Related provisions for PRIN 3.1.5
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When considering whether it is satisfied under section 148(6), the FSA is required by section 148(7) of the Act:(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) 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) to
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 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,
(1) Threshold condition 4 (Adequate resources), requires the FSA to ensure that a firm has adequate resources in relation to the specific regulated activity or regulated activities which it seeks to carry on, or carries on.(2) In this context, the FSA will interpret the term 'adequate' as meaning sufficient in terms of quantity, quality and availability, and 'resources' as including all financial resources, non-financial resources and means of managing its resources; for example,
Achieving the regulatory objectives involves the FSA informing itself of developments in firms and in markets. The Act requires the FSA to monitor a firm's compliance with requirements imposed by or under the Act (paragraph 6 (1) of Schedule 1). The Act also requires the FSA to take certain steps to cooperate with other regulators (section 354). For these purposes, the FSA needs to have access to a broad range of information about a firm's business.
The FSA receives the information in SUP 2.1.3 G through a variety of means, including notifications by firms (see SUP 15) and regular reporting by firms (see SUP 16). This chapter is concerned with the methods of information gathering that the FSA may use on its own initiative in the discharge of its functions under the Act. This chapter does not deal with the information gathering powers that the FSA has under the Unfair Terms Regulations. These are dealt with in UNFCOG2.12
Part XI of the Act (Information Gathering and Investigations) gives the FSA statutory powers, including: (1) to require the provision of information (see section 165 and EG 32);2(2) to require reports from skilled persons (see section 166 and SUP 5);(3) to appoint investigators (see sections 167, 168 and 169 of the Act and EG 32); and2(4) to apply for a warrant to enter premises (see section 176 of the Act and EG 42).2
The purpose of SUP 2.3 is to amplify Principle 11 in the context of information gathering by the FSA on its own initiative in the discharge of its functions under the Act. SUP 2.3 therefore sets out, in guidance on Principle 11 and in rules, how the FSA expects firms to deal with the FSA in that context, including the steps that a firm should take with a view to ensuring that certain connected persons should also cooperate with the FSA.
Section 31 of the Act (Authorised persons) states that an EEA firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 3 to the Act (EEA Passport Rights). Under paragraph 12 of Part II of that Schedule, an EEA firm qualifies for authorisation if:(1) it is seeking to establish a branch in the United Kingdom in exercise of an EEA right and satisfies the establishment conditions (see SUP 13A.4.1 G and SUP 13A.4.2 G); or(2) it is seeking to provide
Under section 31 of the Act, a Treaty firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 4 (Treaty Rights), that is:(1) the Treaty firm is seeking to carry on a regulated activity; and(2) the conditions set out in paragraph 3(1) of Schedule 4 to the Act are satisfied.
The effect of paragraph 5(1) and 5(2) of Schedule 4 to the Act is that a Treaty firm which qualifies for authorisation under that Schedule must, at least seven days before it carries on any of the regulated activities covered by its permission, give the FSA written notice of its intention to do so. Failure to do so is a criminal offence under paragraph 6(1) of that Schedule.
(1) A written notice from a Treaty firm under paragraph 5(2) of Schedule 4 to the Act must be: (a) given to a member of, or addressed for the attention of , the Authorisation Department; and(b) delivered to the FSA by one of the methods in (2).(2) The written notice may be delivered by:(a) post to the address in SUP 13A.3.9 G below; or(b) leaving the application at the address in SUP 13A.3.9 G below and obtaining a time-stamped receipt; or(c) hand delivery to a member of the Authorisation
Under Schedule 5 to the Act (Persons concerned in collective investment schemes), a person who for the time being is an operator, trustee or depositary of a scheme which is a recognised scheme under section 264 of the Act is an authorised person. Such a person is referred to in the Handbook as a UCITS qualifier.
A UCITS qualifier has permission under paragraph 2 of Schedule 5 to the Act, to carry on, as far as is appropriate to the capacity in which it acts in relation to the scheme:(1) the regulated activity of establishing, operating or winding up a collective investment scheme; and(2) any activity in connection with, or for the purposes of, the scheme.
