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SUP 6.3 Applications for variation of permission and/or imposition, variation or cancellation of requirements

What is a variation of permission?

SUP 6.3.1G

[deleted]22

SUP 6.3.1AG

22Under section 55H of the Act, an FCA-authorised person may apply to the FCA to vary its Part 4A permission to:

  1. (1)

    allow it to carry on further regulated activities, other than a PRA-regulated activity; or

  2. (2)

    reduce the number of regulated activities it is permitted to carry on; or

  3. (3)

    vary the description of its regulated activities (including by the removal or variation of any limitations).

SUP 6.3.1BG

22Under section 55I of the Act, an FCA-authorised person may apply to the PRA to vary its Part 4A permission to add regulated activities which include a PRA-regulated activity.

SUP 6.3.2G

[deleted]22

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Applications to impose, vary or cancel requirements

SUP 6.3.2AG

22Under section 55L(5) of the Act a firm with a Part 4A permission may apply to the FCA for the imposition of a new requirement and/or the variation or cancellation of any requirement previously imposed by the FCA.

The scope of applications

SUP 6.3.2CG

22An application may relate to one or more of SUP 6.3.1A G and SUP 6.3.2A G. For example, a firm may apply to vary its Part 4A permission to add a new regulated activity and at the same time remove a regulated activity for which it currently has permission.

SUP 6.3.3G

In applying for a variation of Part 4A permission,22 a branch of a firm from outside the EEA should be mindful of any continuing requirements referred to in the rest of the Handbook.10

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Applications to add additional regulated activities

SUP 6.3.4G

In determining the activities and specified investments for which a Part 4A permission22 is required, and whether to apply for a variation of that permission, a firm may need to take professional advice and may also wish to discuss this with its appropriate supervisory contact.22

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SUP 6.3.5G

Before applying to vary its permission, a firm should determine whether there are any statutory restrictions that do not allow combinations of certain types of regulated activity, particularly for insurance business or UCITS managers. For example, the PRA22 will not grant a variation of Part 4A permission22 to allow a friendly society to carry on reinsurance business as this is not permitted under the Friendly Societies Acts 1974 and 1992.10 A firm should discuss its plans with its appropriate supervisory contact.22

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SUP 6.3.6G

If a firm is seeking a variation of Part 4A permission22 to add categories of regulated activities, it should be mindful of the directive requirements referred to at SUP 6.3.42 G relating to the need to commence new activities within 12 months.

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Applications to remove certain regulated activities

SUP 6.3.7G

If a firm wishes to cease carrying on an activity for which it has Part 4A permission,22 it will usually apply to vary its Part 4A permission22 to remove that activity. If a firm wishes to cease carrying on an activity in relation to any specified investment, it will usually apply to vary its Part 4A permission22 to remove that specified investment from the relevant activity.

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How a variation of permission may affect the firm's approved persons

SUP 6.3.8G
  1. (1)

    Where a firm is submitting an application for variation of Part 4A permission22 which would lead to a change in the controlled functions of its approved persons, it should, at the same time and as appropriate:

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    1. (a)

      make an application for an internal transfer of an approved person, Form E (Internal transfer), or make an application for an individual to perform additional controlled functions, the relevant11 Form A (Application); see:20

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      1. (i)

        SUP 10A.13.3D to SUP 10A.13.5G (for a firm that is not a relevant authorised person);20

      2. (ii)

        SUP 10C.10 (for a relevant authorised person); or20

      3. (iii)

        the corresponding PRA requirements;20

    2. (b)

      notify the appropriate regulator22 of any approved person who has ceased to perform a controlled function specified by that regulator,22 Form C (Ceasing to perform controlled functions); see:20

      22
      1. (i)

        SUP 10A.14 (for a firm that is not a relevant authorised person);20

      2. (ii)

        SUP 10C.14 (for a relevant authorised person); or20

      3. (iii)

        the corresponding PRA requirements;20

  2. (2)

    If the firm intends to recruit new individuals to perform controlled functions, it should apply for approval of the individuals as approved persons as soon as possible using Form A (Application); see:20

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    1. (a)

      SUP 10A.13 (for a firm that is not a relevant authorised person);20

    2. (b)

      SUP 10C.10 (for a relevant authorised person); or20

    3. (c)

      the corresponding PRA requirements.20

Relevant authorised person status

SUP 6.3.9G

20A variation of a firm’s Part 4A permission may mean that it becomes a relevant authorised person. This would have a number of significant consequences, which include:

