Related provisions for PERG 6.4.3
Module |
Relevance to Credit Unions |
The Principles for Businesses (PRIN) |
The Principles for Businesses (PRIN) set out 3high-level requirements 3imposed by the FCA3. They provide a general statement of regulatory requirements. The Principles apply to all12credit unions. In applying the Principles to credit unions, the FCA3 will be mindful of proportionality. In practice, the implications are likely to vary according to the size and complexity 3of the credit union. 1212121212 |
Senior Management Arrangements, Systems and Controls (SYSC) |
SYSC 1,3SYSC 4 to 10 and SYSC 213 apply to all credit unions in respect of the carrying on of their regulated activities and unregulated activities in a prudential context. SYSC 22 (Regulatory references),11SYSC 23 (Senior managers and certification regime: Introduction and classification), SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities), SYSC 25 (Senior managers and certification regime: Management responsibilities maps and handover procedures and material), SYSC 26 (Senior managers and certification regime: Overall and local responsibility), SYSC 27 (Senior managers and certification regime: Certification regime)7 and SYSC 18 (Whistleblowing)11 apply to all credit unions in respect of both their regulated activities and their unregulated activities. SYSC 19F.2 (IDD remuneration incentives) and SYSC 28 (Insurance distribution: specific knowledge, ability and good repute requirements) also apply to credit unions when carrying out insurance distribution activities.11 33 |
This contains rules and guidance that are directly applicable to a credit union’sSMF managers, certification employees and (from 2017) other conduct rules staff. There is also guidance for credit unions on giving their staff training about COCON. |
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Threshold Conditions (COND) |
In order to become authorised under the Act all firms must meet the threshold conditions. The threshold conditions must be met on a continuing basis by credit unions. Failure to meet one of the conditions is sufficient grounds for the exercise by the FCA3 of its powers. 121212 |
12312 | |
The Fit and Proper test for Employees and Senior Personnel7 (FIT) |
The purpose of FIT is to set out and describe the criteria that a firm should3 consider when assessing the fitness and propriety of a person (1)3 in respect of whom an application is being made for approval to undertake a controlled function under the senior managers7 regime, (2)3 who has already been approved, (3) who is a certification employee or (4) whom a firm is considering appointing to be a certification employee3. It also sets out and describes criteria that the FCA will consider when assessing the fitness and propriety of a candidate for a controlled function position and that it may consider when assessing the continuing fitness and propriety of approved persons.3 12312 |
General Provisions (GEN) |
GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the FCA's3 logo and insurance against financial penalties. 12 |
Fees manual (FEES) |
This manual sets out the fees applying to credit unions. |
3Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU) |
MIPRU applies to any credit union carrying out insurance distribution activity5 or home finance mediation activity, or using these services. In particular, it sets out requirements for allocation of responsibility for the credit union’sinsurance distribution activity5 (MIPRU 2), for the use of home finance intermediaries or persons doing insurance distribution activity11 (MIPRU 5) and for professional indemnity insurance (MIPRU 3). |
Conduct of Business sourcebook (COBS) |
A credit union which acts as a CTF provider or provides a cash-deposit ISA will need to be aware of the relevant requirements in COBS. COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Approving and confirming compliance of10 financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply with respect to accepting deposits as set out in those provisions, COBS 4.1 and BCOBS. A credit union that communicates with clients, including in a financial promotion, in relation to the promotion of deferred shares and credit union subordinated debt will need to be aware of the requirements of COBS 4.2 (Fair, clear and not misleading communications) and COBS 4.5 (Communicating with retail clients).4 11A credit union carrying on insurance distribution activities in relation to life policies will also need to be aware of the relevant requirements in COBS. A firm may also elect to comply with COBS in relation to pure protection contracts that otherwise fall under ICOBS (see ICOBS 1 Annex 1 3.1R(1)). 11Credit unions are reminded that they are subject to the requirements of the appropriate legislation, including the Credit Unions Act 1979, relating to activities a credit union may carry on. |
ICOBS applies to any credit union carrying on non-investment insurance distribution5 activities, such as arranging or advising on general insurance contracts to be taken out by members or where those members gain rights under such a contract (for example, in relation to a group policy)11. ICOBS does not apply to a credit union taking out an insurance policy5 for its own purposes11, such as a policy5 against default by members on their loans where the credit union is the beneficiary of the policy5, since in this circumstance the credit union would not be acting as an insurance intermediary, but would itself be the customer. Credit unions are reminded that they are subject to the requirements of the appropriate legislation, including the Credit Unions Act 1979, relating to activities a credit union may carry on. |
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3Mortgages and Home Finance: Conduct of Business sourcebook (MCOB) |
MCOB applies to any credit union that engages in any home finance activity. MCOB rules cover advising and selling standards, responsible lending (including affordability assessment), charges, and the fair treatment of customers in payment difficulties. |
Banking: Conduct of Business sourcebook (BCOBS) |
