This chapter is relevant to an applicant for a Part IV permission, as if that applicant were a firm. Where the chapter refers to usualsupervisory contact, the applicant should read this as being the usual contact inCorporate Authorisation.1

A recognised body should see REC 3.3 for information on waivers of rules in REC under section 294 of the Act.

This chapter is not relevant to the functions of the UKLA, that is the FSA acting in its capacity as the competent authority for the purposes of Part VI of the Act (Official Listing).

This chapter explains how the regime for the waiver or modification of rules works.

Under section 148of the Act (Modification or waiver of rules), the FSA may, on the application or with the consent of a firm, direct that certain rules (see SUP 8.2.6 G to SUP 8.2.8 G):

1. (1)

   are not to apply to the firm; or

2. (2)

   are to apply to the firm with such modifications as may be specified.

The directions referred to in SUP 8.2.1 G (1) and SUP 8.2.1 G (2) are collectively referred to in the Handbook as waivers.

Section 250 of the Act and regulation 7 of the OEIC Regulations allow the FSA to waive the application of certain rules in COLL and CIS to:

1. (1)

   a person, as respects a particular AUT or ICVC, on the application or with the consent of that person; and

2. (2)

   an AUT or ICVC on the application or with the consent of the manager and trustee (in the case of an AUT) or the ICVC and its depositary (in the case of an ICVC).2

Those persons to whom section 250and regulation 7 of the OEIC Regulations are relevant, but who are not firms, should follow SUP 8 as if they were firms.

Section 250 of the Act and regulation 7 of the OEIC Regulations work by giving effect to section 148of the Act in respect of waivers given under section 250(2) and (3) and regulation 7(1) and (2) of the OEIC Regulations.

The rules which the FSA can waive are listed in section 148(1) and 250(1) of the Act and regulation 7 of the OEIC Regulations, and are set out in SUP 8.2.7 G.

Schedule 6 identifies those rules that can and cannot be waived.

Under section 148(4) of the Act, the FSA may not give a waiver unless it is satisfied that:

1. (1)

   compliance by the firm with the rules, or with the rules as unmodified, would be unduly burdensome, or would not achieve the purpose for which the rules were made; and

2. (2)

   the waiver would not result in undue risk to persons whose interests the rules are intended to protect.

Even if the conditions in section 148(4) of the Act are satisfied, the FSA will consider other relevant factors before giving a waiver, such as whether the waiver would be compatible with European law, including relevant EC Directives.2

The FSA is required by section 148(6) of the Act to publish a waiver unless it is satisfied that it is inappropriate or unnecessary to do so (see SUP 8.6).

1. (1)

   The FSA's preferred method of submission for waiver applications is by e-mail or by online submission at www.fsa.gov.uk.4

2. (2)

   The form is available on the FSA's website (see FSA/docs/sup/w_form.doc).3

Before sending in a waiver application, a firm may find it helpful to discuss the application with its usual supervisory contact at the FSA. However, the firm should still ensure that all relevant information is included in the application.

The FSA will acknowledge an application promptly and if necessary will seek further information from the firm. The time taken to determine an application will depend on the issues it raises. However, the FSA will aim to give waiver decisions within 20 business days of receiving an application which includes sufficient information. If the FSA expects to take longer, it will tell the firm and give an estimated decision date. A firm should make it clear in the application if it needs a decision within a specific time.

The FSA will treat a firm's application for a waiver as withdrawn if it does not hear from the firm within 20 business days of sending a communication which requests or requires a response from the firm. The FSA will not do this if the firm has made it clear to the FSA in some other way that it intends to pursue the application. 3

In some cases, the FSA may give a modification of a rule rather than direct that the rule is not to apply. The FSA may also impose conditions on a waiver, for example additional reporting requirements. A waiver may be given for a specified period of time only, after which time it will cease to apply. A firm wishing to extend the duration of a waiver should follow the procedure in SUP 8.3.3 D. A waiver will not apply retrospectively.

If the FSA decides not to give a waiver, it will give reasons for the decision.

A firm may withdraw its application at any time up to the giving of the waiver. In doing so, a firm should give the FSA its reasons for withdrawing the application.

