Content Options

Content Options

View Options

You are viewing the version of the document as on 2023-11-28.

REC 2A.1 Introduction

REC 2A.1.1 G RP

2This chapter applies to a RAP or to a UK RIE applying to become a RAP. Regulation 2 of the RAP regulations provides that an entity must have UK RIE status before it can apply for RAP status.

REC 2A.1.2 G RP

2The RAP recognition requirements must be satisfied by a RAP applicant for recognition to be granted. These requirements apply both on initial recognition and throughout the period that RAP status is held. Therefore, the term RAP in the guidance should be understood to also refer to an applicant where appropriate and where not otherwise stated.

REC 2A.1.3 G RP

2The RAP regulations apply modified provisions of the Act to a RAP. For example, a RAP is an exempt person in respect of its business as an auction platform due to the application of section 285 of the Act as modified by the RAP regulations. Similarly, section 293 of the Act is applied and modified by the RAP regulations to provide for notification rules and notification requirements in relation to RAPs.

REC 2A.2 Method of satisfying the RAP recognition requirements

REC 2A.2.1 UK RP

2Recognised Auction Platforms Regulations, regulation 13

(1) In considering whether [a RAP] or applicant satisfies the [RAP recognition requirements], the [FCA] may:

(a) treat compliance by the [RAP] or applicant with the [recognition requirements] applying to it as a [UK RIE] as conclusive evidence that the [RAP] or applicant satisfies any equivalent [RAP recognition requirements] applying to it under these [RAP regulations], taking into account any arrangements that would be necessary to meet the [RAP recognition requirements], and

(b) take into account all relevant circumstances including the constitution of the person concerned.

(2) Without prejudice to the generality of paragraph (1), [a RAP] or applicant may satisfy [RAP recognition requirements] by making arrangements for functions to be performed on its behalf by any other person.

(3) Where [a RAP] or applicant makes arrangements of the kind mentioned in paragraph (2), the arrangements do not affect the responsibility imposed by these [RAP regulations] on the [RAP] or applicant to satisfy the [RAP recognition requirements], but it is in addition [a RAP recognition requirement] applying to the [RAP] or applicant that the person who performs (or is to perform) the functions is a fit and proper person who is able and willing to perform them.

REC 2A.2.2 G RP

2The FCA will request information from a RAP or RAP applicant in order to determine whether it meets the RAP recognition requirements.

REC 2A.3 Guidance on RAP recognition requirements

REC 2A.3.1 G RP

4In assessing compliance with the RAP recognition requirements, the FCA will have regard to relevant guidance in REC 2 on the equivalent requirements set out in the Recognition Requirement Regulations. The FCA may also take into account compliance by the RAP or RAP applicant with the recognition requirements (see REC 2A.2.1UK). The FCA will not make a separate assessment of compliance with the recognition requirements during the course of examining an application to become a RAP or as part of its ongoing supervision of a RAP, unless there is a specific reason to do so.

REC 2A.3.2 G RP

4The guidance in relation to the recognition requirements in the sections of REC 2 listed in Column A of the table below applies to a RAP in relation to the equivalent RAP recognition requirements listed in Column C and (if shown) with the modifications in Column B.

Table: Guidance on RAP recognition requirements

Column A

REC 2 guidance which applies to a RAP

Column B

Modification to REC 2 guidance for a RAP

Column C

Relevant RAP recognition requirement

REC 2.2.2G to REC 2.2.7G (Relevant circumstances and Outsourcing)

Reg 13

REC 2.3.3G to REC 2.3.9G (Financial resources)

Reg 14

REC 2.4.3G to REC 2.4.6G (Suitability)

In addition to the matters set out in REC 2.4.3G to REC 2.4.6G, the FCA will have regard to whether a key individual has been allocated responsibility for overseeing the auction platform of the UK recognised body.

Reg 15

REC 2.5.3G to REC 2.5.20G (Systems and controls and conflicts) and REC 2.5A (Guidance on Public Interest Disclosure Act: Whistleblowing)

Reg 16 and 17(2)(f)

REC 2.6.26G to REC 2.6.34G (Safeguards for investors)

Reg 17

REC 2.7.3G to REC 2.7.4G (Access to facilities)

The FCA shall have regard to whether a RAP provides access to bid at auctions only to those persons eligible to apply for admission to bid under regulation 16 of the UK auctioning regulations.

Reg 17(2)(a) and 20

REC 2.8.3G to REC 2.8.4G (Settlement and clearing services)

Reg 17(2)(d) and 21

REC 2.9.3G to REC 2.9.4G (Transaction recording)

Reg 17(2)(e)

REC 2.10.3G to REC 2.10.4G (Financial crime and market abuse)

Reg 17(2)(g)

REC 2.11.3G to REC 2.11.4G (Custody)

REC 2.11.4G is replaced with the following for a RAP:

Where a RAP arranges for other persons to provide services for the safeguarding and administration services of assets belonging to users of its facilities, it will also need to satisfy the RAP recognition requirement in regulation 17(2)(h) of the RAP regulations (see REC 2A.2.1UK).

Reg 17(2)(h)

REC 2.12.1G to REC 2.12.2G (Availability of relevant information)

REC 2.12.1G to REC 2.12.2G are replaced with the following for a RAP:

In determining whether appropriate arrangements have been made to make relevant information available to persons engaged in dealing in emissions auction products the FCA may have regard to:

(1) the extent to which auction bidders are able to obtain information in a timely fashion about the terms of those emissions auction products and the terms on which they will be auctioned, either through accepted channels for dissemination of information or through other regularly and widely accessible communication media;

(2) what restrictions, if any, there are on the dissemination of relevant information to auction bidders; and

(3) whether relevant information is, or can be, kept to restricted groups of persons in such a way as to facilitate or encourage market abuse.

