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EG 10.1 2Introduction

EG 10.1.1

An exceptionally urgent case in these circumstances is one where the FCA staff believe that a decision to begin proceedings1

  1. (1)

    should be taken before it is possible to follow the procedure described in paragraph 10.1.2; and1

  2. (2)

    t is necessary to protect the interests of consumers or potential consumers.1

2
EG 10.1.2

The orders the court may make following an application by the FCA under the powers referred to in this chapter are generally known in England and Wales as injunctions, and in Scotland as interdicts. In the chapter, the word 'injunction' and the word 'order' also mean 'interdict'. The FCA's effective use of these powers will help it work towards its operational objectives, in particular, those of securing an appropriate degree of protection for consumers, protecting and enhancing the integrity of the UK financial system and promoting effective competition in the interests of consumers in the markets.1

2
EG 10.1.3

Decisions about whether to apply to the civil courts for injunctions under the Act will be made by the RDC Chairman or, in an urgent case and if the Chairman is not available, by an RDC Deputy Chairman. In an exceptionally urgent case the matter will be decided by the director of Enforcement or, in his or her absence, another member of the FCA's executive of at least director of division level.1

2

EG 10.2 1Section 380 (injunctions for b reaches of relevant requirement9) and section 381 (injunctions in cases of market abuse): the FCA's policy

9 Under sections 380(6)(a) and (7)(a), a 'relevant requirement' in relation to an application by the appropriate regulator means a requirement: which is imposed by or under the Act or by a qualifying EU provision specified, or of a description specified, for the purpose of subsection 380(6) by the Treasury by order; or which is imposed by or under any other Act and whose contravention constitutes an offence mentioned in section 402(1) of the Act; or which is imposed by the AIFMD UK regulation. The definition of “appropriate regulator” is set out in subsections 380(8) to (12) of the Act.

EG 10.2.1

1The court may make three types of order under these provisions: to restrain a course of conduct, to take steps to remedy a course of conduct and to secure assets. As is explained below, the court may also make an order freezing assets under its inherent jurisdiction. In certain cases, the FCA may seek only one type of order, although in others it may seek several.

EG 10.2.2

1The broad test the FCA will apply when it decides whether to seek an injunction is whether the application would be the most effective way to deal with the FCA's concerns. In deciding whether an application for an injunction is appropriate in a given case, the FCA will consider all relevant circumstances and may take into account a wide range of factors. The following list of factors is not exhaustive; not all the factors will be relevant in a particular case and there may be other factors that are relevant.

  1. (1)

    The nature and seriousness of a contravention or expected contravention of a relevant requirement. The extent of loss, risk of loss, or other adverse effect on consumers, including the extent to which client assets may be at risk, may be relevant. The seriousness of a contravention or prospective contravention will include considerations of:

    1. (a)

      whether the losses suffered are substantial;

    2. (b)

      whether the numbers of consumers who have suffered loss are significant;

    3. (c)

      whether the assets at risk are substantial; and

    4. (d)

      whether the number of consumers at risk is significant.

  2. (2)

    In cases of market abuse, the nature and seriousness of the misconduct or expected misconduct in question. The following may be relevant:

    1. (a)

      the impact or potential impact on the financial system of the conduct in question. This would include the extent to which it has resulted in distortion or disruption of the markets, or would be likely to do so if it was allowed to take place or to continue;

    2. (b)

      the extent and nature of any losses or other costs imposed, or likely to be imposed, on other users of the financial system, as a result of the misconduct.

  3. (3)

    Whether the conduct in question has stopped or is likely to stop and whether steps have been taken or will be taken by the person concerned to ensure that the interests of consumers are adequately protected. For example, an application for an injunction may be appropriate where the FCA has grounds for believing that a contravention of a relevant requirement, market abuse or both may continue or be repeated. It is likely to have grounds to believe this where, for example, the Takeover Panel has requested that a person stop a particular course of conduct and that person has not done so.

  4. (4)

    Whether there are steps a person could take to remedy a contravention of a relevant requirement or market abuse. The steps the FCA may require a person to take will vary according to the circumstances but may include the withdrawal of a misleading financial promotion or publishing a correction, writing to clients or investors to notify them of FCA action, providing financial redress and repatriating funds from an overseas jurisdiction. An application by the FCA to the court under section 380(2) or 381(2) for an order requiring a person to take such steps may not be appropriate if, for example, that person has already taken or proposes to take appropriate remedial steps at his own initiative or under a ruling imposed by another regulatory authority (such as the Takeover Panel or a recognised investment exchange). If another authority has identified the relevant steps and the person concerned has failed to take them, the FCA will take this into account and (subject to all other relevant factors and circumstances) may consider it is appropriate to apply for an injunction. In those cases the FCA may consult with the relevant regulatory authority before applying for an injunction.

