This chapter applies to every firm with a Part 4A permission7 which wishes to:

1. (1)

   vary its Part 4A permission;7 or

   7
2. (2)

   cancel its Part 4A permission7 and end its authorisation;7

   77
3. (3)

   have a new requirement imposed on it;7

4. (4)

   vary a requirement imposed on it; or7

5. (5)

   cancel a requirement imposed on it.7

If appropriate, a firm which is an authorised fund manager3 should also refer to COLL 7 for guidance on the termination of ICVCs, ACSs4 and AUTs and on winding up authorised funds3that are not commercially viable.1

This chapter applies to an incoming firm or a UCITS qualifier only in respect of a top-up permission. An incoming firm or a UCITS qualifier should refer to SUP 14 (Variation of passport rights by incoming EEA firms and ending authorisation) for the procedures for changes to permission granted under Schedules 3, 4 or 5 of the Act.

1. (1)

   7In SUP 6 the "relevant regulator" is the regulator to which a firm with a Part 4A permission has made or can make (in accordance with SUP 6) an application to vary or cancel its Part 4A permission or to have imposed on it a new requirement or to vary or cancel any existing requirement (see SUP 6.2.3A G to SUP 6.2.3E G).

2. (2)

   Where the PRA can only determine an application with the consent of the FCA, the FCA may request further information as if it were the relevant regulator.

3. (3)

   In some instances, the Act requires the FCA and the PRA to consult with each other prior to exercising their powers under the Act. Details of where consultation is required have not been set out in SUP 6. Where a provision in SUP 6 makes reference to a power, the exercise of which by the FCA or the PRA (as the case may be) requires consultation under the Act, firms should be aware that the regulator concerned will need to consult the other regulator before exercising that power.

This chapter explains:

1. (1)

   how a firm with a Part 4A permission7 can apply to the relevant regulator7 to vary that permission;

   77
2. (2)

   how a firm which has ceased to carry on any of the regulated activities for which it has a Part 4A permission,7 or which expects to do so in the short term (normally less than six months), should apply to the relevant regulator7 to cancel that permission completely;

   77
3. (2A)

   how a firm with a Part 4A permission can apply to the relevant regulator to:7

   1. (a)

      have a new requirement imposed on it; or7

   2. (b)

      vary a requirement imposed on it; or7

   3. (c)

      cancel a requirement imposed on it.7

4. (3)

   the additional procedures that apply to a firm carrying on regulated activities which create long term obligations to customers (for example, effecting contracts of insurance, carrying out contracts of insurance or accepting deposits) that needs to wind down (run off) its business over a long term period (normally more than six months) and the applications it should make with a view to ultimately cancelling its permission; and

5. (4)

   how the relevant regulator7 assesses those applications.

   7

This chapter also outlines the relevant regulator's powers to withdraw authorisation from a firm whose Part 4A permission7 has been cancelled at the firm's request.

7This chapter does not cover the FCA's use of its own-initiative variation power to vary or cancel a firm'sPart 4A permission or its own-initiative requirement power to impose, vary or cancel a requirement (see SUP 7 (Individual requirements) and EG 8 (Variation and cancellation of permission on the FCA's own initiative and intervention against incoming firms)).

A firm authorised under Part 4A8 of the Act (Permission to carry on regulated activity) has a single Part 4A permission8 granted by the FCA or the PRA. A firm'sPart 4A permission8 specifies all or some of the following elements (see PERG 2 Annex 2 (Regulated activities and the permission regime) and the information online at the FCA and PRA websites):8

1. (1)

   a description of the activities the firm may carry on, including any limitations;

2. (2)

   the specified investments involved; and

3. (3)

   if appropriate, requirements.

Under section 20(1) and 20(1A)8 of the Act (Authorised persons acting without permission), a firm is prohibited from carrying on a regulated activity in the United Kingdom (or purporting to do so) otherwise than in accordance with its permission.

8If an FCA-authorised person wishes to change its Part 4A permission to:

1. (1)

   add a regulated activity, other than a PRA-regulated activity; or

2. (2)

   remove a regulated activity from those to which the permission relates; or

3. (3)

   vary the description of a regulated activity to which the permission relates; or

4. (4)

   cancel the permission;

it can apply to the FCA under section 55H of the Act (Variation by FCA at request of authorised person).

