SUP 6.2 Introduction

A firm authorised under Part 4A of the Act (Permission to carry on regulated activity) has a single Part 4A permission granted by the FCA or the PRA. A firm's Part 4A permission specifies all or some of the following elements (see PERG 2 Annex 2 (Regulated activities and the permission regime) and the information online at the FCA and PRA websites):

1. (1)

   a description of the activities the firm may carry on, including any limitations;

2. (2)

   the specified investments involved; and

3. (3)

   if appropriate, requirements.

Under section 20(1) and 20(1A) of the Act (Authorised persons acting without permission), a firm is prohibited from carrying on a regulated activity in the United Kingdom (or purporting to do so) otherwise than in accordance with its permission.

If an FCA-authorised person wishes to change its Part 4A permission to:

1. (1)

   add a regulated activity, other than a PRA-regulated activity; or

2. (2)

   remove a regulated activity from those to which the permission relates; or

3. (3)

   vary the description of a regulated activity to which the permission relates; or

4. (4)

   cancel the permission;

it can apply to the FCA under section 55H of the Act (Variation by FCA at request of authorised person).

If an FCA-authorised person wishes to change its Part 4A permission, by adding to the regulated activities to which the permission relates one or more regulated activities, which include a PRA-regulated activity, it can apply to the PRA under section 55I of the Act (Variation by PRA at request of authorised person). The PRA can determine such an application only with the consent of the FCA.

If a firm with a Part 4A permission wishes the FCA to:

1. (1)

   impose a new requirement; or

2. (2)

   vary a requirement imposed by the FCA; or

3. (3)

   cancel such a requirement;

it can apply to the FCA under section 55L(5) of the Act (Imposition of Requirements by FCA).

A firm intending to expand its business should assess, taking appropriate professional advice where necessary, whether it will need to make an application in accordance with SUP 6 before making any changes to its business.

If a firm intends to transfer its business to a different legal entity it will need to apply to the relevant regulator for cancellation of its Part 4A permission and the entity to which the business is to be transferred will need to apply for a Part 4A permission.

SUP 6.2.5 G sets out the differences between these types of applications and the circumstances in which they should be made.

A firm which is seeking:

1. (1)

   to vary its Part 4A permission substantially; or

2. (2)

   to cancel its Part 4A permission; or

3. (3)

   the imposition of a new requirement and/or the variation or cancellation of any existing requirement;

should discuss its plans with its supervisory contact at the relevant regulator as early as possible before making an application, in order to comply with Principle 11 (see SUP 15.3.7 G). These discussions will help the relevant regulator and the firm to agree the correct approach for the firm.

If a firm intends to cease carrying on one or more regulated activities permanently, it should give prompt notice to the appropriate regulator to comply with Principle 11 (see SUP 15.3.8 G (1)(d)). A firm should consider whether it needs to notify the appropriate regulator before applying to vary or cancel its Part 4A permission.

Discussions with the appropriate regulator are particularly relevant where the firm has to discharge obligations to its customers or policyholders before it can cease carrying on a regulated activity. This may be the case, for example, where the firm is an insurer, a bank, a dormant asset fund operator, or, as is often the case, holding client money or customer assets.

If an insurer, a bank or a dormant asset fund operator wishes to cease carrying on all regulated activities for which it has Part 4A permission, it will usually be necessary to wind down the business over a long term period which is normally more than six months. This may also be the case for a firm holding client money or customer assets. In these circumstances, it will usually be appropriate for the firm to apply for variation of its Part 4A permission and/or imposition of a new requirement, variation of any existing requirement or cancellation of such a requirement before commencing the wind-down. A firm should only make an application for cancellation of permission when it expects to complete its wind-down (run-off) within six months.

A firm which is winding down (running off) its activities should contact its supervisory contact at the appropriate regulator to discuss its circumstances. Discussions will focus on the firm's winding down plans and the need for the firm to vary or cancel itsPart 4A permission and/or the need to impose a new requirement, vary any existing requirement or cancel such a requirement. Following these discussions the firm should usually make the relevant application, as appropriate.

In certain circumstances the FCA and/or the PRA may use their own-initiative powers or the FCA may use its additional own-initiative variation power (see SUP 7 and SUP 6B (Variation and cancellation of permission and imposition of requirements on the FCA's own initiative and intervention against incoming firms)).

1. (1)

   Specific guidance on the additional procedures for a firm winding down (running off) its business in the circumstances discussed in SUP 6.2.8 G is in SUP 6 Annex 4.

2. (2)

   The guidance in SUP 6 Annex 4 applies to any firm that is applying for variation of Part 4A permission or for the imposition, variation or cancellation of a requirement before it applies for cancellation of Part 4A permission to enable it to wind down (run off) its business over a long term period of six months of more. It will apply to most insurers and banks and, in some circumstances, to firms holding client money or customer assets.

3. (3)

   If a firm wishes to cease carrying on some of its regulated activities, or the specified investments in respect of which the activities are carried on, the appropriate regulator may consider it appropriate for the firm to comply with the additional procedures in SUP 6 Annex 4. This would depend on the scale and nature of the regulated activities concerned. This might be the case, for example, if the firm is ceasing a significant part of its business in respect of which it has outstanding obligations to customers and it is believed that the additional procedures would protect consumers.

A firm making an application in accordance with SUP 6 which requires any approval from the Society of Lloyd's should apply to the Society for this at the same time as applying to the relevant regulator. See SUP 6 Annex 4 for additional procedures.