The directions in this chapter are given under section 318 of the Act (Exercise of powers through Council), for the purpose of achieving the objective specified, as required by section 318(2) of the Act, in LLD 2.2.1 D.
The directions and guidance in this chapter are given in relation to the exercise of the powers of the Society and of the Council generally, with a view to achieving the objective of enabling the FSA to:
comply with its general duty under section 314 of the Act (Authority's general duty);
determine whether underwriting agents, or approved persons acting for them or on their behalf, are complying with the requirements imposed on them by or under the Act;
enforce the provisions of the Act, or requirements made under the Act, by enabling the FSA to consider, where appropriate, whether it should use its powers, for example, to:
vary or cancel the permission of an underwriting agent, under section 45 of the Act (Variation etc on the Authority's own initiative);
withdraw approval from an approved person acting for or on behalf of an underwriting agent, under section 63 of the Act (Withdrawal of approval) (see ENF 7);
prohibit an individual acting for or on behalf of an underwriting agent from involvement in regulated activities, under section 56 of the Act (Prohibition orders) (see ENF 8);
require an underwriting agent to make restitution, under section 384 of the Act (Power of Authority to require restitution) (see ENF 9);
discipline an underwriting agent, or an approved person acting for it or on its behalf, for a breach of a requirement made under the Act, including the Principles, Statements of Principle and rules (see ENF 11, ENF 12 and ENF 13);
apply to court for an injunction, restitution order or insolvency order (see ENF 6, ENF 9 and ENF 10); and
prosecute any criminal offence that the FSA has power to prosecute under the Act (see ENF 15).
The Society must immediately inform the FSA in writing if it becomes aware that any matter likely to be of material concern to the FSA may have arisen in relation to:
the regulated activities for which the Society has permission; or
approved persons or individuals acting for or on behalf of underwriting agents.
LLD 2.3.1 D is designed to enable the FSA to fulfil its monitoring and enforcement obligations under paragraph 6 of Schedule 1 to the Act (The Financial Services Authority), whilst at the same time recognising the Society's powers and responsibilities for supervising and regulating the market.
In view of the Society's responsibilities for the Society's regulatory functions, the FSA's monitoring of underwriting agents, and approved persons acting for them or on their behalf, may be less intensive than its monitoring of firms and approved persons outside the Lloyd's market. The purpose of LLD 2.3.1 D is to ensure that the Society informs the FSA when it becomes aware, as a result of carrying out the Society's regulatory functions, of matters likely to be of material concern to the FSA.
Matters likely to be of material concern to the FSA include but are not limited to:
facts suggesting that an underwriting agent may no longer satisfy the threshold conditions in relation to a regulated activity for which it has a Part IV permission;
facts suggesting that an underwriting agent may have contravened, is contravening, or is likely to contravene, a requirement imposed on it by or under the Act;
facts suggesting that the interests of consumers are or may be at risk;
facts suggesting that an approved person acting for or on behalf of an underwriting agent may not be fit and proper to carry out the functions to which the approval relates;
facts suggesting that an approved person, or individual acting for or on behalf of an underwriting agent, may not be fit and proper to perform functions in relation to a regulated activity carried on by a firm or exempt person;
facts suggesting that an approved person acting for or on behalf of an underwriting agent may have failed to comply with a Statement of Principle, or may have been concerned in the contravention by an underwriting agent of a requirement imposed on it by or under the Act; and
facts suggesting that a person may have committed a criminal offence that the FSA has power to prosecute under the Act and that came to the Society's notice in the course of its regulated activities or the Society's regulatory functions.
The Society must inform the FSA if it commences investigations or disciplinary proceedings relating to apparent breaches:
of the Act or requirements made under the Act, including the threshold conditions or the Principles or other rules, by an underwriting agent; or
of the Statements of Principle by an individual or other person who carries out controlled functions for or on behalf of an underwriting agent.
The Society must inform the FSA if it commences investigations or disciplinary proceedings which do not fall within the scope of LLD 2.4.1 D but which:
involve an underwriting agent, or an approved person who carries out controlled functions for it or on its behalf; or
may indicate that an individual acting for or on behalf of an underwriting agent may not be a fit and proper person to perform functions in relation to regulated activities.