Where an overseas recognised body includes in its report made under section 295(1) of the Act (Notification: overseas investment exchanges and overseas clearing houses) a statement in compliance with section 295(2)(a) of the Act that an event has occurred in the period covered by that report which is likely to affect the FSA's assessment of whether it is satisfied as to the requirements set out in section 292(3) (Overseas investment exchanges and overseas clearing houses), it
An overseas recognised body must include in its report submitted in compliance with section 295(1) of the Act:(1) particulars of any changes to: (a) its memorandum and articles of association or any similar or analogous documents; (b) its regulatory provisions; (c) its chairman or president, or chief executive (or equivalent);(2) particulars of any disciplinary action (or any similar or analogous action) taken against it by any supervisory authority in its home territory, whether
An overseas recognised body must include in the first report submitted under section 295(1) of the Act after the recognition order in relation to that overseas recognised body is made: (1) particulars of any events of the kind described in section 295(2) of the Act which occurred; (2) particulars of any change specified in REC 6.7.4 R (1) or disciplinary action specified in REC 6.7.4 R (2) which occurred; and(3) any annual report and accounts which covered a period ending; after
Where an overseas recognised body proposes to change: (1) its address in the United Kingdom for the service of notices or other documents required or authorised to be served on it under the Act; or(2) the address of its head office;it must give notice to the FSA and inform it of the new address at least 14 days before the change is effected.
(1) Threshold condition 5 (Suitability), requires the firm to satisfy the FSA that it is 'fit and proper' to have Part IV permission having regard to all the circumstances, including its connections with other persons, the range and nature of its proposed (or current) regulated activities and the overall need to be satisfied that its affairs are and will be conducted soundly and prudently (see also PRIN and SYSC).(2) The FSA will also take into consideration anything that could
(1) The emphasis of this threshold condition is on the suitability of the firm itself. The suitability of each person who performs a controlled function will be assessed by the FSA under the approved persons regime (see SUP 10 (Approved persons) and FIT). In certain circumstances, however, the FSA may consider that the firm is not suitable because of doubts over the individual or collective suitability of persons connected with the firm.8(2) When assessing this threshold condition
(1) When determining whether the firm will satisfy and continue to satisfy threshold condition 5, the FSA will have regard to all relevant matters, whether arising in the United Kingdom or elsewhere.(2) Relevant matters include, but are not limited to, whether a firm:(a) conducts, or will conduct, its business with integrity and in compliance with proper standards;(b) has, or will have, a competent and prudent management; and(c) can demonstrate that it conducts, or will conduct,
In determining whether a firm will satisfy, and continue to satisfy, threshold condition 5 in respect of conducting its business with integrity and in compliance with proper standards, the relevant matters, as referred to in COND 2.5.4 G (2), may include but are not limited to whether:(1) the firm has been open and co-operative in all its dealings with the FSA and any other regulatory body (see Principle 11 (Relations with regulators)) and is ready, willing and organised to comply
1Under section 300B(2) of the Act, the FSA may, by rules under section 293 (Notification requirements):(1) 1specify descriptions of regulatory provision in relation to which, or circumstances in which, the duty in section 300B(1) does not apply, or(2) 1provide that the duty applies only to specified descriptions of regulatory provision or in specified circumstances.
1Under section 300B(3) of the Act, the FSA may also by rules under section 293: (1) 1make provision as to the form and contents of the notice required, and(2) 1require the UK recognised body to provide such information relating to the proposal as may be specified in the rules or as the FSA may reasonably require.
