This chapter applies to every firm with a Part IV permission which wishes to:

1. (1)

   vary its Part IV permission; or

2. (2)

   cancel its Part IV permission and end its authorisation.

If appropriate, a firm which is an authorised fund manager3 should also refer to COLL 7 for guidance on the termination of ICVCs and AUTs and on winding up authorised funds3that are not commercially viable.1

This chapter applies to an incoming firm or a UCITS qualifier only in respect of a top-up permission. An incoming firm or a UCITS qualifier should refer to SUP 14 (Variation of passport rights by incoming EEA firms and ending authorisation) for the procedures for changes to permission granted under Schedules 3, 4 or 5 of the Act.

This chapter explains:

1. (1)

   how a firm with Part IV permission can apply to the FSA to vary that permission;

2. (2)

   how a firm which has ceased to carry on any of the regulated activities for which it has Part IV permission, or which expects to do so in the short term (normally less than six months), should apply to the FSA to cancel that permission completely;

3. (3)

   the additional procedures that apply to a firm carrying on regulated activities which create long term obligations to customers (for example, effecting contracts of insurance, carrying out contracts of insurance or accepting deposits) that needs to wind down (run off) its business over a long term period (normally more than six months) and the applications it should make with a view to ultimately cancelling its permission; and

4. (4)

   how the FSA assesses those applications.

This chapter also outlines the FSA's powers to withdraw authorisation from a firm whose Part IV permission has been cancelled at the firm's request. It does not, however, cover the FSA's use of its own-initiative powers to vary or cancel a firm's Part IV permission (see SUP 7 (Individual requirements) and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)).2

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 (see PERG 2 Annex 2 (Regulated activities and the permission regime) and the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml3):

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 a dormant account fund operator,4 or, as is often the case, holding client money or customer assets.

If an insurer,4 a bank, or a dormant account fund operator4 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.

Under section 44 of the Act, a firm may apply to the FSA to vary its Part IV permission to:

1. (1)

   allow it to carry on further regulated activities; or

2. (2)

   reduce the number of regulated activities it is permitted to carry on; or

3. (3)

   vary the FSA's description of its regulated activities (including by the removal or variation of any limitations); or

4. (4)

   cancel any requirement applied for by the firm or imposed by the FSA under section 43 of the Act (Imposition of requirements); or

5. (5)

   vary any such requirement.

An application for variation of Part IV permission may include one or more of SUP 6.3.1 G(1)-(5). For example, a firm may apply to vary its Part IV permission to add a new regulated activity and at the same time remove a regulated activity for which it currently has permission.

In applying for a variation of Part IV permission, a branch of a firm from outside the EEA should be mindful of any continuing requirements referred to in the rest of the Handbook.10

In determining the activities and specified investments for which a Part IV permission is required, and whether to apply for a variation of that permission, a firm may need to take professional advice and may also wish to discuss this with its usual supervisory contact at the FSA.

Before applying to vary its permission, a firm should determine whether there are any statutory restrictions that do not allow combinations of certain types of regulated activity, particularly for insurance business or UCITS managers. For example, the FSA will not grant a variation of Part IV permission to allow a friendly society to carry on reinsurance business as this is not permitted under the Friendly Societies Acts 1974 and 1992.10 A firm should discuss its plans with its usual supervisory contact at the FSA.

If a firm is seeking a variation of Part IV permission to add categories of regulated activities, it should be mindful of the directive requirements referred to at SUP 6.3.42 G relating to the need to commence new activities within 12 months.

If a firm wishes to cease carrying on an activity for which it has Part IV permission, it will usually apply to vary its Part IV permission to remove that activity. If a firm wishes to cease carrying on an activity in relation to any specified investment, it will usually apply to vary its Part IV permission to remove that specified investment from the relevant activity.

1. (1)

   Where a firm is submitting an application for variation of Part IV permission which would lead to a change in the controlled functions of its approved persons, it should, at the same time and as appropriate:

   1. (a)

      make an application to the FSA for an internal transfer of an approved person, Form E (Internal transfer), or make an application to the FSA for an individual to perform additional controlled functions, the relevant11 Form A (Application); see

      SUP 10.13.3 D to SUP 10.13.5 G;

   2. (b)

      notify the FSA of any approved person who has ceased to perform a controlled function, Form C (Ceasing to perform controlled functions);

      see SUP 10.13.6 R to SUP 10.13.13 G.

