This chapter applies to firms, approved persons, and other persons, whether or not they are regulated by the FSA.

This chapter explains the FSA's powers to apply to court for injunctions and gives guidance on how the FSA intends to use these powers. The FSA's effective use of these powers will help it work towards its regulatory objectives of protecting consumers, maintaining confidence in the financial system and reducing financial crime. This chapter does not explain the use of the FSA's power to seek injunctions under the Unfair Terms Regulations. This is explained in ENF 20 (Unfair terms in consumer contracts).1

This chapter contains guidance on the use of the FSA's powers under the Act to apply to court for orders:

1. (1)

   in relation to the contravention of a relevant requirement (section 380 of the Act (Injunctions));

2. (2)

   in cases of market abuse (section 381 of the Act (Injunctions in cases of market abuse)); and

3. (3)

   at the request of the Home State regulator of an incoming EEA firm (section 198 of the Act (Power to apply to court for injunction in respect of certain overseas insurance companies)).

It also gives guidance on the circumstances in which the FSA may ask the court to exercise its inherent jurisdiction to grant an asset-freezing order.

The orders the court may make following an application by the FSA are generally known in England and Wales and Northern Ireland as injunctions, and in Scotland as interdicts. In this chapter, the word 'injunction' and the word 'order' also mean 'interdict'.

A person who disobeys an injunction may be in contempt of court and be liable to imprisonment, to a fine, and/or to have his assets seized.

The powers to make these orders are exercised by the High Court, or in Scotland by the Court of Session. When it seeks an order, the FSA will also ask the court to order that the person who is the subject of the application should pay the FSA's costs.

Under section 380 of the Act (Injunctions), the FSA has power to apply to court for an injunction against persons, whether authorised or not, in connection with a contravention of a 'relevant requirement'. (The Secretary of State for Trade and Industry may also apply for injunctions under this section of the Act).

Sections 380(6)(a) and (7)(a) state that in relation to an application by the FSA, 'relevant requirement' means a requirement:

1. (1)

   'which is imposed by or under the Act; or

2. (2)

   which is imposed by or under any other Act and whose contravention constitutes an offence which the FSA has power to prosecute under the Act (or in the case of Scotland, which is imposed by or under any other Act and whose contravention constitutes an offence under Part V of the Criminal Justice Act 1993 (insider dealing) or under prescribed regulations relating to money laundering)'.

Sections 380(1), (2) and (3) set out the grounds on which the court may grant an injunction.

1. (1)

   Under section 380(1), the FSA may apply to court for an injunction restraining or prohibiting a contravention of a relevant requirement.

2. (2)

   Section 380(1) states, 'If, on the application of the FSA or the Secretary of State, the court is satisfied:

   1. (a)

      that there is a reasonable likelihood that any person will contravene a relevant requirement; or

   2. (b)

      that any person has contravened a relevant requirement and that there is a reasonable likelihood that the contravention will continue or be repeated,

   the court may make an order restraining (or in Scotland an interdict prohibiting) the contravention.'

1. (1)

   Under section 380(2), the FSA may apply to court for an injunction directing a person to remedy a contravention of a relevant requirement.

2. (2)

   Section 380(2) states, 'If on the application of the FSA or the Secretary of State the court is satisfied:

   1. (a)

      that any person has contravened a relevant requirement; and

   2. (b)

      that there are steps which could be taken for remedying the contravention,

   the court may make an order requiring that person, and any other person who appears to have been knowingly concerned in the contravention, to take such steps as the court may direct to remedy it.'

Under section 380(5), 'remedying a contravention' (see ENF 6.3.5 G) includes mitigating the effect of that contravention.

1. (1)

   Under section 380(3), the FSA may apply to court for an injunction to secure assets.

2. (2)

   Section 380(3) states, 'If, on the application of the FSA or the Secretary of State, the court is satisfied that any person may have:

   1. (a)

      contravened a relevant requirement; or

   2. (b)

      been knowingly concerned in the contravention of such a requirement,

   it may make an order restraining (or in Scotland an interdict prohibiting) him from disposing of, or otherwise dealing with, any assets of his which it is satisfied he is reasonably likely to dispose of or otherwise deal with.'