1The duty in section 300B(1) of the Act does not apply to any of the following:(1) any regulatory provision which is required under Community law or any enactment or rule of law in the United Kingdom; or(2) (a) the specification of the standard terms of any derivative which a UK RIE proposes to admission to trading, or the amendment of the standard terms of any derivative already admitted to trading; or(b) the specification or any amendment of standard terms relating to the provision
1A notice under section 300B(1) of the Act of a proposal to make a regulatory provision must be in writing and state expressly that it is a notice for the purpose of that section. To be effective, a notice must: (1) 1contain full particulars of the proposal to make a regulatory provision which is the subject of that notice; and(2) 1either be accompanied by sufficient supporting information to enable the FSA to assess the purpose and effect of the proposed regulatory provision
When a firm appoints a skilled person to provide a report under section 166 of the Act (Reports by skilled persons), the firm must, in a contract with the skilled person:(1) require and permit the skilled person during and after the course of his appointment:(a) to cooperate with the FSA in the discharge of its functions under the Act in relation to the firm; and(b) to communicate to the FSA information on, or his opinion on, matters of which he has, or had, become aware in
In complying with the contractual duty in SUP 5.5.1 R (1) the FSA expects that a skilled person appointed under section 166 of the Act (Reports by skilled persons) will cooperate with the FSA by, amongst other things, providing information or documentation about the planning and progress of the report and its findings and conclusions, if requested to do so. A firm should therefore ensure that the contract it makes with the skilled person requires and permits the skilled person
Section 166(5) of the Act (Authority's power to require information) imposes a duty on certain persons to give assistance to a skilled person. The persons on whom this duty is imposed are those who are providing, or have at any time provided, services to any person falling within SUP 5.2.1 G. They include suppliers under material outsourcing arrangements.
Insurance business transfers are subject to Part VII of the Act and must be approved by the court under section 111. The Financial Services and Markets Act 2000 (Control of Business Transfers)(Requirements on Applicants) Regulations 2001 (SI 2001/3625) also apply. These regulations set out minimum requirements for publicising schemes, notifying certain interested parties directly (subject to the discretion of the court), and giving information to anyone who requests it.
An insurance business transfer scheme is defined in section 105 of the Act and the definition has been extended to transfers from members of Lloyd's to reflect the effect of the Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd's) Order 2001(SI 2001/3626). With certain exclusions (relating to some schemes approved under foreign legislation, some novations of reinsurance or some captive insurers), it includes, in broad terms, any scheme to
Under section 112 of the Act, the court has wide discretion to transfer property and liabilities to the transferee and to make orders in relation to incidental, consequential and supplementary matters. In the opinion of the FSA, the court has the power in such cases and on such terms as may be appropriate, to transfer the benefit of reinsurance contracts protecting the transferred business and to make such amendments to the terms of those contracts as may be necessary to give
Paragraph 9 of Schedule 17 to the Act (The Ombudsman Scheme) requires FOS Ltd to adopt an annual budget which has been approved by the FSA. The annual budget must distinguish between the costs of operating the Compulsory Jurisdiction, the Consumer Credit Jurisdiction4 and the Voluntary Jurisdiction.
Section 234 of the Act (Industry Funding) enables the FSA to require the payment to it or to FOS Ltd, by firms or any class of firm, of specified amounts (or amounts calculated in a specified way) to cover the costs of: (1) the establishment of 1the Financial Ombudsman Service; and (2) its operation in relation to the Compulsory Jurisdiction.
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
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)).
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) 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);6(2) powers to apply to
However, the FSA will not be able to use the following powers against former authorised persons:(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) the power to require firms to make restitution under section 384 of the Act (Power of the FSA to require restitution).
(1) Under section 52(1)of the Act (Determination of applications), the FSA has six months to consider a completed application.(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) Within these time limits, however, the length of the process
Section 19 of the Act (The general prohibition) provides that the requirement to be authorised under the Act only applies in relation to regulated activities which are carried on 'in the United Kingdom'. In many cases, it will be quite straightforward to identify where an activity is carried on. But, when there is a cross-border element, for example because a customer is outside the United Kingdom or because some other element of the activity happens outside the United Kingdom,
Even if a person concludes that he is not carrying on a regulated activity in the United Kingdom, he will need to ensure that he does not contravene other provisions of the Act that apply to unauthorised persons. These include the controls on financial promotion (section 21 (Financial promotion) of the Act) (see PERG 8 (Financial promotion and related activities)), and on giving the impression that a person is authorised (section 24 (False claims to be authorised or exempt)).