2. (2)

   If the firm intends to recruit new individuals to perform controlled functions, it should apply to the FSA for approval of the individuals as approved persons as soon as possible using Form A (Application); see

   SUP 10.12.

A variation of Part IV permission may, in some cases, lead to a change in a firm's prudential category or sub-category (see SUP App 1). For example, an investment management firm which varies its Part IV permission to include accepting deposits and as a result meets the definition of a bank, would move to the prudential category for a bank (see SUP App 1.3.1 G).

Even if a variation of permission does not itself lead to a change in a firm's prudential category or sub-category, the FSA may use its own-initiative powers to require a firm to comply with a different category or sub-category of prudential rules where it considers this to be appropriate. For details of when and how the FSA may use its own-initiative powers in this context, see SUP 7.

A firm with Part IV permission to carry on insurance business, which is applying for a variation of its Part IV permission to add further insurance activities or specified investments, will be required to submit particular information on its existing activities as part of its application. This includes the scheme of operations which is required to be submitted as part of the application pack (for further details on the scheme of operations, see SUP App 2 (Insurers: scheme of operations)).

In applying to vary its Part IV permission to add categories of specified investments, in relation to insurance business, a firm carrying on insurance business will need to determine the classes of specified investments relating to effecting and carrying out contracts of insurance for which variation of Part IV permission will be necessary, having regard to whether certain classes of contract may qualify to be effected or carried out on an ancillary or supplementary basis (see SUP 3.12.6G to SUP 3.12.12G).

The application for variation of Part IV permission will need to provide information about the classes of contract of insurance for which variation of Part IV permission is requested and also those classes qualifying to be carried on, on an ancillary or supplementary basis. For example, an insurer applying to vary its permission to include class 10 (motor vehicle liability, other than carrier's liability) must satisfy the FSA that it will meet, and continue to meet, threshold condition 2A(Appointment of claims representatives). Firms should note that, although the FSA is able in principle to use its power to give Part IV permission for an applicant to carry on a regulated activity for which it did not originally apply, this is not possible under the Insurance Directives, which set out minimum information requirements for an application for authorisation including information on the specified investments the applicant proposes to deal in.10

1. (1)

   A firm carrying on insurance business which is seeking to cease such business in respect of one or more classes of specified investment, but which is not intending to cease all insurance business, should apply to vary its Part IV permission to remove the activity of effecting contracts of insurance in respect of those specified investments in relation to which it no longer wishes to carry on business. A firm intending to cease all insurance business should refer to SUP 6 Annex 4.

2. (2)

   If the application for variation of Part IV permission is granted by the FSA, the firm will have Part IV permission only to carry out contracts of insurance in respect of the specified investments in relation to which it no longer wishes to carry on business (see SUP 6 Annex 4). This will allow the firm to run off this aspect of its business. When the business in question has been run-off completely, the firm should then apply to vary its Part IV permission to remove the relevant classes of specified investment.

1. (1)

   Section 51(2) of the Act (Applications under this Part) requires that the application for variation of Part IV permission must contain a statement:

   1. (a)

      of the desired variation; and

   2. (b)

      of the regulated activity or regulated activities which the firm proposes to carry on if its permission is varied.

2. (2)

   The full form and content of the application for variation of Part IV permission is a matter for direction by the FSA, who will determine the additional information and documentation required on a case by case basis.

1. (1)

   [deleted]7

2. (2)

   A firm is advised to discuss its application with its usual supervisory contact at the FSA before submission, particularly if it is seeking a variation of permission within a short timescale. A firm is also advised to include as much detail as possible (including any additional information identified by its supervisors at this stage) with its application.7

The FSA, as soon as possible after receipt of an application, will advise the firm of any additional information which is required as part of its application (see SUP 6.3.23 G to SUP 6.3.27 G). The amount of information the FSA will require will vary depending on the scale of the variation in the context of the firm as a whole, and the nature, risk profile and complexity of the variation.

