SUP 7.2 The FCA’s powers to set individual requirements and limitations and cancel Part 4A permissions on its own initiative

The FCA has the power under section 55J of the Act and, in respect of FCA-authorised persons, Schedule 6A to the Act to vary or cancel a firm's Part 4A permission and/or, under section 55L of the Act, to impose a requirement on a firm. Varying a firm’s Part 4A permission can include removing one or more regulated activities from those to which the Part 4A permission relates, varying the description of such an activity and/or imposing a limitation on that Part 4A permission.

The circumstances in which the FCA may vary or cancel a firm's Part 4A permission on its own initiative or impose a requirement on a firm under sections 55J or 55L of the Act include where it appears to the FCA that:

1. (1)

   one or more of the threshold conditions for which the FCA is responsible is or is likely to be no longer satisfied by the firm; or

2. (2)

   it is desirable to vary or cancel a firm's permission in order to meet any of the FCA's statutory objectives under the Act; or

3. (3)

   a firm has not carried out one or more regulated activities to which its Part 4A permission applies for a period of at least 12 months, in which case those activities may be removed from the permission.

The FCA may also decide to vary or cancel an FCA-authorised person’s Part 4A permission on its own initiative under Schedule 6A to the Act:

1. (1)

   if that person appears to the FCA not to be carrying on any regulated activity to which the permission relates, including, without restriction, if the person has failed to:

   1. (a)

      pay a periodic fee or levy under the Handbook; or

   2. (b)

      provide the FCA with information required under the Handbook; and

2. (2)

   if that person, when served by the FCA with two notices under paragraph 2 of Schedule 6A, has not:

   1. (a)

      responded in the manner directed, in those notices or otherwise, by the FCA; nor

   2. (b)

      taken other steps as may also be so directed by the FCA;

   the second of which notices will specify any proposed variation and its effective date or the effective date of the proposed cancellation.

1. (1)

   The FCA, having served on the relevant firm notices under paragraph 2 of Schedule 6A to the Act, as described in SUP 7.2.2AG, must serve notice, under paragraph 3 of Schedule 6A, on the firm of its subsequent decision whether or not to vary or cancel.

2. (2)

   If the FCA decides to vary or cancel, the notice served under paragraph 3 must specify any variation and the date on which the variation or cancellation takes effect.

3. (3)

   The FCA may publish, on the Financial Services Register and otherwise, notices it serves under paragraph 2 or 3 of Schedule 6A to the Act and will record on the Financial Services Register any such variation or cancellation.

Apart from the circumstances described in SUP 7.2.2AG(1), the FCA may also form the view, under Schedule 6A to the Act, that a firm is no longer conducting any regulated activity to which its permission relates in light of, without restriction:

1. (1)

   one or more reports, provided to the FCA by the firm, under SUP 16 or otherwise, indicating that it is no longer doing so;

2. (2)

   the firm’s failure, on two or more occasions, to respond substantively to FCA correspondence, requesting a response, sent to:

   1. (a)

      the address of the firm’s principal place of business in the United Kingdom, as notified to the FCA in accordance with SUP 15.5.4R(1); or

   2. (b)

      one or more other postal or electronic addresses previously provided to the FCA by the firm, or otherwise used by the firm, for the purpose of correspondence with the FCA and not known by the FCA to have been superseded in that regard; or

3. (3)

   correspondence from the FCA, sent to such an address, being returned or otherwise notified to the FCA as undelivered.

1. (1)

   The FCA’s additional own-initiative variation power under Schedule 6A to the Act has, unlike the FCA’s own-initiative variation power under section 55J of the Act, a single basis: that it appears to the FCA that the relevant FCA-authorised person is not carrying on any regulated activity to which its Part 4A permission relates.

2. (2)

   If the FCA uses its additional own-initiative variation power, it is therefore more likely to cancel the relevant firm’s permission, rather than merely vary it by removing or amending the description of one or more such activities or by imposing one or more limitations.

