SUP 15.3 General notification requirements

The circumstances which may give rise to any of the events in SUP 15.3.1 R are wide-ranging and the probability of any matter resulting in such an outcome, and the severity of the outcome, may be difficult to determine. However, the FCA11 expects firms to consider properly all potential consequences of events.

In determining whether the FCA11 should be notified of35 an event that may occur in the foreseeable future, a firm should consider both the probability of the event happening and the severity of the outcome should it happen.

Guidance on satisfaction of the threshold conditions is given in COND.

A firm making a notification in accordance with SUP 15.3.1 R should consider the guidance in SUP 15.7.2 G and notify the FCA11 by telephone if appropriate.

Principle 11 requires a firm to deal with its regulators in an open and cooperative way and to disclose to the FCA11 appropriately anything relating to the firm of which the FCA11 would reasonably expect notice. Principle 11 applies to unregulated activities as well as regulated activities and takes into account the activities of other members of a group as well as any appointed representatives34.

10Although PRIN does not apply to a firm in relation to its carrying on of auction regulation bidding, the FCA35expects to be given notice of events that are material to the FCA's35supervision of that business and so firms carrying on that business should have regard to the guidance in SUP 15.3.8 G to SUP 15.3.10 G.

Compliance with Principle 11 includes, but is not limited to, giving the FCA11 notice of:

1. (1)

   any proposed restructuring, reorganisation or business expansion which could have a significant impact on the firm's risk profile or resources, including, but not limited to:

   1. (a)

      setting up a new undertaking within a firm's group, or a new branch (whether in the United Kingdom or overseas); or

   2. (b)

      commencing the provision of cross border services into a new territory; or

   3. (c)

      commencing the provision of a new type of product or service (whether in the United Kingdom or overseas); or

   4. (d)

      ceasing to undertake a regulated activity or ancillary activity, or significantly reducing the scope of such activities; or

   5. (e)

      entering into, or significantly changing, a material outsourcing arrangement (a bank, 1 a building society and a dormant asset fund operator33 should also see 22SYSC 833, and an insurer should also see SYSC 13.94 for further details); or

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   6. (f)

      a substantial change or a series of changes in the governing body of an overseas firm29; or

   7. (g)

      any change to the firm's prudential category or sub-category, as used in the Interim Prudential sourcebooks and SUP and on which guidance is given in SUP App 1; or2

   8. (h)

      any proposed change which limits the liability of any of the members or partners of a firm such as a general partner becoming a limited partner or re-registration as a limited liability company of a company incorporated with unlimited liability;2or7

   9. (i)

      in relation to a dormant asset fund operator33, notify the FCA11 when the operator intends to rely on a third party for the performance of operational functions which are critical or important for the performance of relevant services and activities in connection with operating a dormant asset fund33 on a continuous and satisfactory basis;7

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2. (2)

   any significant failure in the firm's systems or controls, including, but not limited to:34

   1. (a)

      those reported to the firm by the firm’s auditor;

   2. (b)

      those relating to the firm’s oversight of its appointed representatives;34

3. (3)

   any action which a firm proposes to take which would result in a material change in its capital adequacy or solvency, including, but not limited to:

   1. (a)

      any action which would result in a material change in the firm's financial resources or financial resources requirement; or

   2. (b)

      a material change resulting from the payment of a special or unusual dividend or the repayment of share capital or a subordinated loan; or

   3. (c)

      for firms which are subject to the rules on consolidated financial supervision, any proposal under which another group company may be considering such an action; or

   4. (d)

      significant trading or non-trading losses (whether recognised or unrecognised).

The period of notice given to the FCA11 will depend on the event, although the FCA11 expects a firm to discuss relevant matters with it at an early stage, before making any internal or external commitments.

A notification under Principle 11 may be given orally or in writing (as set out in SUP 15.7.1 R and SUP 15.7.2 G), although the FCA11 may request written confirmation of a matter. However, it is the responsibility of a firm to ensure that matters are properly and clearly communicated to the FCA.11 A firm should provide a written notification if a matter either is complex or may be such as to make it necessary for the FCA11 to take action. A firm should also have regard to Principle 11 and the guidance in SUP 15.7.2 G in respect of providing important information promptly.

6SUP 15.3.11 R (1)(e) relates to the standard requirement in the permission of those firms which fall outside MiFID because of the Treasury's implementation of Article 3 of MiFID. Guidance on how the Treasury has exercised the Article 3 exemption for the United Kingdom is given in Q48 and the following questions and answers in PERG 13.5 (Exemptions from MiFID).