  1. (1)

    the application of the special powers in relation to misconduct by approved persons (see DEPP 6.2.9-AG);

  2. (2)

    the approved persons regime switches from SUP 10A to SUP 10C;

  3. (3)

    COCON applies in place of APER;

  4. (4)

    the certification regime described in SYSC 5.2 applies;

  5. (5)

    the criminal offence in section 36 of the Financial Services (Banking Reform) Act 2013 (Offence relating to a decision causing a financial institution to fail) potentially applies, although that offence does not apply to every relevant authorised person; and

  6. (6)

    SYSC 4.5 (Management responsibilities maps for relevant authorised persons), SYSC 4.7 (Senior management responsibilities for relevant authorised persons: allocation of responsibilities) and SYSC 4.9 (Handover procedures and material) apply.

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SUP 6.3.10G

[deleted]22

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Variation of permission involving insurance business

SUP 6.3.11G

A firm with Part 4A permission22 to carry on insurance business, which is applying for a variation of its Part 4A permission22 to add further insurance activities or specified investments, will be required to submit particular information on its existing activities as part of its application. This includes the scheme of operations which is required to be submitted as part of the application pack (for further details on the scheme of operations, see SUP App 2 (Insurers: scheme of operations)).

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SUP 6.3.12G

In applying to vary its Part 4A permission22 to add categories of specified investments, in relation to insurance business, a firm carrying on insurance business will need to determine the classes of specified investments relating to effecting and carrying out contracts of insurance for which variation of Part 4A permission22 will be necessary, having regard to whether certain classes of contract may qualify to be effected or carried out on an ancillary or supplementary basis.

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SUP 6.3.13G

The application for variation of Part 4A permission22 will need to provide information about the classes of contract of insurance for which variation of Part 4A permission22 is requested and also those classes qualifying to be carried on, on an ancillary or supplementary basis. For example, an insurer applying to vary its permission to include class 10 (motor vehicle liability, other than carrier's liability) must satisfy the FCA22 that it will meet, and continue to meet, threshold condition 3F22(Appointment of claims representatives). Firms should note that, although the relevant regulator22 is able in principle to use its power to give Part 4A permission22 for an applicant to carry on a regulated activity for which it did not originally apply, this is not possible under the Solvency II Directive, which sets19 out minimum information requirements for an application for authorisation including information on the specified investments the applicant proposes to deal in.10

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The application for variation of permission and/or imposition, variation or cancellation of requirements22

SUP 6.3.15D
  1. (1)

    Subject to (1A), a17 firm other than a credit union wishing to make an application under SUP 6 must apply online using the forms specified on the online notification and application system21.

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  2. (1A)

    A firm wishing to make an application under SUP 6 which covers only credit-related regulated activities must submit any form, notice or application by using the form in SUP 6 Annex 5 and submitting it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).17

  3. (2)

    [deleted]22

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  4. (3)

    Until the application has been determined, a firm which submits an application must inform the relevant regulator22 of any significant change to the information given in the application immediately it becomes aware of the change.

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  5. (3A)

    Where an application requires the consent of the FCA, a firm which submits an application must inform the FCA of any significant change to the information given in the application immediately it becomes aware of the change.22

  6. (4)

    Where a firm is obliged to submit any form, notice or application online under (1), if the online notification and application system21 information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored a firm must submit any form, notice or application by using the form in SUP 6 Ann 5D and submitting it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).14

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SUP 6.3.15AG
  1. (1)

    14If the online notification and application system fails21 and online submission is unavailable for 24 hours or more, the relevant regulator22 will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 6.3.15 D (4) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.

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  2. (2)

    14Where SUP 6.3.15 D (4) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 6.3.16G
  1. (1)

    Section 55(U)(2)22 of the Act (Applications under this Part) requires that the application for variation of Part 4A permission22 must contain a statement:

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    1. (a)

      of the desired variation; and

    2. (b)

      of the regulated activity or regulated activities which the firm proposes to carry on if its permission is varied.

  2. (1A)

    Section 55(U)(3) of the Act requires that an application for variation of a requirement imposed under section 55L or 55M or the imposition of a new requirement must contain a statement of the desired variation or requirement.22

  3. (2)

    The full form and content of the application for variation of Part 4A permission or for the imposition or variation of a requirement is a matter for direction by the relevant regulator,22 who will determine the additional information and documentation required on a case by case basis.

