Related provisions for SUP 11.7.1
41 - 60 of 389 items.
(1) 1This chapter applies to an EEA firm that wishes to exercise an entitlement to establish a branch in, or provide cross border services into, the United Kingdom under a Single Market Directive. (The Act refers to such an entitlement as an EEA right and its exercise is referred to in the Handbook as "passporting".) (See SUP App 3 (Guidance on passporting issues) for further guidance on passporting.)(2) This chapter also applies to:(a) a Treaty firm that wishes to exercise rights
This chapter does not apply to:(1) an EEA firm that wishes to carry on in the United Kingdom activities which are outside the scope of its EEA right and the scope of a permission granted under Schedule 4 to the Act; in this case the EEA firm requires a "top-up permission" under Part IV of the Act (see the FSA website "How do I get authorised":http://www.fsa.gov.uk/Pages/Doing/how/index.shtml3); or 3(2) an EEA firm that carries on any insurance activity:(a) by the provision of
(1) Under the Gibraltar Order2 made under section 409 of the Act, a Gibraltar firm is treated as an EEA firm under Schedule 3 to the Act if it is:22(a) authorised in Gibraltar under the Insurance Directives; or(b) authorised in Gibraltar under the Banking Consolidation Directive; or22(c) authorised in Gibraltar under the Insurance Mediation Directive; or2(d) authorised in Gibraltar under the MiFID4.24(1A) Similarly, an EEA firm which:2(a) has satisfied the Gibraltar establishment
(1) This chapter explains how an EEA firm and a Treaty firm can qualify for authorisation under Schedules 3 and 4 to the Act and how a UCITS qualifier is authorised under Schedule 5 to the Act. (2) This chapter also provides guidance on Schedule 3 to the Act for an incoming EEA firm that wishes to establish a branch in the United Kingdom instead of, or in addition to, providing cross border services into the United Kingdom or vice versa.
(1) EEA firms should note that this chapter only addresses the procedures which the FSA will follow under the Act after it has received a consent notice or been notified of an EEA firm's intentions by its Home State regulator. So, an EEA firm should consider this guidance in conjunction with the requirements with which it will have to comply in its Home State. (2) The guidance in this chapter represents the FSA's interpretation of the Single Market Directives, the Act and the
Section 235(1) states that a collective investment scheme means any arrangements with respect to property of any description. The purpose or effect of the arrangements must be to enable the persons taking part in them to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. The participants must not have day-to-day control over the management of the property (section
Analysing a typical corporate structure in terms of the definition of a collective investment scheme, money will be paid to the body corporate in exchange for shares or securities issued by it. The body corporate becomes the beneficial owner of that money in exchange for rights against the legal entity that is the body corporate. The body corporate then has its own duties and rights that are distinct from those of the holders of its shares or securities. Such arrangements will,
Where a body corporate does come within the definition of a collective investment scheme in section 235(1) to (3), the only relevant issue is to determine whether or not it is excluded. As PERG 9.2.2 G (Introduction) explains, the exclusions are in the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (SI 2001/1062) (Arrangements not amounting to a collective investment scheme). If a body corporate satisfies any of the exclusions
In the FSA's view, the question of what constitutes a single scheme in line with section 235(4) of the Act does not arise in relation to a body corporate. This is simply because the body corporate is itself a collective investment scheme (and so is a single scheme). Section 235(4) contemplates a 'separate' pooling of parts of the property that is subject to the arrangements referred to in section 235(1). But to analyse a body corporate in this way requires looking through its
A UK firm cannot start providing cross border services into another EEA State under an EEA right unless it satisfies the conditions in paragraphs 20(1) of Part III of Schedule 3 to the Act and, if it derives its EEA right from the Insurance Directives, paragraph 20(4B) of Part III of Schedule 3 to the Act. It is an offence for a UK firm which is not an authorised person to breach this prohibition (paragraph 21 of Part III of Schedule 3 to the Act).The conditions are that:(1) the
8A MiFID investment firm that wishes to obtain a passport for the activity of operating an MTF should follow the procedures described in this chapter. A UK market operator that operates a recognised investment exchange or an MTF and wishes to provide cross border services into another EEA State should follow the procedure described in REC 4.2B.