BCOBS sets out rules and guidance for credit unions on how they should conduct their business with their customers. In particular there are rules and guidance relating to communications with banking customers3and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers3(BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6). 3The rules in BCOBS 3.1 that relate to distance contracts may apply 3to a credit union. This is because BCOBS 3 contains requirements which implemented9 the Distance Marketing Directive39where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)) of the Distance Marketing Directive)9, i.e. if the credit union routinely sells any of its services by post, telephone, fax or the internet3. |
CASS 5 (Client money: insurance distribution activity) applies to credit unions carrying on insurance distribution activities where the credit union receives or holds money in the course of or in connection with those activities (i.e. where the application rules set out in CASS 5.1.1R are met). This may vary on a case-by-case basis depending on the firm’s business model. |
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11Product Intervention and Product Governance sourcebook (PROD) |
PROD 1.4 (Product Intervention and Product Governance Sourcebook (PROD)) and PROD 4 (Product governance: IDD and pathway investments) apply to credit unions involved in the manufacture or distribution of insurance products. |
Supervision manual (SUP) |
The following provisions of SUP are relevant to credit unions: 13SUP 1A13 (The FCA’s 3 approach to supervision), SUP 2 (Information gathering by the FCA or PRA 3 on its own initiative), SUP 3.1 to SUP 3.8 (Auditors), SUP 5 (Reports by skilled11 persons), SUP 6 (Applications to vary and11 cancel Part 4A12permission and to impose, vary or cancel requirements11), SUP 7 (Individual requirements), SUP 8 (Waiver and modification of rules), SUP 9 (Individual guidance), 13SUP 10C (FCA senior managers7 regime for approved persons in SMCR firms7), SUP 11 (Controllers and Close links), SUP 15 (Notifications to the FCA11) and SUP 16 (Reporting Requirements). Where credit unions carry on insurance distribution activities and fall within the category provided at SUP 3.1.2R(10), SUP 3.10 and SUP 3.11 (Auditors) will also be relevant.11 Credit unions are reminded that they are subject to the requirements of the Act and SUP 11 on close links, and are bound to notify the FCA3 of changes. It may be unlikely, in practice, that credit unions will develop such relationships. It is possible, however, that a person may acquire close links with a 3credit union3 within the meaning of the Act by reason of holding the prescribed proportion of deferred shares in the credit union. In relation to SUP 16, credit unions are exempted from the requirement to submit annual reports of 3close links. 1212121212133123121212 |
Decision, Procedure and Penalties manual (DEPP) |
DEPP is relevant to credit unions because it sets out: (1) the FCA's12 decision-making procedure for giving statutory notices. These are warning notices, decision notices and supervisory notices (DEPP 1.2 to DEPP 5); and (2) the FCA's12 policy with respect to the imposition and amount of penalties under the Act (see DEPP 6). 1212 |
Dispute Resolution: Complaints (DISP) |
DISP sets out rules and guidance in relation to treating complainants fairly and the Financial Ombudsman Service. |
Compensation (COMP) |
COMP sets out rules relating to the scheme for compensating consumers when authorised firms are unable, or likely to be unable, to satisfy claims against them.12 |
CONC contains rules that apply to firms carrying on credit-related regulated activities. PERG 2.7.19IG provides guidance on relevant exemptions. Where an exemption applies, the credit union lending will be outside the scope of CONC. However, subject to the constraints in the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 (as relevant), credit unions may undertake credit-related regulated activities to which CONC does apply if the activity is carried out by way of business. This could include lending under a borrower-lender-supplier agreement, including entering into conditional sale agreements and/or hire-purchase agreements, or debt adjusting or debt counselling where the credit union is not the lender. A credit union carrying on such activities should consider whether it requires permission to do so. Further information can be found on the FCA’s website. |
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6General guidance on Benchmark Administration, Contribution and Use (BENCH) |
BENCH provides guidance about which parts of the Handbook are relevant to a firm when carrying out benchmark activities and when using a benchmark. It also provides guidance about the benchmarks regulation. |
The Enforcement Guide (EG) |
The Enforcement Guide (EG) describes the FCA's12 approach to exercising the main enforcement powers given to it by the Act and by other legislation.2 12 |
Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG) and Financial Crime Thematic Reviews (FCTR)8 |
FCG and FCTR provide8guidance on steps that a firm can take to reduce the risk that it might be used to further financial crime. |
This table belongs to COLL 8.2.5 R
1 |
Description of the authorised fund |
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Information detailing: |
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(1) |
the name of the authorised fund; |
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(2) |
that the authorised fund is a qualified investor scheme; and |
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(3) |
in the case of an ICVC, whether the head office of the company is situated in England and Wales or Wales or Scotland or Northern Ireland. |
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3Property Authorised Investment Funds |
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1A |
For a property authorised investment fund, a statement that: |
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(1) |
it is a property authorised investment fund; |
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(2) |
no body corporate may seek to obtain or intentionally maintain a holding of more that 10% of the net asset value of the fund; and |