8If an FCA-authorised person wishes to change its Part 4A permission, by adding to the regulated activities to which the permission relates one or more regulated activities, which include a PRA-regulated activity, it can apply to the PRA under section 55I of the Act (Variation by PRA at request of authorised person). The PRA can determine such an application only with the consent of the FCA.

8If a firm with a Part 4A permission wishes the FCA to:

1. (1)

   impose a new requirement; or

2. (2)

   vary a requirement imposed by the FCA; or

3. (3)

   cancel such a requirement;

it can apply to the FCA under section 55L(5) of the Act (Imposition of Requirements by FCA).

A firm intending to expand its business should assess, taking appropriate professional advice where necessary, whether it will need to make an application in accordance with SUP 68 before making any changes to its business.

1If a firm intends to transfer its business to a different legal entity it will need to apply to the relevant regulator8 for cancellation of its Part 4A permission8 and the entity to which the business is to be transferred will need to apply for a Part 4A permission.8

8 SUP 6.2.5 G sets out the differences between these types of applications and the circumstances in which they should be made.

A firm which is seeking:

1. (1)

   to vary its Part 4A permission8 substantially; or

   8
2. (2)

   to8 cancel its Part 4A permission; or8

   8
3. (3)

   the imposition of a new requirement and/or the variation or cancellation of any existing requirement;8

should discuss its plans with its supervisory contact at the relevant regulator8 as early as possible before making an application, in order to comply with Principle 11 (see SUP 15.3.7 G). These discussions will help the relevant regulator8 and the firm to agree the correct approach for the firm.

If a firm intends to cease carrying on one or more regulated activities permanently, it should give prompt notice to the appropriate regulator8 to comply with Principle 11 (see SUP 15.3.8 G (1)(d)). A firm should consider whether it needs to notify the appropriate regulator8 before applying to vary or cancel its Part 4A permission.8

Discussions with the appropriate regulator8 are particularly relevant where the firm has to discharge obligations to its customers or policyholders before it can cease carrying on a regulated activity. This may be the case, for example, where the firm is an insurer, a bank a dormant account fund operator,4 or, as is often the case, holding client money or customer assets.

If an insurer,4 a bank, or a dormant account fund operator4 wishes to cease carrying on all regulated activities for which it has Part 4A permission,8 it will usually be necessary to wind down the business over a long term period which is normally more than six months. This may also be the case for a firm holding client money or customer assets. In these circumstances, it will usually be appropriate for the firm to apply for variation of its Part 4A permission and/or imposition of a new requirement, variation of any existing requirement or cancellation of such a requirement8 before commencing the wind-down. A firm should only make an application for cancellation of permission when it expects to complete its wind-down (run-off) within six months.

A firm which is winding down (running off) its activities should contact its supervisory contact at the appropriate regulator8 to discuss its circumstances. Discussions will focus on8 the firm's winding down plans and the need for the firm to vary or cancel itsPart 4A permission and/or the need to impose a new requirement, vary any existing requirement or cancel such a requirement. Following these discussions the firm should usually make the relevant application, as appropriate.8

8In certain circumstances the FCA and/or the PRA may use their own-initiative powers (see SUP 7 and EG 8) (Variation and cancellation of permission on the FCA's own initiative and intervention against incoming firms)).

1. (1)

   Specific guidance on the additional procedures for a firm winding down (running off) its business in the circumstances discussed in SUP 6.2.8 G is in SUP 6 Annex 4.

2. (2)

   The guidance in SUP 6 Annex 4 applies to any firm that is applying for variation of Part 4A permission or for the imposition, variation or cancellation of a requirement before it applies for cancellation of Part 4A permission8 to enable it to wind down (run off) its business over a long term period of six months of more. It will apply to most insurers and banks and, in some circumstances, to firms holding client money or customer assets.

   88
3. (3)

   If a firm wishes to cease carrying on some of its regulated activities, or the specified investments in respect of which the activities are carried on, the appropriate regulator8 may consider it appropriate for the firm to comply with the additional procedures in SUP 6 Annex 4. This would depend on the scale and nature of the regulated activities concerned. This might be the case, for example, if the firm is ceasing a significant part of its business in respect of which it has outstanding obligations to customers and it is believed8 that the additional procedures would protect consumers.

