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ENF 4.3 Grounds for exercising the power of intervention against incoming firms

ENF 4.3.1G

Section 194 of the Act (General grounds on which power of intervention is exercisable) sets out the general grounds on which the FSA may exercise its power of intervention. Section 195 (Exercise of power in support of overseas regulator) relates to the exercise of the power on behalf of an overseas regulator.

General grounds for exercising the power against incoming firms

ENF 4.3.2G

Under section 194(1) the FSA may exercise the power of intervention if it appears to it that:

  1. (1)

    an incoming firm has contravened, or is likely to contravene, a requirement which is imposed on it by or under the Act (in a case where the FSA is responsible for enforcing compliance in the United Kingdom); or

  2. (2)

    an incoming firm has, in purported compliance with any requirement imposed by or under the Act, knowingly or recklessly given the FSA information which is false or misleading in a material particular; or

  3. (3)

    it is desirable to exercise the power in order to protect the interests of actual or potential customers in relation to a regulated activity carried on by the firm.

ENF 4.3.3G

Under section 194(3) the FSA may exercise the power if it receives certain information from the Director General of Fair Trading. Section 194(3) applies to an incoming EEA firm that is either:

  1. (1)

    an investment firm which is authorised in another Member State by its Home State regulator; or

  2. (2)

    a credit institution which is authorised in another Member State by its Home State regulator;

exercising an EEA right to carry on Consumer Credit Act business in the United Kingdom (see section 194(2) and paragraph 5(a) and (b) of Schedule 3 to the Act (EEA Passport Rights)).

ENF 4.3.4G

Section 194(3) permits the FSA to exercise its power of intervention in respect of the incoming firm if the Director General of Fair Trading has informed the FSA that:

  1. (1)

    the firm concerned; or

  2. (2)

    any of the firm's employees, agents or associates (whether past or present); or

  3. (3)

    if the firm is a body corporate, a controller of the authorised person or an associate of such a controller; has done any of the things specified in paragraphs (a) to (d) of section 25(2) of the Consumer Credit Act 1974, that is has:

    1. (a)

      committed any offence involving fraud or other dishonesty, or violence; or

    2. (b)

      Contravened any provision made by or under that Act, or by or under any other enactment regulating the provision of credit to individuals or other transactions with individuals; or

    3. (c)

      practised discrimination on grounds of sex, colour, race or ethnic or national origins in, or in connection with, the carrying on of any business; or

    4. (d)

      engaged in business practices appearing to the Director to be deceitful or oppressive, or otherwise unfair or improper (whether lawful or not).

Grounds for exercising the power on behalf of an overseas regulator

ENF 4.3.5G
  1. (1)

    Under section 195(1) of the Act (Exercise of power in support of overseas regulator), the FSA may exercise its power of intervention in respect of an incoming firm at the request of an overseas regulator.

  2. (2)

    Paragraph (1) applies whether or not the FSA's power of intervention is also exercisable as a result of section 194 (see ENF 4.3.2 G to ENF 4.3.4 G).

  3. (3)

    If:

    1. (a)

      a Home State regulator in pursuance of a Community obligation has made a request to the FSA for the exercise of the power; or

    2. (b)

      a Home State regulator has notified the FSA that it has withdrawn an EEA firm's EEA authorisation;

    then, when the FSA decides whether to exercise its power of intervention, it must consider whether it is necessary to exercise the power in order to comply with a Community obligation (See ENF 3.5.19 G for examples of relevant Community obligations).

  4. (4)

    When the FSA decides in any case that the exercise of its power is not necessary to comply with a Community obligation, it may take into account, in particular, the factors that are set out in ENF 3.3.6 G.