SUP 6.2 Introduction

A firm authorised under Part IV of the Act (Permission to carry on regulated activity) has a single Part IV permission granted by the FSA. A firm's Part IV permission specifies all or some of the following elements (as detailed in AUTH 3.3.3 G (When is Part IV permission required and what does it contain?)):

1. (1)

   a description of the activities the firm may carry on, including any limitations;

2. (2)

   the specified investments involved; and

3. (3)

   if appropriate, requirements.

Under section 20(1) of the Act (Authorised persons acting without permission), a firm is prohibited from carrying on a regulated activity in the United Kingdom (or purporting to do so) otherwise than in accordance with its permission.

If a firm wishes to change its Part IV permission, it can apply to the FSA under section 44 of the Act (Variation etc. at request of authorised person) for a variation or cancellation of its Part IV permission. SUP 6.2.5 G sets out the differences between these types of application and the circumstances in which they should be made and SUP 6 Annex 1 gives an overview of the considerations in these cases.

A firm intending to expand its business should assess, taking appropriate professional advice where necessary, whether it will need to apply to the FSA to vary its Part IV permission before making any changes to its business.

1If a firm intends to transfer its business to a different legal entity (for example, the business is to be transferred from a sole trader to a partnership or the other way around) it will need to apply to the FSA for cancellation of its Part IV permission and the entity to which the business is to be transferred will need to apply for a Part IV permission.

A firm which is seeking to:

1. (1)

   vary its Part IV permission substantially; or

2. (2)

   cancel its Part IV permission;

should discuss its plans with its usual supervisory contact at the FSA as early as possible before making an application, in order to comply with Principle 11 (see SUP 15.3.7 G (Notifications to the FSA)). These discussions will help the FSA and the firm to agree the correct approach for the firm.

If a firm intends to cease carrying on one or more regulated activities permanently, it should give prompt notice to the FSA to comply with Principle 11 (see SUP 15.3.8 G (1)(d)). A firm should consider whether it needs to notify the FSA before applying to vary or cancel its Part IV permission.

Discussions with the FSA are particularly relevant where the firm has to discharge obligations to its customers or policyholders before it can cease carrying on a regulated activity. This may be the case, for example, where the firm is an insurer, a bank or, as is often the case, holding client money or customer assets.

If an insureror a bank wishes to cease carrying on all regulated activities for which it has Part IV permission, it will usually be necessary to wind down the business over a long term period which is normally more than six months. This may also be the case for a firm holding client money or customer assets. In these circumstances, it will usually be appropriate for the firm to apply for variation of its Part IV permission before commencing the wind-down. A firm should only make an application for cancellation of permission when it expects to complete its wind-down (run-off) within six months.

A firm which is winding down (running off) its activities should contact its usual supervisory contact at the FSA to discuss its circumstances. The FSA will discuss the firm's winding down plans and the need for the firm to vary or cancel its Part IV permission. Following these discussions, an application for variation or cancellation of Part IV permission, as appropriate, should usually be made by the firm, although, in certain circumstances, the FSA may use its own-initiative powers under section 45 of the Act (Variation etc. on the FSA's own initiative) (see SUP 7 and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)).2

1. (1)

   Specific guidance on the additional procedures for a firm winding down (running off) its business in the circumstances discussed in SUP 6.2.8 G is in SUP 6 Annex 4.

2. (2)

   The guidance in SUP 6 Annex 4 applies to any firm that is applying for variation of Part IV permission before it applies for cancellation of Part IV permission to enable it to wind down (run off) its business over a long term period of six months of more. It will apply to most insurers and banks and, in some circumstances,as advised by the FSA, to firms holding client money or customer assets.

3. (3)

   If a firm wishes to cease carrying on some of its regulated activities, or the specified investments in respect of which the activities are carried on, the FSA may consider it appropriate for the firm to comply with the additional procedures in SUP 6 Annex 4. This would depend on the scale and nature of the regulated activities concerned. This might be the case, for example, if the firm is ceasing a significant part of its business in respect of which it has outstanding obligations to customers and the FSA believes that the additional procedures would protect consumers.

A UK firm should assess the effect of any change to its Part IV permission on its ability to continue to exercise any EEA right or Treaty right and discuss any concerns with its usual supervisory contact at the FSA. A variation of Part IV permission may also change the applicable provisions with which it is required to comply by a Host State.

A UK firm which, as well as applying to vary or cancel its Part IV permission, wishes to vary or terminate any business which it is carrying on in another EEA State under one of the Single Market Directives, should follow the procedures in SUP 13 (Exercise of passport rights by UK firms) on varying or terminating its branch or cross border services business.

A firm making an application to vary or cancel its Part IV permission which requires any approval from the Society of Lloyd's should apply to the Society for this at the same time as applying to the FSA for the variation or cancellation. See SUP 6 Annex 4 for additional procedures.