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REC 3.1 Application and purpose

Application

REC 3.1.1 R
  1. (1)

    The notification rules in this chapter, which are made under section 293 of the Act (Notification requirements), apply to all UK recognised bodies.

  2. (2)

    The rules relating to the form and method of notification in REC 3.2 also apply to overseas recognised bodies.

REC 3.1.2 G

The notification rules for overseas recognised bodies are set out in REC 6. The guidance set out at REC 3.3 in relation to the waiving and modification of notification rules also applies to the notification rules in this chapter and to the notification rules in REC 6.

REC 3.1.3 G

The notification rules in this chapter are in addition to the requirements on UK RIEs2 to give notice or information to the FCA and if applicable, the Bank of England2 under sub-sections 293(5) and (6)2 of the Act.

2 2 2
REC 3.1.3A G

1The notification rules in this chapter which apply to an RAP are without prejudice to notification rules which apply to a UK RIE which operates the RAP. However, a UK RIE which operates an RAP may make a single notification where a notification is required both in its capacity as a UK RIE and an RAP.

Purpose

REC 3.1.4 G

The notification rules in this chapter are made by the FCA2 in order to ensure that it is provided with notice of events and information which it reasonably requires for the exercise of its functions under the Act.

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REC 3.2 Form and method of notification

Form of notification

REC 3.2.1 R

Where a recognised body is required to give any notice or information under any notification rule, it may do so (unless that rule expressly provides otherwise) orally or in writing, whichever is the more appropriate in the circumstances, but, where it gives notice or information orally, it must confirm that notice or information in writing promptly.

Method of notification

REC 3.2.2 R

Unless otherwise stated in the notification rule, a written notification required from a recognised body under any notification rule must be:

  1. (1)

    given to, or addressed for the attention of, the recognised body's usual supervisory contact at the FCA;1

    1
  2. (2)

    delivered to the FCA1 by one of the methods in REC 3.2.3 R.

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REC 3.2.3 R

Methods of notification

Method of delivery

(1)

Post to the address in REC 3.2.4 R

(2)

Leaving the notification at the address in REC 3.2.4 R and obtaining a time-stamped receipt

(3)

Electronic mail to an address for the recognised body's usual supervisory contact at the FCA 1 and obtaining an electronic confirmation of receipt

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(4)

Hand delivery to the recognised body's usual supervisory contact at the FCA 1

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(5)

Fax to a fax number for the recognised body's usual supervisory contact at the FCA,1provided that the FCA1 receives a copy of the notification by one of methods (1) - (4) in this table within five business days after the date of the faxed notification

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REC 3.2.4 R

The address for a written notification to the FCA1 is:

The Financial Conduct Authority1

25 The North Colonnade

Canary Wharf

London E14 5HS

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Timely notification

REC 3.2.5 R

If a notification rule requires notification within a specified period:

  1. (1)

    the recognised body must give the notification so as to be received by the FCA1 no later than the end of that period; and

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  2. (2)

    if the end of that period falls on a day which is not a business day, the notification must be given so as to be received by the FCA1 no later than the first business day after the end of that period.

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Service of Notice Regulations

REC 3.2.6 G

The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) do not apply to notifications required under the notification rules in this chapter and in REC 6 because of the specific rules in this section.

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REC 3.3 Waivers

Statutory power

REC 3.3.1 G

Under section 294 of the Act (Modification or waiver of rules), the FCA1 may, on the application or with the consent of a recognised body (including an ROIE),1 direct that any notification rule is not to apply to the body or is to apply with such modifications as may be specified in the waiver.

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REC 3.3.2 G

A waiver given under section 294 of the Act may be made subject to conditions.

REC 3.3.3 G

Under section 294(4) of the Act, before the FCA1 may give a waiver of notification rules, it must be satisfied that:

1
  1. (1)

    compliance by the recognised body with those notification rules, or with those rules as unmodified, would be unduly burdensome or would not achieve the purpose for which those rules were made; and

  2. (2)

    the waiver would not result in undue risk to persons whose interests those rules are designed to protect.

Applications

REC 3.3.4 G

Where a recognised body wishes to make an application to the FCA1 for a waiver of a notification rule, it should in the first instance inform its usual supervisory contact at the FCA.1

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REC 3.3.5 G

There is no application form, but applicants should make their application formally and in writing and in accordance with any direction the FCA1 may make under section 294(2) of the Act. Each application should set out at least:

1
  1. (1)

    full particulars of the waiver which is requested;

  2. (2)

    the reason why the recognised body believes that the criteria set out in section 294(4) (and described in REC 3.3.3 G) would be met, if this waiver were granted; and

  3. (3)

    where the recognised body believes that these criteria would be met if the FCA1 gave a waiver under section 294 subject to any condition, particulars of the kind of condition contemplated.

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REC 3.3.6 G

The FCA1 may request further information from the applicant, before deciding whether to give a waiver under section 294 of the Act.

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Waivers

REC 3.3.7 G

Any waiver given by the FCA1 under section 294 of the Act will be made in writing, stating:

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  1. (1)

    the name of the recognised body in respect of which the waiver is made;

  2. (2)

    the notification rules which are to be waived or modified in respect of that body;

  3. (3)

    where relevant, the manner in which any rule is to be modified;

  4. (4)

    any condition or time limit to which the waiver is subject; and

  5. (5)

    the date from which the waiver is to take effect.

REC 3.3.8 G

Where the FCA1 considers that it will not give the waiver which has been applied for, the FCA1 will give reasons to the applicant for its decision. The FCA1 will endeavour, where practicable, to inform an applicant in advance where it seems that an application is likely to fail unless it is amended or expanded, so that the applicant will have the opportunity to make any necessary amendments or additions before the application is considered.

