SUP 6.3 Applications for variation of permission and/or imposition, variation or cancellation of requirements

Under section 55H of the Act, an FCA-authorised person may apply to the FCA to vary its Part 4A permission to:

1. (1)

   allow it to carry on further regulated activities, other than a PRA-regulated activity; or

2. (2)

   reduce the number of regulated activities it is permitted to carry on; or

3. (3)

   vary the description of its regulated activities (including by the removal or variation of any limitations).

Under section 55I of the Act, an FCA-authorised person may apply to the PRA to vary its Part 4A permission to add regulated activities which include a PRA-regulated activity.

Under section 55L(5) of the Act a firm with a Part 4A permission may apply to the FCA for the imposition of a new requirement and/or the variation or cancellation of any requirement previously imposed by the FCA.

An application may relate to one or more of SUP 6.3.1A G and SUP 6.3.2A G. For example, a firm may apply to vary its Part 4A permission to add a new regulated activity and at the same time remove a regulated activity for which it currently has permission.

In applying for a variation of Part 4A permission, a branch of a firm from outside the UK should be mindful of any continuing requirements referred to in the rest of the Handbook.

In determining the activities and specified investments for which a Part 4A permission is required, and whether to apply for a variation of that permission, a firm may need to take professional advice and may also wish to discuss this with its appropriate supervisory contact.

Before applying to vary its permission, a firm should determine whether there are any statutory restrictions that do not allow combinations of certain types of regulated activity, particularly for insurance business or result matched startUCITS managersresult matched end. For example, the PRA will not grant a variation of Part 4A permission to allow a friendly society to carry on reinsurance business as this is not permitted under the Friendly Societies Acts 1974 and 1992. A firm should discuss its plans with its appropriate supervisory contact.

If a firm is seeking a variation of Part 4A permission to add categories of regulated activities, it should be mindful of the requirements referred to at SUP 6.3.42 G relating to the need to commence new activities within 12 months.

If a firm wishes to cease carrying on an activity for which it has Part 4A permission, it will usually apply to vary its Part 4A permission to remove that activity. If a firm wishes to cease carrying on an activity in relation to any specified investment, it will usually apply to vary its Part 4A permission to remove that specified investment from the relevant activity.

1. (1)

   Where a firm is submitting an application for variation of Part 4A permission which would lead to a change in the controlled functions of its approved persons, it should, at the same time and as appropriate:

   1. (a)

      make an application for an internal transfer of an approved person, Form E (Internal transfer of a person performing a controlled function), or make an application for an individual to perform additional controlled functions, the relevant Form A (Application to perform senior management functions); see:

      1. (i)

         SUP 10A.13.3D to SUP 10A.13.5G (for a firm that has appointed representatives);

      2. (ii)

         SUP 10C.10 (for an SMCR firm); or

      3. (iii)

         the corresponding PRA requirements;

   2. (b)

      notify the FCA or PRA of any approved person who has ceased to perform a controlled function specified by that regulator, Form C (Notice of ceasing to perform controlled functions (including senior management functions)); see:

      1. (i)

         SUP 10A.14 (for a firm that has appointed representatives);

      2. (ii)

         SUP 10C.14 (for an SMCR firm); or

      3. (iii)

         the corresponding PRA requirements.

2. (2)

   If the firm intends to recruit new individuals to perform controlled functions, it should apply for approval of the individuals as approved persons as soon as possible using Form A (Application to perform senior management functions); see:

   1. (a)

      SUP 10A.13 (for a firm that has appointed representatives);

   2. (b)

      SUP 10C.10 (for an SMCR firm); or

   3. (c)

      the corresponding PRA requirements.

A variation of a firm’s Part 4A permission may mean that it becomes an SMCR firm or that it changes from one type of SMCR firm to another. This would have a number of significant consequences, which include:

1. (1)

   the application of the special powers in relation to misconduct by approved persons (see DEPP 6.2.9-AG);

2. (2)

   the senior managers regime in SUP 10C applies;

3. (3)

   COCON applies to its staff; and

4. (4)

   the other elements of the regime for SMCR firms described in SYSC 23.4 (Overview of the senior managers and certification regime) apply (which differ depending on the type of SMCR firm).