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(3) |
in the event that the authorised fund manager reasonably considers that a body corporate holds more than 10% of the net asset value of the fund, the authorised fund manager is entitled to delay any redemption or cancellation of units in accordance with 6A if the authorised fund manager reasonably considers such action to be: |
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(a) |
necessary in order to enable an orderly reduction of the holding to below 10%; and |
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(b) |
in the interests of the unitholders as a whole. |
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2 |
Constitution |
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The following statements: |
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(1) |
the scheme property of the scheme is entrusted to a depositary for safekeeping (subject to any exception permitted by the rules); |
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(2) |
if relevant, the duration of the scheme is limited and, if so, for how long; |
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(3) |
charges and expenses of the scheme may be taken out of scheme property; |
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(4) |
for an ICVC: |
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(a) |
what the maximum and minimum sizes of the scheme's capital are; and |
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(b) |
the unitholders are not liable for the debts of the company;5 6 |
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5(4A) |
for an ICVC which is an umbrella, a statement that the assets of a sub-fund belong exclusively to that sub-fund and shall not be used to discharge directly or indirectly the liabilities of, or claims against, any other person or body, including the umbrella, or any other sub-fund, and shall not be available for any such purpose;6 |
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6(4B) |
for a co-ownership scheme which is an umbrella, the property subject to a sub-fund is beneficially owned by the participants in that sub-fund as tenants in common (or, in Scotland, is the common property of the participants in that sub-fund) and must not be used to discharge any liabilities of, or meet any claims against, any person other than the participants in that sub-fund; |
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6(4C) |
for a limited partnership scheme, that the scheme prohibits pooling as is mentioned in section 235(3)(a) of the Act in relation to separate parts of the scheme property, with the effect that the scheme cannot be an umbrella; |
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(5) |
for an AUT: |
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(a) |
the trust deed: |
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(i) |
is made under and governed by the law of England and Wales, or the law of Scotland or the law of Northern Ireland; |
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(ii) |
is binding on each unitholder as if he had been a party to it and that he is bound by its provisions; and |
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(iii) |
authorises and requires the trustee and the manager to do the things required or permitted of them by its terms; |
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(b) |
subject to the provisions of the trust deed and all the rules made under section 247 of the Act (Trust scheme rules): |
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(i) |
the scheme (other than sums held to the credit of the distribution account) is held by the trustee on trust for the unitholders according to the number of units held by each unitholder or, where relevant, according to the number of individual shares in the scheme property represented by the units held by each unitholder; and |
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(ii) |
the sums standing to the credit of any distribution account are held by the trustee on trust to distribute or apply in accordance with COLL 8.5.15 R (Income); |
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(c) |
a Unitholder is not liable to make any further payment after he has paid the price of his units and that no further liability can be imposed on him in respect of the units he holds; and |
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(d) |
payments to the trustee by way of remuneration are authorised to be paid (in whole or in part) out of the scheme property; and6 6 |
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(6)6 |
for an ACS: |
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(a) |
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(i) |
is made under and governed by the law of England and Wales, or the law of Scotland or the law of Northern Ireland; |
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(ii) |
is binding on each unitholder as if he had been a party to it and that he is bound by its provisions; |
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(iii) |
authorises and requires the depositary and the authorised contractual scheme manager to do the things required or permitted of them by its terms; and |
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(iv) |
states that units may not be issued to a person other than a person7: |
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(A) |
who 7is a: |
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(i) |
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(ii) |
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(iii) |
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(B) |
to whom units in a qualified investor scheme may be promoted under COBS 4.12B.7R11; 77 |
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(v) |
states that the authorised contractual scheme manager of an ACS must redeemunits as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in (iv)(A) and (B); |
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(vi) |
states that for a co-ownership scheme: |