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REC 3.3.9 G

Where the FCA1 wishes to give a waiver under section 294 of the Act with the consent of a recognised body (rather than on the application of a recognised body), the FCA1 will correspond or discuss this with that body in order to agree an appropriate waiver.

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Reviews of waivers

REC 3.3.10 G

The FCA1 will periodically review any waiver it has given. The FCA1 has the right to revoke a waiver under section 294(6) of the Act. This right is likely to be exercised in the event of a material change in the circumstances of the recognised body or in any fact on the basis of which the waiver was given.

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REC 3.4 Key individuals and internal organisation

Purpose

REC 3.4.1 G

The purpose of REC 3.4 is to enable the FCA3 to monitor changes in the arrangements a UK recognised body makes for the carrying out of its relevant functions or for overseeing the work of key individuals or departments responsible for its relevant functions.

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Key individuals

REC 3.4.2 R

[deleted]3

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REC 3.4.2A R

1Where, in relation to a UK RIE a proposal has been made to appoint or elect a person as a key individual, that UK RIE must at least 30 days before the date of the appointment or election give notice of that event, and give the information specified for the purposes of this rule in REC 3.4.4A R to the FCA.3

[Note: Article 37(1), paragraph 1, second sentence of MiFID]

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REC 3.4.2B R

1Where, in relation to a UK RIE a person has resigned as, or has ceased to be, a key individual, that UK RIE must immediately give notice of that event, and give the name of the person.

[Note: Article 37(1), paragraph 1, second sentence of MiFID]

REC 3.4.3 G
  1. (1)

    Key individuals include the persons who, under the operational or managerial arrangements of the UK recognised body, are appointed to manage the departments responsible for carrying out its relevant functions, whether or not they are members of its governing body. A person appointed to carry out specific tasks, such as to conduct a particular investigation into a specific set of facts, would not usually be a key individual.

  2. (2)

    A key individual need not be an employee of a UK recognised body. For example, an employee of an undertaking in the same group or a self-employed contractor of a UK recognised body might be a key individual, depending on the role he plays in that body.

  3. (3)

    A department of a UK recognised body should be regarded as responsible for carrying out a relevant function if it is responsible for any activity or activities which form a significant part of a relevant function or which make a significant contribution to the performance of a relevant function.

  4. (4)

    The FCA3 does not need to be notified where minor changes are made to the responsibilities of a key individual, but where a major change in responsibilities is made which amounts to a new appointment, the FCA3 should be notified under REC 3.4.2A R.3

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REC 3.4.4 R

[deleted]3

REC 3.4.4A R

1The following information is specified for the purposes of REC 3.4.2A R:

  1. (1)

    that person's name;

  2. (2)

    his date of birth;

  3. (3)

    a description of the responsibilities which he will have in the post to which he is to be appointed or elected, including for a UK RIE which operates an RAP where the person has responsibilities both in the UK RIE and RAP, a description of the responsibilities he has in respect of each body.3

[Note: Article 37(1), paragraph 1, second sentence of MiFID]

Standing committees

REC 3.4.5 R

Where the governing body of a UK recognised body delegates any of its functions (which relate to that UK recognised body'srelevant functions) to a standing committee, or appoints a standing committee to manage or oversee the carrying out of any of that UK recognised body'srelevant functions, that UK recognised body must immediately notify the FCA3 of that event and give the FCA3 the following information:

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  1. (1)

    the names of the members of that standing committee; and

  2. (2)

    the terms of reference of that standing committee (including a description of any powers delegated to that committee and any conditions or limitations placed on the exercise of those powers).

REC 3.4.6 R

Where:

  1. (1)

    there is any change in the composition or the terms of reference of any standing committee referred to in REC 3.4.5 R; or

  2. (2)

    any such committee is dissolved;

the UK recognised body must immediately notify the FCA3 of that event and give particulars of any change referred to in (1) to the FCA.3

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REC 3.4.7 G
  1. (1)

    Standing committees include permanent committees with executive, supervisory, policy-making or rule-making responsibilities. Committees appointed for particular tasks or committees established for purely consultative or advisory purposes would not usually be considered to be standing committees.

  2. (2)

    Committees which include persons who are not members of the governing body can be standing committees.

REC 3.5 Disciplinary action and events relating to key individuals

Disciplinary action

REC 3.5.1 R

Where any key individual of a UK recognised body:

  1. (1)

    is the subject of any disciplinary action because of concerns about his alleged misconduct;

  2. (2)

    resigns as a result of an investigation into his alleged misconduct; or

  3. (3)

    is dismissed for misconduct;

that body must immediately give the FCA1 notice of that event, and give the information specified for the purposes of this rule in REC 3.5.2 R.

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REC 3.5.2 R

The following information is specified for the purposes of REC 3.5.1 R:

  1. (1)

    the name of the key individual and his responsibilities within the UK recognised body;

  2. (2)

    details of the acts or alleged acts of misconduct by that key individual; and

  3. (3)

    details of any disciplinary action which has been or is proposed to be taken by that body in relation to that key individual.

Other events

REC 3.5.3 R

Where a UK recognised body becomes aware that any of the following events has occurred in relation to a key individual, it must immediately give the FCA1 notice of that event:

1
  1. (1)

    a petition for bankruptcy is presented (or similar or analogous proceedings under the law of a jurisdiction outside the United Kingdom are commenced) against that key individual; or

  2. (2)

    a bankruptcy order (or a similar or analogous order under the law of a jurisdiction outside the United Kingdom) is made against him; or

  3. (3)

    he enters into a voluntary arrangement (or a similar or analogous arrangement under the law of a jurisdiction outside the United Kingdom) with his creditors.