  5. (5)

    Whether there is a danger of assets being dissipated. The main purpose of an application under section 380(3), sections 381(3) and (4) or pursuant to the court's inherent jurisdiction, is likely to be to safeguard funds containing client assets (e.g. client accounts) and/or funds and other assets from which restitution may be made. The FCA may seek an injunction to secure assets while a suspected contravention is being investigated or where it has information suggesting that a contravention is about to take place.

  6. (6)

    The costs the FCA would incur in applying for and enforcing an injunction and the benefits that would result. There may be other cases which require the FCA's attention and take a higher priority, due to the nature and seriousness of the breaches concerned. There may, therefore, be occasions on which the FCA considers that time and resources should not be diverted from other cases in order to make an application for an injunction. These factors reflect the FCA's duty under the Act to have regard to the need to use its resources in the most efficient and economic way.

  7. (7)

    The disciplinary record and general compliance history of the person who is the subject of the possible application. This includes whether the FCA (or a previous regulator) has taken any previous disciplinary, remedial or protective action against the person. It may also be relevant, for example, whether the person has previously given any undertakings to the FCA (or any previous regulator) not to do a particular act or engage in particular behaviour and is in breach of those undertakings.

  8. (8)

    Whether the conduct in question can be adequately addressed by other disciplinary powers, for example public censure or financial penalties.

  9. (9)

    The extent to which another regulatory authority can adequately address the matter. Certain circumstances may give rise not only to possible enforcement action by the FCA, but also to action by other regulatory authorities. The FCA will examine the circumstances of each case, and consider whether it is appropriate for the FCA to take action to address the relevant concern. In most cases the FCA will consult with other relevant regulatory authorities before making an application for an order.

  10. (10)

    Whether there is information to suggest that the person who is the subject of the possible application is involved in financial crime.

  11. (11)

    In any case where the FCA is of the opinion that any potential exercise of its powers under section 381 may affect the timetable or the outcome of a takeover bid, the FCA will consult the Takeover Panel before taking any steps to exercise these powers and will give due weight to its views.

EG 10.3 1Asset-freezing injunctions

EG 10.3.1

1Where the FCA applies to the court under section 380(3) or sections 381(3) and (4) of the Act, the FCA may ask the court to exercise its inherent jurisdiction to make orders on an interim basis, restraining a person from disposing of, or otherwise dealing with, assets. To succeed in an application for such interim relief, the FCA will have to show a good arguable case for the granting of the injunction. The FCA will not have to show that a contravention has already occurred or may have already occurred.

EG 10.3.2

1The FCA may request the court to exercise its inherent jurisdiction in cases, for example, where it has evidence showing that there is a reasonable likelihood that a person will contravene a requirement of the Act and that the contravention will result in the dissipation of assets belonging to investors.

EG 10.4 1Other relevant powers

EG 10.4.1

1The FCA has a range of powers it can use to take remedial, protective and disciplinary action against a person who has contravened a relevant requirement or engaged in market abuse, as well as its powers to seek injunctions under sections 380 and 381 of the Act and under the courts' inherent jurisdiction. Where appropriate, the FCA may exercise these other powers before, at the same time as, or after it applies for an injunction against a person.

EG 10.4.2

1When, in relation to firms, the FCA applies the broad test outlined in paragraph 10.2.2, it will consider the relative effectiveness of the other powers available to it, compared with injunctive relief. For example, where the FCA has concerns about whether a firm will comply with restrictions that the FCA could impose by exercising its own-initiative powers, it may decide it would be more appropriate to seek an injunction. This is because breaching any requirement imposed by the court could be punishable for contempt. Alternatively, where, for example, the FCA has already imposed requirements on a firm by exercising its own-initiative powers and these requirements have not been met, the FCA may seek an injunction to enforce those requirements.

EG 10.4.3

1The FCA'sown-initiative powers do not apply to unauthorised persons. This means that an application for an injunction is the only power by which the FCA may seek directly to prevent unauthorised persons from actual or threatened breaches or market abuse. The FCA will decide whether an application against an unauthorised person is appropriate, in accordance with the approach discussed in paragraph 10.2.2. The FCA may also seek an injunction to secure assets where it intends to use its insolvency powers against an unauthorised person.

EG 10.4.4

1In certain cases, conduct that may be the subject of an injunction application will also be an offence which the FCA has power to prosecute under the Act. In those cases, the FCA will consider whether it is appropriate to prosecute the offence in question, as well as applying for injunctions under section 380, section 381, or both.

EG 10.4.5

1Where the FCA exercises its powers under section 380, section 381 and/or invokes the court's inherent jurisdiction to obtain an order restraining the disposal of assets, it may also apply to the court for a restitution order for the distribution of those assets.

EG 10.6 1Applications for injunctions under regulation 12 of the Unfair Terms Regulations or Schedule 3 to the CRA : the FCA 's policy

EG 10.6.1

1The Unfair Terms Regulations still apply to contracts entered into before 1 October 2015. Please read the pre-1 October 2015 version of this guide for the FCA’s approach and policy relating to its powers under the Unfair Terms Regulations.