5. (5)

   [deleted]

6. (6)

   [deleted]

A firm with Part 4A permission to carry on insurance business, which is applying for a variation of its Part 4A permission to add further insurance activities or specified investments, will be required to submit particular information on its existing activities as part of its application. This includes the scheme of operations which is required to be submitted as part of the application pack (for further details on the scheme of operations, see SUP App 2 (Insurers: scheme of operations)).

In applying to vary its Part 4A permission to add categories of specified investments, in relation to insurance business, a firm carrying on insurance business will need to determine the classes of specified investments relating to effecting and carrying out contracts of insurance for which variation of Part 4A permission will be necessary, having regard to whether certain classes of contract may qualify to be effected or carried out on an ancillary or supplementary basis.

The application for variation of Part 4A permission will need to provide information about the classes of contract of insurance for which variation of Part 4A permission is requested and also those classes qualifying to be carried on, on an ancillary or supplementary basis. For example, an insurer applying to vary its permission to include class 10 (motor vehicle liability, other than carrier's liability) must satisfy the FCA that it will meet, and continue to meet, threshold condition 3F(Appointment of claims representatives). Firms should note that, although the relevant regulator is able in principle to use its power to give Part 4A permission for an applicant to carry on a regulated activity for which it did not originally apply, this is not possible under the Solvency II Directive, which sets out minimum information requirements for an application for authorisation including information on the specified investments the applicant proposes to deal in.

1. (1)

   If the online notification and application system fails and online submission is unavailable for 24 hours or more, the relevant regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 6.3.15 D (4) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.

2. (2)

   Where SUP 6.3.15 D (4) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

1. (1)

   Section 55(U)(2) of the Act (Applications under this Part) requires that the application for variation of Part 4A permission must contain a statement:

   1. (a)

      of the desired variation; and

   2. (b)

      of the regulated activity or regulated activities which the firm proposes to carry on if its permission is varied.

2. (1A)

   Section 55(U)(3) of the Act requires that an application for variation of a requirement imposed under section 55L or 55M or the imposition of a new requirement must contain a statement of the desired variation or requirement.

3. (2)

   The full form and content of the application for variation of Part 4A permission or for the imposition or variation of a requirement is a matter for direction by the relevant regulator, who will determine the additional information and documentation required on a case by case basis.

1. (1)

   [deleted]

2. (2)

   A firm is advised to discuss its application with the relevant regulator before submission, particularly if it is seeking a variation of Part 4A permission or imposition, variation or cancellation of a requirement within a short timescale. A firm is also advised to include as much detail as possible (including any additional information identified by its supervisors at this stage) with its application.

The relevant regulator, as soon as possible after receipt of an application, will advise the firm of any additional information which is required as part of its application (see SUP 6.3.23 G to SUP 6.3.27 G). The amount of information required will vary depending on the scale of the variation in the context of the firm as a whole, and the nature, risk profile and complexity of the variation.

A firm which is making an application for variation of Part 4A permission to wind down (run off) its business before applying for a cancellation of that permission (see SUP 6.2.9 G) should read SUP 6 Annex 4 for details of the additional procedures that apply.

In certain cases, the relevant regulator may consider that granting an application for imposition, variation or cancellation of any requirement or for variation of Part 4A permission which includes adding further regulated activities or changing a limitation would cause a significant change in the firm's business or risk profile. In these circumstances, the relevant regulator may require the firm to complete appropriate parts of the full application pack (see the relevant regulator's website ), as directed by the relevant regulator. Applications for variation involving significant changes may be processed by the firm's appropriate supervisory contact in conjunction with the Authorisations Team. Examples of an application for imposition, variation or cancellation of a requirement and for variation of Part 4A permission which may represent a significant change include, but are not limited to, an application:

1. (1)

   to carry on new regulated activities such as accepting deposits;

2. (2)

   to extend the insurance business of a firm which already has Part IV permission which includes carrying out or effecting contracts of insurance (or both), to new classes of specified investment; or

3. (3)

   to remove a requirement preventing a firm from holding or controlling client money.

4. (4)

   [deleted]

A firm that wishes to make a significant change to its business, or is unsure whether the changes it is proposing would be considered to be significant, should contact the relevant regulator. The relevant regulator will discuss with the firm whether it will be required to submit parts of the application pack and whether any reports from third parties may be required.