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(A) |
the scheme property is beneficially owned by the participants as tenants in common (or, in Scotland, is the common property of the participants); |
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(B) |
the arrangements constituting the scheme are intended to constitute a co-ownership scheme as defined in section 235A(2) of the Act; and |
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(C) |
the operator and depositary are required to wind up the scheme if directed to do so by the FCA in exercise of its power under section 261X (Directions) or section 261Z (Winding up or merger of master UCITS) of the Act; |
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(vii) |
states: |
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(A) |
whether the transfer of units in the ACS scheme or, for a co-ownership scheme which is an umbrella (sub-funds of which pursue differing policies in relation to transfer of units), in each particular sub-fund, is either: |
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(i) |
prohibited; or |
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(ii) |
allowed; |
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(B) |
where transfer of units is allowed by the scheme or, where appropriate the sub-fund, in accordance with (A)(ii), units may only be transferred in accordance with the conditions specified by FCArules, including that units may not be transferred to a person other than a person : 7 |
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(i) |
who 7is a: |
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(1) |
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(2) |
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(3) |
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(ii) |
to whom units in a qualified investor scheme may be promoted under COBS 4.12B.7R11; and 77 |
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(viii) |
states that for a limited partnership scheme, the scheme is not dissolved on any person ceasing to be a limited partner or nominated partner provided that there remains at least one limited partner; |
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(b) |
subject to the provisions of the contractual scheme deed and all the rules made under section 261I of the Act (Contractual scheme rules) and for the time being in force: |
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(i) |
the scheme property (other than sums standing to the credit of the distribution account) is held by, or to the order of, the depositary for and on behalf of the unitholders according to the number of units held by each unitholder or, where relevant, according to the number of individual shares in the scheme property represented by the units held by each unitholder; and |
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(ii) |
the sums standing to the credit of any distribution account are held by the depositary to distribute or apply them in accordance with COLL 8.5.15 R(Income); and |
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(c) |
a unitholder in a co-ownership scheme is not liable to make any further payment after he has paid the price of his units and that no further liability can be imposed on him in respect of the units he holds; |
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(d) |
a unitholder in a limited partnership scheme is not liable for the debts or obligations of the limited partnership scheme beyond the amount of the scheme property which is available to the authorised contractual scheme manager to meet such debts or obligations, provided that the unitholder does not take part in the management of the partnership business; |
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(e) |
the exercise of rights conferred on limited partners by FCA rules does not constitute taking part in the management of the partnership business; |
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(f) |
the limited partners, other than the nominated partner, are to be the participants in the scheme; and |
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(g) |
the operator of a co-ownership scheme is authorised to: |
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(i) |
acquire, manage and dispose of the scheme property; and |
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(ii) |
enter into contracts which are binding on unitholders for the purposes of, or in connection with, the acquisition, management or disposal of scheme property. |
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3 |
Investment objectives |
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A statement of the object of the scheme, in particular the types of investments and assets in which it and each sub-fund (where applicable) may invest and that the object of the scheme is to invest in property of that kind with the aim of spreading investment risk. |
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4 |
Units in the scheme |
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A statement of: |
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(1) |
the classes of units which the scheme may issue, indicating, for a scheme which is an umbrella, which class or classes may be issued in respect of each sub-fund; and |
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(2) |
the rights attaching to units of each class (including any provisions for the expression in two denominations of such rights). |
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5 |
Limitation on issue of and redemption of units |
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Details as to: |
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(1) |
the provisions relating to any restrictions on the right to redeem units in any class; and |
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(2) |
the circumstances in which the issue of the units of any particular class may be limited. |
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6 |
Income and distribution |
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Details of the person responsible for the calculation, transfer, allocation and distribution of income for any class of unit in issue during the accounting period. |