Under section 381 of the Act (Injunctions in cases of market abuse), the FSA has power to apply to court for an injunction against persons, whether authorised or not, in cases of market abuse. The Secretary of State for Trade and Industry has no power to apply for injunctions under this section of the Act.

Sections 381(1), (2), (3) and (4) set out the grounds upon which the court may grant an injunction.

1. (1)

   Under section 381(1), the FSA may apply to court for an injunction restraining or prohibiting market abuse.

2. (2)

   Section 381(1) states, 'If, on the application of the FSA, the court is satisfied:

   1. (a)

      that there is a reasonable likelihood that any person will engage in market abuse; or

   2. (b)

      that any person is or has engaged in market abuse and that there is a reasonable likelihood that the market abuse will continue or be repeated,

   the court may make an order restraining (or in Scotland an interdict prohibiting) the market abuse.'

1. (1)

   Under section 381(2), the FSA may apply to court for an injunction requiring a person to take steps to remedy market abuse.

2. (2)

   Section 381(2) states, 'If on the application of the FSA the court is satisfied:

   1. (a)

      that any person is or has engaged in market abuse; and

   2. (b)

      that there are steps which could be taken for remedying the market abuse,

   the court may make an order requiring him to take such steps as the court may direct to remedy it.'

Under section 381(6), 'remedying the market abuse' (see ENF 6.4.3 G) includes mitigating the effect of the market abuse.

Section 381(4) states, 'The court may make an order restraining (or in Scotland an interdict prohibiting) the person concerned from disposing of, or otherwise dealing with, any assets of his which it is satisfied that he is reasonably likely to dispose of, or otherwise deal with.'

Section 381(3) states that section 381(4) (see ENF 6.4.4 G) applies if '...on the application of the FSA, the court is satisfied that any person (a) may be engaged in market abuse; or (b) may have been engaged in market abuse.'

As an alternative to applying to the court under section 380(3) (Injunctions) or sections 381(3) and (4) (Injunctions in cases of market abuse) of the Act, the FSA may ask the court to exercise its inherent jurisdiction to grant a freezing order, restraining a person from disposing of, or otherwise dealing with, assets. To succeed in an application for an asset-freezing injunction the FSA will have to show a good arguable case for the granting of the injunction.

The FSA may request the court to exercise its inherent jurisdiction in cases where it has evidence showing that there is a reasonable likelihood that a person will contravene a requirement of the Act and that the contravention will result in the dissipation of assets belonging to investors. Unlike an application under section 380(3) or 381(3) and (4), the FSA will not have to show that a contravention has already occurred or may have already occurred.

Sections 380 (Injunctions) and 381 (Injunctions in cases of market abuse) of the Act enable the court to make three types of order: to restrain a course of conduct, to take steps to remedy a course of conduct and to secure assets (see ENF 6.3 and ENF 6.4). An application under the court's inherent jurisdiction will enable the court to make an order freezing assets. In certain cases, the FSA may seek only one type of order, although in others it may seek several.

The FSA recognises that an application for an injunction under sections 380 and/or 381 of the Act, or under the court's inherent jurisdiction, will have serious consequences for those concerned. The broad test the FSA will apply when it decides whether to seek an injunction is whether the application would be the most effective way to deal with the FSA's concerns. In deciding whether an application for an injunction is appropriate in a given case, the FSA will consider all relevant circumstances and may take into account a wide range of factors. The following list of factors is not exhaustive; not all the factors will be relevant in a particular case and there may be other factors that are relevant.

1. (1)

   The nature and seriousness of a contravention or expected contravention of a relevant requirement (see ENF 6.3.2 G). The extent of loss, risk of loss, or other adverse effect on consumers, including the extent to which client assets may be at risk, may be relevant. The seriousness of a contravention or prospective contravention will include considerations of:

   1. (a)

      whether the losses suffered are substantial;

   2. (b)

      whether the numbers of consumers who have suffered loss are significant;

   3. (c)

      whether the assets at risk are substantial; and

   4. (d)

      whether the number of consumers at risk is significant.

2. (2)

   In cases of market abuse, the nature and seriousness of the misconduct or expected misconduct in question. The following may be relevant:

   1. (a)

      the impact or potential impact on the financial system of the conduct in question. This would include the extent to which it has resulted in distortion or disruption of the markets, or would be likely to do so if it was allowed to take place or to continue;

   2. (b)

      the extent and nature of any losses or other costs imposed, or likely to be imposed, on other users of the financial system, as a result of the misconduct.

