ENF 18.4 Disapplication orders
The FSA may be alerted to concerns in relation to the carrying out of exempt regulated activities by a member, by the relevant designated professional body or by complaints from others such as employees or clients of the member.
When the FSA has concerns about the fitness and propriety of a member to carry out exempt regulated activities, it will consider all the relevant circumstances of the case, including whether those concerns arise from the fitness and propriety of specific individuals engaged to perform the exempt regulated activities carried out by the member or whether its concerns arise from wider concerns about the member itself.
In most cases, where the FSA is concerned about the fitness and propriety of a specific individual, it may be more appropriate for the FSA to consider whether to make an order prohibiting the individual from performing functions in relation to exemptregulated activities rather than a disapplication order in relation to the member concerned. The criteria which the FSA will apply when determining whether to make a prohibition order against an individual who is not regulated by the FSA are set out in ENF 8.8 (Prohibition orders against other individuals). In addition to the factors referred to in ENF 8.8, the FSA may also take into consideration any disciplinary action that has been, or will be taken against the individual concerned by the relevant designated professional body, where that disciplinary action reflects on the fitness and propriety of the individual concerned to perform exempt regulated activities.
The FSA will also take into account the potentially more serious consequences that a disapplication of an exemption will have for the member concerned compared with the consequences of a prohibition of a particular individual engaged in exempt regulated activities. However, the FSA may consider it appropriate in some cases to disapply an exemption where it decides that the member concerned is not fit and proper to carry out exempt regulated activities in accordance with section 327 of the Act (Exemption from the general prohibition).
As an alternative to making an order to disapply an exemption, the FSA may consider issuing a private warning. A private warning may be appropriate where the FSA has concerns in relation to a member's fitness and propriety but feels that its concerns in relation to the conduct of exempt regulated activities can be more appropriately addressed by a private warning than by a disapplication of the member's exemption.
When it decides whether to exercise its power to disapply an exemption from the general prohibition in relation to a member, the FSA will take into account all relevant circumstances which may include, but are not limited to, the following factors:
- (1)
disciplinary or other action taken by the relevant designated professional body, where that action relates to the fitness and propriety of the member concerned: where the FSA considers that its concerns in relation to the fitness and propriety of the member concerned may be, or have been adequately addressed by disciplinary or other action taken by the relevant designated professional body it may consider not making a disapplication order in addition to such action; however, where the FSA considers that its concerns, and in particular, any risks presented to the member's clients in respect of its exemptregulated activities, are not adequately addressed by that action, the FSA will consider making a disapplication order;
- (2)
the significance of the risk which the member presents to its clients: if the FSA is satisfied that there is a significant risk to clients and consumers it may consider making a disapplication order;
- (3)
the extent of the member's compliance with rules made by the FSA under section 332(1) of the Act (Rules in relation to whom the general prohibition does not apply) or by the relevant designated professional body under section 332(3) of the Act;
Where the FSA is considering whether to exercise its power to make a disapplication order in relation to a member, it will liaise closely with the relevant designated professional body.
Where the FSA is considering making a disapplication order against a member as a result of a breach of rules made by the FSA under section 323(1) of the Act, it will take into account any proposed application by the member concerned for authorisation under the Act. The FSA may refrain from making a disapplication order pending its consideration of the application for authorisation.