EG 8.5 1Cancelling a firm’s Part 4A permission on its own initiative

1The FCA will consider cancelling a firm's Part 4A permission using its own-initiative powers contained in sections 55J and 55Q respectively of the Act in two main circumstances:

1. (1)

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

2. (2)

   where the firm's regulated activities have come to an end and it has not applied for cancellation of its Part 4A permission.

1The grounds on which the FCA may exercise its power to cancel an authorised person's permission under section 55J of the Act are the same as the grounds for variation and for imposition of requirements. They are set out in section 55J(1) and section 55L(2) and described in EG 8.1.1. Examples of the types of circumstances in which the FCA may cancel a firm's Part 4A permission include:

1. (1)

   non-compliance with a Financial Ombudsman Service award against the firm;

2. (2)

   material non-disclosure in an application for authorisation or approval or material non-notification after authorisation or approval has been granted. The information which is the subject of the non-disclosure or non-notification may also be grounds for cancellation;

3. (3)

   failure to have or maintain adequate financial resources, or a failure to comply with regulatory capital requirements;

4. (4)

   non-submission of, or provision of false information in, regulatory returns, or repeated failure to submit such returns in a timely fashion;

5. (5)

   non-payment of FCA fees or repeated failure to pay FCA fees except under threat of enforcement action; and

6. (6)

   failure to provide the FCA with valid contact details or failure to maintain the details provided, such that the FCA is unable to communicate with the firm;

7. (7)

   repeated failures to comply with rules or requirements;

8. (8)

   a failure to co-operate with the FCA which is of sufficient seriousness that the FCA ceases to be satisfied that the firm is fit and proper, for example failing without reasonable excuse to:

   1. (a)

      comply with the material terms of a formal agreement made with the FCA to conclude or avoid disciplinary or other enforcement action; or

   2. (b)

      provide material information or take remedial action reasonably required by the FCA.

Sections 55J(6) and 55K of the Act sets out further grounds on which the FCA may cancel the permission of authorised persons which are investment firms and section 55J(6A) of the Act set out further grounds on which the FCA may cancel the permission of authorised persons who are full-scope UK AIFMs.

2The FCA may also vary or cancel, under Schedule 6A to the Act, the Part 4A permission of a firm that is an FCA-authorised person if:

1. (1)

   it appears to the FCA that that person is carrying on no regulated activity to which the permission relates; and

2. (2)

   that person has failed to respond as directed to notices served by the FCA on that person under paragraph 2 of Schedule 6A.

Schedule 6A specifies that the FCA may form the view that a firm is carrying on no such regulated activity on the basis of its failure to pay a periodic fee or levy or provide information to the FCA, in each case as required by the Handbook. Further guidance on this power is given in SUP 7.

1Depending on the circumstances, the FCA may need to consider whether it should first use its own-initiative powers to impose requirements on a firm or to vary a firm's Part 4A permission before going on to cancel it. Amongst other circumstances, the FCA may use this power where it considers it needs to take immediate action against a firm because of the urgency and seriousness of the situation.

1Where the situation appears so urgent and serious that the firm should immediately cease to carry on all regulated activities, the FCA may first vary the firm's Part 4A permission so that there is no longer any regulated activity for which the firm has a Part 4A permission. If it does this, the FCA will then have a duty to cancel the firm's Part 4A permission - once it is satisfied that it is no longer necessary to keep the Part 4A permission in force.

1However, where the FCA has cancelled a firm's Part 4A permission, it is required by section 33 of the Act to go on to give a direction withdrawing the firm's authorisation. Accordingly, the FCA may decide to keep a firm's Part 4A permission in force to maintain the firm's status as an authorised person and enable it (the FCA) to monitor the firm's activities. An example is where the FCA needs to supervise an orderly winding down of the firm's regulated business (see SUP 6.4.22 (When will the relevant regulator grant an application for cancellation of permission)). Alternatively, the FCA may decide to keep a firm's Part 4A permission in force to maintain the firm's status as an authorised person to use administrative enforcement powers against the firm.