1The grounds on which the FCA may exercise its power to cancel an authorised person's permission under section 55J of the Act are the same as the grounds for variation and for imposition of requirements. They are set out in section 55J(1) and section 55L(2) and described in EG 8.1.1. Examples of the types of circumstances in which the FCA may cancel a firm's Part 4A permission include:
material non-disclosure in an application for authorisation or approval or material non-notification after authorisation or approval has been granted. The information which is the subject of the non-disclosure or non-notification may also be grounds for cancellation;
failure to have or maintain adequate financial resources, or a failure to comply with regulatory capital requirements;
non-submission of, or provision of false information in, regulatory returns, or repeated failure to submit such returns in a timely fashion;
repeated failures to comply with rules or requirements;
Sections 55J(6) and 55K of the Act sets out further grounds on which the FCA may cancel the permission of authorised persons which are investment firms and section 55J(6A) of the Act set out further grounds on which the FCA may cancel the permission of authorised persons who are full-scope UK AIFMs.
Schedule 6A specifies that the FCA may form the view that a firm is carrying on no such regulated activity on the basis of its failure to pay a periodic fee or levy or provide information to the FCA, in each case as required by the Handbook. Further guidance on this power is given in SUP 7.
1Depending on the circumstances, the FCA may need to consider whether it should first use its own-initiative powers to impose requirements on a firm or to vary a firm's Part 4A permission before going on to cancel it. Amongst other circumstances, the FCA may use this power where it considers it needs to take immediate action against a firm because of the urgency and seriousness of the situation.
1Where the situation appears so urgent and serious that the firm should immediately cease to carry on all regulated activities, the FCA may first vary the firm's Part 4A permission so that there is no longer any regulated activity for which the firm has a Part 4A permission. If it does this, the FCA will then have a duty to cancel the firm's Part 4A permission - once it is satisfied that it is no longer necessary to keep the Part 4A permission in force.
1However, where the FCA has cancelled a firm's Part 4A permission, it is required by section 33 of the Act to go on to give a direction withdrawing the firm's authorisation. Accordingly, the FCA may decide to keep a firm's Part 4A permission in force to maintain the firm's status as an authorised person and enable it (the FCA) to monitor the firm's activities. An example is where the FCA needs to supervise an orderly winding down of the firm's regulated business (see SUP 6.4.22 (When will the relevant regulator grant an application for cancellation of permission)). Alternatively, the FCA may decide to keep a firm's Part 4A permission in force to maintain the firm's status as an authorised person to use administrative enforcement powers against the firm.