A firm which is making an application for variation of Part IV permission to wind down (run off) its business before applying for a cancellation of that permission (see SUP 6.2.9 G) should read SUP 6 Annex 4 for details of the additional procedures that apply.

In certain cases, FSA may consider that granting an application for variation of Part IV permission which includes adding further regulated activities or changing a requirement or limitation would cause a significant change in the firm's business or risk profile. In these circumstances, the FSA may require the firm to complete appropriate parts of the full application pack (see the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml10), as directed by the FSA. Applications for variation involving significant changes may be processed by the firm's usual supervisory contact at the FSA, in conjunction with the Permissions10 department. Examples of an application for variation of Part IV permission which may represent a significant change include, but are not limited to, an application:

1. (1)

   to carry on new regulated activities such as accepting deposits;

2. (2)

   to extend the insurance business of a firm which already has Part IV permission which includes carrying out or effecting contracts of insurance (or both), to new classes of specified investment; or

3. (3)

   to remove a requirement preventing a firm from holding or controlling client money; or

4. (4)

   which causes the firm to change prudential category by, for example, removing a requirement relating to prudential category (see SUP App 1).1

A firm that wishes to make a significant change to its business, or is unsure whether the changes it is proposing would be considered to be significant, should contact its usual supervisory contact at the FSA. The FSA will discuss with the firm whether it will be required to submit parts of the application pack and whether any reports from third parties may be required.1

1. (1)

   The FSA may ask for any information it reasonably requires before determining the application. The information required will be determined on a case by case basis, taking into account the FSA's existing knowledge of the firm and the variation requested. The FSA will advise the firm of the information required at an early stage in the application process.

2. (2)

   The nature of the information and documents requested will be related to the risks posed to the FSA's regulatory objectives by the regulated activities and any unregulated activities that the firm is seeking to carry on. This information will be proportional to the nature of the business which the firm intends to carry on or the risks posed by the firm.

1. (1)

   The information the FSA may require includes, but is not limited to, the examples given in SUP 6.3.25 G:

Specific information may also be required by the FSA on the activities the firm intends to cease, or cease carrying on in relation to any specified investments (see SUP 6 Annex 4).

When determining whether to grant an application, the FSA may request further information, including reports from third parties such as the firm's auditors, and may require meetings with, and visits to, the firm. The FSA may also require a statement from members of the firm's governing body confirming, to the best of their knowledge, the completeness and accuracy of the information supplied. The FSA may also discuss the application with other regulators , exchanges.

1. (1)

   The FSA is required by section 41(2) of the Act to ensure that a firm applying to vary its Part IV permission satisfies and will continue to satisfy the threshold conditions in relation to all the regulated activities for which the firm has or will have Part IV permission after the variation. However, the FSA's duty under the Act does not prevent it, having regard to that duty, from taking such steps as it considers necessary in relation to a particular firm, to meet any of its regulatory objectives.15 This may include granting a firm's application for variation of Part IV permission when it wishes to wind down (run off) its business activities and cease to carry on new business as a result of no longer being able to satisfy the threshold conditions.

   15
2. (2)

   In addition, the FSA may refuse the application if it appears that any of its regulatory objectives15 would be adversely affected if the application were to be granted and it is desirable in order to meet any of its regulatory objectives15 for the application to be refused.

   1515

In determining whether the firm satisfies and continues to satisfy the threshold conditions, the FSA will consider whether the firm is ready, willing and organised to comply with the regulatory requirements it will be subject to if the requested variation of Part IV permission is granted.

The FSA will also consider the specific requirements that apply to certain types of activity as these may not allow certain combinations of activity.