The fees payable for a firm applying for the imposition, variation or cancellation of any requirements and/or a variation of its Part 4A permission are set out in FEES 3.

1. (1)

   The relevant regulator may ask for any information it reasonably requires before determining the application. The information required will be determined on a case by case basis, taking into account the relevant regulator's existing knowledge of the firm and the change requested. The relevant regulator will advise the firm of the information required at an early stage in the application process.

2. (2)

   The nature of the information and documents requested will be related to the risks posed to the relevant regulator's statutory objectives by the regulated activities and any unregulated activities that the firm is carrying on or is seeking to carry on. This information will be proportional to the nature of the business which the firm intends to carry on or the risks posed by the firm.

1. (1)

   The information the relevant regulator may require includes, but is not limited to, the examples given in SUP 6.3.25 G:

Specific information may also be required by the relevant regulator on the activities the firm intends to cease, or cease carrying on in relation to any specified investments (see SUP 6 Annex 4).

When determining whether to grant an application, the relevant regulator may request further information, including reports from third parties such as the firm's auditors, and may require meetings with, and visits to, the firm. The relevant regulator may also require a statement from members of the firm's governing body confirming, to the best of their knowledge, the completeness and accuracy of the information supplied. The relevant regulator may also discuss the application with other regulators or exchanges.

1. (1)

   The relevant regulator is required by section 55B(3) of the Act to ensure that a firm applying to gain or vary a Part 4A permission or to impose or vary a requirement satisfies and will continue to satisfy the threshold conditions in relation to all the regulated activities for which the firm has or will have a Part 4A permission.

2. (2)

   [deleted]

Where a firm applies to the PRA for the variation of its Part 4A permission, the FCA, in giving consent to such an application or imposing any requirements on the firm, is required by section 55B(3) of the Act to ensure that the firm satisfies and will continue to satisfy the threshold conditions for which the FCA is responsible in relation to all the regulated activities for which the firm has or will have Part 4A permission after the variation.

1. (1)

   The FCA's duty under section 55B(3) of the Act does not prevent it, having regard to that duty, from taking such steps as it considers necessary in relation to a particular firm, to meet any of its operational objectives. This may include granting or consenting to (as the case may be) a firm's application for variation of Part 4A permission when it wishes to wind down (run off) its business activities and cease to carry on new business as a result of no longer being able to satisfy the threshold conditions.

2. (2)

   The FCA may refuse an application, or refuse to give its consent to an application, under section 55B(3) of the Act if it considers that it is desirable to do so in order to advance any of its operational objectives.

In determining whether the firm satisfies and continues to satisfy the threshold conditions, the regulator concerned will consider whether the firm is ready, willing and organised to comply with the regulatory requirements it will be subject to if the application is granted.

The specific requirements that apply to certain types of activity will also need to be considered as these may not allow certain combinations of activity.

In considering whether to grant (or consent to, as the case may be) a firm's application to vary its Part 4A permission or impose or vary a requirement, the regulator concerned will also have regard, under section 55R(1) of the Act (Persons connected with an applicant), to any person appearing to be, or likely to be, in a relationship with the firm which is relevant. The Financial Groups Directive Regulations make special consultation provisions where the regulator is exercising its functions under Part 4A of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary supervision. Broadly, where a regulator, in the course of carrying on supplementary supervision, is considering varying the Part 4A permission of a person who is a member of a group which is a financial conglomerate, the consultation provisions in section 55R(2) of the Act are disapplied. In their place, the regulations impose special obligations, linked to the Financial Groups Directive, to obtain the consent of the relevant competent authorities, to consult those authorities and to consult with the group itself.

The FCA's power to vary a Part 4A permission after it receives an application from a firm extends to including in the Part 4A permission as varied any provision that could be included as though a fresh permission was being given in response to an application under section 55A of the Act (Application for permission). Under section 55E of the Act (Giving permission: the FCA) the FCA may:

1. (1)

   incorporate in the description of a regulated activity such limitations (for example, as to the circumstance in which a regulated activity may or may not be carried on) as it considers appropriate; or

2. (2)

   specify a narrower or wider description of regulated activity than that to which the application relates; or

3. (3)

   give permission for the carrying on of a regulated activity which is not included among those to which the application relates and is not a PRA-regulated activity.