8(1) If8 the UK firm'sEEA right derives from MiFID8, the Banking Consolidation Directive or the UCITS Directive, paragraph 20(3) of Part III of Schedule 3 to the Act requires the FSA to send a copy of the notice of intention8 to the Host State Regulator within one month8 of receipt.8However, a UK firm passporting under the Banking Consolidation Directive or MiFID may start providing cross border services as soon as it satisfies the relevant conditions (see SUP 13.4.2 G).888888(2)
In addition, under section 290A
of the Act (Refusal of recognition
on ground of excessive regulatory provision), the FSA must refuse to make a recognition
order in relation to a body applying for recognition as a UK RIE or UK RCH if it appears to the FSA that an existing or proposed regulatory
provision of the applicant in connection with the applicant's
business as an investment exchange or the provision by the applicant of clearing services imposes, or will impose, an excessive
An application should:(1) be
made in accordance with any directions the FSA may make under section 287 (Application by an investment exchange) or section 288 (Application by a clearing
house) of the Act;(2) be accompanied by the applicant's regulatory
provisions and
in the case of an application under section 287 of the Act information
required pursuant to sub-sections 287(3)(c), (d) and (e) of the Act (see REC
5.2.3A G) 1(the material specifically prescribed in section 287 or
1The
information required pursuant to sub-sections 287(c), (d) and (e) of the Act is:(1) a programme of operations which
includes the types of business the applicant proposes to undertake and the
applicant's proposed organisational structure;(2) particulars of the persons who
effectively direct the business and operations of the exchange; and(3) particulars of the ownership of
the exchange, and in particular the identity and scale of interests of the
persons who are in a position
Under section 289 of the Act (Applications: supplementary), the FSA may
require the applicant to provide additional information, and may require the
applicant to verify any information in any manner. In view of their likely
importance for any application, the FSA will normally wish to arrange for its own inspection of an applicant's
information technology systems.
Where the FSA considers that it is unlikely to make a recognition
order, or to seek the
Treasury's approval, it will discuss its concerns with
the applicant as early as possible with a view to enabling the applicant to
make changes to its rules or guidance, or other parts of the application (see REC 5.2.7 G).
If the FSA decides
that it will not make a recognition order,
it will follow the procedure set out in section 298 of the Act (Directions
and revocation: procedure) and described
Alternatively, the FSA may decide to approve the proposed acquisition or increase of control subject to such conditions as it considers appropriate, having regard to the FSA's duty to ensure that the firm concerned will satisfy, and continue to satisfy, the threshold conditions (section 185 of the Act).(1) If the FSA proposes to approve subject to conditions, it must give a warning notice.2(2) If the FSA decides to proceed to approve subject to conditions, it must give a decision
A notice which approves a change of control (with or without conditions) is effective only for a limited period as set out in the notice (or, if no such period is specified, for one year) (section 184(3) of the Act). An approved change in control may not therefore take place after the end of this period.
Before giving an approval notice orwarning notice , the FSAmust comply with certain requirements as to consultation with 1competent authorities outside the United Kingdom (sections 183(2) and 188(2) of the Act and the Financial Services and Markets Act 2000 (Consultation with Competent Authorities) Regulations 2001). The Financial Groups Directive Regulations make special provision in relation to (the change in control over a UK authorised person (within the meaning of section
Under section 169(1)(b) of the Act,
the FSA may
appoint an investigator to investigate any matter at the request of an overseas regulator. The powers of the investigator appointed by the FSA (referred to here as the 'FSA's investigator') include the power to require persons to
attend at a specified time and place and answer questions (the compulsory
interview power).