3. (3)

   Whether the conduct in question has stopped or is likely to stop and whether steps have been taken or will be taken by the person concerned to ensure that the interests of consumers are adequately protected. For example, an application for an injunction may be appropriate where the FSA has grounds for believing that a contravention of a relevant requirement, market abuse or both may continue or be repeated. It is likely to have grounds to believe this where, for example, the Takeover Panel has requested that a person stop a particular course of conduct and that person has not done so.

4. (4)

   Whether there are steps a person could take to remedy a contravention of a relevant requirement or market abuse. The steps the FSA may require a person to take will vary according to the circumstances but may include the withdrawal of a misleading financial promotion or publishing a correction, writing to clients or investors to notify them of FSA action, providing financial redress and repatriating funds from an overseas jurisdiction. An application by the FSA to the court under section 380(2) or 381(2) for an order requiring a person to take such steps may not be appropriate if, for example, that person has already taken or proposes to take appropriate remedial steps at his own initiative or under a ruling imposed by another regulatory authority (such as the Takeover Panel or a recognised investment exchange). If another authority has identified the relevant steps and the person concerned has failed to take them, the FSA will take this into account and (subject to all other relevant factors and circumstances) may consider it is appropriate to apply for an injunction. In those cases the FSA may consult with the relevant regulatoryauthority before applying for an injunction.

5. (5)

   Whether there is a danger of assets being dissipated. The main purpose of an application under section 380(3) (see ENF 6.3.7 G), sections 381(3) and (4) (see ENF 6.4.6 G) or pursuant to the court's inherent jurisdiction (see ENF 6.5), is likely to be to safeguard funds containing client assets (ie client accounts) and/or funds and other assets from which restitution may be made (see ENF 9 (Restitution and redress)). The FSA may seek an injunction to secure assets while a suspected contravention is being investigated or where it has information suggesting that a contravention is about to take place.

6. (6)

   The costs the FSA would incur in applying for and enforcing an injunction and the benefits that would result (although the FSA may be able to recover those costs: see ENF 6.2.6 G). There may be other cases which require the FSA's attention and take a higher priority, due to the nature and seriousness of the breaches concerned. There may, therefore, be occasions on which the FSA considers that time and resources should not be diverted from other cases in order to make an application for an injunction. These factors reflect the FSA's duty under the Act to have regard to the need to use its resources in the most efficient and economic way.

7. (7)

   The disciplinary record and general compliance history of the person who is the subject of the possible application. This includes whether the FSA (or a previous regulator) has taken any previous disciplinary, remedial or protective action against the person. It may also be relevant, for example, whether the person has previously given any undertakings to the FSA (or any previous regulator) not to do a particular act or engage in particular behaviour and is in breach of those undertakings.

8. (8)

   Whether the conduct in question can be adequately addressed by other disciplinary powers, for example public censure or financial penalties.

9. (9)

   The extent to which another regulatory authority can adequately address the matter. Certain circumstances may give rise not only to possible enforcement action by the FSA, but also to action by other regulatory authorities. The FSA will examine the circumstances of each case, and consider whether it is appropriate for the FSA to take action to address the relevant concern. In most cases the FSA will consult with other relevant regulatory authorities before making an application for an order. The FSA's approach to potential action involving other regulatory authorities is discussed in detail, in the context of discipline of firms and approved persons, in ENF 11.8 (Action involving other regulatory authorities), and in the context of sanctions for market abuse, in ENF 14.9 (Action involving other UK regulatory authorities).

10. (10)

    Whether there is information to suggest that the person who is the subject of the possible application is involved in financial crime.

11. (11)

    In any case where the FSA is of the opinion that any potential exercise of its powers under section 381 may affect the timetable or the outcome of a takeover bid, the FSA will consult the Takeover Panel before taking any steps to exercise these powers and will give due weight to its views.

The FSA has a range of powers it can use to take remedial, protective and disciplinary action against a person who has contravened a relevant requirement or engaged in market abuse, as well as its powers to seek injunctions under sections 380 (Injunctions) and 381 (Injunctions in cases of market abuse) of the Act or the courts' inherent jurisdiction. Where appropriate, the FSA may exercise these other powers before, at the same time as, or after it applies for an injunction against a person.