In considering whether to grant a firm's application to vary its Part IV permission, the FSA will also have regard, under section 49(1) of the Act (Persons connected with an applicant), to any person6 appearing to be, or likely to be, in a relationship with the firm which is relevant. The Financial Groups Directive Regulations make special consultation provisions where the FSA is exercising its functions under Part IV of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary supervision6.10 Broadly, where the FSA, in the course of carrying on supplementary supervision, is considering varying the Part IV permission of a person who is a member of a group which is a financial conglomerate, the consultation provisions in section 49(2) of the Act are disapplied. In their place, the regulations impose special obligations, linked to the Financial Groups Directive, to obtain the consent of the relevant competent authorities, to consult those authorities and to consult with the group itself.10

The FSA's power to vary a Part IV permission after it receives an application from a firm extends to including in the Part IV permission as varied any provision that could be included as though a fresh permission was being given in response to an application under section 40 of the Act (Application for permission). Under sections 42 (Giving permission) and 43 of the Act (Imposition of requirements), the FSA may:

1. (1)

   incorporate in the description of a regulated activity a limitation (for example, as to the circumstance in which a regulated activity may or may not be carried on); or

2. (2)

   specify a narrower or wider description of regulated activity than the firm applied for in the application for variation of Part IV permission (see SUP 3.9.29G(3) for restrictions on insurers); or

3. (3)

   require the firm not to take a specified action (for example, not to hold client money); or

4. (4)

   require the firm to take a specified action (for example, to submit financial returns more frequently than normal).

Thus, when determining an application for variation of Part IV permission, the FSA can, therefore:

1. (1)

   include new limitations and vary existing limitations, either on application from the firm (for example, the customer categories with which a firm may carry on a specified activity), or if considered appropriate by the FSA under section 42(7)(a) of the Act; or

2. (2)

   include any new requirements and vary existing requirements, either on application from the firm or where considered appropriate by the FSA under section 43 of the Act to ensure that the firm satisfies and continues to satisfy the threshold conditions.

If limitations or requirements are varied or imposed by the FSA which were not included in the firm's application for variation of Part IV permission, the FSA will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

Under section 52(1) of the Act (Determination of applications), the FSA has six months to consider a completed application from the date of receipt.

If the FSA receives an application which is incomplete (that is, if information or a document required as part of the application is not provided), section 52(2) of the Act requires the FSA to determine that incomplete application within 12 months of the initial receipt of the application.

Within these time limits, however, the length of the process will relate directly to the complexity of the variation requested. The FSA publishes standard response times on its website at www.fsa.gov.uk setting out how long the application process is expected to take in practice. From time to time, the FSA also publishes its performance against these times.

At any time after receiving an application and before determining it, the FSA may require the applicant to provide additional information or documents. The circumstances of each application will dictate what additional information or procedures are appropriate.

A decision to grant an application for variation of Part IV permission, as applied for, will be taken by appropriately experienced FSA staff. However, if the FSA staff dealing with the application recommend that a firm's application for variation of Part IV permission be either refused or granted subject to limitations or requirements or a narrower description of regulated activities than applied for, the decision will be taken by either the RDC or executive procedures.

DEPP 9gives guidance on the FSA's decision making procedures including the procedures it will follow if it proposes to refuse an application for variation of Part IV permission either in whole or in part (for example, an application granted by the FSA but subject to limitations or requirements not applied for).

If the variation of Part IV permission is given, the FSA will expect a firm to commence a new regulated activity in accordance with its business plan (revised as necessary to take account of changes during the application process) or scheme of operations for an insurer. Firms should take this into consideration when determining when to make an application to the FSA.

1. (1)

   Firms should be aware that the FSA may exercise its own-initiative power to vary or cancel their Part IV permission if they do not (see EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms))9:

   1. (a)

      commence a regulated activity for which they have Part IV permission within a period of at least 12 months from the date of being given; or

   2. (b)

      carry on a regulated activity for which they have Part IV permission for a period of at least 12 months (irrespective of the date of grant).

2. (1A)

   13The FSA may exercise its own-initiative power to cancel an investment firm'sPart IV permission if the investment firm has provided or performed no investment services and activities at any time during the period of six months ending with the day on which the warning notice under section 54(1) of the Act is given (see EG 8).9

   [Note: article 8(a) of MiFID]

3. (2)

   If the FSA considers that such a variation or cancellation of the firm'sPart IV permission is appropriate, it will discuss the proposed action with the firm and its reasons for not commencing or carrying on the regulated activities concerned.

When a firm commences new regulated activities following a variation of a Part IV permission, it should have particular regard to the requirements of Principle 11 (Relations with regulators) (see SUP 15.3.8 G (1)(c)).

