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SUP 2.1 Application and purpose

Application

SUP 2.1.1R

The application of this chapter is the same as the application of Principle 11 (Relations with regulators).

SUP 2.1.2G

PRIN 3 (Rules about application) specifies to whom, to what and where Principle 11 applies.

SUP 2.1.2AG

6CBTL firms are subject to a duty to deal with the FCA in an open and co-operative manner under article 18(1)(d) of the MCD Order. SUP 2.3 applies to CBTL firms in relation to complying with that duty as though:

  1. (1)

    a reference to firm included a reference to a CBTL firm;

  2. (2)

    a reference to the regulatory system were a reference to the provisions of the MCD Order, rules, directions and guidance applicable to CBTL firms;

  3. (3)

    a reference to Principle 11 were a reference to the duty imposed by article 18(1)(d) of the MCD Order;

  4. (4)

    a reference to the appropriate regulator’s functions under the Act were a reference to the FCA’s functions under Part 3 of the MCD Order;

  5. (5)

    a reference to SUP 12.5.3G were a reference to SUP 12.5.3AG;

  6. (6)

    a reference to material outsourcing were a reference to outsourcing services of such importance that weakness, or failure, of the services would cast serious doubt upon the CBTL firm’s continuing satisfaction of any condition for registration in article 8(2) or 8(3) of the MCD Order; and

  7. (7)

    the rules were guidance in the same terms but with the word “must” replaced with the word “should”.

Purpose

SUP 2.1.3G

Achieving the regulatory objectives involves the FCA informing itself of developments in firms and in markets. The Act requires the FCA to maintain arrangements for supervising authorised persons (section 1L(1)). 5 The Act also requires the FCA to take certain steps to cooperate with other relevant bodies and 3regulators (section 354A). For these purposes, the FCA needs to have access to a broad range of information about a firm's business.

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SUP 2.1.4G

The FCA receives the information in SUP 2.1.3 G through a variety of means, including notifications by firms (see SUP 15) and regular reporting by firms (see SUP 16). This chapter is concerned with the methods of information gathering that the FCA may use on its own initiative in the discharge of its functions under the Act. This chapter does not deal with the information gathering powers that the FCA has under the Unfair Terms Regulations and the CRA. 7These are dealt with in UNFCOG2.1

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SUP 2.1.5G

Part XI of the Act (Information Gathering and Investigations) gives the FCA8 statutory powers, including:

8
  1. (1)

    to require the provision of information (see sections 165 and 83 EG 32);

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  2. (2)

    to require reports from skilled persons (see section 166 and SUP 5);

  3. (3)

    to appoint investigators (see sections 167, 168 and 169 of the Act and EG 32); and

    2
  4. (4)

    to apply for a warrant to enter premises (see section 176 of the Act and EG 42).

    2
SUP 2.1.6G

The FCA prefers to discharge its functions by working in an open and cooperative relationship with firms. The FCA will look to obtain information in the context of that relationship unless it appears that obtaining information in that way will not achieve the necessary results, in which case it will use its statutory powers. The FCA has exercised its rule-making powers to make Principle 11 which requires that a firm must deal with its regulators in an open and cooperative way, and must disclose to the FCA appropriately anything relating to the firm of which the FCA would reasonably expect notice.

SUP 2.1.7G

The FCA operates in the context of the Act and the general law. The purpose of SUP 2.2 is to explain how certain provisions of the Act and the general law are relevant to the FCA's methods of information gathering described in SUP 2.3 and SUP 2.4.

SUP 2.1.8G

The purpose of SUP 2.3 is to amplify Principle 11 in the context of information gathering by the FCA on its own initiative in the discharge of its functions under the Act. SUP 2.3 therefore sets out, in guidance on Principle 11 and in rules, how the FCA expects firms to deal with the FCA in that context, including the steps that a firm should take with a view to ensuring that certain connected persons should also cooperate with the FCA.

SUP 2.1.9G

The purpose of SUP 2.4 is to explain a particular method of information gathering used by the FCA, known as "mystery shopping". Information about how a firm sells financial products can be very difficult to obtain, and the purpose of this method is to obtain such information from individuals who approach a firm in the role of potential retail consumers on the FCA's initiative. The FCA may seek information about particular issues or the activities of individual firms by means of mystery shopping.

SUP 2.1.10G

6The purpose of applying the provisions set out in SUP 2.1.2AG to CBTL firms is to amplify the duty of CBTL firms to deal with the FCA in an open and co-operative manner under article 18(1)(d) of the MCD Order.