   88

A UK firm should assess the effect of any change to its Part 4A permission, or any requirements,8 on its ability to continue to exercise any EEA right or Treaty right and discuss any concerns with its appropriate supervisory contact(s). This8 may also change the applicable provisions with which it is required to comply by a Host State.

A UK firm which, as well as applying to vary or cancel its Part 4A permission,8 wishes to vary or terminate any business which it is carrying on in another EEA State under one of the Single Market Directives, should follow the procedures in SUP 13 (Exercise of passport rights by UK firms) on varying or terminating its branch or cross border services business.

A firm making an application in accordance with SUP 68 which requires any approval from the Society of Lloyd's should apply to the Society for this at the same time as applying to the relevant regulator.8 See SUP 6 Annex 4 for additional procedures.

27Under 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).

27Under 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.

27Under 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.

27An 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.

In applying for a variation of Part 4A permission,27 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

In determining the activities and specified investments for which a Part 4A permission27 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.27

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 PRA27 will not grant a variation of Part 4A permission27 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.27

If a firm is seeking a variation of Part 4A permission27 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.

If a firm wishes to cease carrying on an activity for which it has Part 4A permission,27 it will usually apply to vary its Part 4A permission27 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 permission27 to remove that specified investment from the relevant activity.

1. (1)

   Where a firm is submitting an application for variation of Part 4A permission27 which would lead to a change in the controlled functions of its approved persons, it should, at the same time and as appropriate:

   27
   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

      2727
      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 regulator27 of any approved person who has ceased to perform a controlled function specified by that regulator,27 Form C (Ceasing to perform controlled functions); see:20

      27
      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

   27
   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

20A variation of a firm’sPart 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.

A firm with Part 4A permission27 to carry on insurance business, which is applying for a variation of its Part 4A permission27 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)).

In applying to vary its Part 4A permission27 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 permission27 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.

The application for variation of Part 4A permission27 will need to provide information about the classes of contract of insurance for which variation of Part 4A permission27 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 FCA27 that it will meet, and continue to meet, threshold condition 3F27(Appointment of claims representatives). Firms should note that, although the relevant regulator27 is able in principle to use its power to give Part 4A permission27 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

1. (1)

   14If the online notification and application system fails21 and online submission is unavailable for 24 hours or more, the relevant regulator27 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.

   27181827
2. (2)

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

1. (1)

   Section 55(U)(2)27 of the Act (Applications under this Part) requires that the application for variation of Part 4A permission27 must contain a statement:

   2727
   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.27

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,27 who will determine the additional information and documentation required on a case by case basis.

   2727

1. (1)

   [deleted]7

2. (2)

   A firm is advised to discuss its application with the relevant regulator27 before submission, particularly if it is seeking a variation of Part 4A permission or imposition, variation or cancellation of a requirement27 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

   2727

The relevant regulator,27 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 required27 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.

A firm which is making an application for variation of Part 4A permission27 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.

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 permission27 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 regulator27 may require the firm to complete appropriate parts of the full application pack (see the relevant regulator's27 website ), as directed by the relevant regulator.27 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 permission27 which may represent a significant change include, but are not limited to, an application:

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.27

4. (4)

   [deleted]27

   27

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 regulator27 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

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 3.27

1. (1)

   The relevant regulator27 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's27 existing knowledge of the firm and the change27 requested. The relevant regulator27 will advise the firm of the information required at an early stage in the application process.

   272727
2. (2)

   The nature of the information and documents requested will be related to the risks posed to the relevant regulator's statutory objectives27 by the regulated activities and any unregulated activities that the firm is carrying on or is27 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.

   27

1. (1)

   The information the relevant regulator27 may require includes, but is not limited to, the examples given in SUP 6.3.25 G:

   27

Specific information may also be required by the relevant regulator27 on the activities the firm intends to cease, or cease carrying on in relation to any specified investments (see SUP 6 Annex 4).

When determining whether to grant an application, the relevant regulator27 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 regulator27 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 regulator27 may also discuss the application with other regulators or27 exchanges.