REC 3.6 Constitution and governance

REC 3.6.1 R

Where a UK recognised body is to circulate any notice or other document proposing any amendment to its memorandum or articles of association (or other similar agreement or document relating to its constitution) to:

  1. (1)

    its shareholders (or any group or class of them); or

  2. (2)

    its members (or any group or class of them); or

  3. (3)

    any other group or class of persons which has the power to make that amendment or whose consent or approval is required before it may be made;

that UK recognised body must give notice of that proposed amendment, and give the information specified for the purposes of this rule in REC 3.6.2 R to the FCA1, at the same time as that notice or document is circulated.

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REC 3.6.2 R

The following information is specified for the purposes of REC 3.6.1 R:

  1. (1)

    the proposed amendments referred to in REC 3.6.1 R;

  2. (2)

    the reasons for the proposal; and

  3. (3)

    a description of the group or class of persons to whom the proposal is to be circulated.

REC 3.6.3 G

A UK recognised body which is incorporated as a company in the United Kingdom will, in many circumstances, be able to comply with REC 3.6.1 R by providing a copy of the notice of special resolution issued to its shareholders.

REC 3.6.4 R

Where a UK recognised body makes an amendment to its memorandum or articles of association (or other similar agreement or document relating to its constitution), that UK recognised body must immediately give the FCA1notice of that event, and give written particulars of that amendment and of the date on which it is to become or became effective.

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REC 3.6.5 G

A UK recognised body which is incorporated as a company in the United Kingdom will, in many circumstances, be able to comply with REC 3.6.4 R by providing a copy of the special resolution effecting the amendment.

REC 3.6.6 R

Where any change is made to an agreement which relates to the constitution or governance of a UK recognised body:

  1. (1)

    between that UK recognised body and another person; or

  2. (2)

    between the owners of that UK recognised body; or

  3. (3)

    between the owners of that UK recognised body and another person; or

  4. (4)

    between other persons;

that UK recognised body must give the FCA1notice of that event as soon as it is aware of it, and give written particulars of that change and of the date on which it is to become or became effective.

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REC 3.6.7 G

The purpose of REC 3.6.6 R is to ensure that the FCA1is informed of changes to agreements which specify the arrangements by which a UK recognised body will be governed or by which important decisions will be taken within that body. It is not intended to cover any agreement by which someone is appointed to be a key individual or which covers the terms and conditions of service in such an appointment.

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REC 3.7 Auditors

REC 3.7.1 R

Where the auditors of a UK recognised body cease to act as such, that UK recognised body must immediately give the FCA1notice of that event, and the following information:

1
  1. (1)

    whether the appointment of those auditors expired or was terminated;

  2. (2)

    the date on which they ceased to act; and

  3. (3)

    if it terminated, or decided not to renew, their appointment, its reasons for taking that action or decision.

REC 3.7.2 R

Where a UK recognised body appoints new auditors, that body must immediately give the FCA1notice of that event, and the following information:

1
  1. (1)

    the name and business address of those new auditors; and

  2. (2)

    the date of their appointment as auditors.

REC 3.8 Financial and other information

REC 3.8.1 R

A UK recognised body must give the FCA1:

1
  1. (1)

    a copy of its annual report and accounts; and

  2. (2)

    a copy of the consolidated annual report and accounts:

    1. (a)

      of any group in which the UK recognised body is a subsidiary undertaking; or

    2. (b)

      (if the UK recognised body is not a subsidiary undertaking in any group) of any group of which the UK recognised body is a parent undertaking;

no later than the time specified for the purpose of this rule in REC 3.8.2 R.

REC 3.8.2 R

The time specified for the purpose of REC 3.8.1 R is the latest of:

  1. (1)

    four months after the end of the financial year to which the document which is to be given to the FCA1relates; or

    1
  2. (2)

    the time when the documents described in REC 3.8.1 R (1) or REC 3.8.1 R (2)(b) are sent to the members or shareholders of the UK recognised body; or

  3. (3)

    the time when the document described in REC 3.8.1 R (2)(a) are sent to the shareholders in a parent undertaking of the group to which that document relates.

REC 3.8.3 R

Where an audit committee of a UK recognised body has prepared a report in relation to any period or any matter relating to any relevant function of that UK recognised body, the UK recognised body must immediately give the FCA1a copy of that report.

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REC 3.8.4 R

A UK recognised body must give the FCA1a copy of:

1
  1. (1)

    its quarterly management accounts; or

  2. (2)

    its monthly management accounts;

within one month of the end of the period to which they relate.

REC 3.8.5 G

A UK recognised body is not required to provide quarterly and monthly management accounts in respect of the same period, but management accounts (whether quarterly or monthly) should be submitted for all periods. A UK recognised body may choose whichever method is the more suitable for it, but where it intends to change from providing monthly to quarterly management accounts (or from quarterly to monthly management accounts), it should inform the FCA1 of that fact.

1
REC 3.8.6 R

A UK recognised body must give the FCA1:

1
  1. (1)

    a statement of its anticipated income, expenditure and cashflow for each financial year; and

  2. (2)

    an estimated balance sheet showing its position as it is anticipated at the end of each financial year;

before the beginning of that financial year.

REC 3.8.7 R

Where the accounting reference date of a UK recognised body is changed, that body must immediately give notice of that event to the FCA1and inform it of the new accounting reference date.

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REC 3.9 Fees and incentive schemes

REC 3.9.1 G

The purpose of REC 3.9.2 R is to enable the FCA1to obtain information on changes to standard tariffs for matters such as membership and trading and of any scheme introduced by the UK recognised body for rebating or waiving fees or charges. A UK recognised body is not required to inform the FCA1of fees or charges for which the UK recognised body does not charge according to a standard tariff.

