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DEPP 6A.1 Introduction

DEPP 6A.1.1 G

1 DEPP 6A sets out the FCA's2 statement of policy with respect to:4

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  1. (1)

    4the imposition of suspensions or restrictions under sections 88A, 89Q and 206A of the Act, and the period for which those suspensions or restrictions are to have effect, as required by sections 88C(1), 89S(1) and 210(1) of the Act;4

  2. (2)

    4the imposition of suspensions, conditions or limitations under section 66 of the Act, the period for which suspensions or conditions are to have effect, and the period for which approvals under section 59 have effect as a result of a limitation, as required by section 69(1); and4

  3. (3)

    4the imposition of disciplinary prohibitions, suspensions or restrictions under sections 123A and 123B of the Act, as required by section 124(1).

DEPP 6A.1.2 G
  1. (1)

    For the purposes of DEPP 6A, "suspension" refers to the suspension of:2

    1. (a)

      any permission which an authorised person has to carry on a regulated activity (under sections 123B or4 206A of the Act),2

    2. (b)

      any approval of the performance by an approved person of any function to which the approval relates (under section 66 of the Act),2

    3. (c)

      a sponsor's approval (under section 88A(2)(b) of the Act),2

    4. (d)

      and a primary information provider's approval (under section 89Q(2)(b) of the Act);

      2
  2. (2)

    "restriction" refers to limitations or other restrictions in relation to:2

    1. (a)

      the carrying on of a regulated activity by an authorised person (under sections 123B or4 206A of the Act), 2

    2. (b)

      [deleted]3

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    3. (c)

      the performance of services to which a sponsor's approval relates (under section 88A(2)(c) of the Act), and2

    4. (d)

      the dissemination of regulated information by a primary information provider (under section 89Q(2)(c) of the Act);5.2

  3. (3)

    “condition” refers to a condition imposed in relation to any approval of the performance by an approved person of any function to which the approval relates (under section 66 of the Act); 4

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  4. (4)

    “limitation” refers, apart from in DEPP 6A.1.2G(2), to a limitation of the period for which any approval of the performance by an approved person of any function to which the approval relates is to have effect (under section 66 of the Act); and43

  5. (5)

    4“disciplinary prohibition” refers to a temporary or permanent prohibition on an individual holding an office or position involving responsibility for taking decisions about the management of a MiFID investment firm (under section 123A(2)(a) and (3) of the Act) or a temporary prohibition on an individual directly or indirectly acquiring or disposing of financial instruments (or emission auction products) on his or her own account or the account of a third party, (under section 123A(2)(b) of the Act) or a temporary prohibition on an individual directly or indirectly making a bid at an auction conducted by a recognised auction platform, on his or her own account or the account of a third party (under section 123A(2)(c) of the Act).

    4[Note: see Regulation 6 and Schedule 1 to the RAP Regulations for application of the powers to contraventions of the auction regulation]

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DEPP 6A.1.3 G

The power to impose a suspension, restriction, condition,4 limitation or disciplinary prohibition4 is a disciplinary measure which the FCA2 may use in addition to, or instead of, imposing a financial penalty or issuing a public censure. The principal purpose of imposing such a measure3 is to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches, helping to deter other persons from committing similar breaches, and demonstrating generally the benefits of compliant behaviour. These measures3 are tools that the FCA may employ to help it to achieve its statutory objectives. Examples of measures3 that we may impose include:

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  1. (1)

    we may restrict3 an authorised person's carrying on of a regulated activity so that they can only sell certain products or provide certain services;

  2. (2)

    we may place a condition on3 an approved person's performance of their controlled functions so that they can only give advice to consumers or deal in certain products if they are appropriately supervised.

DEPP 6A.1.4 G

The powers to impose a suspension, restriction, condition or limitation3 in relation to authorised persons and approved persons, and to impose a disciplinary prohibition in relation to individuals,4 are disciplinary measures;2 where the FCA2 considers it necessary to take action, for example, to protect consumers from an authorised person, the FCA2 will seek to cancel or vary the authorised person'spermissions. If the FCA2 has concerns with a person's fitness to be approved, and considers it necessary to take action, the FCA2 will seek to prohibit the approved person or withdraw their3 approval. For an SMF manager, the FCA may instead vary their approval by imposing one or more conditions, if the FCA is satisfied that they would be a fit and proper person to perform functions in relation to regulated activities if the conditions are imposed, and that it is appropriate to do so.3 While the powers to impose a suspension or a restriction in relation to sponsors and primary information providers under sections 88A(2)(b)/(c) and 89Q(2)(b)/(c) of the Act are disciplinary measures, the FCA can impose suspensions, limitations or other restrictions in relation to sponsors and primary information providers in other circumstances.2

