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REC 4.8 The section 298 procedure

REC 4.8.1GRP

A decision to:

  1. (1)

    revoke a recognition order under section 297 of the Act (Revoking recognition); or

  2. (2)

    make a direction under section 296 (FSA's powers to give directions); or

  3. (3)

    refuse to make a recognition order under section 290 (Recognition orders) or 290A (Refusal of recognition on ground of excessive regulatory provision)2;

is a serious one and section 298 of the Act (Directions and revocation: procedure) sets out a procedure (see REC 4.8.9 G) which the FSA will follow unless, in the case of a revocation of a recognition order, the recognised body concerned has given its consent (see section 297(1)) or, in a case where the FSA proposes to make a direction under section 296, it considers it is essential not to follow, or to cut short, the procedure (see REC 4.6.4 G and REC 4.8.7 G).

REC 4.8.2GRP

The FSA's internal arrangements provide for any of these decisions to be taken at an appropriately senior level.

REC 4.8.3GRP

In considering whether it would be appropriate to exercise the powers under section 296 or section 297 of the Act, the FSA will have regard to all relevant information and factors including:

  1. (1)

    its guidance to recognised bodies;

  2. (2)

    the results of its routine supervision of the body concerned;

  3. (3)

    the extent to which the failure or likely failure to satisfy the recognition requirements or other obligations in or under the Act or, in the case of a UK RIE, the MiFID implementing requirements 1may affect the regulatory objectives.

REC 4.8.4GRP

In considering whether or not to make a recognition order, the FSA will have regard to all relevant information and factors, including its guidance to recognised bodies and applicants and the information provided by applicants. Details of the application processes and other guidance for applicants are set out in REC 5 and (for overseas applications) REC 6.

REC 4.8.5GRP

The procedures laid down in section 298 of the Act are summarised, with the FSA's guidance about the actions it proposes to take in following these procedures, in the table at REC 4.8.9 G.

REC 4.8.6GRP

Before exercising its powers under section 296 or section 297 of the Act, the FSA will usually discuss its intention, and the basis for this, with the key individuals or other appropriate representatives of the recognised body. It will usually discuss its intention not to make a recognition order with appropriate representatives of the applicant.

REC 4.8.7G

Under section 298(7) of the Act, the FSA need not follow the procedure in section 298 in relation to giving a direction under section 296, when it considers it essential not to do so. Guidance on the circumstances in which the FSA will usually act in this way is given in REC 4.6.4 G.

REC 4.8.8G

Under section 290(6) of the Act, the FSA need not follow the procedure in section 298 in relation to a refusal to make a recognition order if (under section 307) the Treasury has not given its approval for the recognition order to be made. Further guidance is given in REC 5 and REC 6 (for overseas applications).

REC 4.8.9GRP

Key steps in the section 298 procedure

The FSA will:

Guidance

(1)

give written notice to the recognised body (or applicant);

The notice will state why the FSA intends to take the action it proposes to take, and include an invitation to make representations, and the date by which representations should be made .

(2)

take such steps as it considers reasonably practicable to bring the notice to the attention of the members of the recognised body or of the applicant, as the case may be;

The FSA will also notify persons individually (as far as it considers it reasonably practicable to do so) if it considers that the action it proposes to take would affect them adversely in a way which would be different from its effect on other persons of the same class.

(3)

publish the notice so as to bring it to the attention of other persons likely to be affected;

(4)

receive representations from the recognised body or applicant concerned, any member of the recognised body or applicant, and any other person who is likely to be affected by the action the FSA proposes to take;

The FSA will not usually consider oral representations without first receiving written representations from the person concerned. It will normally only hear oral representations from the recognised body (or applicant) itself or of a person whom it has notified individually, on request.

(5)

write promptly to any person who requests the opportunity to make oral representations if it decides not to hear that person's representations;

The FSA will indicate why it will not hear oral representations and the FSA will allow the person concerned further time to respond.

(6)

have regard to representations made;

(7)

(when it has reached its decision) notify the recognised body (or applicant) concerned in writing.

(8)

(if it has decided to give a direction, or revoke or refuse to make a recognition order) take such steps as it considers reasonably practicable to bring its decision to the attention of members of the recognised body or applicant and to other persons likely to be affected.

The FSA will usually give notice of its decision to the same persons and in the same manner as it gave notice of its intention to act.