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SUP 6.3.17G
  1. (1)

    [deleted]7

  2. (2)

    A firm is advised to discuss its application with the relevant regulator22 before submission, particularly if it is seeking a variation of Part 4A permission or imposition, variation or cancellation of a requirement22 within a short timescale. A firm is also advised to include as much detail as possible (including any additional information identified by its supervisors at this stage) with its application.7

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SUP 6.3.18G

The relevant regulator,22 as soon as possible after receipt of an application, will advise the firm of any additional information which is required as part of its application (see SUP 6.3.23 G to SUP 6.3.27 G). The amount of information required22 will vary depending on the scale of the variation in the context of the firm as a whole, and the nature, risk profile and complexity of the variation.

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Applications from firms winding down (running off) business over the long term

SUP 6.3.19G

A firm which is making an application for variation of Part 4A permission22 to wind down (run off) its business before applying for a cancellation of that permission (see SUP 6.2.9 G) should read SUP 6 Annex 4 for details of the additional procedures that apply.

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Applications involving significant changes

SUP 6.3.20G

In certain cases, the relevant regulator may consider that granting an application for imposition, variation or cancellation of any requirement or for variation of Part 4A permission22 which includes adding further regulated activities or changing a limitation would cause a significant change in the firm's business or risk profile. In these circumstances, the relevant regulator22 may require the firm to complete appropriate parts of the full application pack (see the relevant regulator's22 website ), as directed by the relevant regulator.22 Applications for variation involving significant changes may be processed by the firm's appropriate supervisory contact in conjunction with the Authorisations Team. Examples of an application for imposition, variation or cancellation of a requirement and for variation of Part 4A permission22 which may represent a significant change include, but are not limited to, an application:

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  1. (1)

    to carry on new regulated activities such as accepting deposits;

  2. (2)

    to extend the insurance business of a firm which already has Part IV permission which includes carrying out or effecting contracts of insurance (or both), to new classes of specified investment; or

  3. (3)

    to remove a requirement preventing a firm from holding or controlling client money.22

  4. (4)

    [deleted]22

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SUP 6.3.21G

A firm that wishes to make a significant change to its business, or is unsure whether the changes it is proposing would be considered to be significant, should contact the relevant regulator. The relevant regulator22 will discuss with the firm whether it will be required to submit parts of the application pack and whether any reports from third parties may be required.1

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SUP 6.3.22G

The fees payable for a firm applying for the imposition, variation or cancellation of any requirements and/or a variation of its Part 4A permission are set out in FEES 3.22

Information to be supplied to the relevant regulator as part of the application22

SUP 6.3.23G
  1. (1)

    The relevant regulator22 may ask for any information it reasonably requires before determining the application. The information required will be determined on a case by case basis, taking into account the relevant regulator's22 existing knowledge of the firm and the change22 requested. The relevant regulator22 will advise the firm of the information required at an early stage in the application process.

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  2. (2)

    The nature of the information and documents requested will be related to the risks posed to the relevant regulator's statutory objectives22 by the regulated activities and any unregulated activities that the firm is carrying on or is22 seeking to carry on. This information will be proportional to the nature of the business which the firm intends to carry on or the risks posed by the firm.

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SUP 6.3.24G
  1. (1)

    The information the relevant regulator22 may require includes, but is not limited to, the examples given in SUP 6.3.25 G:

    22
SUP 6.3.25G

Information which may be required. See SUP 6.3.24 G

Type of business

Information which may be required

All

1. Details of how the firm plans to comply with the relevant regulator's22 regulatory requirements relating to any additional regulated activities it is seeking to carry on.

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2. Descriptions of the firm's key controls, senior management arrangements and audit and proposed compliance arrangements in respect of any new regulated activity (see SYSC).

3. Organisation charts and details of individuals transferring or being recruited to perform new controlled functions (see SUP 10A and SUP 10C, and the corresponding PRA requirements 20for details of the application or transfer procedures under the approved persons regime).

Insurance business

1. A scheme of operations in accordance with SUP App 2.

2. (If the application seeks to vary a permission to include motor vehicle liability insurance business) details of the claims representatives12 required by threshold condition 3F22 (Appointment of claims representatives), if applicable.