The information provided under LLD 2.4.1 D and LLD 2.4.2 D should include information about any:
commencement of an inquiry under Lloyd's Inquiries and Investigations Byelaw (No 3 of 1983);
issue of proceedings under Lloyd's Issue of Proceedings by Council Byelaw (No 18 of 1983);
administrative suspension under Lloyd's Administrative Suspension Byelaw (No 7 of 1987);
making of a review order under Lloyd's Review Powers Byelaw (No 5 of 1986);
imposition of penalties under Lloyd's Misconduct and Penalties Byelaw (No 30 of 1996);
directions given under Lloyd's Suspension: Supplementary and Consequential Matters Byelaw (No 19 of 1983);
institution of disciplinary proceedings, settlement of disciplinary proceedings, or decisions of a Disciplinary Tribunal under Lloyd's Disciplinary Committees Byelaw (No 31 of 1996); and
restitution ordered under Lloyd's Restitution Orders Byelaw (No 24 of 2000).
At the end of each calendar month, the Society should report to the FSA on the progress of all investigations and disciplinary proceedings previously reported under LLD 2.4.1 D and LLD 2.4.2 D that are still in progress or which ceased during that month.
The Society should send the FSA the information under LLD 2.4.1 D, LLD 2.4.2 D and LLD 2.4.5 G within five business days of the end of each calendar month.
LLD 2.5.2 G sets out the FSA's policy regarding notification to the Society when the FSA investigates or takes action in relation to an underwriting agent, an approved person who carries out controlled functions for or on behalf of an underwriting agent, or an individual acting for or on behalf of an underwriting agent.
Subject to the restrictions on disclosure or use of confidential information in or under sections 348 (Restrictions on disclosure of confidential information by Authority etc) and 349 (Exceptions from section 348) of the Act, any restrictions on disclosure or use that apply under European or common law, and any special circumstances of an individual case, the FSA will notify the Society when the FSA does any of the following:
requires, or authorises an officer to require, an underwriting agent to provide specified information or documents under section 165 of the Act (Authority's power to require information); or
requires an underwriting agent to provide a report by a skilled person under section 166 of the Act (Reports by skilled persons); or
appoints an investigator to carry out an investigation under any of sections 167 to 169 of the Act (Appointment of persons to carry out general investigations, Appointment of persons to carry out investigations in particular cases, Investigations etc in support of overseas regulator) where the subject of the investigation is an underwriting agent or an approved person acting for or on behalf of an underwriting agent; or
executes a warrant to search for and to seize documents where the subject of the investigation is an underwriting agent or an approved person acting for or on behalf of an underwriting agent; or
issues a supervisory notice, a warning notice, a decision notice, a notice of discontinuance or a final notice in relation to the following administrative enforcement action against an underwriting agent:
variation or cancellation of permission on the FSA's own initiative under sections 45 to 47 of the Act (Variation etc at request of authorised person, Variation of permission on acquisition of control, Exercise of power in support of overseas regulator); or
restitution required by the FSA under section 384 of the Act (Power of Authority to require restitution); or
disciplinary action under sections 205 and 206 of the Act (Public censure, Financial penalties); or
issues a warning notice, a decision notice, a notice of discontinuance or a final notice in relation to the following administrative enforcement action against an approved person acting for or on behalf of an underwriting agent:
withdrawal of approval under section 63 of the Act (Withdrawal of approval); or
prohibition from regulated activities under section 56 of the Act (Prohibition orders); or
disciplinary action under section 66 of the Act (Disciplinary powers); or
issues a warning notice, a decision notice, a notice of discontinuance or a final notice in relation to the prohibition from regulated activities under section 56 of the Act (Prohibition orders) of an individual acting for or on behalf of an underwriting agent; or
applies to the court for an injunction under section 380 (Injunctions) or restitution order under section 382 (Restitution orders) of the Act in relation to an underwriting agent or an approved person acting for or on behalf of an underwriting agent, or for an administration order, winding up order or bankruptcy order against an underwriting agent under Part XXIV of the Act (Insolvency); or
commences a criminal prosecution against an underwriting agent or approved person acting for or on behalf of an underwriting agent.
ENF 11 gives further guidance on the policy and procedures which apply in circumstances where both the FSA and other regulatory authorities have an interest in investigating or disciplining a firm, individual or other person. The FSA and the Society have agreed to have enforcement co-operation arrangements to assist them when they are considering cases of regulatory concern or misconduct of mutual interest.