Under section 44(2) of the Act (Variation etc. at request of authorised person), if an authorised person with a Part IV permission applies to the FSA, the FSA may cancel that permission. Cancellation applies to a firm's entire Part IV permission, that is to every activity and every specified investment and not to the individual elements such as specified investments. Changes to the individual elements of a permission would require a variation.

Under section 44(3) of the Act, the FSA may refuse an application from a firm to cancel its Part IV permission if it appears that it is desirable for the application to be refused in order to meet any of the FSA'sregulatory objectives.10

1. (1)

   [deleted]10

   10
2. (2)

   [deleted]10

   10

1. (1)

   A firm may apply to the FSA to cancel its Part IV permission before it has ceased carrying on all regulated activities. However, where a firm makes a formal application for cancellation of its permission when it has not yet ceased carrying on regulated activities, the FSA will expect the firm:

   1. (a)

      to cease those regulated activities within the short term (normally no more than six months from the date of application for cancellation); and

   2. (b)

      to have formal plans to cease its regulated activities in an orderly manner.

2. (2)

   Firms should note, however, that the FSA will not grant an application for cancellation of Part IV permission until the firm can demonstrate that it has ceased carrying on all regulated activities (SUP 6.4.19 G).

3. (3)

   The FSA may apply additional procedures or require additional information, as if the firm had entered into a long term wind down of business (see SUP 6 Annex 4), if it considers it appropriate to the circumstances of the firm.

Additional guidance for a firm carrying on insurance business, accepting deposits, operating a dormant account fund8 or which holds client money or customer's assets is given in SUP 6 Annex 4. As noted in SUP 6.2.9 G, it will usually be appropriate for a firm to apply for variation of its Part IV permission while winding down (running off) its regulated activities and before applying to cancel its Part IV permission.

1. (1)

   In addition to applying for cancellation of Part IV permission in accordance with SUP 6.4.5 D, a firm may discuss prospective cancellations with its usual supervisory contact at the FSA.4 Alternatively a firm can contact the Firms Contact Centre on 0845 606 9966.

   4
2. (2)

   To contact the Cancellations Team: Cancellations4 Team:

   4
   1. (a)

      write to: Cancellations Team, The Financial ServicesAuthority, 25 The North Colonnade, Canary Wharf, London, E14 5HS; or

   2. (b)

      email cancellation.team@fsa.gov.uk

3. (3)

   If a firm which has applied for cancellation decides to remain authorised it should inform the FSA immediately using one of the methods in SUP 6.4.6 G (2).

When an 4application is received4, the FSA4 will send the firm a written acknowledgement. The firm will be required to provide information which, in the opinion of the FSA, is necessary for it to determine whether to grant or refuse the application for cancellation of Part IV permission. The Cancellations4Team will work with the firm's usual supervisory contact at the FSA during this process.

The information which the FSA may request on the circumstances of the application for cancellation and the confirmations which the FSA may require a firm to provide will differ according to the nature of the firm and the activities it has Part IV permission to carry on.

A firm will be expected to demonstrate to the FSA that it has ceased carrying on regulated activities. The FSA may require, as part of the application, a report from the firm that includes, but is not limited to, the confirmations referred to in SUP 6.4.12 G (as appropriate to the firm's business). The FSA may also require additional information to be submitted with the report including, in some cases, confirmation or verification from a professional adviser on certain matters to supplement the report (see SUP 6.4.15 G).

1. (1)

   If a firm is subject to the complaints rules in DISP, the FSA may request confirmation from the firm that there are no unresolved, unsatisfied or undischarged complaints against the firm from a customer of the firm.

2. (2)

   If there are unresolved or undischarged complaints against a firm from a customer of the firm, the FSA may request confirmation, as appropriate, of the steps (if any) which have been taken under the firm's complaints procedures and the amount of compensation claimed. The FSA may also request an explanation of the arrangements made for the future consideration of such complaints.

If the firm is carrying on designated investment business with retail clients7, the FSA may request confirmation that the firm has written, or intends to write, to all retail clients7with, or for whom, the firm has conducted regulated activities within a certain period.