REC 2.12.2G

A RAP does not need to maintain its own arrangements for providing information on the terms of emissions auction products to auction bidders where it has made adequate arrangements for other persons to do so on its behalf or there are other effective and reliable arrangements for this purpose.

Reg 17(2)(c)

REC 2.13.3G to REC 2.13.6G (Promotion and maintenance of standards)

Reg 18

REC 2.14.3G to REC 2.14.6G (Rules and consultation)

Reg 19

REC 2.15.3G to REC 2.15.6G (Discipline)

Reg 22

REC 2.16.3G to REC 2.16.4G (Complaints

Reg 23

REC 2A.4 Power and procedure for RAP penalties and censures

REC 2A.4.1 G RP

3Under regulation 5A (Power to impose civil penalties) of the RAP Regulations, where the FCA considers that a RAP has contravened any requirement in regulations 17, 18(8), 19(1) or (2), or 37 of the UK auctioning regulations, the FCA has the power to impose a civil penalty on that RAP.

REC 2A.4.2 G RP

3Where the FCA is entitled to impose a penalty on a RAP, it may instead publish a statement censuring it.

REC 2A.4.3 G RP

3The provisions of the UK auctioning regulations referred to in REC 2A.4.1G are applicable to a RAP and require it to, in summary:

  1. (1)

    only grant admission to bid to applicants that comply with the conditions set out in regulation 17 of the UK auctioning regulations, including the prerequisite that the applicants are eligible to bid in accordance with regulation 16 of the UK auctioning regulations;

  2. (2)

    require an applicant for admission to bid to ensure that its clients, and the clients of its clients, are able to comply with information requirements, interviews, investigations and verifications carried out or required by the RAP;

  3. (3)

    refuse to grant admission to bid, or revoke or suspend that admission, to any person:

    1. (a)

      that is not, or is no longer, eligible to bid (under regulation 16 of the UK auctioning regulations); does not meet, or no longer meets, the requirements of regulations 16, 17 and 18 of the UK auctioning regulations; or is wilfully or repeatedly in breach of the UK auctioning regulations, the terms and conditions of its admission to bid or other related instructions or agreements; or

    2. (b)

      where the RAP suspects the person is involved with money laundering, terrorist financing, criminal activity or market abuse, provided that such refusal, revocation or suspension is unlikely to frustrate efforts by the law enforcement authorities to pursue or apprehend the perpetrators of those activities; and

  4. (4)

    monitor the relationship with bidders admitted to bid in its auctions.

REC 2A.4.4 G RP

3The power in regulation 5A of the RAP Regulations to impose a civil penalty or publish a statement adds to the FCA's other supervisory powers in relation to RAPs (see REC 4) and its power to impose penalties on a RAP under the Money Laundering Regulations. The FCA will use this power under the RAP Regulations where it is appropriate to do so and with regard to the relevant factors listed in DEPP 6.2.1G. In deciding between a civil penalty or a public statement, the FCA will also have regard to the relevant factors listed in DEPP 6.4.

REC 2A.4.5 G RP

3The FCA will notify the subject of the investigation that it has appointed officers to carry out an investigation under either or both the RAP Regulations or the Money Laundering Regulations and the reasons for the appointment, unless notification is likely to prejudice the investigation or otherwise result in it being frustrated. The FCA expects to carry out a scoping visit early on in the enforcement process in most cases.

REC 2A.4.6 G RP

3Where the FCA uses the power to impose a penalty, it will be for an amount that is effective, proportionate and dissuasive and with regard to relevant factors listed in DEPP 6.5 to DEPP 6.5D in determining the appropriate level of financial penalty.

REC 2A.4.7 G RP

3The FCA will also have regard to whether the person followed any of the FCA’s guidance and will not take action under regulation 5A of the RAP Regulations where there are reasonable grounds for it to be satisfied that the person took all reasonable steps and exercised all due diligence to ensure that the requirement was complied with.

REC 2A.4.8 G RP

3When the FCA proposes or decides to take action against a RAP in exercise of its power in regulation 5A of the RAP Regulations, it must give the RAP a warning notice or a decision notice respectively. Those notices must state the amount of the penalty or set out the terms of the statement, as applicable. On receiving a warning notice, the RAP has a right to make representations on the FCA’s proposed decision.

REC 2A.4.9 G RP

3Where the FCA is proposing or deciding to publish a statement censuring a RAP or impose a penalty on the RAP under regulation 5A of the RAP Regulations, the FCA’s decision maker will be the RDC. This is to ensure that the FCA’s power to censure or impose a penalty on a RAP has the same layer of separation in the decision-making process, and is exercised consistently with, similar penalty and censure powers of the FCA under other legislation. The RDC will make its decisions following the procedure set out in DEPP 3.2 or, where appropriate, DEPP 3.3. A RAP that receives a decision notice under regulation 5A of the RAP Regulations may refer the matter to the Tribunal.

REC 2A.4.10 G RP

3 Sections 393 and 394 of the Act apply to notices referred to in this section. See DEPP 2.4 (Third party rights and access to FCA material).

REC 2A.4.11 G RP

3As with cases under the Act, the FCA may settle or mediate appropriate cases to assist it to exercise its functions in the most efficient and economic way. The settlement discount scheme set out in DEPP 6.7 applies to penalties imposed under the RAP Regulations.

REC 2A.4.12 G RP

3The FCA will apply the approach to publicity that it has outlined in EG 6.