1 1
REC 3.9.2 R

A UK recognised body must give the FCA1a summary of:

1
  1. (1)

    any proposal to change the fees or charges levied on its members (or any group or class of them), at the same time as the proposal is communicated to those members; and

  2. (2)

    any such change, no later than the date when it is published or notified to those members.

REC 3.10 Complaints

REC 3.10.1 R

Where a UK recognised body's complaints investigator has investigated a complaint arising in connection with the performance of, or failure to perform, any of its regulatory functions, and that complaints investigator has made a recommendation in respect of that complaint that the UK recognised body should:

  1. (1)

    make a compensatory payment to any person; or

  2. (2)

    remedy the matter which was the subject of that complaint;

the UK recognised body must immediately notify the FCA1of that event, and give the FCA1a copy of the complaints investigator's report and particulars of his recommendations as soon as that report or those recommendations are available to it.

1 1

REC 3.11 Insolvency events

REC 3.11.1 R

On:

  1. (1)

    the presentation of a petition for the winding up of a UK recognised body (or the commencement of any similar or analogous proceedings under the law of a jurisdiction outside the United Kingdom); or

  2. (2)

    the appointment of a receiver, administrator, liquidator, trustee or sequestrator of assets of that body (or of any similar or analogous appointment under the laws of a jurisdiction outside the United Kingdom); or

  3. (3)

    the making of a voluntary arrangement by that body with its creditors (or of any similar or analogous arrangement under the law of a jurisdiction outside the United Kingdom);

that body must immediately give the FCA1notice of that event.

1

REC 3.12 Legal proceedings

REC 3.12.1 R

If any civil or criminal legal proceedings are instituted against a UK recognised body, it must, unless REC 3.12.2 R applies, immediately give notice of that event and give the following information to the FCA:1

1
  1. (1)

    in the case of civil proceedings, the name of the claimant, particulars of the claim, the amount of damages and any other remedy sought by the claimant, and particulars of any allegation that any act or omission of that body was in bad faith; and

  2. (2)

    in the case of criminal proceedings, particulars of the offence with which that body is charged.

REC 3.12.2 R

A UK recognised body is not required to give notice of civil legal proceedings or information about them to the FCA1under REC 3.12.1 R, where:

1
  1. (1)

    the amount of damages claimed would not significantly affect that UK recognised body's financial resources, if the claim were successful;

  2. (2)

    the claim would not have a significant adverse effect on the reputation and standing of that body, if that claim were successful; and

  3. (3)

    the claim does not relate to that body's regulatory functions.

REC 3.13 Delegation of relevant functions

REC 3.13.1 G
  1. (1)

    The purpose of REC 3.13 is to enable the FCA2to monitor any significant instances where UK recognised bodies outsource their functions to other persons (as permitted 1under Regulation 6 of the Recognition Requirements Regulations or, in relation to an RAP, under regulation 13 of the RAP regulations1. See REC 2.2 and REC 2A.2).1

    21
  2. (2)

    The FCA2does not need to be notified of every instance of outsourcing by a UK recognised body, but only where an activity or activities which form a significant part of a relevant function or which make a significant contribution to the performance of a relevant function are outsourced.

    2
REC 3.13.2 R

Where a UK recognised body makes an offer or agrees to delegate any of its relevant functions to another person, it must immediately give the FCA2notice of that event, and:

2
  1. (1)

    inform the FCA2of the reasons for that delegation or proposed delegation;

    2
  2. (2)

    inform the FCA2of the reasons why it is satisfied that it will continue to meet the recognition requirements or (for an RAP) RAPrecognition requirements1 following that delegation;

    2
  3. (3)

    where it makes such an offer by issuing a written invitation to tender to another body or person, give the FCA2a copy of that invitation to tender; and

    2
  4. (4)

    where it makes such an agreement, give the FCA2a copy of that agreement.

    2
REC 3.13.3 R

A UK recognised body must immediately give the FCA2notice, where it makes an offer or agrees to undertake any relevant function of another UK recognised body.

2

REC 3.14 Products, services and normal hours of operation

Purpose

REC 3.14.1 G

The purpose of REC 3.14 is to ensure that the FCA3is informed of planned changes to the services a UK recognised body intends to provide and of the normal hours of operation of those services. Unplanned suspensions of those services, unplanned changes in hours of operation and events causing a UK recognised body to be unable to provide those services should be notified to the FCA3under the rules in REC 3.15.

3 3

Products and services

REC 3.14.2 R

Where a UK RIE proposes to admit to trading (or to cease to admit to trading) by means of its facilities:

  1. (1)

    a specified investment (other than a security or an option in relation to a security); or

  2. (2)

    a type of security or a type of option in relation to a security;

it must give the FCA3notice of that event, and the information specified for the purposes of this rule in REC 3.14.6 R to the FCA3, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).

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REC 3.14.2A R

1When a UK RIE removes a financial instrument from trading on a regulated market, it must immediately give the FCA3notice of that event and relevant information including particulars of that financial instrument and the reasons for the action taken.

[Note: Article 41(1), paragraph 2 of MiFID]

3
REC 3.14.3 R

Where a UK recognised body proposes to provide (or to cease to provide) clearing facilitation services3 in respect of:

3
  1. (1)

    a specified investment (other than a security or an option in relation to a security); or

  2. (2)

    a type of security or a type of option in relation to a security;

it must give the FCA3notice of that event and the information specified for the purposes of this rule in REC 3.14.6 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).