EG 10.6.2

1For a consumer contract term, if the FCA decides, after notifying the Competition and Markets Authority (the CMA), to the extent required by Schedule 3 to the CRA, to address issues using its powers under Schedule 3, if the contract term is within the CRA's scope, it will, unless the case is urgent, generally first write to a person using or proposing or recommending the use of that term.

EG 10.6.3

1When writing, the FCA will express its concerns about whether the term is or would be unfair within the meaning of sections 62 to 64 of the CRA, or non-transparent within the meaning of section 68 of the CRA, or purports or would purport to exclude or restrict any liability described in the sections of the CRA specified in paragraph 3(2) of Schedule 3 and will invite the person's comments on those concerns.

EG 10.6.4

1If the FCA, having considered those comments, remains of the view that the term is or would be unfair or non-transparent or purports, or would purport, to be exclusionary or restrictive, as described above, it will normally ask the person to undertake to stop using, relying on or recommending it or proposing its use. It should be noted that, under paragraphs 2(3), 6(3) and 7(1) of Schedule 3 to the CRA, such an undertaking must be notified by the FCA to the CMA and any relevant complainant and then the CMA is under a duty to publish it.

EG 10.6.5

1In relation to a notice to consumers within the CRA's scope, the FCA will generally, after notifying the CMA, request such an undertaking from the relevant person, if the notice causes the FCA relevant concerns, without first seeking comments. Although the FCA will, unless the case is an urgent one and time does not permit, then have regard to any representations responsive to that request.

EG 10.6.6

1If, whether in relation to such a notice or such a term, the person either declines to give such an undertaking, or gives such an undertaking and fails to follow it, the FCA will consider the need to apply to court for an injunction under Schedule 3 to the CRA. The FCA will, again, notify the CMA appropriately at this stage, as required by Schedule 3.

EG 10.6.7

1In determining whether to seek an injunction under Schedule 3 to the CRA against a person, after or, in an urgent case, instead of requesting such an undertaking, the FCA will consider the full circumstances of each case. A number of factors may be relevant for this purpose. The following list is not exhaustive; not all of the factors may be relevant in a particular case, and there may be other factors that are relevant such as:

  1. (1)

    whether the FCA is satisfied that the contract term or notice in question may properly be regarded, if it is used, as unfair, non-transparent and/or purportedly exclusionary and/or restrictive within the meaning of the CRA;

  2. (2)

    the extent and nature of the detriment to consumers resulting from the term or notice, or the potential detriment which could result from the term or notice;

  3. (3)

    whether the person has, if asked to do so, fully cooperated with the FCA in resolving the FCA's concerns about the particular contract term or notice;

  4. (4)

    the likelihood of success of an application for an injunction;

  5. (5)

    the costs the FCA would incur in applying for and enforcing an injunction and the benefits that would result from that action; the FCA is more likely to be satisfied that an application is appropriate where an injunction would not only prevent the use of the particular contract term or notice, but would also be likely, as paragraph 5(3)(b) of Schedule 3 to the CRA envisages, to prevent the use of similar terms or notices, or terms or notices having a similar effect.

EG 10.6.8

1In an urgent case, the FCA may seek a temporary injunction, to prevent the continued or potential use of the term or notice until it can be fully considered by the court. An urgent case is one in which the FCA considers that the actual or potential detriment is so serious that urgent action is necessary. In deciding whether to apply for a temporary injunction, the FCA may take into account a number of factors, including one or more of the factors set out in paragraph 10.6.7. In such an urgent case, the FCA may seek a temporary injunction without first consulting with the person or persons using or proposing to use, or recommending the use of, the relevant term or notice.

EG 10.6.9

1In deciding whether to grant an a final injunction under Schedule 3 to the CRA, the court will decide whether the term or notice in question is unfair, purportedly restrictive or exclusionary or non-transparent within the meaning of the CRA. The court may grant an injunction on such terms as it sees fit. For example, it may require the person to stop including a term in contracts with consumers or issuing, publishing, communicating or announcing a notice to consumers from the date of the injunction and to stop relying on the term in such contracts which have been concluded or on the notice to the extent that it has already been issued, published, communicated or announced. If the person fails to comply with the injunction, the person will be in contempt of court.

EG 10.6.10

1The CRA provides that a term or notice that is unfair or a term that excludes or restricts liability in any of the ways specified in the CRA is not binding on the consumer. This is the case irrespective of whether there has been a decision of a court to that effect. To The CRA also provides that, to the extent that it is practicable, the rest of the contract continues in effect.

EG 10.6.11

1When the FCA considers that a case requires enforcement action under the CRA, it will take the enforcement action itself, after appropriately notifying the CMA, if the person against whom such action will be taken is a firm or an appointed representative.

EG 10.6.12

1Where that person is not a firm or an appointed representative, the FCA will liaise with the CMA or (as appropriate) another CRA regulator.

EG 10.7 1FCA costs

EG 10.7.1

1When it seeks an injunction under a power discussed in this chapter, the FCA may ask the court to order that the person who is the subject of the application should pay the FCA's costs.