If the FSA believes that a particular waiver given to a firm may have relevance to other firms, it may publish general details about the possible availability of the waiver. For example, IPRU(INV) 3-80(10)G explains that a firm that wishes to use its own internal model to calculate its position risk requirement (PRR) will need to apply for a waiver of the relevant rules.

Under section 148(2) of the Act the FSA may give a waiver with the consent of a firm. This power may be used by the FSA in exceptional circumstances where the FSA considers that a waiver should apply to a number of firms (for example, where a rule unmodified may not meet the particular circumstances of a particular category of firm). In such cases the FSA will inform the firms concerned that the waiver is available, either by contacting firms individually or by publishing details of the availability of the waiver on the FSA's website The firms concerned will not have to make a formal application but will have to give their written consent for the waiver to apply.

An application for a waiver of an evidential provision will normally be granted only if a breach of the underlying binding rule is actionable under section 150 of the Act. Individual guidance would normally be a more appropriate response (see SUP 9 (Individual Guidance)) if there is no right of action.2

An application for a waiver of the presumption of compliance created by an evidential provision would not normally be granted.2

For an application for a waiver of the presumption of contravention of a binding rule, which is actionable under section 150 of the Act, the FSA would normally wish to be satisfied that the evidential rule is itself unduly burdensome or does not achieve the purpose of the rule.2

In the case of an application for a waiver of a two-way evidential provision relating to an actionable binding rule, the policy in SUP 8.3.12 G would apply to the presumption of compliance and the policy in SUP 8.3.13 G would apply to the presumption of contravention. In other words, any modification is likely to be in relation to the second presumption only.2

If the FSA gives a firm a waiver, then the relevant rule no longer applies to the firm. But:

1. (1)

   if a waiver directs that a rule is to apply to a firm with modifications, then contravention of the modified rule could lead to FSA enforcement action and (if applicable) a right of action under section 150 of the Act (Actions for damages); and

2. (2)

   if a waiver is given subject to a condition, it will not apply to activities conducted in breach of the condition, and those activities, if in breach of the original rule, could lead to FSA enforcement action or such a right of action.

Substantive changes to the rules (this would not include simple editorial changes) in the Handbook may affect existing waivers, changing their practical effect and creating a need for a change to the original waiver. The FSA will consult on proposed rule changes. A firm should note proposed rule changes and discuss the impact on a waiver with its usual supervisory contact at the FSA.

Firms are also referred to SUP 15.6 (Inaccurate, false or misleading information). This requires, in SUP 15.6.4 R, a firm to notify the FSA if false, misleading, incomplete or inaccurate information has been provided. This would apply in relation to information provided in an application for a waiver.

The FSA is required by section 148(6) of the Act to publish a waiver unless it is satisfied that it is inappropriate or unnecessary to do so. If the FSA publishes a waiver, it will not publish details of why a waiver was required or any of the supporting information given in a waiver application.

When considering whether it is satisfied under section 148(6), the FSA is required by section 148(7) of the Act:

1. (1)

   to take into account whether the waiver relates to a rule contravention of which is actionable under section 150 of the Act (Actions for damages); Schedule 5 identifies such rules;

2. (2)

   to consider whether its publication would prejudice, to an unreasonable degree, the commercial interests of the firm concerned, or any other member of its immediate group; and

3. (3)

   to consider whether its publication would be contrary to an international obligation of the United Kingdom (for example, the confidentiality obligations in the Single Market Directives)

Waivers can affect the legal rights of third parties, including consumers. In the FSA's view it is important that the fact and effect of such waivers should be transparent. So the fact that a waiver relates to a rule that is actionable under section 150 of the Act (see SUP 8.6.2 G (1)) will tend to argue in favour of publication.