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REC 3.14.4 R

[deleted]

3 3
REC 3.14.5 G

Securities falling within the same article in Part III of the Regulated Activities Order which may be given the same generic description (for example, shares admitted to the UKofficial list) will normally be regarded as being of the same type. Options in relation to the same type of security will normally be regarded as being options of the same type.

REC 3.14.6 R

The following information is specified for the purposes of REC 3.14.2 R and REC 3.14.3 R:

  1. (1)

    a description of the specified investment to which the proposal relates;

  2. (2)

    where that specified investment is a derivative, the proposed terms of that derivative; and

  3. (3)

    in the case of a UK RIE which is admitting that specified investment to trading, the name of any RCH which will provide clearing services in respect of that specified investment under an agreement with that UK RIE.

REC 3.14.7 R

Where:

  1. (1)

    a UK RIE proposes to amend the standard terms of any derivative admitted to trading by means of its facilities; or

  2. (2)

    a UK RIE3 proposes to amend the standard terms relating to any derivative in respect of which it provides clearing facilitation services;3

    333

it must give the FCA3notice of that event, and written particulars of those proposed amendments, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).

3
REC 3.14.8 R

Where a UK recognised body proposes to make (or to cease to make) arrangements for the safeguarding and administration of assets belonging to any other person (other than an undertaking in the same group), that recognised body must give the FCA3notice of that event, and the information specified for the purposes of this rule in REC 3.14.9 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).

3
REC 3.14.9 R

The following information is specified for the purposes of REC 3.14.8 R:

  1. (1)

    a description of the assets (or types of assets) to which the proposal relates; and

  2. (2)

    the date or dates on which arrangements referred to in REC 3.14.8 R will be made (or cease to be made).

REC 3.14.10 G

The FCA3does not need to be notified of proposals to offer (or to withdraw offers of) safeguarding and administration services for individual assets of the same type. Specified investments (other than securities) falling within the same article in Part III of the Regulated Activities Order will normally be regarded as being of the same type. Securities falling within the same article in Part III of the Regulated Activities Order which may be given the same generic description (for example, shares admitted to the UK official list) will also normally be regarded as being of the same type.

3

Hours of operation

REC 3.14.11 R

Where a UK recognised body proposes to change its normal hours of operation or (for RAPs) the timing, frequency or duration of its bidding windows,2 it must give the FCA3notice of that proposal, and particulars of, and the reasons for, the actions proposed, at the same time as the proposal is first formally communicated to its members or shareholders, or any group or class of them.

3

REC 3.14A Operation of a regulated market or MTF

Purpose

REC 3.14A.1 G

1The purpose of REC 3.14A is to ensure that the FCA3is informed of planned changes to a UK RIE markets and their regulatory status as either a regulated market or MTF.

3

Operation of a regulated market

REC 3.14A.2 R

Where a UK RIE proposes to operate a new regulated market or close an existing regulated market it must give the FCA3notice of that event and the information specified for the purposes of this rule in REC 3.14A.3 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).

3
REC 3.14A.3 R

The following information is specified for the purposes of REC 3.14A.2 R:

  1. (1)

    where the UK RIE proposes to operate a new regulated market:

    1. (a)

      a description of the regulated market; and

    2. (b)

      a description of the specified investments which will be admitted to trading on that regulated market.

  2. (2)

    where the UK RIE proposes to close a regulated market, the name of that regulated market.

Operation of an MTF

REC 3.14A.4 R

Where a UK RIE proposes to operate a new MTF or close an existing MTF it must give the FCA3notice of that event and the information specified for the purposes of this rule in REC 3.14A.5 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).

3
REC 3.14A.5 R

The following information is specified for the purposes of REC 3.14A.4 R:

  1. (1)

    where the UK RIE proposes to operate a new MTF:

    1. (a)

      a description of the MTF; and

    2. (b)

      a description of the specified investments which will be admitted to trading on that MTF.

  2. (2)

    where the UK RIE proposes to close a MTF, the name of that MTF.

Operation of a recognised auction platform

REC 3.14A.6 G

2If a UK RIE proposes to operate an RAP, it will need to make a separate application to be recognised as an RAP (see REC 5 (Applications)).

REC 3.15 Suspension of services and inability to operate facilities

Purpose

REC 3.15.1 G
  1. (1)

    The purpose of REC 3.15.2 R to REC 3.15.5 G is to enable the FCA3 to obtain information where a UK recognised body decides to suspend the provision of its services in relation to particular investments or (for an RAP) decides to cancel an auction.2 Planned changes to the provision of services should be notified to the FCA3under REC 3.14.

    33
  2. (2)

    REC 3.15.6 R to REC 3.15.7 R provide for notification to the FCA3where a UK recognised body is unable to operate or provide its facilities for reasons outside its control or where it decides to extend its hours of operation in an emergency.

    3
  3. (3)

    2REC 3.15.8 R to REC 3.15.9 G provide for notification to the FCA3where an RAP has to cancel an auction in specified circumstances.

    3

Suspension of services

REC 3.15.2 R

Where, for any reason, an RIE:

  1. (1)

    suspends trading in any derivative (other than an option in relation to a security), in any type of security or in any type of option in relation to a security; or

  2. (2)

    temporarily calls a trading halt in respect of any type of security or in any type of option in relation to a security;

it must immediately give the FCA3notice of that event, particulars of that derivative, type of security or type of option in relation to a security, as the case may be, and the reasons for the action taken.

3
REC 3.15.2A R

1When a UK RIE suspends trading on a regulated market in any financial instrument, it must immediately give the FCA3notice of that event and relevant information including particulars of that financial instrument and the reasons for the action taken.

