SUP 7.3 Criteria for varying a firm's permission or imposing, varying or cancelling requirements on the FCA's own initiative

The FCA expects to maintain a close working relationship with certain types of firm and expects that routine supervisory matters arising can be resolved during the normal course of this relationship by, for example, issuing individual guidance where appropriate (see SUP 9.3). However, where the FCA deems it appropriate, it will exercise its own-initiative powers:

1. (1)

   in circumstances where it considers it appropriate for the firm to be subject to a formal requirement, breach of which could attract enforcement action; or

2. (2)

   if a variation is needed to enable the firm to comply with the requirement, due to agreements the firm may have with third parties. (For example a firm may be under a contractual obligation to do something, but only if it can do so lawfully. In this case, if the FCA considers the firm must not do it, then the FCA would need to prevent it doing so through a variation in its Part 4A permission to enable the firm to avoid breaching the contractual obligation.)

The FCA may also seek to exercise its own-initiative powers in certain situations, including the following:

1. (1)

   If the FCA determines that a firm's management, business or internal controls give rise to material risks that are not fully addressed by existing requirements, the FCA may seek to use its own-initiative powers.

2. (2)

   If a firm becomes or is to become involved with new products or selling practices which present risks not adequately addressed by existing requirements, the FCA may seek to vary the firm's Part 4A permission in respect of those risks.

3. (3)

   If there has been a change in a firm's structure, controllers, activities or strategy which generate material uncertainty or create unusual or exceptional risks, then the FCA may seek to use its own-initiative powers. (See also SUP 11.7 for a description of the FCA's ability to impose a requirement on the acquisition of control of a firm under section 55O of the Act.)

4. (4)

   At the request of, or to assist an overseas regulator as set out in section 55Q of the Act.

5. (5)

   The FCA may separately exercise its additional own-initiative variation power, as described in SUP 7.2.2AG to SUP 7.2.2DG and SUP 7.2.3AG.

Pursuant to sections 55L, 55N, 55O, 55P and 55Q of the Act, within the scope of its functions and powers, the FCA may seek to impose requirements which include but are not restricted to:

1. (1)

   requiring a firm to submit regular reports covering, for example, trading results, management accounts, customer complaints, connected party transactions;

2. (2)

   where appropriate, requiring a firm to maintain prudential limits, for example on large exposures, foreign currency exposures or liquidity gaps;

3. (3)

   requiring a firm to submit a business plan;

4. (4)

   limiting the firm's activities;

5. (5)

   requiring an FCA-authorised person to maintain a particular amount or type of financial resources.

The FCA will seek to give a firm reasonable notice of an intent to vary its permission or impose a requirement and, except when exercising its additional own-initiative variation power, to agree with the firm an appropriate timescale. However, if the FCA considers that a delay may create a risk to any of the FCA's statutory objectives, the FCA may need to act immediately using its powers under section 55J and/or 55L of the Act with immediate effect.