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EG 16.1 1The FCA’s general approach to making disapplication orders

EG 16.1.1

1The FCA's power under section 329 of the Act to make an order disapplying an exemption from the general prohibition in relation to a person who is a member of the professions on the grounds that the member is not a fit and proper person to conduct exempt regulated activities, and to maintain a public record of disapplication orders, will assist the FCA in pursuing its statutory objectives.

EG 16.1.2

1The FCA may make a range of disapplication orders depending on the particular circumstances of each case, including the range of exempt regulated activities undertaken and the particular exempt regulated activities to which the person's lack of fitness and propriety in that context is relevant.

EG 16.1.3

1The FCA recognises that a decision to make a disapplication order may have serious consequences for a member in relation not only to the conduct by the member of exempt regulated activities, but also in relation to the other business carried on by the member. When it decides whether to exercise its power to make a disapplication order, the FCA will consider all relevant circumstances including whether other action, in particular the making of a prohibition order (see chapter 9 of this guide), would be more appropriate. In general, the FCA is likely to exercise its powers to make an order disapplying an exemption where it considers that a member of a profession presents such a risk to the FCA'sstatutory objectives that it is appropriate to prevent the member from carrying out the exempt regulated activities. The FCA will also have regard to any disciplinary action taken, or to be taken, against the person by the relevant designated professional body.

EG 16.2 1Disapplication orders

EG 16.2.1

1When the FCA has concerns about the fitness and propriety of a member to carry out exempt regulated activities, it will consider all the relevant circumstances of the case, including whether those concerns arise from the fitness and propriety of specific individuals engaged to perform the exempt regulated activities carried out by the member or whether its concerns arise from wider concerns about the member itself.

EG 16.2.2

1In most cases, where the FCA is concerned about the fitness and propriety of a specific individual, it may be more appropriate for the FCA to consider whether to make an order prohibiting the individual from performing functions in relation to exempt regulated activities rather than a disapplication order in relation to the member concerned. The criteria which the FCA will apply when determining whether to make a prohibition order against an individual who is not regulated by the FCA are set out in paragraphs 9.5.1 to 9.5.2 of this guide (prohibition orders against other individuals). In addition to the factors referred to in these paragraphs, the FCA may also take into consideration any disciplinary action that has been, or will be taken against the individual concerned by the relevant designated professional body, where that disciplinary action reflects on the fitness and propriety of the individual concerned to perform exempt regulated activities.

EG 16.2.3

1The FCA will also take into account the potentially more serious consequences that a disapplication of an exemption will have for the member concerned compared with the consequences of a prohibition of a particular individual engaged in exempt regulated activities. However, the FCA may consider it appropriate in some cases to disapply an exemption where it decides that the member concerned is not fit and proper to carry out exempt regulated activities in accordance with section 327 of the Act (Exemption from the general prohibition).

EG 16.2.4

1As an alternative to making an order to disapply an exemption, the FCA may consider issuing a private warning. A private warning may be appropriate where the FCA has concerns in relation to a member's fitness and propriety but feels that its concerns in relation to the conduct of exempt regulated activities can be more appropriately addressed by a private warning than by a disapplication of the member's exemption.

EG 16.2.5

1When it decides whether to exercise its power to disapply an exemption from the general prohibition in relation to a member, the FCA will take into account all relevant circumstances which may include, but are not limited to, the following factors:

  1. (1)

    Disciplinary or other action taken by the relevant designated professional body, where that action relates to the fitness and propriety of the member concerned: where the FCA considers that its concerns in relation to the fitness and propriety of the member concerned may be, or have been adequately addressed by disciplinary or other action taken by the relevant designated professional body it may consider not making a disapplication order in addition to such action; however, where the FCA considers that its concerns, and in particular, any risks presented to the member'sclients in respect of its exempt regulated activities, are not adequately addressed by that action, the FCA will consider making a disapplication order;

  2. (2)

    The significance of the risk which the member presents to its clients: if the FCA is satisfied that there is a significant risk to clients and consumers it may consider making a disapplication order;

  3. (3)

    The extent of the member's compliance with rules made by the FCA under section 332(1) of the Act (Rules in relation to whom the general prohibition does not apply) or by the relevant designated professional body under section 332(3) of the Act;

EG 16.2.6

1Where the FCA is considering whether to exercise its power to make a disapplication order in relation to a member, it will liaise closely with the relevant designated professional body.

EG 16.2.7

1Where the FCA is considering making a disapplication order against a member as a result of a breach of rules made by the FCA under section 323(1) of the Act, it will take into account any proposed application by the member concerned for authorisation under the Act. The FCA may refrain from making a disapplication order pending its consideration of the application for authorisation.

EG 16.3 1Applications under section 329(3) for variation or revocation of disapplication orders

EG 16.3.1

1When considering whether to grant or refuse an application under section 329(3) of the Act to vary or revoke a disapplication order, the FCA will take into account all the relevant circumstances. These may include, but are not limited to:

  1. (1)

    any steps taken by the person to rectify the circumstances which gave rise to the original order;

  2. (2)

    whether the person has ceased to present the risk to clients and consumers or to the FCA'sstatutory objectives which gave rise to the original order;

  3. (3)

    the circumstances giving rise to the original order and any additional information which, had it been known by the FCA, would have been relevant to the decision to make the order;

  4. (4)

    the amount of time which has elapsed since the order was made.

EG 16.3.2

1The FCA will not generally grant an application to vary a disapplication order unless it is satisfied that the proposed variation will not result in the person presenting the same degree of risk to clients or consumers that originally gave rise to the order to disapply the exemption. Similarly, the FCA will not revoke a disapplication order unless and until it is satisfied that the person concerned is fit and proper to carry out exempt regulated activities generally or those specific exempt regulated activities in relation to which the exemption has been disapplied.

EG 16.4 1The effect of a disapplication order

EG 16.4.1

1When the FCA has made a disapplication order, the member against which it has been made may not perform the exempt regulated activities to which the order relates. If the member contravenes the order, there will be a breach of the general prohibition that may be prosecuted under section 23 of the Act (see chapter 12).

EG 16.4.2

1A disapplication order in relation to exempt regulated activities made against a member will be relevant should that member subsequently apply for authorisation under the Act. Whether or not such an application for authorisation is successful will depend on many factors, including the FCA's grounds for making the disapplication order. For example, if the order for disapplication of the exemption was made on the grounds of a breach of rules made under section 332(1) of the Act, the FCA may accept an application for authorisation notwithstanding the disapplication order. If, however, the order was made on grounds of a breach of the rules of a designated professional body resulting in a significant risk to clients in relation to the provision of exempt regulated activities, it is unlikely that an application for approval made by the member would be accepted by the FCA before the revocation of the disapplication order.