Table Territorial issues relating to overseas insurance intermediaries carrying on insurance mediation activities in or into the United Kingdom
Needs Part IVpermission |
Schedule 3 EEA passport rights available |
Overseas persons exclusion available |
|
Registered EEA-based intermediary with UK branch (registered office or head office in another EEA State) |
No |
Yes |
No |
Registered EEA-based intermediary with no UK branch providing cross-border services |
No |
Yes |
Potentially available [see Note] |
Third country intermediary operating from branch in the UK |
Yes |
No |
No |
Third country intermediary providing services in (or into) the UK |
Yes unless overseas persons exclusion applies |
No |
Potentially available |
This does not, however, affect the firm'sauthorisation under Schedule 3 to the Act (see PERG 5.12.9 G to PERG 5.12.10 G (Passporting)). |
|||
3For EEA-based intermediaries this table assumes that the insurance mediation activities are within the scope of the Insurance Mediation Directive. |
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In determining the location of an activity, and hence whether it is carried on in the United Kingdom, various factors need to be taken into account in turn, notably:(1) section 418 of the Act (Carrying on regulated activities in the United Kingdom);(2) the nature of the activity; and(3) the overseas persons exclusion (see PERG 5.12.9 G to PERG 5.12.10 G (Overseas persons)).
Section 418 of the Act extends the meaning that 'carry on regulated activity in the United Kingdom' would normally have by setting out additional cases in which a person who would not otherwise be regarded as carrying on the activity in the United Kingdom is to be regarded as doing so. Each of the following cases thus amounts to carrying on a regulated activity in the United Kingdom:(1) where a UK-based person carries on a regulated activity in another EEA State in the exercise
Article 72 of the Regulated Activities Order (Overseas persons) provides a potential exclusion for persons with no permanent place of business in the United Kingdom from which regulated activities are conducted or offers to conduct regulated activities are made. Where these persons carry on insurance mediation activities in the United Kingdom, they may be able to take advantage of the exclusions in article 72 of the Regulated Activities Order. In general terms, these apply where
In determining whether a firm has complied with any provision in or under the Act such as any Principle or other rule, anything that an appointed representative has done or omitted to do as respects the business for which the firm has accepted responsibility will be treated as having been done or omitted to be done by the firm (section 39(4) of the Act ).
In addition to the requirements as to the business test and the link to the United Kingdom, two other essential elements must be present before a person needs authorisation under the Act. The first is that the investments must come within the scope of the system of regulation under the Act (see PERG 2.6). The second is that the activities, carried on in relation to those specified investments, are regulated under the Act (see PERG 2.7). Both investments and activities are defined
The Regulated Activities Order contains exclusions. Exclusions may exist in relation to both the element of investment and the element of activity. Each should therefore be checked carefully. The exclusions that relate to specified investments are considered in PERG 2.6, together with the outline of the specified investments. The exclusions that relate to activities are considered separately from the outline of activities (see PERG 2.8 and PERG 2.9).