The FSA will usually require the report in SUP 6.4.9 G to be signed by a director or other officer with authority to bind the firm. It may include confirmations from the firm that, in relation to business carried on under its Part IV permission, it has:

1. (1)

   ceased carrying on all regulated activities;

2. (2)

   properly disbursed funds in its client bank accounts and closed those accounts;

3. (3)

   discharged all insurance or deposit liabilities; and

4. (4)

   properly transferred all investments, title documents and other property that it held on behalf of clients.

The FSA may also require a resolution from the firm's governing body, for example to support the application for cancellation of permission, expressed to be irrevocable, and to give the signatory the authority to sign the formal report to the FSA.

Under section 397 of the Act (Misleading statements and practices), it is an offence, in purported compliance with a requirement imposed by or under the Act (including the directions in SUP 6.4.5 D), for a person to knowingly or recklessly give the FSA information that is false or misleading. If necessary, a firm should take appropriate professional advice when supplying information required by the FSA. An insurer, for example, may ask an actuary to check assumptions in respect of future claims made under contracts of insurance.

The FSA may require additional information, including professional advice, to supplement or support the report in SUP 6.4.9 G where it considers this appropriate. Examples of reports that may be requested by the FSA include, but are not limited to those detailed in SUP 6.4.16 G.

If a firm is transferring its business, the FSA may require a professional opinion in respect of certain aspects of the transfer. For example, the FSA may require a legal opinion on the validity of arrangements to transfer regulated activities, client money, client deposits, custody assets or any other property belonging to clients, to another authorised person. Alternatively, an auditor or reporting accountant may be requested to verify that a transfer has been properly accounted for in the firm's books and records. Transfers of insurance and banking business are subject to statutory requirements (see SUP 18).

A firm which is applying for cancellation of Part IV permission and which is not otherwise authorised by, or under, the Act should, at the same time, comply with SUP 10.13.6 R and notify the FSA of persons ceasing to perform controlled functions. These forms should give the effective date of withdrawal, if known (see SUP 10 (Approved persons)).

The FSA will usually not cancel a firm's Part IV permission until the firm can demonstrate that, in relation to business carried on under that permission, it has, as appropriate:

1. (1)

   ceased carrying on regulated activities or fully run off or transferred all insurance liabilities;

2. (2)

   repaid all client money and client deposits;

3. (3)

   discharged custody assets and any other property belonging to clients; and

4. (4)

   discharged, satisfied or resolved complaints against the firm.

If it is not possible for a firm to demonstrate a relevant matter referred to in SUP 6.4.19 G, for example, depositors are uncontactable, the firm will be expected to have satisfied the FSA that it has made adequate provisions for discharging any liabilities to clients which do not involve the firm carrying on regulated activities.

Before the FSA cancels a firm'sPart IV permission, the firm will be expected to be able to demonstrate that it has ceased or transferred all regulated activities under that permission. For example, the firm may be asked to provide evidence that a transfer of business (including, where relevant, any client money, customer assets or deposits or insurance liabilities) is complete. As noted in SUP 6.4.9 G, the FSA may require the firm to confirm this by providing a report, in a form specified by the FSA:

1. (1)

   as part of the application for cancellation of permission, if the firm has ceased carrying on all regulated activities under its Part IV permission at the time of application (see SUP 6.4.9 G); or

2. (2)

   after the application but before its determination, if the firm has not ceased carrying on regulated activities under its Part IV permission at the time of application.

In deciding whether to cancel a firm'sPart IV permission, the FSA will take into account all relevant factors in relation to business carried on under that permission, including whether:

1. (1)

   there are unresolved, unsatisfied or undischarged complaints against the firm from any of its customers;

2. (2)

   the firm has complied with CASS 4.3.99 R,5CASS 5.5.80 R and CASS 7.2.15 R5 (Client money: discharge of fiduciary duty) and CASS 4.3.104 R and CASS 7.2.19 R5(Client money: allocated but unclaimed client money) if it has ceased to hold client money; these rules apply to both repayment and transfer to a third party;1

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3. (3)

   the firm has ceased to hold or control custody assets in accordance with instructions received from clients (including instructions set out in an agreement entered into in accordance with CASS 2.3.2 R (Custody: client agreement)) and COBS 6.1.7 R7 (Information concerning safeguarding of designated investments belonging to clients and client money)5;

