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ENF 8.5 Prohibition orders against approved persons

ENF 8.5.1G

When the FSA has concerns about the fitness and propriety of an approved person, it may consider whether it should seek to withdraw his approval, prohibit him from conducting regulated activities, or both. ENF 7 (Withdrawal of approval) sets out the FSA's approach to the use of its power to withdraw approval in relation to individuals who are approved persons. The grounds on which the FSA may withdraw approval are similar to the grounds on which the FSA may consider exercising its power to make a prohibition order against individuals who are approved persons. 1

ENF 8.5.1AG

1The FSA will consider in each case whether its regulatory objectives of maintaining market confidence in the financial system, promoting public awareness, protecting consumers and reducing financial crime can adequately be achieved by withdrawing approval or disciplinary sanctions, for example, public censure or financial penalties, or by issuing a private warning. The FSA considers that a prohibition order generally has more serious consequences than the withdrawal of approval because a prohibition order will usually be wider in scope (see ENF 8.3.2 G). It is therefore likely that the FSA will consider making a prohibition order against approved persons only in the more serious cases of lack of fitness and propriety where it considers that the other powers available to it are not sufficient to achieve the FSA's regulatory objectives.

ENF 8.5.2G

When it decides whether to exercise its power to make a prohibition order against an approved person, the FSA will consider the following factors:

  1. (1)

    whether the individual is fit and proper to perform functions in relation to regulated activities. The criteria for assessing the fitness and propriety of approved persons are contained in FIT 2.1 (Honesty, integrity and reputation); FIT 2.2 (Competence and capability) and FIT 2.3 (Financial soundness). The criteria include:

    1. (a)

      honesty, integrity and reputation; this includes an individual's openness and honesty in dealing with consumers, market participants and regulators and ability and willingness to comply with requirements placed on him by or under the Act as well as with other legal and professional obligations and ethical standards;

    2. (b)

      competence and capability; this includes an assessment of the individual's skills to carry out the controlled function that he is performing; and

    3. (c)

      financial soundness; this includes whether the individual has been the subject of any judgment debts or awards in the United Kingdom or elsewhere that are continuing or were not satisfied within a reasonable period;

  2. (2)

    whether and to what extent, the approved person has:

    1. (a)

      failed to comply with the Statements of Principle; or

    2. (b)

      been knowingly concerned in a contravention by the relevant firm of a requirement imposed on the firm by or under the Act (including the Principles and other rules);

  3. (3)

    the relevance, materiality and length of time since the occurrence of any matters indicating unfitness;

  4. (4)

    the particular controlled function the approved person is performing, the nature and activities of the firm concerned and the markets in which he operates;

  5. (5)

    the severity of the risk which the individual poses to consumers and to confidence in the financial system;

  6. (6)

    the previous disciplinary record and general compliance history of the individual including whether the FSA (or any previous regulator) has previously imposed a disciplinary sanction on the individual.

ENF 8.5.3G

The FSA may have regard to the cumulative effect of a number of factors which, when considered on their own, may not be sufficient to show that the individual is fit and proper to continue to carry out the controlled function.

ENF 8.5.4G

It is impossible to produce a definitive list of matters which the FSA might take into account when considering whether an individual is not a fit and proper person to carry out a particular, or any, controlled function in relation to a particular, or any, firm. This is because of the diverse nature of the activities and controlled functions which the FSA regulates. Therefore, certain matters that do not fit squarely, or at all, within the matters referred to above may fall to be considered, for example, if an individual has been convicted of, or dismissed or suspended from employment for abuse of drugs or other substances, or has convictions for serious assault. In these circumstances the FSA will consider whether the conduct or matter in question is relevant to the individual's fitness and propriety.

ENF 8.5.5G

Where the FSA has withdrawn the approval of an individual who is an approved person and that individual has continued to carry out controlled functions in relation to regulated activities despite the withdrawal of his approval in relation to those functions, the FSA will consider whether it is appropriate to make a prohibition order against him.