In making waiver applications under section 250 of the Act or regulation 7 of the OEIC Regulations, SUP 8.6.2 G (2) should be read in application to rules in COLL or CIS as if the word "commercial" were omitted.1

In considering whether commercial interests would be prejudiced to an unreasonable degree (see SUP 8.6.2 G (2)), the FSA will weigh the prejudice to firms' commercial interests against the interests of consumers, markets and other third parties in disclosure. In doing so the FSA will consider factors such as the extent to which publication of the waiver would involve the premature release of proprietary information to commercial rivals, for example relating to a product innovation, or reveal information which could reasonably be regarded as the firm's own intellectual property. In line with section 148(8) of the Act, the FSA will also consider whether prejudice to a firm's commercial interests could be avoided or mitigated by publication of the waiver without disclosing the identity of the firm.

The FSA may consider publication unnecessary where, for example, the waiver relates to a minor matter that does not affect any third party and is unlikely to be of relevance or interest to other firms.

If, after taking into account the matters in SUP 8.3.3 D to SUP 8.6.6 G, a firm believes there are good grounds for the FSA either to withhold publication or to publish the waiver without disclosing the identity of the firm, it should make this clear in its application (see SUP 8.3.3 D (7)). If the FSAproposes to publish a waiver against the wishes of the firm, the FSA will give the firm the opportunity to withdraw its application before the waiver is given.

A decision to withhold a waiver or identity of a firm from publication may be for a limited period only, usually as long as the duration of the relevant grounds for non-publication. If the FSA proposes to publish information about a waiver that had previously been withheld, it will first give the firm an opportunity to make representations.

The principal means of publication of waiver information will be the FSA's website (www.fsa.gov.uk).

Once the FSA has given a waiver, it may vary it with the firm's consent, or on the firm's application. If a firm wishes the FSA to vary a waiver, it should follow the procedures in SUP 8.3.3 D, giving reasons for the application. In a case where a waiver has been given to a number of firms (see SUP 8.3.10 G), if the FSAwishes to vary such waivers with the consent of those firms, it will follow the procedures in SUP 8.3.10 G.

If the waiver that has been varied has previously been published, the FSA will publish the variation unless it is satisfied that it is inappropriate or unnecessary to do so, having regard to any representation made by the firm.

The FSA may revoke a waiver at any time. In deciding whether to revoke a waiver, the FSA will consider whether the conditions in section 148(4) of the Act are no longer satisfied (see SUP 8.3.1 G), and whether the waiver is otherwise no longer appropriate. The FSA may revoke a waiver with immediate effect, if it considers that this is necessary, for example, in order to prevent undue risk to consumers.

If the FSA proposes to revoke a waiver, or revokes a waiver with immediate effect, it will:

1. (1)

   give the firm written notice either of its proposal, or of its action, giving reasons;

2. (2)

   state in the notice a reasonable period (usually 28 days) within which the firm can make representations about the proposal or action; if a firm wants to make oral representations, it should inform the FSA as quickly as possible , specify who will make the representations and which matters will be covered; the FSA will inform the firm of the time and place for hearing the representations and may request a written summary;

3. (3)

   after considering any representations, in the case of a proposed revocation, give the firm written confirmation of its decision to revoke the waiver or not; or, in the case of a revocation that has already taken effect, either confirm the revocation or seek the firm's consent to a new waiver.

If the waiver that has been revoked has previously been published, the FSA will publish the revocation unless it is satisfied that it is inappropriate or unnecessary to do so, having regard to any representations made by the firm.

The waivers regime is overseen by a staff committee. Its responsibility is to ensure that the giving of waivers is in accordance with the requirements of the Act, of the guidance in SUP 8 and of other relevant guidance. Decisions on individual applications are made under arrangements designed to result in rapid, responsive and well-informed decision making. The arrangements include arrangements for collective decision making to set general policies, and, as necessary, determine cases for applications with substantially common characteristics (for example, waivers in relation to the same rule or related rules or by firms in a similar position). It also includes arrangements for decision making by individuals within established precedents and policies.

1If the FSA, in the course of carrying on supplementary supervision of a financial conglomerate, is considering exercising its powers under section 148 of the Act (Modification or waiver of rules), regulation 4 of the Financial Groups Directive Regulations contains special provisions. The FSA must, in broad terms, do two things. Where required by those regulations, it must obtain the consent of the relevant competent authorities of the group. And, where required by those Regulations, it must consult those competent authorities.