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Status: You are viewing the version of the handbook as on 2005-06-30.

ENF 3.2 The FSA's powers to vary Part IV permission on its own initiative

ENF 3.2.1G

The FSA's powers to vary a firm's Part IV permission on its own initiative, and the grounds for exercising those powers, are contained in sections 45 (Variation etc on FSA's own initiative) to 47 (Exercise of power in support of overseas regulator) of the Act:

  1. (1)

    section 45 (Variation etc on FSA's own initiative) sets out various cases where the FSA may vary (or cancel) a firm's Part IV permission and identifies the types of provisions that the FSA may impose on a firm;

  2. (2)

    section 46 (Variation of permission on acquisition of control) gives the FSA power to vary a firm's Part IV permission when a person has acquired control over the firm (and is dealt with in SUP 11.7.18 G (FSA's right to object to existing controllers)); and

  3. (3)

    section 47 (Exercise of power in support of overseas regulator) gives the FSA power to vary (or cancel) a firm'sPart IV permission in support of an overseas regulator.

Limitations and requirements that the FSA may impose

ENF 3.2.2G

Sections 45(2) and (4) of the Act identify the types of provisions that the FSA may impose when it uses its own-initiative power to vary Part IV permission under section 45. They also apply when the FSA seeks to exercise this power in support of an overseas regulator under sections 47(1) and (2).

ENF 3.2.3G

Section 45(2) states that the FSA's own-initiative power includes the power to vary a Part IV permission in any of the ways mentioned in section 44(1) of the Act. Under section 44(1), the FSA may vary a firm's Part IV permission, amongst other ways, by:

  1. (1)

    removing a regulated activity from the firm's Part IV permission;

  2. (2)

    varying the description of a regulated activity included in the firm's Part IV permission;

  3. (3)

    varying a requirement imposed under section 43 of the Act (see ENF 3.2.8 G to ENF 3.2.10 G).

ENF 3.2.4G

Under section 45(4), the FSA's power extends to including in the Part IV permission as varied any provision that it could include if it were giving a fresh Part IV permission in response to an application under section 40 of the Act (Application for permission) (see AUTH 2 Annex 2 G G (Regulated activities and the permission regime) and AUTH 3 (applications for Part IV permission).

ENF 3.2.5G

The types of provisions that the FSA may include in a fresh Part IV permission are identified in section 42(7) (Giving permission) and section 43 (Imposition of requirements) of the Act. ENF 3.2.6 G to ENF 3.2.10 G describe sections 42(7) and 43 and give examples of the types of limitations and restrictions that the FSA may consider imposing when using its powers to vary Part IV permission in support of its enforcement activities. The FSA may also use its powers to vary Part IV permission in support of its supervision activities and SUP 7.3 (Criteria for varying a firm's permission) includes examples of the limitations and restrictions that the FSA may consider imposing when varying Part IV permission in that context.

ENF 3.2.6G

Under section 42(7) the FSA may incorporate in the description of a regulated activity such limitations as it considers appropriate (for example, about the circumstances in which the activity may, or may not, be carried on).

ENF 3.2.7G

Examples of the limitations that the FSA may impose under section 42(7), when exercising its own-initiative power in support of its enforcement function, include limitations on:

  1. (1)

    The number, or category, of customers that a firm can deal with;

  2. (2)

    The number of specified investments that a firm can deal in;

  3. (3)

    The activities of the firm so that they fall within specific regulatory regimes (for example, so that oil market participants, locals, corporate finance advisory firms and service providers are permitted only to carry on those types of activities).

ENF 3.2.8G

Section 43 relates to the imposition of requirements:

  1. (1)

    under section 43(1) a Part IV permission may include such requirements as the FSA considers appropriate;

  2. (2)

    under section 43(2) a requirement may, in particular, be imposed so as to require the firm concerned to:

    1. (a)

      take specified action; or

    2. (b)

      refrain from taking specified action.

ENF 3.2.9G

Examples of requirements that the FSA may consider including in a firm's Part IV permission when exercising its own-initiative power in support of its enforcement function are:

  1. (1)

    a requirement not to take on new business;

  2. (2)

    a requirement not to hold or control client money; and

  3. (3)

    a requirement not to trade in certain categories of specified investment.

ENF 3.2.10G

Other requirements that the FSA may include in a Part IV permission are set out in section 48(3) of the Act (Prohibitions and restrictions) and are referred to as 'assets requirements'. An assets requirement is a requirement (under section 43) that:

  1. (1)

    prohibits the disposal of, or other dealing with, any of the firm's assets (whether in the United Kingdom or elsewhere) or restricts those disposals or dealings; or

  2. (2)

    Requires that all or any of the firm's assets, or all or any assets belonging to investors but held by the firm or to its order, must be transferred to a trustee approved by the FSA.