Where the FSA appoints an investigator in response to a request from an overseas regulator it may, under section 169(7) of the Act,
direct him to permit a representative of that regulator to attend and take
part in any interviews conducted for the purposes of the investigation. The FSA may
only give a direction under section 169(7) if it is satisfied that any information
obtained by an overseas regulator as a result of the interview will
be subject to the safeguards equivalent
Before making a direction under
section 169(7) the FSA will discuss and determine with the overseas
regulator how this statement of policy will
apply to the conduct of the interview, taking into account all the circumstances
of the case. Amongst other matters, the FSA will at this stage determine the extent to which the representative
of the overseas regulator will be able to participate in
the interview. The overseas regulator will be notified of this determination
on the issuing
Section 341 of the Act (Access to books etc.) provides that an auditor of a firm appointed under SUP 3.3.2 R: (1) has a right of access at all times to the firm's books, accounts and vouchers; and(2) is entitled to require from the firm's officers such information and explanations as he reasonably considers necessary for the performance of his duties as auditor.
In complying with SUP 3.6.1 R, a firm should take reasonable steps to ensure that each of its appointed representatives or, where applicable, tied agents1 gives the firm's auditor the same rights of access to the books, accounts and vouchers of the appointed representative or tied agent1and entitlement to information and explanations from the appointed representative's or tied agent's1 officers as are given in respect of the firm by section 341 of the Act (see also SUP 12.5.5
In complying with SUP 3.6.1 R, a firm should take reasonable steps to ensure that each of its suppliers under a material outsourcing arrangement gives the firm's auditor the same rights of access to the books, accounts and vouchers of the firm held by the supplier, and entitlement to information and explanations from the supplier's officers as are given in respect of the firm by section 341 of the Act.
Firms and their officers, managers and controllers are reminded that, under section 346 of the Act (Provision of false or misleading information to auditor or actuary), knowingly or recklessly giving false information to an auditor appointed under SUP 3.3.2 R constitutes an offence in certain circumstances, which could render them liable to prosecution. This applies even when an auditor is also appointed under an obligation in another enactment.
The circumstances in which the FSA may vary a firm'sPart IV permission on
its own initiative under section 45 of the Act include
where it appears to the FSA that:(1) one
or more of the threshold conditions is or is likely to be no longer
satisfied; or(2) it
is desirable to vary a firm's permission in order to protect the interests of consumers or
potential consumers.
The FSA may also use its powers under section 45 for
enforcement purposes. EG 82 sets out in detail the FSA's powers under section 45 and
the circumstances under which the FSA may vary a firm's permission in this way, whether for enforcement purposes or as part of its
day to day supervision of firms.
This chapter provides additional guidance on when the FSA will use these powers for supervision purposes.2
The FSA may use its powers under section 45 of the Act only in respect of a Part IV permission ; that is, a permission granted
to a firm under section 42 of the Act (Giving
permission) or having effect as if so given. In respect of an incoming EEA firm, an incoming
Treaty firm, or a UCITS qualifier,
this power applies only in relation to any top-up
permission that it has. There are similar but more limited powers
under Part XIII of the Act in
relation to the permission of
an
Section 80 (1) of the Act (general duty of disclosure in listing
particulars) requires listing particulars submitted
to the FSA to contain all such information as investors
and their professional advisers would reasonably require, and reasonably expect
to find there, for the purpose of making an informed assessment of:(1) the assets and liabilities, financial
position, profits and losses, and prospects of the issuer of
the securities; and(2) the rights attaching to the securi
(1) The listing
particulars must contain a summary that
complies with the requirements in section 87A(5) and (6) of the Act and PR 2.1.4 EU to PR 2.1.7 R (as if those requirements
applied to the listing particulars).(2) Paragraph (1) does not apply:(a) in relation to specialist
securities referred to in LR 4.1.1R (2);
or(b) if, in accordance with PR 2.1.3 R,
no summary would be required
in relation to the securities.
A request to the FSA to authorise the omission of specific
information in a particular case must:(1) be in writing from the issuer;(2) identify the specific information
concerned and the specific reasons for the omission; and(3) state why in the issuer's opinion
one or more of the grounds in section 82 of the Act applies.