[Note: Article 41(1), paragraph 2 of MiFID]

3
REC 3.15.3 R

Where a UK recognised body suspends providing clearing facilitation services generally in respect of any derivative (other than an option in relation to a security), type of security or type of option in relation to a security, it must immediately give the FCA notice of that event, particulars of that derivative, type of security or type of option in relation to a security, as the case may be, and the reasons for the action taken.3

3
REC 3.15.4 R

Where a UK recognised body suspends any arrangements it makes for the safeguarding and administration of any type of asset belonging to any other person (other than an undertaking in the same group), that UK recognised body must immediately give the FCA3notice of that event, particulars of that type of asset and the reasons for the action taken.

3
REC 3.15.5 G

Specified investments (other than securities or options in relation to securities) falling within the same article in Part III of the Regulated Activities Order will normally be regarded as being assets of the same type. Securities falling within the same article in Part III of the Regulated Activities Order which may be given the same generic description (for example, shares admitted to the UK official list) will normally be regarded as being of the same type. Options in relation to the same type of security will normally be regarded as being options of the same type.

Inability to operate facilities

REC 3.15.6 R

Where, because of the occurrence of any event or circumstances, a UK recognised body is unable to operate any of its facilities within its normal hours of operation, it must immediately give the FCA3notice of that inability and inform the FCA:3

3 3
  1. (1)

    which facility it is unable to operate;

  2. (2)

    what event or circumstance has caused it to become unable to operate that facility within those hours; and

  3. (3)

    what action, if any, it is taking or proposes to take to enable it to recommence operating that facility.

Extension of hours of operation

REC 3.15.7 R

Where, because of the occurrence of any event or circumstances, a UK recognised body extends its hours of operation, it must immediately give the FCA3notice of that event, and inform the FCA3:

3 3
  1. (1)

    what event or circumstance has caused it to do so;

  2. (2)

    the new hours of operation; and

  3. (3)

    the date on which it expects to revert to its normal hours of operation.

Recognised auction platforms - cancellation of auctions

REC 3.15.8 R

2Where an RAP has to cancel an auction in the circumstances set out in articles 7(5) or 7(6) of the auction regulation, it must immediately give the FCA3notice of that cancellation.

3
REC 3.15.9 G

2Under article 7(7) of the auction regulation, an RAP is required to notify the FCA3of:

3
  1. (1)

    the methodology used to determine the application of article 7(6) of the auction regulation; and

  2. (2)

    modifications to that methodology made between bidding windows.

REC 3.16 Information technology systems

REC 3.16.1 G

The purpose of REC 3.16 is to ensure that the FCA1receives a copy of the UK recognised body's plans and arrangements for ensuring business continuity if there are major problems with its computer systems. The FCA1does not need to be notified of minor revisions to, or updating of, the documents containing a UK recognised body's business continuity plan (for example, changes to contact names or telephone numbers).

1 1
REC 3.16.2 R

Where a UK recognised body changes any of its plans for action in the event of a failure of any of its information technology systems resulting in disruption to the operation of its facilities, it must immediately give the FCA1notice of that event, and a copy of the new plan.

1
REC 3.16.3 R

Where any reserve information technology system of a UK recognised body fails in such a way that, if the main information technology system of that body were also to fail, it would be unable to operate any of its facilities during its normal hours of operation, that body must immediately give the FCA1notice of that event, and inform the FCA:1

1 1
  1. (1)

    what action that UK recognised body is taking to restore the operation of the reserve information technology system; and

  2. (2)

    when it is expected that the operation of that system will be restored.

REC 3.17 Inability to discharge regulatory functions

REC 3.17.1 R

Where, because of the occurrence of any event or circumstances, a UK recognised body is unable to discharge any regulatory function, it must immediately give the FCA1notice of its inability to discharge that function, and inform the FCA:1

1 1
  1. (1)

    what event or circumstance has caused it to become unable to do so;

  2. (2)

    which of its regulatory functions it is unable to discharge; and

  3. (3)

    what action, if any, it is taking or proposes to take to deal with the situation and, in particular, to enable it to recommence discharging that regulatory function.

REC 3.18 Membership

REC 3.18.1 G
  1. (1)

    The purpose of REC 3.18 is to enable the FCA4 to monitor changes in the types of member admitted by UK recognised bodies and to ensure that the FCA4has notice of foreign jurisdictions in which the members of UK recognised bodies are based. UK recognised bodies may admit persons who are not authorised persons or persons who are not located in the United Kingdom, provided that the recognition requirements2or (for RAPs) RAP recognition requirements continue to be met.

    44
  2. (2)

    REC 3.18.2 R focuses on the admission of persons who are not authorised persons (whether or not they are located in the United Kingdom) and on whether the specific recognition requirement or (for an RAP) RAP recognition requirement2 relating to access to facilities can still be met. REC 3.18.3 R focuses on the admission of members from outside the UK and whether all relevant recognition requirements2or (for an RAP) RAPrecognition requirements can be met.

  3. (3)

    The information required under REC 3.18 is relevant to the FCA's4 supervision of the UK recognised body's obligations in relation to the enforceability of compliance with the UKrecognised body's rules.1 It is also relevant to the FCA's4broader responsibilities concerning integrity of the UK financial system4 and, in particular, its functions in relation to market abuse and financial crime. It may also be necessary in the case of members based outside the United Kingdom to examine the implications for the enforceability of default rules or collateral and the settlement of transactions, and thus the ability of the UK RIE2 to continue to meet the recognition requirements. It follows that the admission of a member from outside the United Kingdom who is not an authorised person could require notification under both REC 3.18.2 R and REC 3.18.3 R, although a single report from the UK recognised body covering both notifications would be acceptable to the FCA.4

    4144244
REC 3.18.2 R

Where a UK recognised body admits a member who is not an authorised person of a type of which, immediately before that time, that UK recognised body had not admitted to membership, it must immediately give the FCA4notice of that event, and:

4
  1. (1)

    a description of the type of person whom it is admitting to membership;

    2
  2. (2)

    (in relation to a UK RIE ) 2particulars of its reasons for considering that, in admitting that type of person to membership, it is able to continue to satisfy the recognition requirement in paragraph 4(2)(a) of the Schedule to the Recognition Requirements Regulations which applies to it; and2

    44
  3. (3)

    2(in relation to an RAP) particulars of its reasons for considering that, in admitting that type of person to membership, it is able to continue to satisfy the RAP recognition requirement in regulation 20 (Access to auctions) which applies to it.