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DEPP 6A.1.5 G

3The FCA expects to impose a limitation in two situations. The FCA may impose a limitation where it considers it appropriate for an approval to cease to have effect:

  1. (1)

    after a certain period, unless the approved person demonstrates during the period of limitation that it is appropriate for them to be reapproved without the limitation;

  2. (2)

    after a short period, without giving the approved person the opportunity to demonstrate that they should be re-approved.

The imposition of a limitation in (2) is equivalent to a withdrawal of approval, apart from that it is carried out for disciplinary reasons and the FCA will have made no finding of lack of fitness or propriety. The FCA recognises that the use of this power will have serious consequences for the approved person concerned; therefore, it will exercise its power in a proportionate manner. The FCA’s policy on determining the length of the limitation is set out in DEPP 6A.3AG.

DEPP 6A.2 Deciding whether to take action

DEPP 6A.2.1 G

The FCA1 will consider the full circumstances of each case and determine whether it is appropriate to impose a suspension, restriction, condition,3 limitation or disciplinary prohibition3.2 The FCA1 will usually make this decision at the same time as it determines whether or not to impose a financial penalty or a public censure.

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DEPP 6A.2.2 G

The FCA1 will take into account relevant factors in deciding whether it is appropriate to impose a suspension, restriction, condition,3 limitation or disciplinary prohibition3.2 These may include factors listed in DEPP 6.2. There may also be other factors, not listed in DEPP 6.2, that are relevant.

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DEPP 6A.2.3 G

The FCA1 will consider it appropriate to impose a suspension, restriction, condition,3 limitation3 or disciplinary prohibition3 where it believes that such action will be a more effective and persuasive deterrent than the imposition of a financial penalty alone. This is likely to be the case where the FCA1 considers that direct and visible action in relation to a particular breach is necessary. Examples of circumstances where the FCA1 may consider it appropriate to take such action2 include:

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  1. (1)

    where the FCA1 (or any previous regulator) has taken any previous disciplinary action resulting in adverse findings against the person;

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  2. (2)

    where the FCA1 has previously taken action in respect of similar breaches and has failed to improve industry standards;

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  3. (3)

    where the person has failed properly to carry out an agreed redress package or other agreed remedial measures;

  4. (4)

    where the misconduct appears to be widespread across a number of individuals across a particular business area (suggesting a poor compliance culture);

  5. (5)

    where the person's competitive position in the market has improved as a result of the breach;

  6. (6)

    if, in accordance with DEPP 6.5D, the FCA1 considers that a proposed penalty would cause the subject of enforcement action serious financial hardship and that it is appropriate to reduce the proposed penalty;4

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  7. (7)

    where, in view of the nature and seriousness of an approved person’s misconduct, the FCA considers it appropriate to impose a limitation on part or all of their approval; and3

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  8. (8)

    3where, in view of the nature and seriousness of an individual’s misconduct, the FCA considers it appropriate to impose a disciplinary prohibition.

DEPP 6A.2.4 G

The FCA1 expects usually to impose a suspension, restriction, condition or limitation in relation to4 activities directly linked to the breach. However, in certain circumstances the FCA1 may also impose a suspension, restriction, condition or limitation in relation to4 activities that are not directly linked to the breach, for example, where an authorised person's relevant business area no longer exists or has been restructured.

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DEPP 6A.2.5 G

1For the purposes of section 89S(1)(d) of the Act, the FCA expects usually to suspend the approval of a primary information provider.

DEPP 6A.3 Determining the appropriate length of the period of suspension, restriction, condition or disciplinary prohibition

DEPP 6A.3.1 G

The FCA2 will consider all the relevant circumstances of a case when it determines the length of the period of suspension, restriction,4 condition or disciplinary prohibition4 (if any) that is appropriate for the breach concerned, and is also a sufficient deterrent. Set out below is a list of factors that may be relevant for this purpose. The list is not exhaustive: not all of these factors may be applicable in a particular case, and there may be other factors, not listed, that are relevant.