When, in relation to firms, the FSA applies the broad test outlined in ENF 6.6.2 G, it will consider the relative effectiveness of the other powers available to it, compared with injunctive relief. For example, where the FSA has concerns about whether a firm will comply with restrictions that the FSA could impose by exercising its own initiative powers (see ENF 3 (Variation of Part IV permission on the FSA's own initiative), it may decide it would be more appropriate to seek an injunction. This is because breaching any requirement imposed by the court could be punishable for contempt (see ENF 6.2.5 G). Alternatively, where, for example, the FSA has already imposed requirements on a firm by exercising its own-initiative powers and these requirements have not been met, the FSA may seek an injunction to enforce those requirements.

The FSA's own-initiative powers do not apply to unauthorised persons. This means that an application for an injunction is the only power by which the FSA may seek directly to prevent unauthorised persons from actual or threatened breaches or market abuse. The FSA will decide whether an application against an unauthorised person is appropriate, in accordance with the approach discussed in ENF 6.6. The FSA may also seek an injunction to secure assets where it intends to use its insolvency powers (see ENF 10 (Insolvency proceedings and orders against debt avoidance)) against an unauthorised person.

In certain cases, conduct that may be the subject of an injunction application will also be an offence which the FSA has power to prosecute under the Act. In those cases, the FSA will consider whether it is appropriate to prosecute the offence in question, as well as applying for injunctions under section 380, section 381, or both. ENF 15 (Prosecution of criminal offences) sets out the offences the FSA has power to prosecute, and the FSA's policy and procedure for prosecution of these offences.

Where the FSA exercises its powers under section 380, section 381 or invokes the court's inherent jurisdiction to obtain an order restraining the disposal of assets, it may also apply to the court for a restitution order for the distribution of those assets. The FSA's policy and procedure in relation to restitution orders is set out in ENF 9 (Restitution and redress).

Under section 198 of the Act (Power to apply to court for injunction in respect of certain overseas insurance companies) the FSA has power to apply to court on behalf of the Home State regulator of certain incoming EEA firms for an injunction restraining the incoming EEA firm from disposing of, or otherwise dealing with, any of its assets.

1. (1)

   Section 198(1) sets out the circumstances in which the FSA may exercise the power referred to in ENF 6.8.1 G.

2. (2)

   Section 198(1) states, 'This section applies if the FSA has received a request made in respect of an incoming EEA firm in accordance with:

   1. (a)

      Article 20.5 of the First Non-Life Directive; or

   2. (b)

      Article 24.5 of the First Life Directive'

The FSA's power under section 198 is intended to implement article 20.5 of the First Non-Life Directive, on general insurance, and article 24.5 of the First Life Directive, on long-term insurance. Section 198(1) limits use of the power to where it is in accordance with those articles, which means that it can be exercised only where the Home State regulator concerned has asked the FSA to prohibit the free disposal of the incoming EEA firm's assets and has confirmed that:

1. (1)

   the incoming EEA firm has failed to comply with the requirements of article 15 of the First Non-LifeDirective, or article 17 of the First LifeDirective; or

2. (2)

   the solvency margin of the incoming EEA firm has fallen below the minimum required by article 16.3 of the First Non-Life Directive, or article 19 of the First Life Directive; or

3. (3)

   the solvency margin of the incoming EEA firm has fallen below the guaranteefund as defined in article 17 of the First Non-Life Directive, or article 20 of the First Life Directive.

The FSA will therefore consider exercising this power only where a request from a Home State regulator satisfies the requirements of section 198(1).

1. (1)

   The FSA considers it generally appropriate to publish details of its successful applications to the court for injunctions. For example, where the court has ordered an injunction to prohibit further illegal activity, it will normally be appropriate to publicise this to inform consumers of the position and help them avoid dealing with the person who is the subject of the injunction. However, there may be circumstances when the FSA decides not to publicise, or not to do this immediately. These circumstances might, for example, be where publication could damage confidence in the financial system or undermine market integrity in a way that would be prejudicial to the interests of consumers.

2. (2)

   Where the behaviour to which the injunction relates has occurred in the context of a takeover bid, the FSA will consult the Takeover Panel over the timing of publication if the FSA believes that publication may affect the timetable or outcome of that bid, and will give due weight to the Takeover Panel's views.