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3Redemption or cancellation of units on breach of law or rules |
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6A |
A statement that where any holding of units by a unitholder is (or is reasonably considered by the authorised fund manager to be) an infringement of any law, governmental regulation or rule, those units must be redeemed or cancelled. |
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7 |
Base currency |
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A statement of the base currency of the scheme. |
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8 |
Meetings |
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Details of the procedures for the convening of meetings and the procedures relating to resolutions, voting and the voting rights for unitholders. |
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9 |
Powers and duties of the authorised fund manager and depositary |
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Where relevant, details of any function to be undertaken by the authorised fund manager and depositary which the rules in COLL require to be stated in the instrument constituting the fund.8 8 |
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10 |
Termination and suspension |
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Details of: |
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(1) |
the grounds under which the authorised fund manager may initiate a suspension of the scheme and any associated procedures; and |
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(2) |
the methodology for determining the rights of unitholders to participate in the scheme property on winding up. |
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110A |
Investment in overseas2 property through an intermediate holding vehicle1 |
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If investment in an overseas2 immovable is to be made through an intermediate holding vehicle or a series of intermediate holding vehicles, a statement that the purpose of that intermediate holding vehicle or series of intermediate holding vehicles will be to enable the holding of overseas2 immovables by the scheme.1 |
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11 |
Other relevant matters |
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Details of those matters which enable the scheme, authorised fund manager or depositary to obtain any privilege or power conferred by the rules in COLL which is not otherwise provided for in the instrument constituting the fund.8 8 |
1 Deductions and Ratios (Items 10, 11 and 15) |
(a) |
[deleted]2 |
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(b) |
A firm2which is subject to a liquid capital requirement under IPRU-INV 5.4.1R may take into account qualifying subordinated loans in the calculation of liquid capital up to a maximum of 400% of its Tier 1 capital. |
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2 Non corporate entities |
(a) |
In the case of partnerships or sole traders, the following terms should be substituted, as appropriate, for items 1 to 4 in Tier 1 capital: |
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(i) |
partners' capital accounts (excluding loan capital); |
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(ii) |
partners' current accounts (excluding unaudited profits and loan capital); |
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(iii) |
proprietors' account (or other term used to signify the sole trader's capital but excluding unaudited profits). |
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(b) |
Loans other than qualifying subordinated loans shown within partners' or proprietors' accounts must be classified as Tier 2 capital under item 12. |
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(c) |
For the calculation of own funds, partners' current accounts figures are subject to the following adjustments in respect of a defined benefit occupational pension scheme: |
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(i) |
a firm must derecognise any defined benefit asset; |
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(ii) |
a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount. The election must be applied consistently in respect of any one financial year. |
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Note 1 |
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A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme. |
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2A Reserves |
For the calculation of own funds the following adjustments apply to the audited reserves figure: |
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(a) |
a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost; |
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(b) |
in respect of a defined benefit occupational pension scheme, a firm must derecognise any defined benefit asset; |
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(c) |
a firm may substitute for a defined benefit liability the firm's deficit reduction amount. The election must be applied consistently in respect of any one financial year. |
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Note 2 |
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A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme. |
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(d) |
a firm must not include any unrealised gains from investment property. |
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Note 3 |
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Unrealised gains from investment property should be reported as part of revaluation reserves. |
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(e) |
where applicable, a firm must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but exclude from the deduction or addition any asset or liability which will give rise to future cash flows), together with any associated deferred tax. |
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Note 4 |