The guidance in COND 2 explains each threshold condition in Part I of Schedule 6 (threshold conditions) to the Act and how the FSA will interpret it in practice. An overview of the threshold conditions is given in COND 1 Annex 1 G. This guidance is not, however, exhaustive and is written in very general terms. A firm will need to have regard to the obligation placed upon the FSA under section 41 (the threshold conditions) of the Act; that is, the FSA must ensure that the firm
(1) For ease of reference, the threshold conditions in or under Schedule 6 to the Act have been quoted in full in COND 2. (2) As these provisions impose obligations, they are printed in bold type. The use of bold type is not intended to indicate that these quotations are rules made by the FSA.(3) Where words have been substituted for the text of these provisions the substitutions are enclosed in square brackets ([ ]). However, none of the changes made by the FSA in these quotations
(1) A firm must notify the FSA of:(a) a significant breach of a rule (which includes a Principle, or a Statement of Principle ; or(b) a breach of any requirement imposed by the Act or by regulations or an order made under the Act by the Treasury (except if the breach is an offence, in which case (c) applies);6(c) the bringing of a prosecution for, or a conviction of, any offence under the Act;(d) a breach of a directly applicable provision in the MiFID Regulation; or6(e) a breach
A firm must notify the FSA immediately if:(1) civil proceedings are brought against the firm and the amount of the claim is significant in relation to the firm's financial resources or its reputation; or(2) any action is brought against the firm under section 71 of the Act (Actions for damages) or section 150 (Actions for damages); or(3) disciplinary measures or sanctions have been imposed on the firm by any statutory or regulatory authority, professional organisation or trade
3SUP 15.3.23 D to SUP 15.3.25 D are given in relation to the exercise of the powers of the Society and of the Council generally, with a view to achieving the objective of enabling the FSAto:(1) comply with its general duty under section 314 of the Act (Authority's general duty);(2) determine whether underwriting agents, or approved persons acting for them or on their behalf, are complying with the requirements imposed on them by or under the Act;(3) enforce the provisions of the
3The Society must inform the FSA if it commences investigations or disciplinary proceedings relating to apparent breaches:(1) of the Act or requirements made under the Act, including the threshold conditions or the Principles or other rules, by an underwriting agent; or(2) of the Statements of Principle by an individual or other person who carries out controlled functions for or on behalf of an underwriting agent.
(1) Before an EEA firm exercises an EEA right to establish a branch in the United Kingdom other than under the Insurance Mediation Directive, the Act requires it to satisfy the establishment conditions, as set out in paragraph 13(1) of Part II of Schedule 3 to the Act. (2) For the purposes of paragraph 13(1)(b)(iii) of Part II of Schedule 3 to the Act, the information to be included in the consent notice has been prescribed under regulation 2 of the EEA Passport Rights Regula
(1) When the FSA receives a consent notice from the EEA firm'sHome State regulator, it will, under paragraphs 13(2)(b), (c) and 13(3) of Part II of Schedule 3 to the Act, notify the applicable provisions (if any) to:(a) the EEA firm; and(b) in the case of an EEA firm passporting under the Insurance Directives, the Home State regulator;within two months of the notice2 date.2(1A) The notice date is:2(a) for a MiFID investment firm, the date on which the Home State gave the consent
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) a person, as respects a particular AUT or ICVC, on the application or with the consent of that person; and(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
Section 34 of the Act states that an incoming EEA firm no longer qualifies for authorisation under Schedule 3 to the Act if it ceases to be an incoming EEA firm as a result of:(1) having its EEA authorisation withdrawn by its Home State regulator; or(2) ceasing to have an EEA right in circumstances in which EEA authorisation is not required; this is relevant to a financial institution that is a subsidiary of a credit institution (of the kind mentioned in Article 19of the Banking
Section 36 of the Act states that a UCITS qualifier may ask the FSA to give a direction cancelling its authorisation under paragraph 1(1) of Schedule 5 to the Act. UCITS qualifiers should also refer to COLLG 3.1.11 Gand CIS 17.4.8 G (Revocation of recognition: Schemes recognised under section 264 of the Act).1
Within the legal constraints that apply, the FSA may pass on to a skilled person any information which it considers relevant to the skilled person's function. A skilled person, being a primary recipient under section 348 of the Act (Restrictions on disclosure of confidential information by Authority etc.), is bound by the confidentiality provisions in Part XXIII of the Act (Public record, disclosure of information and cooperation) as regards confidential information he receives
The limitations in the following sections of the Act are relevant to this chapter:(1) section 175(5) (Information and documents: supplemental provisions) under which a person may be required under Part XI of the Act (Information Gathering and Investigations) to disclose information or produce a document subject to banking confidentiality (with exceptions); and (2) section 413 (Protected items), under which no person may be required to produce, disclose or allow the inspection
Any rule in the Handbook which has the status letter "E" in the margin or heading:(1) is to be taken also to provide that contravention of the rule does not give rise to any of the consequences provided for by provisions of the Act other than section 149(Evidential provisions); and(2) incorporates the status letter "E" in the margin or heading as part of the rule.