4. (4)

   the firm has repaid all client deposits, if it is ceasing to carry on regulated activities including accepting deposits;

5. (5)

   the FSA or another regulator has commenced an investigation against the firm or continuing enforcement action against the firm;

6. (6)

   there are any matters affecting the firm which should be investigated before a decision on whether the firm should have its Part IV permission cancelled by the FSA or be disciplined;

7. (7)

   the firm has unsettled or unexpired liabilities to consumers, for example, outstanding contracts (such as deposits or insurance liabilities);

8. (8)

   the firm has settled all its debts to the FSA; and

9. (9)

   the factors set out in SUP 6.4.19 G apply.

If the FSA has granted an application for cancellation of Part IV permission and withdrawn a firm's status as an authorised person (see SUP 6.5) it will retain certain investigative and enforcement powers in relation to the firm as a former authorised person. These include:

1. (1)

   information gathering and investigation powers in Part XI of the Act (Investigation gathering and investigations) (seeEG 3 (Use of information gathering and investigation powers)6);

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2. (2)

   powers to apply to court for injunctions and restitution orders in Part XXV of the Act (Injunctions and restitution) (seeEG 106 (Injunctions) and EG 116 (Restitution and redress));

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3. (3)

   powers in Part XXIV of the Act (Insolvency) to petition for administration orders or winding up orders against companies or insolvent partnerships, or bankruptcy orders (or in Scotland sequestration awards) against individuals (see EG 13 (Insolvency)6);

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4. (4)

   powers in Part XXVII of the Act (Offences) to prosecute offences under the Act and other specified provisions (see EG 126 (Prosecution of criminal offences)).

   6

However, the FSA will not be able to use the following powers against former authorised persons:

1. (1)

   powers to take disciplinary action against firms by publishing statements of misconduct under section 205 of the Act (Public censure) or imposing financial penalties under section 206(1) of the Act (Financial penalties); and

2. (2)

   the power to require firms to make restitution under section 384 of the Act (Power of the FSA to require restitution).

Consequently, the FSA considers that it will have good reason not to grant a firm's application for cancellation of permission where:

1. (1)

   it proposes to exercise any of the powers described in SUP 6.4.24 G; or

2. (2)

   it has already begun disciplinary and restitution proceedings against the firm by exercising either or both of these powers against the firm.

TheFSA's use of those powers is outlined in DEPP 6 (Penalties)6.

1. (1)

   Under section 52(1)of the Act (Determination of applications), the FSA has six months to consider a completed application.

2. (2)

   If the FSA receives an application which is incomplete, that is, where information or a document required as part of the application is not provided, section 52(2) of the Act requires the FSA to determine the incomplete application within 12 months of the initial receipt of the application.

3. (3)

   Within these time limits, however, the length of the process will relate directly to the complexity of variation requested and whether the firm has fully wound down (run off) its activities at the time it applies. The FSA publishes standard response times on its website setting out how long the application process is expected to take in practice. From time to time, the FSA also publishes its performance against these times.

A decision to grant an application for cancellation of permission will be taken by appropriately experienced FSA staff. Where, however, the FSA staff dealing with the application recommend that a firm's application for cancellation of Part IV permission be refused, the decision will be taken by the RDC if the applicant makes representations to the FSA. If there are no representations, the decision will be made under executive procedures.3

See DEPP6 for guidance on the FSA's decision making procedures, including the procedures it will follow if it proposes to refuse an application for cancellation of Part IV permission.

Under section 33(2) of the Act (Withdrawal of authorisation by the FSA), if the FSA cancels a firm's Part IV permission, and as a result there is no regulated activity for which the firm has permission, the FSA is required to give a direction withdrawing the firm's status as an authorised person.

If the FSA concludes that it should grant a firm's application for cancellation of permission and end its authorisation, the FSA will:

1. (1)

   cancel the firm's Part IV permission under section 44(2) of the Act;

2. (2)

   withdraw the firm's authorised status under section 33(2) of the Act by giving the firm a direction in writing; and

3. (3)

   update the firm's entry in the FSA register to show it has ceased to be authorised.