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DEPP 6A.3.2 G

The following factors may be relevant to determining the appropriate length of the period of suspension, restriction,4 condition or disciplinary prohibition4 to be imposed on a person under the Act:

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  1. (1)

    Deterrence

    When determining the appropriate length of the period of suspension, restriction,4 condition or disciplinary prohibition4 the FCA2 will have regard to the principal purpose for which it imposes sanctions, namely to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches and helping to deter other persons from committing similar breaches, as well as demonstrating generally the benefits of compliant business.

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  2. (2)

    The seriousness of the breach

    The FCA2 will have regard to the seriousness of the breach. In assessing this, it will consider the impact and nature of the breach, and whether it was committed deliberately or recklessly. Where the breach was committed by an authorised person, relevant factors may include those listed in DEPP 6.5A.2 G (6) to (9). Where the breach was committed by an individual in a non-market abuse case4, relevant factors may include those listed in DEPP 6.5B.2 G (8) to (11). Where the breach was committed by an individual in a market abuse case, relevant factors may include those listed in DEPP 6.5C.2G(11) to (14).4 There may also be other factors, not listed in these sections, that are relevant.

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  3. (3)

    Aggravating and mitigating factors

    The FCA2 will have regard to factors that may aggravate or mitigate a breach. Where the breach4 was committed by an authorised person, sponsor or primary information provider2, relevant factors may include those listed in DEPP 6.5A.3 G (2). Where the breach was committed by an individual in a non-market abuse case4, relevant factors may include those listed in DEPP 6.5B.3 G (2). Where the breach was committed by an individual in a market abuse case, relevant factors may include those listed in DEPP 6.5C.3G(2).4 There may also be other factors, not listed in these sections, that are relevant.

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  4. (4)

    The impact of suspension, restriction,4 condition or disciplinary prohibition4 on the person in breach

    The following considerations may be relevant to the assessment of the impact of suspension or restriction on an authorised person, sponsor or primary information provider2:

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    1. (a)

      the authorised person's, sponsor's or primary information provider's2 expected lost revenue and profits from not being able to carry out the suspended or restricted activity;

    2. (b)

      the cost of any measures the authorised person, sponsor or primary information provider2 must undertake to comply with the suspension or restriction;

    3. (c)

      potential economic costs, for example, the payment of salaries to employees who will not work during the period of suspension or restriction or the payment of compensation to consumers who will suffer loss as a result of the suspension or restriction;

    4. (d)

      the effect on other areas of the authorised person's, sponsor's or primary information provider's2 business; and

    5. (e)

      whether the suspension or restriction would cause the authorised person, sponsor or primary information provider2 serious financial hardship.

    6. The following considerations may be relevant to the assessment of the impact of suspension or condition3 on an approved person or the impact of a disciplinary prohibition on an individual4:

    7. (f)

      the person's4 expected lost earnings from not being able to carry out the suspended,4 restricted or prohibited4 activity; and

    8. (g)

      whether the suspension,4 restriction or disciplinary prohibition4 would cause the person4 serious financial hardship.

  5. (5)

    The impact of suspension,4 restriction or disciplinary prohibition44 on persons other than the person in breach

    The following considerations may be relevant to the assessment of the impact of suspension,4 restriction or disciplinary prohibition4 on persons other than the person in breach:

    1. (a)

      the extent to which consumers may suffer loss or inconvenience as a result of the suspension or restriction. For example, if it is difficult for consumers to switch to a competitor, a longer period of suspension or restriction is likely to have more impact; and

    2. (b)

      the impact of the suspension,4 restriction or disciplinary prohibition4 on markets.

DEPP 6A.3.3 G

The FCA2 may delay the commencement of the period of suspension,4 restriction or disciplinary prohibition4. In deciding whether this is appropriate, the FCA2 will take into account all the circumstances of a case. Considerations that may be relevant in respect of an authorised person, sponsor or primary information provider2 include:

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  1. (1)

    the impact of the suspension or restriction on consumers;

  2. (2)

    any practical measures the authorised person, sponsor or primary information provider2 needs to take before the period of suspension or restriction begins, for example, changes to its systems and controls to enable it to stop or limit the activity in question;

  3. (3)

    the impact of the suspension or restriction on other costs incurred by the authorised person, sponsor or primary information provider2, for example, cancelling suppliers or suspending employees.

