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EG 8.3 1Use of the own-initiative powers2

EG 8.3.1RP

1The FCA may impose a variation of permission or a requirement so that it takes effect immediately or on a specified date if it reasonably considers it necessary for the variation or requirement to take effect immediately (or on the date specified), having regard to the ground on which it is exercising its own-initiative powers.

EG 8.3.2RP

1The FCA will consider exercising its own-initiative power 2where:

  1. (1)

    the information available to it indicates serious concerns about the firm or its business that need to be addressed immediately; and

  2. (2)

    circumstances indicate that it is appropriate to use statutory powers immediately to require and/or prohibit certain actions by the firm in order to ensure the firm addresses these concerns.

EG 8.3.3RP

1It is not possible to provide an exhaustive list of the situations that will give rise to such serious concerns, but they are likely to include one or more of the following characteristics:

  1. (1)

    information indicating significant loss, risk of loss or other adverse effects for consumers, where action is necessary to protect their interests;

  2. (2)

    information indicating that a firm's conduct has put it at risk of being used for the purposes of financial crime, or of being otherwise involved in crime;

  3. (3)

    evidence that the firm has submitted to the FCA inaccurate or misleading information so that the FCA becomes seriously concerned about the firm's ability to meet its regulatory obligations;

  4. (4)

    circumstances suggesting a serious problem within a firm or with a firm’s controllers that calls into question the firm’s ability to continue to meet the threshold conditions.

EG 8.3.4RP

1The FCA will consider the full circumstances of each case when it decides whether a2 variation of Part 4A permission or an imposition of a requirement is appropriate. The following is a non-exhaustive list of factors the FCA may consider.

  1. (1)

    The extent of any loss, or risk of loss, or other adverse effect on consumers. The more serious the loss or potential loss or other adverse effect, the more likely it is that the FCA’s 2exercise of own-initiative powers will be appropriate, to protect the consumers' interests.

  2. (2)

    The extent to which customer assets appear to be at risk. Exercise2 of the FCA’s own-initiative power may be appropriate where the information available to the FCA suggests that customer assets held by, or to the order of, the firm may be at risk.

  3. (3)

    The nature and extent of any false or inaccurate information provided by the firm. Whether false or inaccurate information warrants the FCA’s 2exercise of its own-initiative powers will depend on matters such as:

    1. (a)

      the impact of the information on the FCA’s view of the firm's compliance with the regulatory requirements to which it is subject, the firm's suitability to conduct regulated activities, or the likelihood that the firm's business may be being used in connection with financial crime;

    2. (b)

      whether the information appears to have been provided in an attempt knowingly to mislead the FCA, rather than through inadvertence;

    3. (c)

      whether the matters to which false or inaccurate information relates indicate there is a risk to customer assets or to the other interests of the firm's actual or potential customers.

  4. (4)

    The seriousness of any suspected breach of the requirements of the legislation or the rules and the steps that need to be taken to correct that breach.

  5. (5)

    The financial resources of the firm. Serious concerns may arise where it appears the firm may be required to pay significant amounts of compensation to consumers. In those cases, the extent to which the firm has the financial resources to do so will affect the FCA’s decision about whether exercise of the FCA’s own-initiative powers is appropriate to preserve the firm's assets, in the interests of the consumers. The FCA will take account of any insurance cover held by the firm. It will also consider the likelihood of the firm's assets being dissipated without the FCA’s intervention, and whether the exercise of the FCA’s power to petition for the winding up of the firm is more appropriate than the use of its own-initiative powers (see chapter 13 of this guide).

  6. (6)

    The risk that the firm's business may be used or has been used to facilitate financial crime, including money laundering. The information available to the FCA, including information supplied by other law enforcement agencies, may suggest the firm is being used for, or is itself involved in, financial crime. Where this appears to be the case, and the firm appears to be failing to meet the threshold conditions or has put its customers' interests at risk, the FCA’s 2use of its own-initiative powers may well be appropriate.

  7. (7)

    The risk that the firm's conduct or business presents to the financial system and to confidence in the financial system.

  8. (8)

    The firm’s conduct. The FCA will take into account:

    1. (a)

      whether the firm identified the issue (and if so whether this was by chance or as a result of the firm’s normal controls and monitoring);

    2. (b)

      whether the firm brought the issue promptly to the FCA’s attention;

    3. (c)

      the firm’s past history, management ethos and compliance culture;

    4. (d)

      steps that the firm has taken or is taking to address the issue.

  9. (9)

    The impact that use of the FCA’s own-initiative powers will have on the firm's business and on its customers. The FCA will take into account the (sometimes significant) impact that a variation of permission may have on a firm's business and on its customers' interests, including the effect of variation on the firm's reputation and on market confidence. The FCA will need to be satisfied that the impact of any use of the own-initiative power is likely to be proportionate to the concerns being addressed, in the context of the overall aim of achieving its statutory objectives.