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Accepting deposits and designated investment business

1. A business plan which includes the impact of the variation on the firm's existing or continuing business financial projections for the firm, including the impact of the requested change22 on the firm's financial resources and capital adequacy requirements.2

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SUP 6.3.26G

Specific information may also be required by the relevant regulator22 on the activities the firm intends to cease, or cease carrying on in relation to any specified investments (see SUP 6 Annex 4).

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SUP 6.3.27G

When determining whether to grant an application, the relevant regulator22 may request further information, including reports from third parties such as the firm's auditors, and may require meetings with, and visits to, the firm. The relevant regulator22 may also require a statement from members of the firm's governing body confirming, to the best of their knowledge, the completeness and accuracy of the information supplied. The relevant regulator22 may also discuss the application with other regulators or22 exchanges.

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When will an application for variation of permission and/or imposition or variation of requirements be granted?22

SUP 6.3.28G
  1. (1)

    The relevant regulator22 is required by section 55B(3) of the Act to ensure that a firm applying to gain or vary a Part 4A permission or to impose or vary a requirement22 satisfies and will continue to satisfy the threshold conditions in relation to all the regulated activities for which the firm has or will have a Part 4A permission.22

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  2. (2)

    [deleted]22

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SUP 6.3.28AG

22Where a firm applies to the PRA for the variation of its Part 4A permission, the FCA, in giving consent to such an application or imposing any requirements on the firm, is required by section 55B(3) of the Act to ensure that the firm satisfies and will continue to satisfy the threshold conditions for which the FCA is responsible in relation to all the regulated activities for which the firm has or will have Part 4A permission after the variation.

SUP 6.3.28BG
  1. (1)

    22The FCA's duty under section 55B(3) of the Act does not prevent it, having regard to that duty, from taking such steps as it considers necessary in relation to a particular firm, to meet any of its operational objectives. This may include granting or consenting to (as the case may be) a firm's application for variation of Part 4A permission when it wishes to wind down (run off) its business activities and cease to carry on new business as a result of no longer being able to satisfy the threshold conditions.

  2. (2)

    The FCA may refuse an application, or refuse to give its consent to an application, under section 55B(3) of the Act if it considers that it is desirable to do so in order to advance any of its operational objectives.

SUP 6.3.29G

In determining whether the firm satisfies and continues to satisfy the threshold conditions, the regulator concerned22 will consider whether the firm is ready, willing and organised to comply with the regulatory requirements it will be subject to if the application22 is granted.

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SUP 6.3.30G

The specific requirements that apply to certain types of activity will also need to be considered22 as these may not allow certain combinations of activity.

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SUP 6.3.31G

In considering whether to grant (or consent to, as the case may be)22 a firm's application to vary its Part 4A permission or impose or vary a requirement, the regulator concerned will also have regard, under section 55R(1)22 of the Act (Persons connected with an applicant), to any person6 appearing to be, or likely to be, in a relationship with the firm which is relevant. The Financial Groups Directive Regulations make special consultation provisions where the regulator is exercising its functions under Part 4A22 of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary supervision6.10 Broadly, where a regulator,22 in the course of carrying on supplementary supervision, is considering varying the Part 4A permission22 of a person who is a member of a group which is a financial conglomerate, the consultation provisions in section 55R(2)22 of the Act are disapplied. In their place, the regulations impose special obligations, linked to the Financial Groups Directive, to obtain the consent of the relevant competent authorities, to consult those authorities and to consult with the group itself.10

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The regulator's powers in respect of application for variation of Part IV permission22

SUP 6.3.32G

[deleted]22

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SUP 6.3.32AG

22The FCA's power to vary a Part 4A permission after it receives an application from a firm extends to including in the Part 4A permission as varied any provision that could be included as though a fresh permission was being given in response to an application under section 55A of the Act (Application for permission). Under section 55E of the Act (Giving permission: the FCA) the FCA may:

  1. (1)

    incorporate in the description of a regulated activity such limitations (for example, as to the circumstance in which a regulated activity may or may not be carried on) as it considers appropriate; or

  2. (2)

    specify a narrower or wider description of regulated activity than that to which the application relates; or

  3. (3)

    give permission for the carrying on of a regulated activity which is not included among those to which the application relates and is not a PRA-regulated activity.

