SUP 2.1 Application and purpose

PRIN 3 (Rules about application) specifies to whom, to what and where Principle 11 applies.

Achieving the regulatory objectives involves the FCA informing itself of developments in firms and in markets. The Act requires the FCA to monitor a firm's compliance with requirements imposed by or under the Act, or by any directly applicable Community regulation or decision made under MiFID or the UCITS Directive or the auction regulation4 (paragraph 6 (1) of Schedule 1). The Act also requires the FCA to take certain steps to cooperate with other relevant bodies and 3regulators (section 354A). For these purposes, the FCA needs to have access to a broad range of information about a firm's business.

The FCA receives the information in SUP 2.1.3 G through a variety of means, including notifications by firms (see SUP 15) and regular reporting by firms (see SUP 16). This chapter is concerned with the methods of information gathering that the FCA may use on its own initiative in the discharge of its functions under the Act. This chapter does not deal with the information gathering powers that the FCA has under the Unfair Terms Regulations. These are dealt with in UNFCOG2.1

Part XI of the Act (Information Gathering and Investigations) gives the FCA10 statutory powers, including:

1. (1)

   to require the provision of information (see sections 165 and 103 EG 32);

   31032310
2. (2)

   to require reports from skilled persons (see section 166 and SUP 5);

3. (3)

   to appoint investigators (see sections 167, 168 and 169 of the Act and EG 32); and

   2
4. (4)

   to apply for a warrant to enter premises (see section 176 of the Act and EG 42).

   2

The FCA prefers to discharge its functions by working in an open and cooperative relationship with firms. The FCA will look to obtain information in the context of that relationship unless it appears that obtaining information in that way will not achieve the necessary results, in which case it will use its statutory powers. The FCA has exercised its rule-making powers to make Principle 11 which requires that a firm must deal with its regulators in an open and cooperative way, and must disclose to the FCA appropriately anything relating to the firm of which the FCA would reasonably expect notice.

The FCA operates in the context of the Act and the general law. The purpose of SUP 2.2 is to explain how certain provisions of the Act and the general law are relevant to the FCA's methods of information gathering described in SUP 2.3 and SUP 2.4.

The purpose of SUP 2.3 is to amplify Principle 11 in the context of information gathering by the FCA on its own initiative in the discharge of its functions under the Act. SUP 2.3 therefore sets out, in guidance on Principle 11 and in rules, how the FCA expects firms to deal with the FCA in that context, including the steps that a firm should take with a view to ensuring that certain connected persons should also cooperate with the FCA.

The purpose of SUP 2.4 is to explain a particular method of information gathering used by the FCA, known as "mystery shopping". Information about how a firm sells financial products can be very difficult to obtain, and the purpose of this method is to obtain such information from individuals who approach a firm in the role of potential retail consumers on the FCA's initiative. The FCA may seek information about particular issues or the activities of individual firms by means of mystery shopping.