1. (1)

   The relevant regulator27 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 requirement27 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.27

   27271527
2. (2)

   [deleted]27

   151527

27Where 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.

1. (1)

   27The 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.

In determining whether the firm satisfies and continues to satisfy the threshold conditions, the regulator concerned27 will consider whether the firm is ready, willing and organised to comply with the regulatory requirements it will be subject to if the application27 is granted.

The specific requirements that apply to certain types of activity will also need to be considered27 as these may not allow certain combinations of activity.

In considering whether to grant (or consent to, as the case may be)27 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)27 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 4A27 of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary supervision6.10 Broadly, where a regulator,27 in the course of carrying on supplementary supervision, is considering varying the Part 4A permission27 of a person who is a member of a group which is a financial conglomerate, the consultation provisions in section 55R(2)27 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

27The 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.

27Thus, 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.

27If 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.

If limitationsare varied or imposed or requirements are imposed by the relevant regulator27 which were not included in the firm's application for variation of Part 4A permission, the relevant regulator27 will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

27Where 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).

Under section 55V(1)27 of the Act (Determination of applications), the relevant regulator27 has six months to consider a completed application from the date of receipt.

If the relevant regulator27 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)27 of the Act requires the relevant regulator27 to determine that incomplete application within 12 months of the initial receipt of the application.

27Where 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.

Within these time limits, however, the length of the process will relate directly to the complexity of the application.27

27The 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.

At any time after receiving an application and before determining it, the relevant regulator27 may require the applicant to provide additional information or documents. The circumstances of each application will dictate what additional information or procedures are appropriate.

A decision to grant an application will be taken by appropriately experienced staff at the relevant regulator.27 However, if the staff dealing with the application recommend that a firm's application for variation of Part 4A permission27 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.27

DEPP 9gives guidance on the FCA's27 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 requirement27 either in whole or in part (for example, an application granted by the FCA27 but subject to limitations or requirements not applied for).

If the variation ofPart 4A permission is given, the relevant regulator27 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.27

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)):27

   27
   1. (a)

      commence a regulated activity for which they have Part 4A permission27 within a period of at least 12 months from the date of being given; or

      27
   2. (b)

      carry on a regulated activity for which they have Part 4A permission27 for a period of at least 12 months (irrespective of the date of grant).

      27
2. (1A)

   13The appropriate regulator27 may exercise its own-initiative variation power27 to cancel an investment firm'sPart 4A permission27 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)27 of the Act is given (see EG 8).9

   [Note: article 8(a) of MiFID]

   27272727
3. (2)

   If the appropriate regulator27 considers that such a variation or cancellation of the firm'sPart 4A permission27 is appropriate, it will discuss the proposed action with the firm and its reasons for not commencing or carrying on the regulated activities concerned.

   2727

When a firm commences new regulated activities following a variation of a Part 4A permission,27 it should have particular regard to the requirements of Principle 11 (Relations with regulators) (see SUP 15.3.8 G (1)(c)).

24Under section 55H(3) of the Act (Variation by FCA at request of authorised person), if an FCA-authorised person applies to the FCA, the FCA may cancel its Part 4A permission. Cancellation applies to a firm's entire Part 4A permission, that is to every activity and every specified investment and not to the individual elements such as specified investments. Changes to the individual elements of a permission would require a variation.

24Under section 55H(4) of the Act, the FCA may refuse an application from a firm to cancel its Part 4A permission if it considers that it is desirable to do so in order to advance any of its operational objectives.

1. (1)

   A firm may apply to the relevant regulator to cancel its Part 4A permission24 before it has ceased carrying on all regulated activities. However, where a firm makes a formal application for cancellation of its permission when it has not yet ceased carrying on regulated activities, the relevant regulator24 will expect the firm:

   2424
   1. (a)

      to cease those regulated activities within the short term (normally no more than six months from the date of application for cancellation); and

   2. (b)

      to have formal plans to cease its regulated activities in an orderly manner.

2. (2)

   Firms should note, however, that the relevant regulator24 will not grant an application for cancellation of Part 4A permission24 until the firm can demonstrate that it has ceased carrying on all regulated activities (SUP 6.4.19 G).

