ENF 8.3 The FSA's power to make a prohibition order

Under section 56(2) of the Act (Prohibition orders), the FSA may make a prohibition order if it appears that an individual is not fit and proper to carry out functions in relation to regulated activities carried on by firms. The FSA may make an order prohibiting the individual from carrying out a specified function in relation to regulated activities, any function within a specified description, or any function in relation to regulated activities.

A prohibition order may relate to:

1. (1)

   a specified regulated activity, any regulated activity falling within a specified description or all regulated activities;

2. (2)

   firms generally, or any firm within a specified class of firm.

Under section 56(4), an individual who carries out or agrees to carry out a function in breach of a prohibition order is guilty of an offence and liable, on summary conviction, to a fine not exceeding level 5 on the standard scale (section 37(1) of the Criminal Justice Act 1982 states that a level 5 fine shall not exceed £5000). In proceedings for an offence under section 56(4), it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing an offence.

Section 56(6) states that a firm must take reasonable care to ensure that no function which relates to the carrying on of a regulated activity is carried out by a person who is prohibited from carrying out that function by a prohibition order (see ENF 8.11.2 G).

Section 56(8) states that the FSA's power to make a prohibition order applies to the performance of functions in relation to regulated activities carried on by:

1. (1)

   a person who is an exempt person in relation to that activity; and

2. (2)

   a person to whom, as a result of Part XX of the Act (Provision of financial services by members of the professions), the general prohibition does not apply in relation to that activity (see ENF 8.7);

as it applies to the carrying out of functions in relation to a regulated activity carried on by a firm.

Under section 57(1) of the Act (Prohibition orders: procedure and right to refer to Tribunal), if the FSA proposes to make a prohibition order it must give the individual concerned a warning notice setting out the terms of the prohibition. The FSA's procedures for issuing warning notices in this area are the same as those set out in DEC 2.2 (Warning notice procedure).

Under section 57(3), if the FSA decides to make a prohibition order it must give the individual concerned a decision notice. The FSA's procedures in relation to decision notices in this area are the same as those set out in DEC 2.3 (Decision notice procedure).

An individual who receives a decision notice making a prohibition order may refer the matter to the Tribunal. Further information about referrals to the Tribunal is set out in DEC 5.1 (The Tribunal).