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Reserves must be audited unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
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3 Intangible assets (Item 6) |
Intangible assets comprise: |
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(a) |
formation expenses to the extent that these are treated as an asset in the firm's accounts; |
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(b) |
goodwill, to the extent that it is treated as an asset in the firm's accounts; and |
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(c) |
other assets treated as intangibles in the firm's accounts. |
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Intangible assets do not include a deferred acquisition cost asset. |
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4 Material current year losses (Item 7) |
Losses in current year operating figures must be deducted when calculating Tier 1 capital if such losses are material. For this purpose profits and losses must be calculated quarterly or monthly, as appropriate. If this calculation reveals a net loss it shall only be deemed to be material for the purposes of this Table if it exceeds 10 per cent of the firm's Tier 1 capital. |
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5 Material holdings in credit and financial institutions (Item 8) |
Material holdings comprise: |
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(a) |
where the firm holds more than 10 per cent of the equity share capital of the institution, the value of that holding and the amount of any subordinated loans to the institution and the value of holdings in qualifying capital items or qualifying capital instruments issued by the institution; |
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(b) |
in the case of holdings other than those mentioned in (a) above, the value of holdings of equity share capital in, and the amount of subordinated loans made to, such institutions and the value of holdings in qualifying capital items or qualifying capital instruments issued by such institutions to the extent that the total of such holdings and subordinated loans exceeds 10 per cent of the firm'sown funds calculated before the deduction of item 8. |
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6 Long term qualifying subordinated loans (Item 11) |
Loans having the characteristics prescribed by IPRU-INV 5.6.1R may be included in item 11, subject to the limits set out in paragraph (1) above. |
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7 Qualifying arrangements (Item 13) |
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A firm2 may only include qualifying undertakings in its calculation of liquid capital if: |
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(i) |
it maintains liquid capital equivalent to 6/52 of its annual expenditure in a form other than qualifying undertakings; and |
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(ii) |
the total amount of all qualifying undertakings plus qualifying subordinated loans does not exceed the limits set out in paragraph (1)(b) above. |
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8 Net trading book profits (Item 14) |
Unaudited2 profits can be included at item 14. |
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This Item must not be included in the liquid capital calculation of a firm whose permitted business includes establishing, operating or winding up a personal pension scheme. |
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Note 5 |
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Non-trading book interim profits may only be included in Tier 1 of the calculation if they have been independently verified by the firm’s external auditors, unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
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For this purpose, the external auditor should normally undertake at least the following: |
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(a) |
satisfy himself that the figures forming the basis of the interim profits have been properly extracted from the underlying accounting records; |
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(b) |
review the accounting policies used in calculating the interim profits so as to obtain comfort that they are consistent with those normally adopted by the firm in drawing up its annual financial statements; |
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(c) |
perform analytical review procedures on the results to date, including comparisons of actual performance to date with budget and with the results of prior periods; |
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(d) |
discuss with management the overall performance and financial position of the firm; |
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(e) |
obtain adequate comfort that the implications of current and prospective litigation, all known claims and commitments, changes in business activities and provisions for bad and doubtful debts have been properly taken into account in arriving at the interim profits; and |
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(f) |
follow up problem areas of which the auditors are already aware in the course of auditing the firm’s financial statements. |
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A firm wishing to include interim profits in Tier 1 capital in a financial return should submit to the FCA with the financial return a verification report signed by its external auditor which states whether the interim results are fairly stated, unless the firm is exempt from the provisions of Part VII of the Companies Act 198 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
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Profits on the sale of capital items or arising from other activities which are not directly related to the investment business of the firm may also be included within the calculation of liquid capital, but (unless the firm is exempt as above) only if they can be separately verified by the firm’s auditors. In such a case, such profits can form part of the firm’s Tier 1 capital as profits. |