Thus, when determining an application for variation of Part 4A permission, the FCA can, include new limitations and vary existing limitations, either on application from the firm (for example, the customer categories with which a firm may carry on a specified activity) or, if considered appropriate, by the FCA under section 55E(5) of the Act.

If a firm has applied (whether to the FCA or the PRA) for the variation of a Part 4A permission, the FCA has the power to impose on that person such requirements, taking effect on or after the variation of permission, as the FCA considers appropriate.

If limitations are varied or imposed or requirements are imposed by the relevant regulator which were not included in the firm's application for variation of Part 4A permission, the relevant regulator will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

Where a firm has made an application to the PRA for the variation of its Part 4A permission and requirements are imposed by the FCA which were not included in the firm's application, the FCA will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

Under section 55V(1) of the Act (Determination of applications), the relevant regulator has six months to consider a completed application from the date of receipt.

If the relevant regulator receives an application which is incomplete (that is, if information or a document required as part of the application is not provided), section 55V(2) of the Act requires the relevant regulator to determine that incomplete application within 12 months of the initial receipt of the application.

Where the application cannot be determined by the PRA without the consent of the FCA, section 55V(3) of the Act requires that the FCA's decision must also be made within the period required in SUP 6.3.35 G or SUP 6.3.36 G as appropriate.

Within these time limits, however, the length of the process will relate directly to the complexity of the application.

The FCA publishes standard times on its website setting out how long the application process is expected to take. From time to time, the FCA also publishes its performance against these times.

At any time after receiving an application and before determining it, the relevant regulator may require the applicant to provide additional information or documents. The circumstances of each application will dictate what additional information or procedures are appropriate.

If the relevant regulator fails to determine an application within the time period specified in section 55V of the Act, this does not mean that the application is deemed to be granted.

A decision to grant an application will be taken by appropriately experienced staff at the relevant regulator. However, if the staff dealing with the application recommend that a firm's application for variation of Part 4A permission be either refused or granted subject to limitations or requirements or a narrower description of regulated activities than applied for, the decision will be subject to the regulator's formal decision making process.

DEPP gives guidance on the FCA's decision making procedures including the procedures it will follow if it proposes to refuse an application for variation of Part 4A permission or for imposition or variation of a requirement either in whole or in part (for example, an application granted by the FCA but subject to limitations or requirements not applied for).

If the variation ofPart 4A permission is given, the relevant regulator will expect a firm to commence a new regulated activity in accordance with its business plan (revised as necessary to take account of changes during the application process) or scheme of operations for an insurer. Firms should take this into consideration when determining when to make an application to the relevant regulator.

1. (1)

   Firms should be aware that the appropriate regulator may exercise its own-initiative variation power or, in respect of FCA-authorised persons , the FCA may exercise its additional own-initiative variation power , in each case to vary or cancel their Part 4A permission (see section 55J of the Act (Variation or cancellation on initiative of regulator) and Schedule 6A to the Act (Variation or cancellation of Part 4A permission on initiative of FCA : additional power)) if the firm does not:

   1. (a)

      commence a regulated activity for which they have Part 4A permission within a period of at least 12 months from the date of being given permission to carry on that particular activity;

   2. (b)

      carry on a particular regulated activity for which they have Part 4A permission for a period of at least 12 months (irrespective of the date of grant); or

   3. (c)

      respond, in the manner or by taking the steps directed by the FCA , to notices given by the FCA under paragraph 2 of Schedule 6A to the Act , which notices are given on the basis that it appears to the FCA that the relevant firm is carrying on no regulated activity to which its permission relates (for detail on the circumstances in which such notices may be issued, see SUP 7.2.2AG to SUP 7.2.2DG and SUP 7.2.3AG ).

2. (1A)

   The appropriate regulator may exercise its own-initiative variation power to cancel an investment firm's Part 4A permission if the investment firm has provided or performed no investment services and activities at any time during the period of six months ending with the day on which the warning notice under section 55Z(1) of the Act is given (see SUP 6B ) and, if the investment firm is an FCA-authorised person , note also the FCA’s additional own-initiative variation power .

   [ Note: article 8(a) of MiFID ]

3. (2)

   [deleted]

When a firm commences new regulated activities following a variation of a Part 4A permission, it should have particular regard to the requirements of Principle 11 (Relations with regulators) (see SUP 15.3.8 G (1)(c)).