   2424
3. (3)

   The relevant regulator24 may apply additional procedures or require additional information, as if the firm had entered into a long term wind down of business (see SUP 6 Annex 4), if it considers it appropriate to the circumstances of the firm.

   24

Additional guidance for a firm carrying on insurance business, accepting deposits, operating a dormant account fund8 or which holds client money or customer's assets is given in SUP 6 Annex 4. As noted in SUP 6.2.9 G, it will usually be appropriate for a firm to apply for variation of its Part 4A permission and/or the imposition, variation or cancellation of a requirement24 while winding down (running off) its regulated activities and before applying to cancel its Part 4A permission.24

1. (1)

   9If the online notification and application system fails16 and online submission is unavailable for 24 hours or more, the relevant regulator24 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 6.4.5 D (5) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.

   24121224
2. (2)

   9Where SUP 6.4.5 D (5) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

1. (1)

   In addition to applying for cancellation of Part 4A permission24 in accordance with SUP 6.4.5 D, a firm may discuss prospective cancellations with its supervisory contact at the appropriate regulator.244 Alternatively a firm can contact the Contact Centre on 0300 500 0597.1424

   424241414
2. (2)

   To contact the Cancellations Team:

   424
   1. (a)

      write to: Cancellations Team, The Financial Conduct24Authority, 12 Endeavour Square, London, E20 1JN19; or24; or24

      24
   2. (b)

      email cancellation.team@fca.org.uk24

3. (3)

   If a firm which has applied for cancellation decides to remain authorised it should inform the relevant regulator24 immediately using one of the methods in SUP 6.4.6 G (2).

   24

When an 4application is received4, the relevant regulator24 will send the firm a written acknowledgement. The firm will be required to provide information which, in the opinion of the relevant regulator,24 is necessary for it to determine whether to grant or refuse the application for cancellation of Part 4A permission.24

The information which the relevant regulator24 may request on the circumstances of the application for cancellation and the confirmations which the relevant regulator24 may require a firm to provide will differ according to the nature of the firm and the activities it has Part 4A permission24 to carry on.

A firm will be expected to demonstrate to the relevant regulator24 that it has ceased carrying on regulated activities. The relevant regulator24 may require, as part of the application, a report from the firm that includes, but is not limited to, the confirmations referred to in SUP 6.4.12 G (as appropriate to the firm's business). The relevant regulator24 may also require additional information to be submitted with the report including, in some cases, confirmation or verification from a professional adviser on certain matters to supplement the report (see SUP 6.4.15 G).

1. (1)

   If a firm is subject to the complaints rules in DISP, the FCA24 may request confirmation from the firm that there are no unresolved, unsatisfied or undischarged complaints against the firm from a customer of the firm.

   24
2. (2)

   If there are unresolved or undischarged complaints against a firm from a customer of the firm, the FCA24 may request confirmation, as appropriate, of the steps (if any) which have been taken under the firm's complaints procedures and the amount of compensation claimed. The FCA24 may also request an explanation of the arrangements made for the future consideration of such complaints.

   2424

If the firm is carrying on designated investment business with retail clients7, the FCA24 may request confirmation that the firm has written, or intends to write, to all retail clients7with, or for whom, the firm has conducted regulated activities within a certain period.

The relevant regulator24 will usually require the report in SUP 6.4.9 G to be signed by a director or other officer with authority to bind the firm. It may include confirmations from the firm that, in relation to business carried on under its Part 4A permission, it has:

1. (1)

   ceased carrying on all regulated activities;

2. (2)

   properly disbursed funds in its client bank accounts and closed those accounts;

3. (3)

   discharged all insurance or deposit liabilities; and

4. (4)

   properly transferred all investments, title documents and other property that it held on behalf of clients.

The relevant regulator24 may also require a resolution from the firm's governing body, for example to support the application for cancellation of permission, expressed to be irrevocable, and to give the signatory the authority to sign the formal report to the relevant regulator.24

Under section 39824 of the Act (Misleading the FCA or PRA: residual cases),24 it is an offence, in purported compliance with a requirement imposed by or under the Act (including the directions in SUP 6.4.5 D), for a person to knowingly or recklessly give the regulator24 information that is false or misleading. If necessary, a firm should take appropriate professional advice when supplying information required by the regulator(s).24 An insurer, for example, may ask an actuary to check assumptions in respect of future claims made under contracts of insurance.