(1) The rules to which section 149of the Act applies ("evidential provisions") are identified in the Handbook by the status letter "E" in the margin or heading.(2) Other provisions in the Handbook, although also identified by the status letter "E" in the margin or heading, are actually not rules but provisions in codes and GEN 2.2.3 R does not apply to them. These code provisions are GEN 2.1.4 E, and those provisions in the Code of Practice for Approved Persons (APER 3 and APER
The application of the Interpretation Act 1978 to the Handbook has the effect, in particular, that:(1) expressions in the Handbook used in the Act have the meanings which they bear in the Act, unless the contrary intention appears;(2) where reference is made in the Handbook to an enactment, it is a reference to that enactment as amended and includes a reference to that provision as extended or applied by or under any other enactment, unless the contrary intention appears; and(3)
(1) If a firm, which is a partnership7 or unincorporated association, is dissolved, but its authorisation continues to have effect under section 32 of the Act (Partnerships and unincorporated associations) in relation to any partnership or unincorporated association7 which succeeds to the business of the dissolved firm, the successor partnership or unincorporated association7 is to be regarded as the same firm for the purposes of the Handbook unless the context otherwise requires7.77(2)
In principle, it is possible to view a change of partners7 in a partnership7, or a change in the membership of the unincorporated association, as the formation of a new partnership7 or association. GEN 2.2.18 R reflects section 32 of the Act (Partnerships and unincorporated associations), which provides for the continuing authorisation of partnerships7 and unincorporated associations following a change in partners7 or members if certain conditions are satisfied. GEN 2.2.18 R
The FSA uses various methods of information gathering on its own initiative which require the cooperation of firms:(1) Visits may be made by representatives or appointees of the FSA. These visits may be made on a regular basis, on a sample basis, for special purposes such as theme visits (looking at a particular issue across a range of firms), or when the FSA has a particular reason for visiting a firm. Appointees of the FSA may include persons who are not FSA staff, but who have
In complying with Principle 11, the FSA considers that a firm should, in relation to the discharge by the FSA of its functions under the Act:(1) make itself readily available for meetings with representatives or appointees of the FSA as reasonably requested;(2) give representatives or appointees of the FSA reasonable access to any records, files, tapes or computer systems, which are within the firm's possession or control, and provide any facilities which the representatives
(1) A firm must permit representatives of the FSA, or persons appointed for the purpose by the FSA, to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the FSA's functions under the Act.(2) A firm must take reasonable steps to ensure that its agents, suppliers under material outsourcing arrangements and appointed representatives permit such access to their business premises. (See also, in respect
The test in section 236(3)(a) of the Act is whether the reasonable investor would expect that, were he to invest, he would be in a position to realise his investment within a period appearing to him to be reasonable. In the FSA's view, this is an objective test with the appropriate objective judgment to be applied being that of the hypothetical reasonable investor with qualities such as those mentioned in PERG 9.7.2 G (The investment condition: the 'reasonable investor').