It remains the Government's responsibility to ensure the proper implementation of MiFID2. Certain2persons subject to the requirements of MiFID2 must be brought within the scope of regulation under the Act. A core element of MiFID is the concept of investment firm.2 An investment firm is any person whose regular occupation or2 business is2 the provision of one or more2investment services to third parties or the performance of one or more investment activities on a professional
For persons who are MiFID2investment firms, the activities that must be caught by the Regulated Activities Order are those that are caught by MiFID2. To achieve this result, some of the exclusions in the Order (that will apply to persons who are not caught by MiFID2) have been made unavailable to MiFID2investment firms when they provide or perform investment services and activities. A "MiFID investment firm", for these purposes, includes credit institutions to which MiFID applies
The Insurance Mediation Directive has in part been implemented through various amendments to the Regulated Activities Order. These include article 4(4A) (Specified activities: general) which precludes a person who, for remuneration, takes up or pursues insurance mediation or reinsurance mediation in relation to a risk or commitment situated in an EEA State from making use of certain exclusions. In other cases, some of the exclusions provided in relation to particular regulated
Each of these aspects of the definition is considered in greater detail in PERG 9.4 (Collective investment scheme (section 235 of the Act)) to PERG 9.9 (The investment condition: the 'satisfaction test' (section 236(3)(b) of the Act)). Although the definition has a number of elements, the FSA considers that it requires an overall view to be taken of the body corporate. This is of particular importance in relation to the investment condition (see PERG 9.6.3 G and PERG 9.6.4 G (The
The FSA understands that the aim of the definition in section 236 of the Act is to include any body corporate which, looked at as a whole, functions as an open-ended investment vehicle. The definition operates against a background that there is a wide range of different circumstances in which any particular body corporate can be established and operated. For example, the definition applies to bodies corporate wherever they are formed. So, in the application of the definition to
For a body corporate formed outside the United Kingdom, there is an additional issue as to how the applicable corporate law and the definition of open-ended investment company in the Act relate to one another. The FSA understands this to operate as follows. The term 'body corporate' is defined in section 417(1) of the Act (Interpretation) as including 'a body corporate constituted under the law of a country or territory outside the United Kingdom'. So, whether or not any particular
A number of controls apply under the Act to the promotion of shares or securities that are issued by any body corporate. These controls differ according to whether the person making the promotion is an unauthorised person (see PERG 9.10.2 G) or an authorised person (see PERG 9.10.3 G to PERG 9.10.6 G). In addition, where a body corporate is not an open-ended investment company:(1) the requirements of Prospectus Rules relating to the publication of an approved prospectus may1 apply
The controls under the Act that apply to promotions of shares or securities by unauthorised persons are in section 21 of the Act (Restrictions on financial promotion). These controls apply where an unauthorised person makes a financial promotion in, or from, the United Kingdom that relates to the shares in or securities of any body corporate. The same controls apply regardless of whether the shares or securities being promoted are issued by a body corporate that is an open-ended
Promotions made by authorised persons in the United Kingdom are generally subject to the controls in COB 3 (Financial Promotion). However, in the case of shares in, or securities of, a body corporate which is an open-ended investment company, additional controls are imposed by Chapter II of Part XVII of the Act (Restrictions on promotion of collective investment schemes) (see PERG 8.20). Section 238 of the Act (Restrictions on promotion) prevents an authorised person communicating
There are a number of other exemptions in the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (SI 2001/1060). In general terms, these exemptions are equivalent to the exemptions from section 21 of the Act that apply to units. There is guidance on those exemptions in PERG 8.20.3 G (Additional restriction on the promotion of collective investment schemes).
A person carrying on the regulated activity of establishing, operating or winding up a collective investment scheme that is constituted by an open-ended investment company will need permission for those activities. In line with section 237(2) of the Act (Other definitions), the operator of a collective investment scheme that is an open-ended investment company is the company itself. But where the open-ended investment company is incorporated outside the United Kingdom, it will
1Chapter 1A of Part XVIII of the Act places an obligation on controllers and proposed controllers of UK RIEs to notify the FSAof acquisitions of or increases in control. Furthermore, those persons are required to obtain the FSA's approval before becoming a controller or increasing the level of control held (in certain circumstances).
SUP 14.6 (Cancelling qualification for authorisation), which sets out how to cancel qualification for authorisation under the Act, also applies to:(1) an incoming Treaty firm that qualifies for authorisation under Schedule 4 to the Act; and(2) a UCITS qualifier that is an authorised person under Schedule 5 to the Act; a UCITS qualifier should, however, refer to COLL 9.4.2 R and CIS for full details of applicable rules and guidance.2
(1) Under the Gibraltar Order4 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:(a) authorised in Gibraltar under the Insurance Directives; or(b) authorised in Gibraltar under the Banking Consolidation Directive;44(c) authorised in Gibraltar under the Insurance Mediation Directive; or4(d) authorised in Gibraltar under the Investment Services Directive .4(1A) 4Similarly, an EEA firm which:(a) has satisfied the Gibraltar
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.