3. (3)

   The FCA will, however, consider all relevant facts and circumstances, including, without restriction:

   1. (a)

      the relevant firm’s responses, if any, to the notices given by the FCA under paragraph 2 of Schedule 6A; and

   2. (b)

      if applicable, the factors described in SUP 6.4.22G, including whether there are any matters relating to the firm requiring investigation,

   before deciding whether to use its additional own-initiative variation power and whether to use it to cancel or vary.

The FCA may also use its own-initiative powers for enforcement purposes. SUP 6B sets out in detail the FCA's powers under sections 55J and 55L of the Act and the circumstances under which the FCA may use its own-initiative powers in this way, whether for enforcement purposes or as part of its day to day supervision of firms . This chapter provides additional guidance on when the FCA will use these powers for supervision purposes.

The FCA may use its additional own-initiative variation power, under Schedule 6A to the Act, where it appears to the FCA that an FCA-authorised person is conducting no regulated activity to which its Part 4A permission relates, in an enforcement context, including, without restriction:

1. (1)

   during an investigation into the FCA-authorised person in question and/or a person associated with that FCA-authorised person;

2. (2)

   when considering the possibility of such an investigation; or

3. (3)

   during proceedings against the FCA-authorised person in question and/or a person associated with that FCA-authorised person.

The FCA may use its own-initiative powers and additional own-initiative variation power only in respect of a firm's Part 4A permission; that is, a permission granted to a firm under sections 55E or 55F of the Act (Giving permission) or having effect as if so given.

The FCA will consult the PRA before using its own-initiative powers in relation to a PRA-authorised person, or a member of a group which includes a PRA-authorised person.

In the case of a dual-regulated PRA-authorised person, the FCA may exercise its own-initiative variation power to add a new regulated activity other than a PRA-regulated activity to those activities already included in the firm's Part 4A permission, or to widen the description of a regulated activity, only after consulting with the PRA.

If the FCA exercises its own-initiative powers, it will do so by issuing a supervisory notice. The procedure that will be followed is set out in DEPP 2.

If the FCA exercises its additional own-initiative variation power, under Schedule 6A to the Act, it will do so, as described more fully in SUP 7.2.2AG and SUP 7.2.2BG, after:

1. (1)

   issuing notices under paragraph 2 of that Schedule; and

2. (2)

   deciding to exercise the power, issue a notice under paragraph 3 of that Schedule,

which notices the FCA may decide to publish, in which case Schedule 6A to the Act provides that the FCA may do so in such manner as it considers appropriate.

A firm has a right of referral to the Tribunal in respect of the FCA exercising its own-initiative powers on the firm's Part 4A permission.

1. (1)

   A firm has no right of referral to the Tribunal in respect of the FCA exercising its additional own-initiative variation power, under Schedule 6A to the Act, on the firm’s Part 4A permission.

2. (2)

   The FCA cannot exercise that power, on which guidance is given in SUP 7.2.2AG to SUP 7.2.2DG, until it has given the firm two notices in writing and considered any response to those notices.

3. (3)

   Such response will, if it complies with an applicable FCA direction, given in those notices or otherwise, lead to the FCA not exercising that power.

4. (4)

   The date on which the FCA proposes to exercise that power and, if different, the date on which the resulting variation or cancellation of the firm’s Part 4A permission is proposed to take effect, must be specified in the second of those notices and both dates must be at least 14 days after the date on which that notice is given.

5. (5)

   Further, a firm can apply, within 12 months of the exercise of the FCA’s power taking effect, to the FCA under Schedule 6A to the Act for the retrospective annulment of the decision to exercise it.

6. (6)

   More detailed guidance on such annulment is given in SUP 7.4.

7. (7)

   Whatever decision the FCA takes on that application, both the firm and the FCA have a right of referral to the Tribunal in respect of the matter.