In the FSA's view, the 'realisation' of an investment means converting an asset into cash or money. The FSA does not consider that 'in specie' redemptions (in the sense of exchanging shares or securities of BC with other shares or securities) will generally count as realisation. Section 236(3)(a) refers to the realisation of an investment, the investment being represented by the 'value' of shares or securities held in BC. In the FSA's view, there is no realisation of value where
The use of an expectation test ensures that the definition of an open-ended investment company is not limited to a situation where a holder of shares in, or securities of, a body corporate has an entitlement or an option to realise his investment. It is enough if, on the facts of any particular case, the reasonable investor would expect that he would be able to realise the investment. The following are examples of circumstances in which the FSA considers that a reasonable investor
In the FSA's view, the fact that a person may invest in the period shortly before a redemption date would not cause a body corporate, that would not otherwise be regarded as such, to be open-ended. This is because the investment condition must be applied in relation to BC as a whole (see PERG 9.6.3 G (The investment condition (section 236(3) of the Act): general).
Similarly, if BC issues shares or securities on different terms as to the period within which they are to be redeemed or repurchased (see PERG 9.6.4 G (The investment condition (section 236(3) of the Act): general), BC must be considered as a whole. Whether or not the expectation test is satisfied in relation to a particular body corporate is bound to involve taking account of the terms on which its shares or securities, or classes of shares or securities, are issued. But this
This exemption covers twodistinct situations. Article 16(1) applies to all exempt persons where they make financial promotions for the purpose of their exempt activities. These persons would include appointed representatives, recognised investment exchanges, recognised clearing houses and those who are able to take advantage of the Exemption Order. So, it allows exempt persons both to promote that they have expertise in certain controlled activities and to make financial promotions
Article 16 (2) applies to unsolicited real time financial promotions made by an appointed representative in carrying on the business:(1) for which his principal has accepted responsibility for the purposes of section 39 of the Act (Exemption of appointed representatives); and(2) in relation to which the appointed representative is exempt under section 39.In addition, the financial promotion may only be made in the circumstances in which it could be made by the appointed representative'sprincipal
The purpose of these 1exemptions1 is to ensure that, subject to certain conditions, the restriction in section 21 of the Act does not apply to those who merely transport the financial promotions of other persons. Obvious examples here are postal and Internet service providers, courier companies and telecommunications companies. PERG 8.6.5 G explains that such persons may not be regarded as communicating a financial promotion simply because they have distributed it. Article 18
Financial promotions made only to or directed only at certain types of person who are sophisticated enough to understand the risks involved are exempt. These are:(1) authorised persons;(2) exempt persons (where the financial promotion relates to a controlled activity which is a regulated activity for which the person is exempt);(3) governments and local authorities; and(4) persons whose ordinary business involves carrying on a controlled activity of the kind to which the financial
The broad scope of the restriction in section 21 of the Act will inevitably mean that it will, from time to time, apply to journalists and others who make their living from commenting on news including financial affairs (such as broadcasters). This is liable to happen when such persons offer share tips or recommend the use of a particular firm for investment purposes. Such tips or recommendations are likely to amount to inducements to engage in investment activity.
The first part of the exemption (referred to in PERG 8.12.34G (1)) specifically precludes any form of written communication. However, the FSA understands that the Treasury did not intend to prohibit the use of written words in the form of subtitling. These may be an aid to those with hearing difficulties or to interpret a foreign language, or the use of captions which supplement a spoken communication by highlighting aspects of it without introducing anything new. The FSA cannot
In order to make an unsolicited real time financial promotion, an overseas communicator must rely on either article 32 or article 33. Article 32 provides an exemption for unsolicited real time financial promotions made by an overseas communicator to persons who were previously overseas and were a customer of his then. This is subject to certain conditions, including that, in broad terms, the customer would reasonably expect to be contacted about the subject matter of the financial
This exemption disapplies the restriction in section 21 of the Act from non-real time financial promotions or solicited real time financial promotions which are made to a person who the communicator believes on reasonable grounds to be a certified high net worth individual and which relate to certain investments. These investments must be either;(1) shares in or debentures of an unlisted company; or(2) warrants,certificates representing certain securities, options, futures or
The second exemption in article 50A disapplies the restriction in section 21 of the Act from non-real time financial promotions or solicited real time financial promotions which are made to a person who the communicator believes on reasonable grounds to be a self-certified sophisticated investor and which relate to one or more of the specified investments in PERG 8.14.21G (1) to (3) (Certified high net worth individuals (article 54)).