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9 Short term qualifying subordinated loans (Item 15) |
Loans having the characteristics prescribed by IPRU-INV 5.6.3R may be included in item 15 subject to the limits set out in paragraph (1) above. Tier 2 capital which exceeds the ratios prescribed by paragraph (1)(a) and (b) may be included in item 15 subject to paragraph (1) above. |
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10 Illiquid assets (Item 16) |
Illiquid assets comprise: |
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(a) |
tangible fixed assets. |
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Note 6 |
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In respect of tangible fixed assets purchased under finance leases the amount to be deducted as an illiquid asset shall be limited to the excess of the asset over the amount of the related liability shown on the balance sheet. |
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(b) |
holdings in, including subordinated loans to, credit or financial institutions which may be included in the own funds of such institutions unless they have been deducted under item 8; |
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(c) |
any investment in undertakings other than credit institutions and other financial institutions where such investments are not readily realisable; |
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(d) |
any deficiency in net assets of a subsidiary; |
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(e) |
deposits not available for repayment within 90 days or less (except for payments in connection with margined futures or options contracts); |
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Note 7 |
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Where cash is placed on deposit with a maturity of more than 90 days but is repayable on demand subject to the payment of a penalty, then this is not required to be deducted as an illiquid asset but a deduction is required for the amount of the penalty. |
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(f) |
loans, trade and3 other debtors and accruals not falling due to be repaid within 90 days or which are more than one month overdue by reference to the contractual payment date; |
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(g) |
physical stocks (except where subject to the position risk requirement as set out in IPRU-INV 5.11; and |
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(h) |
prepayments to the extent that the period of prepayment exceeds six weeks in the case of a firm subject to the 6/52 expenditure based requirement or thirteen weeks in the case of a firm subject to the 13/52 expenditure based requirement. |
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(i) |
if not otherwise covered, any holding in eligible capital instruments of an insurance undertaking, insurance holding company, or reinsurance undertaking that is a subsidiary or participation. Eligible capital instruments include ordinary share capital, cumulative preference shares, perpetual securities and long-term subordinated loans that are eligible for insurance undertakings under INSPRU 1. |
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Illiquid assets do not include a defined benefit asset or a deferred acquisition cost asset. |
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11 Qualifying property (Item 17) |
This item comprises the qualifying amount calculated in accordance with IPRU-INV 5.7.1R. |
Table: Disapplied or modified modules or provisions of the Handbook
Module |
Disapplication or modification |
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Senior Management Arrangements, Systems and Control sourcebook (SYSC) [FCA] |
SYSC 6.1.4C R (requirement of debt management firm or credit repair firm to appoint a compliance officer) does not apply to a firm with an interim permission. SYSC 6.3.8 R (responsibility for anti-money laundering systems and controls) does not apply to a firm with only an interim permission. SYSC 6.3.9 R (requirement to appoint a money laundering reporting officer) does not apply to a firm with only an interim permission. |
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Fees manual (FEES) [FCA] |
The Fees manual does not apply in respect of the fee provided for in FEES 8.1.1R (1), except for the rules and guidance in FEES 2.3 and FEES 8.1. |
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Guidance applies with necessary modifications to reflect Chapter 4 of Part 8 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013 (see Note 1). |
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Note 1 |
A firm is treated as having an interim permission on and after 1 April 2014 to carry on credit-related regulated activity4 or operating an electronic system in relation to lending5 under the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013 if it met the conditions set out in Chapter 4 of Part 8 of that Order. Section 55B(3) of the Act (satisfaction of threshold conditions) does not require the FCA or PRA to ensure that the firm will satisfy, and continue to satisfy, in relation to the credit-related regulated activities4 or operating an electronic system in relation to lending5 for which it has an interim permission, the threshold conditions for which that regulator is responsible. The FCA or PRA can, however, exercise its power under section 55J of the Act (variation or cancellation on initiative of regulator) or under section 55L of the Act (in the case of the FCA) or section 55M of the Act (in the case of the PRA) (imposition of requirements by the regulator) in relation to a firm if, among other things, it appears to the FCA or PRA that the firm is failing, or is likely to fail, to satisfy the threshold conditions in relation to the credit-related regulated activities4 or operating an electronic system in relation to lending5 for which it has an interim permission for which the regulator is responsible. The guidance4 in COND should be read accordingly. 4444 |