The relevant regulator24 may require additional information, including professional advice, to supplement or support the report in SUP 6.4.9 G where it considers this appropriate. Examples of reports that may be requested by the relevant regulator24 include, but are not limited to those detailed in SUP 6.4.16 G.

If a firm is transferring its business, the relevant regulator24 may require a professional opinion in respect of certain aspects of the transfer. For example, the relevant regulator24 may require a legal opinion on the validity of arrangements to transfer regulated activities, client money, client deposits, custody assets or any other property belonging to clients, to another authorised person. Alternatively, an auditor or reporting accountant may be requested to verify that a transfer has been properly accounted for in the firm's books and records. Transfers of insurance and banking business are subject to statutory requirements (see SUP 18).

1. (1)

   A firm which is applying for cancellation of Part 4A permission and which is not otherwise authorised by, or under, the Act should, at the same time:15

   1. (a)

      comply with:15

      1. (i)

         SUP 10A.14.8R (for a firm that is not a relevant authorised person);15

      2. (ii)

         SUP 10C.14.5R (for a relevant authorised person); or15

      3. (iii)

         the corresponding PRA requirements; and15

   2. (b)

      notify the appropriate regulator of persons ceasing to perform controlled functions specified by that regulator.15

2. (2)

   These forms should give the effective date of withdrawal, if known (see SUP 10A and SUP 10C (FCA’s regimes for approved persons)).15

The relevant regulator24 will usually not cancel a firm'sPart 4A permission24 until the firm can demonstrate that, in relation to business carried on under that permission, it has, as appropriate:

1. (1)

   ceased carrying on regulated activities or fully run off or transferred all insurance liabilities;

2. (2)

   repaid all client money and client deposits;

3. (3)

   discharged custody assets and any other property belonging to clients; and

4. (4)

   discharged, satisfied or resolved complaints against the firm.

If it is not possible for a firm to demonstrate a relevant matter referred to in SUP 6.4.19 G, for example, depositors are uncontactable, the firm will be expected to have satisfied the relevant regulator24 that it has made adequate provisions for discharging any liabilities to clients which do not involve the firm carrying on regulated activities.

Before the relevant regulator24 cancels a firm'sPart 4A permission,24 the firm will be expected to be able to demonstrate that it has ceased or transferred all regulated activities under that permission. For example, the firm may be asked to provide evidence that a transfer of business (including, where relevant, any client money, customer assets or deposits or insurance liabilities) is complete. As noted in SUP 6.4.9 G, the relevant regulator24 may require the firm to confirm this by providing a report, in a form specified by the relevant regulator:24

1. (1)

   as part of the application for cancellation of permission, if the firm has ceased carrying on all regulated activities under its Part 4A permission24 at the time of application (see SUP 6.4.9 G); or

   24
2. (2)

   after the application but before its determination, if the firm has not ceased carrying on regulated activities under itsPart 4A permission24 at the time of application.

   24

In deciding whether to cancel a firm'sPart 4A permission, the relevant regulator24 will take into account all relevant factors in relation to business carried on under that permission, including whether:

1. (1)

   there are unresolved, unsatisfied or undischarged complaints against the firm from any of its customers;

2. (2)

   the firm has complied with CASS 5.5.80 R and CASS 7.11.34R 13 (Client money: discharge of fiduciary duty)24 and CASS 7.11.50 R135(Client money: allocated but unclaimed client money) if it has ceased to hold client money; these rules apply to both repayment and transfer to a third party;1

   5241313
3. (3)

   the firm has ceased to hold or control custody assets in accordance with instructions received from clients and COBS 6.1.7 R7 or article 49 of the MiFID Org Regulation (see COBS 6.1ZA.9EU18)17 (Information concerning safeguarding of designated investments belonging to clients and client money)5;

   24
4. (4)

   the firm has repaid all client deposits, if it is ceasing to carry on regulated activities including accepting deposits;

5. (5)

   the relevant regulator24 or another regulator has commenced an investigation against the firm or continuing enforcement action against the firm;

   24
6. (6)

   there are any matters affecting the firm which should be investigated before a decision on whether the firm should have its Part 4A permission cancelled by the relevant regulator24 or be disciplined;

   24
7. (7)

   the firm has unsettled or unexpired liabilities to consumers, for example, outstanding contracts (such as deposits or insurance liabilities);

8. (8)

   the firm has settled all its debts to the appropriate regulator;24 and

   24
9. (9)

   the factors set out in SUP 6.4.19 G apply.