DEPP 6A.3.4 G

1The FCA2 and the person on whom a suspension,4 restriction or disciplinary prohibition4 is to be imposed may seek to agree the length of the period of suspension,4 restriction or disciplinary prohibition4 and other terms. In recognition of the benefits of such agreements, DEPP 6.7 provides that the length of a period of suspension,4 restriction or disciplinary prohibition (other than a permanent disciplinary prohibition) 4 which might otherwise have been imposed will be reduced to reflect the stage at which the FCA2 and the person concerned reached an agreement.

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DEPP 6A.3A Determining the appropriate length of the period of limitation for approvals under section 59 of the Act

DEPP 6A.3A.1 G

1The FCA will consider all the relevant circumstances when it determines the period of limitation. Set out below is a list of factors that may be relevant for this purpose. The list is not exhaustive: not all of these factors may be applicable and there may be other factors, not listed, that are relevant.

DEPP 6A.3A.2 G

1The following factors may be relevant when determining the period of limitation:

  1. (1)

    whether the FCA may be minded to reapprove the approved person in the future, for example if the approved person takes action specified by the FCA during the period of limitation;

  2. (2)

    the approved person's expected lost earnings if the FCA imposes a short period of limitation;

  3. (3)

    whether imposing a short period of limitation would cause the approved person serious financial hardship.

DEPP 6A.4 The interaction between the power to impose suspensions, restrictions, conditions, limitations or disciplinary prohibitions and the power to impose penalties or public censures

DEPP 6A.4.1 G

The deterrent effect and impact on a person of a combination of sanctions3 may be greater than where only a single sanction3 is imposed. The FCA1 will consider the overall impact and deterrent effect of the sanctions it imposes when determining the level of any3 penalty and the length of suspension,3 restriction, condition, limitation or disciplinary prohibition3.

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DEPP 6A.4.2 G

The FCA1 expects usually to take the following approach in respect of the interaction between sanctions3:

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  1. (1)

    The FCA1 will determine which sanction, or combination of sanctions, is appropriate for the breach.

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  2. (2)

    If the FCA1, following the approach set out in DEPP 6.2, considers it appropriate to impose a financial penalty, it will calculate the appropriate level of the financial penalty, following the approach set out in DEPP 6.5 to DEPP 6.5D.

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  3. (3)

    If the FCA1, following the approach set out in DEPP 6A.2, considers it appropriate to impose a suspension, restriction, condition,3 limitation or disciplinary prohibition (or some combination of these)3,it will calculate the appropriate length of the period (or periods)3 of sanction3, following the approach set out in DEPP 6A.3 or DEPP 6A.3A, as appropriate2.

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  4. (4)

    Where the FCA1 considers it appropriate to impose a combination of sanctions3, it will decide whether the combined impact on the person is likely to be disproportionate in respect to the breach and the deterrent effect of the sanctions.

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  5. (5)

    If the FCA1 considers the combined impact on the person is likely to be disproportionate, it will decide whether to reduce the period of suspension, restriction,3 condition, or disciplinary prohibition, and3 the amount of any3 financial penalty or both, so that the combined impact of the sanctions is proportionate in relation to the breach and the deterrent effect of the sanctions. The FCA1 will decide which sanction or sanctions3 to reduce after considering all the circumstances of the case.

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  6. (6)

    In deciding the final level of any3 financial penalty and the length of any3 period of suspension, restriction, condition,3 limitation or disciplinary prohibition3, the FCA1 will also take into account any representations by the person that the combined impact will cause them serious financial hardship. The FCA1 will take the approach set out in DEPP 6.5D in assessing this.

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DEPP 6A.4.3 G

The FCA1 may depart from the approach set out in DEPP 6A.4.2 G. For example, the FCA1 may at the outset consider that a financial penalty is the only appropriate sanction for a breach but, having determined the appropriate level of financial penalty, may consider it appropriate to reduce the amount of the financial penalty for serious financial hardship reasons. In such a situation, the FCA1 may consider it appropriate to impose a suspension, restriction, condition,3 limitation or disciplinary prohibition3 even if the FCA1 at the outset did not consider such a sanction to be appropriate. The FCA1 will take into account whether the person would suffer serious financial hardship in deciding the length of the period of suspension, restriction, condition,3 limitation or disciplinary prohibition3 and may decide not to impose such a measure2 if it considers such action would result in serious financial hardship.

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