In SUP 15.3.11 R(1)(a) or (1)(aa)18, significance should be determined having regard to potential financial losses to customers or to the firm, frequency of the breach, implications for the firm's systems and controls and if there were delays in identifying or rectifying the breach.

In assessing whether an event that may occur in the foreseeable future should be notified to the FCA11 a firm should consider the guidance in SUP 15.3.3 G.

A notification under SUP 15.3.11 R should include:

1. (1)

   information about any circumstances relevant to the breach or offence;

2. (2)

   identification of the rule or requirement or offence; and

3. (3)

   information about any steps which a firm or other person has taken or intends to take to rectify or remedy the breach or prevent any future potential occurrence.

1. (1)

   20Some matters that need to be notified under SUP 15.3.11R may also have to be notified under SUP 10A.14 or SUP 10C.1430 (Changes to an FCA-approved person's details).

2. (2)

   However, there is no need to make the same notification twice.

3. (3)

   Any notification required under both SUP 10C.14 and SUP 15.3.11R should be made in accordance with SUP 10C.14, which requires notification using Forms C or D.

4. (4)

   SUP 10C.14 only applies to SMCR firms28. SUP 10A.14 applies similar, but less extensive, obligations to firms that are not SMCR firms28. Paragraphs (2) and (3) apply to those notifications as well. Such notifications should however be made under SUP 10A.14.

1. (1)

   Some matters that need to be notified under SUP 15.3.11R may also have to be notified under SUP 15.11 (Notification of COCON breaches and disciplinary action).

2. (2)

   If the same thing has to be notified under SUP 15.11 and SUP 15.3.11R, a firm should make separate notifications under both. This is because:23

   1. (a)

      notification under SUP 15.11 is annual and notification under SUP 15.3.11R is immediate; and23

   2. (b)

      the details of what has to be notified under those requirements are different.23

A notification under SUP 15.3.15 R should include details of the matter and an estimate of the likely financial consequences, if any.

In determining whether a matter is significant, a firm should have regard to:

1. (1)

   the size of any monetary loss or potential monetary loss to itself or its customers (either in terms of a single incident or group of similar or related incidents);

2. (2)

   the risk of reputational loss to the firm; and

3. (3)

   whether the incident or a pattern of incidents reflects weaknesses in the firm's internal controls.

The notifications under SUP 15.3.17 R are required as the FCA11 needs to be aware of the types of fraudulent and irregular activity which are being attempted or undertaken, and to act, if necessary, to prevent effects on consumers or other firms. A notification under SUP 15.7.3 G should provide all relevant and significant details of the incident or suspected incident of which the firm is aware.

In addition, the firm may have suffered significant financial losses as a result of the incident, or may suffer reputational loss, and the FCA11 will wish to consider this and whether the incident suggests weaknesses in the firm's internal controls.

15Changes that the FCA would expect to be notified of under SUP 15.3.26 R include:

1. (1)

   an AIFM being appointed to manage another AIF;

2. (2)

   the appointment of a different depositary for an AIF the AIFM manages; and

3. (3)

   the appointment of any new senior personnel if the AIFM is not required to apply for the FCA's approval for that appointment under section 59 of the Act.

19A SEF manager or a RVECA manager29 should notify the FCA of the following changes in the following manner:

1. (1)

   for changes to senior personnel, by using the form in SUP 15 Annex 6B R; and

2. (2)

   for changes to the jurisdiction in which its SEF or RVECA29 is marketed or to market a new SEF or RVECA29, by using the form in SUP 15 Annex 6F G

21A notification under SUP 15.3.32R should include:

1. (1)

   information about any circumstances relevant to the infringement or possible infringement;

2. (2)

   identification of the relevant law; and

3. (3)

   information about any steps which the firm or other person has taken or intends to take to rectify or remedy the infringement or prevent any future potential occurrence.

21In determining whether a matter is significant, a firm should have regard to the actual or potential effect on competition, any customer detriment, and the duration of any infringement and implications for the firm's systems and controls.

1. (1)

   21Where a firm notifies the FCA under SUP 15.3.32R, the firm should not infer or assume that any lack of (or delay in) a response, objection or enforcement activity by the FCA or any other competition authority means that the agreement or conduct:

   1. (a)

      does not infringe competition law; or

   2. (b)

      is, or will be, immune from enforcement.

2. (2)

   Notification under SUP 15.3.32R is not sufficient to constitute an application for leniency or immunity from penalty in any subsequent investigation under Chapter 1 of the Competition Act 199829.