part 4A permission because it has serious concerns about a firm, or about the way its business is being or has been conducted include where:

1. (1)

   in relation to the grounds for exercising the power under section 55J(1)(a) or section 55L(2)(a) of the Act, the firm appears to be failing, or appears likely to fail, to satisfy the threshold conditions relating to one or more, or all, of its regulated activities, because for instance:

   1. (a)

      the firm's material and financial resources appear inappropriate for the scale or type of regulated activity it is carrying on, for example, where it has failed to take account of the need to manage risk professional indemnity insurance or where it is unable to meet its liabilities as they have fallen due; or

   2. (b)

      the firm appears not to be a fit and proper person to carry on a regulated activity because:

      1. (i)

         it has not conducted its business in compliance with high standards which may include putting itself at risk of being used for the purposes of financial crime or being otherwise involved in such crime;

      2. (ii)

         it has not been managed soundly and prudently and has not exercised due skill, care, and diligence in carrying on one or more, or all, of its regulated activities;

      3. (iii)

         it has breached requirements imposed on it by or under the Act (including the Principles and the rules), for example in respect of its disclosure or notification requirements, and the breaches are material in number or in individual seriousness;

   3. (c)

      the firm’s business model is not suited to its regulated activities, for example, where the firm’s business model is not compatible with its affairs being conducted in a sound and prudent manner;

   4. (d)

      the firm is not capable of effective supervision by the FCA, for example, where the way in which its business is organised or its membership of a group is likely to prevent effective supervision;

2. (2)

   in relation to the grounds for exercising the power under section 55J(1)(c)(i) or section 55L(2)(c), it appears that the interests of consumers are at risk because the firm appears to have breached any of Principles 6 to 10 of the FCA’s Principles (see PRIN 2.1.1R) to such an extent that it is desirable that limitations, restrictions, or prohibitions are placed on the firm's regulated activity.