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COND 1.3 General

COND 1.3.1GRP

The guidance in COND 2 explains each FCA1 threshold condition in Schedule 6 (threshold conditions) to the Act and indicates1 how the FCA1 will interpret it in practice. This guidance is not, however, exhaustive and is written in very general terms. A firm will need to have regard to the obligation placed upon the FCA1 under section 55B (The threshold conditions) of the Act; that is, the FCA1 must ensure that the firm will satisfy, and continue to satisfy, the FCA1 threshold conditions in relation to each regulated activity for which it has, or will have, permission.

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COND 1.3.2GRP
  1. (1)

    The FCA1 will consider whether a firm satisfies, and will continue to satisfy, the FCA1 threshold conditions in the context of the size, nature, scale and complexity of the business which the firm carries on or will carry on if the relevant application is granted.

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  2. (2)

    In relation to threshold conditions set out in paragraphs 2D to 2F of Schedule 6 to the Act in respect of firms which are not PRA-authorised persons and paragraphs 3C to 3E of Schedule 6 to the Act in respect of firms which are PRA-authorised persons1, the FCA1 will consider whether a firm is ready, willing and organised to comply, on a continuing basis, with the requirements and standards under the regulatory system which apply to the firm, or will apply to the firm, and for which the FCA is responsible,1 if it is granted Part 4A permission1, or a variation of its permission. These matters will also be considered if the FCA1 is exercising its own-initiative powers1 (see COND 1.2.3 G). Guidance to firms on the implications of this is given under each of those threshold conditions.

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COND 1.3.3GRP

Although the FCA1 may consider that a matter is relevant to its assessment of a firm, the fact that a matter is disclosed to the FCA1, for example in an application, does not necessarily mean that the firm will fail to satisfy the FCA1 threshold conditions. The FCA1 will consider each matter in relation to the regulated activities for which the firm has, or will have, permission, having regard to its statutory objectives1. A firm should disclose each relevant matter but, if it is appropriate to do so, it is encouraged to discuss it with the FCA1. This will enable the FCA1 to consider fully how material or significant the matter is and how it affects the ability of the firm to satisfy, and continue to satisfy, the FCA1 threshold conditions.

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COND 1.3.3AGRP

1In determining the weight to be given to any relevant matter, the FCA will consider its significance in relation to the regulated activities for which the firm has, or will have, permission, in the context of its ability to supervise the firm adequately, having regard to the FCA's statutory objectives. In this context, a series of matters may be significant when taken together, even though each of them in isolation might not give serious cause for concern.

COND 1.3.3BGRP

1In determining whether the firm will satisfy, and continue to satisfy, the FCA threshold conditions, the FCA will have regard to all relevant matters, whether arising in the United Kingdom or elsewhere.

COND 1.3.3CGRP

1When assessing the FCA threshold conditions, the FCA may have regard to any person appearing to be, or likely to be, in a relevant relationship with the firm, in accordance with section 55R of the Act (Persons connected with an applicant). For example, a firm's controllers, its directors or partners, other persons with close links to the firm (see COND 2.3), and other persons that exert influence on the firm which might pose a risk to the firm's satisfaction of the FCA threshold conditions, would be in a relevant relationship with the firm.

COND 1.3.3DGRP

1In making its assessment, the FCA will consider the individual circumstances of each firm on a case-by-case basis.

COND 1.3.3EGRP

1Notes on the contents of a business plan are given in the business plan section of the application pack for Part 4A permission on the FCA's website.

Statutory quotations

COND 1.3.4GRP
  1. (1)

    For ease of reference, the FCA1 threshold conditions in or under Schedule 6 to the Act have been quoted in full in COND 2.

  2. (1A)

    1Paragraphs 2A and 3A of Schedule 6 of the Act have not been quoted. These set out the application of the FCA threshold conditions to firms which do not carry on, or are not seeking to carry on, a PRA regulated activity and firms which carry on, or are seeking to carry on, a PRA regulated activity respectively. This application is summarised in COND 1.1A.

  3. (2)

    As the FCA threshold conditions1 impose obligations, they are printed in bold type. The use of bold type is not intended to indicate that these quotations are rules made by the FCA1.

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  4. (3)

    [deleted]1

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  5. (4)

    Paragraph 1A of Schedule 6 of the Act sets out interpretative provisions that apply to the threshold conditions. These are repeated in COND 1.3.5 G below for ease of reference.

COND 1.3.5UKRP

1Paragraph 1A of Schedule 6 to the Act

  1. (1)

    "assets" includes contingent assets;

    "consolidated supervision" has the same meaning as in section 3M(a);

    "consumer" has the meaning given by section 425A(b);

    "financial crime" is to be read with section 1H(3)(c);

    "functions", in relation to either the FCA or the PRA, means the functions conferred on that regulator by or under this Act;

    "liabilities" includes contingent liabilities;

    "relevant directives" has the same meaning as in section 3M;

    "Society" means the society incorporated by Lloyd's Act 1871(d) by the name of Lloyd's;

    "subsidiary undertaking" includes all the instances mentioned in Article 1(1) and (2) of the Seventh Company Law Directive in which an entity may be a subsidiary of an undertaking.

  2. (2)

    For the purposes of this Schedule, the "non-financial resources" of a person include any systems, controls, plans or policies that the person maintains and the human resources that the person has available.

  3. (3)

    In this Schedule, references to "integrity of the UK financial system" are to be read with section 1D(2)(e).

  4. (4)

    The reference to the failure of a person is to be read in accordance with section 2J(3) and (4)(f).