REC 3.18.3 R

Where a UK recognised body admits for the first time a member whose head or registered office is in a jurisdiction from which that UK recognised body has not previously admitted members, it must immediately give the FCA4notice of that event, and:

4
  1. (1)

    the name of that jurisdiction;

  2. (2)

    the name of any regulatory authority in that jurisdiction which regulates that member in respect of activities relating to specified investments or (for an RAP) relating to emissions auction products; 3and2

    3
  3. (3)

    particulars of its reasons for considering that, in admitting a member from that jurisdiction to membership, it is able to continue to satisfy the recognition requirements or (for an RAP) the RAPrecognition requirements 2which apply to it.

REC 3.18.4 G

A type of member means the description of any group of members to whom the same generic description could be applied. For example, the description of any group of members separately identified or defined in the rules might constitute a type of member for the purposes of this section.

REC 3.19 Investigations

REC 3.19.1 R

Where a UK recognised body becomes aware that a person has been appointed by any regulatory body (other than the FCA2or a UK recognised body) to investigate:

2
  1. (1)

    any business transacted by means of its facilities or1

    2
  2. (2)

    any aspect of the clearing facilitation services2 which it provides;

    2

it must immediately give the FCA2notice of that event.

2
REC 3.19.2 G

A UK recognised body need not give the FCA2notice of:

2
  1. (1)

    routine inspections or visits undertaken in the course of regular monitoring, complaints handling or as part of a series of 'theme visits'; or

  2. (2)

    routine requests for information; or

  3. (3)

    investigations into the conduct of members of the UK recognised body or of other users of its facilities where the use of its facilities is a small or incidental part of the subject matter of the investigation.

REC 3.20 Disciplinary action relating to members

REC 3.20.1 R

Where a UK recognised body has taken any disciplinary action against any member or any employee of a member, in respect of a breach of a rule relating to the carrying on by the UK recognised body of any of its regulatory functions, that body must immediately notify the FCA1of that event, and give:

1
  1. (1)

    the name of the person concerned;

  2. (2)

    details of the disciplinary action taken by the UK recognised body; and

  3. (3)

    the UK recognised body's reasons for taking that disciplinary action.

REC 3.20.2 R

Where an appeal is lodged against any disciplinary action referred to in REC 3.20.1 R, the UK recognised body must immediately give the FCA1notice of that event, and:

1
  1. (1)

    the name of the appellant and the grounds on which the appeal is based, immediately; and

  2. (2)

    the outcome of the appeal, when known.

REC 3.21 Criminal offences and civil prohibitions

REC 3.21.1 R

Where a UK recognised body has evidence tending to suggest that any person has:

  1. (1)

    been carrying on any regulated activity in the United Kingdom in contravention of the general prohibition; or

  2. (2)

    been engaged in market abuse; or

  3. (3)

    committed a criminal offence under the Act or subordinate legislation made under the Act; or

  4. (4)

    committed a criminal offence under Part V of the Criminal Justice Act 1993 (Insider dealing); or

  5. (5)

    committed a criminal offence under the Money Laundering Regulations;

it must immediately give the FCA1notice of that event, and full details of that evidence in writing.

[Note: Article 26(2), first sentence (part) and Article 43(2), first sentence (part) of MiFID. The rest of Article 26(2), first sentence (in so far as it relates to market operators operating an MTF) and Article 43(2), first sentence of MiFID is implemented by REC 3.25.1 R]

1

REC 3.22 Restriction of, or instruction to close out, open positions

REC 3.22.1 R

Where a UK RIE decides to:

  1. (1)

    restrict the open position on any of the contracts of a member; or

  2. (2)

    issue instructions to a member to close out its positions on any contracts;

that UK RIE must immediately give the FCA2notice of that event, and the member's name, the nature and size of any position to be restricted or closed out and the reasons for the UK RIE's decision.

2
REC 3.22.2 R

1Where an RAP proposes to impose a maximum bid size or take other remedial measures to mitigate risks of market abuse, financial crime or anti-competitive behaviour in accordance with article 57 of the auction regulation, the RAP must give the FCA2notice of that event and details of the remedial measures proposed.

2

REC 3.23 Default

REC 3.23.1 R

Where a UK RIE2 decides to put a member into default, it must immediately give notice of that event, and give the following information to the FCA2, at the same time as that decision is communicated to that member or to any other member (or group or class of them) of that body:

2 2
  1. (1)

    the name of the member and (where relevant) the class of membership;

  2. (2)

    the reasons for that decision; and

  3. (3)

    the names of any other exchange,1clearing house or auction platform 1on which, to the best of that UK RIE's2 knowledge, that member clears business or transacts for, or in respect of, its clients.2

    2
2

REC 3.24 Transfers of ownership

REC 3.24.1 R

1When a UK RIE becomes aware of a transfer of ownership of the UK RIE which gives rise to a change in the persons who are in a position to exercise significant influence over the management of the UK RIE or (in the case of a UK RIE that is also an RAP) over the management of the RAP,2 whether directly or indirectly, it must immediately notify the FCA3of that event, and:

3
  1. (1)

    give the name of the person(s) concerned; and

  2. (2)

    give details of the transfer.

