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SIFA 5.1 Authorisation

SIFA 5.1.1G

The Authorisation manual (AUTH) sets out the background and provides guidance on how we authorise firms. All firms and individuals enter the regulatory environment through an authorisation or approval process. Our assessment at entry aims to allow only those firms and individuals satisfying the necessary criteria (including honesty, competence and financial soundness) to engage in regulated activity.

The authorisation / approval process: our duties

SIFA 5.1.2G

Our duties are to:

SIFA 5.1.3G

Table:

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Authorise firms that satisfy the necessary conditions (the threshold conditions) by granting permission to carry on specified regulated activities;

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Approve individuals to carry on controlled functions in firms as being fit and proper to carry out these functions;

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Answer technical enquiries about whether firms require authorisation or individuals require approval;

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Seek to ensure that investment business is not being carried out by unauthorised firms; and

•

Collect and maintain intelligence information about authorised firms and individuals.

Threshold conditions

SIFA 5.1.4G

Before granting Part IV permission (permission for a firm to carry on regulated activities under the Financial Services and Markets Act 2000 (the Act)) we must ensure that the applicant satisfies and will continue to satisfy the threshold conditions. These are as follows:

SIFA 5.1.5G

Threshold Conditions

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Legal status - can be a sole trader, partnership, limited liability partnership or a limited company.

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The head office and registered office must be in the UK if your firm is a body corporate formed in the UK.

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Close links with connected persons such as directors, controllers or partners must not impede FSA supervision.

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A firm must have adequate financial resources.

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Suitability - the applicant must be fit and proper.
SIFA 5.1.6G

The threshold conditions are set out in Schedule 6 of the Act. There is guidance on the conditions in COND. You are responsible for ensuring that you continue to meet the threshold conditions in order to retain your authorisation and scope of permission.

Scope of permission

SIFA 5.1.7G

Following a successful application, we will grant an applicant Part IV permission. The scope of your firm's permission is set out in a Scope of Permission Notice that defines the scope in terms of regulated activities together with any limitations on customer type or product and any other requirements or restrictions.

SIFA 5.1.8G

Table:

Typical investment business regulated activities for IFAs are:

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Arranging deals in investments.

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Making arrangements with a view to transactions in investments.

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Advising on investments.

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Advising on pension transfers and opt-outs.
SIFA 5.1.9G

Your permission will specify the regulated activities and the investments where you can do business with private customers. A permission may also include one or more limitations or requirements as explained in section 5.1.13 below.

SIFA 5.1.10G

You are responsible on a continuing basis for ensuring that your firm holds the correct permission that includes the investment business activities that you wish to carry out.

Which parts of the Handbook apply

SIFA 5.1.11G

Both the Authorisation and Supervision manuals are relevant.

SIFA 5.1.12G

In the Authorisation manual (AUTH) there is:

  1. (1)

    An overview of the sourcebook in AUTH chapter 1.

  2. (2)

    An explanation of the authorisation process and the permission regime in AUTH chapter 3. This includes the following sections:

SIFA 5.1.13G

Table:

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Permission to carry on regulated activities: AUTH 3.4

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Information on specified investments: AUTH 3.5

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Information on limitations: AUTH 3.6. An example of a limitation is where we limit the number of clients a firm can deal with during an initial period until its systems are proven.

•

How we may impose requirements: AUTH 3.7. For example, some firms have a requirement to submit independent compliance reviews or not to hold client money.
SIFA 5.1.14G

After Part IV permission has been granted, a firm can apply to vary or cancel that Part IV permission including any limitation or requirement, at any time. The procedures that need to be followed are set out in SUP chapter 6.

SIFA 5.1.15G

Chapter 15 of this Overview covers Variation and Cancellation of Permission.

Further information

SIFA 5.1.16G

The Application Pack and Guidance notes are available from our:

  1. (1)

    Publications Helpline or our Enquiries and Applications Department at a charge of £25.00 plus VAT; or

  2. (2)

    from our website. (We plan to produce enhanced guidance and a shorter version of the Application form to help smaller firms with their applications. This should be available for firms to use in the first quarter of 2004.)

SIFA 5.1.17G

When we grant an application for Part IV permission, we will update the FSA Register with the activities the firm has permission to carry on. You can access the Register on our website.

Further issues

SIFA 5.1.18G

There are the following further issues relating to authorisation:

  1. (1)

    The scope of your firm's permission affects the fees you pay us. Broadly, the wider the scope the higher the fees.

  2. (2)

    The scope of your permission may also affect the category of business into which your firm falls for financial resources purposes.

  3. (3)

    We consider the scope of a firm's permission when deciding which risk category the firm falls into. We monitor firms in a higher risk category more closely.

SIFA 5.1.19G

Table:

The following sections of this Overview are also relevant:

•'FSA supervision of small firms' - Chapter 6;

•'Approved persons' - Chapter 7;

•'Variation of permission' - Chapter 15.1;

•'Cancellation of permission' - Chapter 15.2; and

•'Fees' - Chapter 18.