If an application for cancellation of a firm'sPart 4A permission has been granted and a firm's status as an authorised person has been withdrawn (see SUP 6.5) it will remain subject to certain investigative and enforcement powers as a former authorised person. These include:24

1. (1)

   information gathering and investigation powers in Part XI of the Act (Investigation gathering and investigations) (seeEG 3 (Use of information gathering and investigation powers)6);

   6
2. (2)

   powers to apply to court for injunctions and restitution orders in Part XXV of the Act (Injunctions and restitution) (seeEG 106 (Injunctions) and EG 116 (Restitution and redress));

   66
3. (3)

   powers in Part XXIV of the Act (Insolvency) to petition for administration orders or winding up orders against companies or insolvent partnerships, or bankruptcy orders (or in Scotland sequestration awards) against individuals (see EG 13 (Insolvency)6);

   6
4. (4)

   powers in Part XXVII of the Act (Offences) to prosecute offences under the Act and other specified provisions (see EG 126 (Prosecution of criminal offences)).

   6

However, the following powers may not be used24 against former authorised persons:

1. (1)

   powers to take disciplinary action against firms by publishing statements of misconduct under section 205 of the Act (Public censure) or imposing financial penalties under section 206(1) of the Act (Financial penalties); and

2. (2)

   the power to require firms to make restitution under section 384 of the Act (Power of FCA or PRA24 to require restitution).

   24

Consequently, the relevant regulator24 considers that it will have good reason not to grant a firm's application for cancellation of permission where:

1. (1)

   the FCA and/or the PRA24 proposes to exercise any of the powers described in SUP 6.4.24 G; or

   24
2. (2)

   the FCA and/or the PRA24 has already begun disciplinary and/or24 restitution proceedings against the firm by exercising either or both of these powers against the firm.

   24

TheFCA's24 use of those powers is outlined in DEPP 6 (Penalties)6.

1. (1)

   Under section 55V(1)24of the Act (Determination of applications), the relevant regulator24 has six months to consider a completed application.

   2424
2. (2)

   If the relevant regulator24 receives an application which is incomplete, that is, where information or a document required as part of the application is not provided, section 55V(2) of the Act requires the relevant regulator24 to determine the incomplete application within 12 months of the initial receipt of the application.

   2424
3. (3)

   Within these time limits, however, the length of the process will relate directly to the complexity of cancellation24 requested and whether the firm has fully wound down (run off) its activities at the time it applies.

   2424

24The FCA publishes standard response times on its website setting out how long the application process is expected to take in practice. From time to time, the FCA also publishes its performance against these times.

A decision to grant an application for cancellation of permission will be taken by appropriately experienced staff at the relevant regulator.24 Where, however, the staff dealing with the application recommend that a firm's application for cancellation of Part 4A permission24 be refused, the decision will be subject to the regulator's formal decision making process.24

See DEPP6 for guidance on the FCA's24 decision making procedures, including the procedures it will follow if it proposes to refuse an application for cancellation of Part 4A permission.24

Under section 33(2) of the Act (Withdrawal of authorisation), if the appropriate regulator cancels a firm'sPart 4A permission,1 and as a result there is no regulated activity for which the firm has permission, the regulator authorising that firm1 is required to give a direction withdrawing the firm's status as an authorised person.

1If the FCA concludes that it should grant an FCA-authorised person's application for cancellation of permission and end its authorisation, the FCA will:

1. (1)

   cancel the firm'sPart 4A permission under section 55H(3) of the Act;

2. (2)

   withdraw the firm'sauthorised status under section 33(2) of the Act by giving the firm a direction in writing; and

3. (3)

   update the firm's entry in the Financial Services Register to show it has ceased to be authorised.