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CASS does not apply with respect to credit-related regulated activity to a firm with7: (1) only an interim permission; or (2) an interim permission that is treated as a variation of permission; if the firm acts in accordance with the provisions of paragraphs 3.42 and 3.43 of the Debt management (and credit repair services) guidance (OFT366rev) previously issued by the Office of Fair Trading, as they were in effect immediately before 1 April 2014. 77577 |
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SUP 3 (Auditors), SUP 10A (FCA Approved persons), SUP 10C (FCA senior managers11 regime for approved persons in SMCR firms11) and SUP 12 (Appointed representatives) (see Note 2) do not apply: (1) to a firm with only an interim permission; or (2) with respect to a credit-related regulated activity or operating an electronic system in relation to lending5 for which a firm has an interim permission that is treated as a variation of permission,7 except that SUP 3.10 and SUP 3.11 apply to a firm in relation to its designated investment business that comprises operating an electronic system in relation to lending.7 87 |
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Note 2 |
A firm may not be a principal in relation to a regulated activity for which it has interim permission. A firm with interim permission may, however, be an appointed representative in relation to a regulated activity which it does not have interim permission to carry on (article 59 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013). |
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SUP 6 (Applications to vary and cancel Part 4A permission and to impose, vary or cancel requirements) applies: (1) with necessary modifications to reflect Chapter 4 of Part 8 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013 (see Note 3); (2) with the modifications to SUP 6.3.15D9 and SUP 6.4.5D9 set out in paragraph 1.2 of this Schedule. |
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Note 3 |
If a firm with interim permission applies to the appropriate regulator under section 55A of the Act for Part 4A permission to carry on a regulated activity or under section 55H or 55I of the Act to vary a Part 4A permission that the firm has otherwise than by virtue of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013 by adding a regulated activity to those to which the permission relates, the application may be treated by the appropriate regulator as relating also to some or all of the regulated activities for which the firm has interim permission. |
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SUP 11 (Controllers and close links) does not apply to a firm with only an interim permission (see Note 4). |
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Note 4 |
A firm is not to be regarded as an authorised person for the purposes of Part 12 of the Act (control over authorised person) if it has only an interim permission (see article 59 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013). |
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For a firm with only an interim permission (1) SUP 15.5.1 R, SUP 15.5.2 G, SUP 15.5.4 R, SUP 15.5.5 R are modified so that the words "reasonable advance", "and the date on which the firm intends to implement the change of name" and "and the date of the change" are omitted; and (2) SUP 15.7.1 R, SUP 15.7.4 R and SUP 15.7.5A R are modified so that a notification of a change in name, address or telephone number must be made using the online Consumer Credit Interim Permissions system available on the FCA's website. (3) If in a notification to the FCA the firm is required to enter its FRN number it must include it interim permission number. |
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SUP 16 (Reporting requirements) does not apply to a firm with only an interim permission except for SUP 16.14.10 7776 |
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SUP 16.11 and SUP 16.12 apply to a firm, which was an authorised person immediately before 1 April 2014, with an interim permission that is treated as a variation of permission with respect to credit-related regulated activity or operating an electronic system in relation to lending5 as if the changes to SUP 16.11 and SUP 16.12 effected by the Consumer Credit (Consequential and Supplementary Amendments) Instrument 2014 had not been made.10 6 |
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DISP 1.10 (Complaints reporting rules) and DISP 1.10A (Complaints data publication rules) do not apply to a person with only an interim permission. |
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DISP 1.10 (Complaints reporting rules) and DISP 1.10A (Complaints data publication rules) apply to a firm, which was an authorised person immediately before 1 April 2014, with an interim permission that is treated as a variation of permission with respect to credit-related regulated activity or operating an electronic system in relation to lending5 as if the changes to DISP 1.10 and DISP 1.10A effected by the Consumer Credit (Consequential and Supplementary Amendments) Instrument 2014 had not been made. |
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CONC 10 (Prudential requirements for debt management firms) does not apply: (1) to a firm with only an interim permission; or (2) with respect to credit-related regulated activity or operating an electronic system in relation to lending5 for which a firm has an interim permission that is treated as a variation of permission. |
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For a firm only with an interim permission, PERG 5.11.13 G is modified so that following the words "which does not otherwise consist of carrying on regulated activities" is added "(other than a regulated activity carried on by a firm only with an interim permission listed in article 59A of the Financial Services and Markets Act 2000 (Regulated Activities)(Amendment)(No.2) Order 2013 (SI 2013/1881) which is to be disregarded for this purpose)". Article 59A enables a firm with only an interim permission which would be able to benefit from article 72B of the Regulated Activities Order, but for carrying on the new consumer credit regulated activities to continue to do so. |