[Note: Article 38(2)(b) of MiFID]

REC 3.24.2 G

The FCA3may regard a person who falls within any of the cases in section 301(B)(2) of the Act as being in a position to exercise significant influence.

3

REC 3.25 Significant breaches of rules and disorderly trading conditions

REC 3.25.1 R

1A UK RIE and an RAP2must immediately notify the FCA3of:

3
  1. (1)

    significant breaches of its rules; or

  2. (2)

    disorderly trading conditions on any of its markets or auctions.2

[Note: Article 26(2), first sentence (part) and Article 43(2), first sentence (part) of MiFID. The rest of Article 26(2), first sentence (in so far as it relates to market operators operating an MTF) and Article 43(2), first sentence of MiFID is implemented by REC 3.21.1 R (2)]

REC 3.26 Proposals to make regulatory provision

Statutory power

REC 3.26.1 G

1Under section 300B(1) of the Act (Duty to notify proposal to make regulatory provision), a UK RIE3 that proposes to make any regulatory provision must give written notice of the proposal to the FCA4without delay.

3 4 4
REC 3.26.2 G

1Under section 300B(2) of the Act, the FCA4may, by rules under section 293 (Notification requirements):

4
  1. (1)

    1specify descriptions of regulatory provision in relation to which, or circumstances in which, the duty in section 300B(1) does not apply, or

  2. (2)

    1provide that the duty applies only to specified descriptions of regulatory provision or in specified circumstances.

REC 3.26.3 G

1Under section 300B(3) of the Act, the FCA4may also by rules under section 293:

4
  1. (1)

    1make provision as to the form and contents of the notice required, and

  2. (2)

    1require the UK recognised body to provide such information relating to the proposal as may be specified in the rules or as the FCA4may reasonably require.

    4

1Disapplication of duty to notify proposal to make regulatory provision

REC 3.26.4 R

1The duty in section 300B(1) of the Act does not apply to any of the following:

  1. (1)

    any regulatory provision which is required under EU2 law or any enactment or rule of law in the United Kingdom; or

    2
  2. (2)
    1. (a)

      the specification of the standard terms of any derivative which a UK RIE proposes to admission to trading, or the amendment of the standard terms of any derivative already admitted to trading; or

    2. (b)

      the specification or any amendment of standard terms relating to the provision of clearing facilitation services4for any derivative; or

      4
    3. (c)

      the specification or any amendment of operating procedures which are reasonably consequential on any regulatory provision falling within (a) or (b); or

  3. (3)

    any regulatory provision which is expressed to have effect for no longer than three months which is made by a UK recognised body in response to an emergency event (including, without limitation, a war, terrorist attack or labour strike); or

  4. (4)

    any regulatory provision which does not impose a requirement (including any obligation or burden) on persons affected (directly or indirectly) by it; or

  5. (5)

    any other regulatory provision which has not been excluded under (1), (2), (3) or (4) other than any such provision which (taken together with any other regulatory provision not otherwise the subject of a notice under section 300B(1) of the Act):

    1. (a)

      materially increases disclosure, reporting or corporate governance requirements imposed on any person (whether directly or indirectly); or

    2. (b)

      imposes a material limitation affecting any person (whether directly or indirectly including, without limitation, through an amendment to fees or charges) on the type or nature of financial instruments which may be listed or the subject of admission to trading on the facilities operated by the UK RIE proposing to make the regulatory provision; or

    3. (c)

      materially limits access to, or use by, any person (whether directly or indirectly including, without limitation, through an amendment to fees or charges) of the facilities operated by the UK recognised body proposing to make the regulatory provision;5 or

    4. (d)

      materially limits or restricts the ability of any person to supply services (including, without limitation, trading, clearing, settlement or information services) to persons who are users of the facilities operated by the UK RIE proposing to make the regulatory provision (whether directly or indirectly, including by the imposition of an obligation or burden on the supplier or on a user of the UK RIE); or5

      5
    5. (e)

      materially adds to the circumstances in which any person (whether directly or indirectly) may be liable to penalties or other sanctions or have liability in damages.5

Notice to the FCA

REC 3.26.5 R

1A notice under section 300B(1) of the Act of a proposal to make a regulatory provision must be in writing and state expressly that it is a notice for the purpose of that section. To be effective, a notice must:

  1. (1)

    1contain full particulars of the proposal to make a regulatory provision which is the subject of that notice; and

  2. (2)

    1either be accompanied by sufficient supporting information to enable the FCA4to assess the purpose and effect of the proposed regulatory provision or refer to such information in circumstances where such information has already been provided to the FCA.4

    44
REC 3.26.6 G

1In determining whether a UK RIE3has provided sufficient supporting information, the FCA4may have regard to the extent to which the information includes:

4 4
  1. (1)

    1clearly expressed reasons for the proposed regulatory provision; and

  2. (2)

    1an appropriately detailed assessment of the likely costs and benefits of the proposed regulatory provision.

REC 3.26.7 R

1A UK RIE3must provide such additional information in connection with a notice under section 300B(1) of the Act as the FCA4may reasonably require.

3 4 4
REC 3.26.8 G

1Where a UK RIE3wishes to give notice to the FCA4for the purposes of section 300B(1) of the Act, it should in the first instance inform its usual supervisory contact at the FCA.4

3 4 4 4
REC 3.26.9 G

1The FCA4expects that an advanced draft of any consultation document a UK RIE3intends to publish in connection with a proposed regulatory provision could provide some or all of the information described in REC 3.26.5 R.3

4 3 4