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Status: You are viewing the version of the handbook as on 2009-03-31.

COND 1.2 Purpose

COND 1.2.1GRP

COND gives guidance on the threshold conditions set out in or under Schedule 6 to the Act (Threshold conditions). The threshold conditions represent the minimum conditions which a firm is required to satisfy, and continue to satisfy, in order to be given and to retain Part IV permission.

Applications for Part IV permission or variation of Part IV permission

COND 1.2.2GRP
  1. (1)

    Under section 41(2) of the Act (The threshold conditions), in giving or varying a Part IV permission or imposing or varying any requirement, the FSA must ensure that the firm concerned will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which it has or will have permission.

  2. (2)

    If, however, the applicant for permission is an incoming firm seeking top-up permission, or variation of top-up permission, under Part IV of the Act (Permission to carry on regulated activities), then under paragraphs 6 and 7 of Schedule 6 to the Act, the FSA will have regard only to satisfaction of threshold conditions 1, 3, 4 and 5, as relevant to the regulated activities for which the applicant has, or will have, Part IV permission.

Exercise of the FSA's own-initiative power

COND 1.2.3GRP
  1. (1)

    If, among other things, a firm is failing to satisfy any of the threshold conditions, or is likely to fail to do so, section 45 of the Act (Variation etc. on the FSA's own initiative) states that the FSA may exercise its own-initiative power. Use of the FSA's own-initiative power is explained in SUP 7 (Individual requirements), and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)1.

    1
  2. (2)

    If, when exercising its own-initiative power under section 45(1) of the Act, the FSA varies a firm's permission, or imposes or varies a requirement, then, under section 41(1) of the Act, the FSA must ensure that the firm concerned will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which it has or will have permission. However, section 41(2) of the Act states that the duty imposed by section 41(1) of the Act does not prevent the FSA taking such steps as it considers necessary in relation to a particular firm in order to secure its regulatory objective of consumer protection.

  3. (3)

    The FSA can also exercise its own-initiative power under section 45 of the Act in relation to the top-up permission of an incoming firm. But this is only on the grounds that the incoming firm is failing, or likely to fail, to satisfy threshold conditions 1, 3, 4 or 5 in relation to that permission.

Approval of acquisitions or increases of control

COND 1.2.4G
  1. (1)

    Under section 186(3) of the Act (Objection to acquisition of control), in deciding whether the approval requirements for a proposed acquisition or increase of control are satisfied, the FSA must have regard, in relation to the control that the acquirer:

    1. (a)

      has over the firm; or

    2. (b)

      will have over the firm if the proposal which has been notified to the FSA is carried out;

    to its general duty to ensure that the firm will continue to satisfy the threshold conditions.

  2. (2)

    The FSA must also have regard to the threshold conditions in imposing any conditions on its approval of an acquisition or increase of control (section 185(2) of the Act (Conditions attached to approval)). See SUP 11.7.3 G (Acquisition or increase of control: procedures).