ENF 5.5 The FSA's policy for exercising its power to cancel Part IV permission
The FSA will consider cancelling a firm's Part IV permission in two main circumstances:
- (1)
where the FSA has very serious concerns about a firm, or the way its business is or has been conducted;
- (2)
where the firm's regulated activities have come to an end and it has not applied for cancellation of its Part IV permission.
Examples of these circumstances are set out in ENF 3.3.2 G.
The FSA's own-initiative powers to vary and to cancel Part IV permission are similar to each other. The FSA may exercise the powers on the same grounds (see ENF 5.3.2 G) and where appropriate the FSA may impose a variation of Part IV permission which, by removing all regulated activities from the Part IV permission, has a similar effect to cancelling it. However the statutory procedure is different and this may determine how the FSA acts in any particular case. Of greater significance, however, the FSA may impose a variation of Part IV permission either with immediate effect, or on a date specified by it (see ENF 3.5.9 G). In contrast a cancellation of Part IV permission only becomes effective on completion of the statutory procedure, or subsequent referral to the Tribunal, or completion of the appeal process.
Depending on the circumstances, the FSA may need to consider whether it should first use its own-initiative powers to vary a firm's Part IV permission before going on to cancel it. Circumstances in which the FSA will consider using its own-initiative power to vary a firm's Part IV permission are set out in ENF 3.5. Amongst other circumstances, the FSA 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 (see in particular ENF 3.5.9 G to ENF 3.5.11 G).
Where the situation appears so urgent and serious that the firm should immediately cease to carry on all regulated activities, the FSA may first vary the firm's Part IV permission so that there is no longer any regulated activity for which the firm has a Part IV permission. If it does this, the FSA will then have a duty to cancel the firm's Part IV permission - once it is satisfied that it is no longer necessary to keep the Part IV permission in force (See ENF 5.3.2 G).1
However, where the FSA has cancelled a firm's Part IV permission, it is required by section 33 of the Act (Withdrawal of authorisation by the Authority) to go on to give a direction withdrawing the firm's authorisation. Accordingly, the FSA may decide to keep a firm's Part IV permission in force to maintain the firm's status as an authorised person and enable it (the FSA) to monitor the firm's activities. For example, where the FSA needs to supervise an orderly winding down of the firm's regulated business (see SUP 6.4.22(When will the FSA grant an application for cancellation of permission)). Alternatively, the FSA may decide to keep a firm's Part IV permission in force to maintain the firm's status as an authorised person to use administrative enforcement powers against the firm. For example, where the FSA proposes to impose a financial penalty on the firm under section 206 of the Act (Financial penalties) (see ENF 13).1
The circumstances in which the FSA may consider cancelling a firm's Part IV permission in support of an overseas regulator depend on whether or not the FSA is required to consider exercising the power in order to comply with a Community obligation. The FSA will consider the factors set out in ENF 3.5.14 G to ENF 3.5.26 G in relation to variation of Part IV permission and any specific request made to it by the overseas regulator to cancel, rather than vary, the firm's Part IV permission.