SUP 6.3.32BG

22Thus, when determining an application for variation of Part 4A permission, the FCA can, include new limitations and vary existing limitations, either on application from the firm (for example, the customer categories with which a firm may carry on a specified activity) or, if considered appropriate, by the FCA under section 55E(5) of the Act.

SUP 6.3.32CG

22If a firm has applied (whether to the FCA or the PRA) for the variation of a Part 4A permission, the FCA has the power to impose on that person such requirements, taking effect on or after the variation of permission, as the FCA considers appropriate.

SUP 6.3.33G

[deleted]22

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SUP 6.3.34G

If limitationsare varied or imposed or requirements are imposed by the relevant regulator22 which were not included in the firm's application for variation of Part 4A permission, the relevant regulator22 will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

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SUP 6.3.34AG

22Where a firm has made an application to the PRA for the variation of its Part 4A permission and requirements are imposed by the FCA which were not included in the firm's application, the FCA will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

How long will an application take?

SUP 6.3.35G

Under section 55V(1)22 of the Act (Determination of applications), the relevant regulator22 has six months to consider a completed application from the date of receipt.

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SUP 6.3.36G

If the relevant regulator22 receives an application which is incomplete (that is, if information or a document required as part of the application is not provided), section 55V(2)22 of the Act requires the relevant regulator22 to determine that incomplete application within 12 months of the initial receipt of the application.

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SUP 6.3.36AG

22Where the application cannot be determined by the PRA without the consent of the FCA, section 55V(3) of the Act requires that the FCA's decision must also be made within the period required in SUP 6.3.35 G or SUP 6.3.36 G as appropriate.

SUP 6.3.37G

Within these time limits, however, the length of the process will relate directly to the complexity of the application.22

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SUP 6.3.37AG

22The FCA publishes standard times on its website setting out how long the application process is expected to take. From time to time, the FCA also publishes its performance against these times.

SUP 6.3.38G

At any time after receiving an application and before determining it, the relevant regulator22 may require the applicant to provide additional information or documents. The circumstances of each application will dictate what additional information or procedures are appropriate.

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How will the relevant regulator make the decision?22

SUP 6.3.39G

A decision to grant an application will be taken by appropriately experienced staff at the relevant regulator.22 However, if the staff dealing with the application recommend that a firm's application for variation of Part 4A permission22 be either refused or granted subject to limitations or requirements or a narrower description of regulated activities than applied for, the decision will be subject to the regulator's formal decision making process.22

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SUP 6.3.40G

DEPP 9gives guidance on the FCA's22 decision making procedures including the procedures it will follow if it proposes to refuse an application for variation of Part 4A permission or for imposition or variation of a requirement22 either in whole or in part (for example, an application granted by the FCA22 but subject to limitations or requirements not applied for).

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Commencing new regulated activities

SUP 6.3.41G

If the variation ofPart 4A permission is given, the relevant regulator22 will expect a firm to commence a new regulated activity in accordance with its business plan (revised as necessary to take account of changes during the application process) or scheme of operations for an insurer. Firms should take this into consideration when determining when to make an application to the relevant regulator.22

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SUP 6.3.42G
  1. (1)

    Firms should be aware that the appropriate regulator may exercise its own-initiative variation power to vary or cancel their Part 4A permission if they do not (see section 55J of the Act (Variation or cancellation on initiative of regulator)):22

    22
    1. (a)

      commence a regulated activity for which they have Part 4A permission22 within a period of at least 12 months from the date of being given; or

      22
    2. (b)

      carry on a regulated activity for which they have Part 4A permission22 for a period of at least 12 months (irrespective of the date of grant).

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  2. (1A)

    13The appropriate regulator22 may exercise its own-initiative variation power22 to cancel an investment firm's Part 4A permission22 if the investment firm has provided or performed no investment services and activities at any time during the period of six months ending with the day on which the warning notice under section 55Z(1)22 of the Act is given (see EG 8).9

    [Note: article 8(a) of MiFID]

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  3. (2)

    If the appropriate regulator22 considers that such a variation or cancellation of the firm's Part 4A permission22 is appropriate, it will discuss the proposed action with the firm and its reasons for not commencing or carrying on the regulated activities concerned.

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SUP 6.3.43G

When a firm commences new regulated activities following a variation of a Part 4A permission,22 it should have particular regard to the requirements of Principle 11 (Relations with regulators) (see SUP 15.3.8 G (1)(c)).

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