Related provisions for PERG 6.7.2

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DEPP 1.2.2GRP

Table: Summary of statutory and related notices

Notice

Description

Act reference

Further information

Warning notice

Gives the recipient details about action that the FCA2 proposes to take and about the right to make representations.

2

Section 387

DEPP 2.2

Decision notice

Gives the recipient details about action that the FCA2 has decided to take. The FCA2 may also give a further decision notice if the recipient of the original decision notice consents.

22

Section 388

DEPP 2.3

Notice of discontinuance

Identifies proceedings set out in a warning notice or decision notice and which are not being taken or are being discontinued.

Section 389

DEPP 1.2.4 G and DEPP 3.2.26 G

Final notice

Sets out the terms of the action that the FCA2 is taking.

2

Section 390

DEPP 1.2.4 G

Supervisory notice

Gives the recipient details about action that the FCA2 has taken or proposes to take, for example to vary a Part 4A permission.2

22

Section 395(13)

DEPP 2.2 and DEPP 2.3
EG 19.30.7RP
1For example, the FCA will notify the subject of the investigation that it has appointed investigators to carry out an investigation under the MCDO and the reasons for the appointment, unless notification is likely to result in the investigation being frustrated. In most cases, the FCA expects to carry out a scoping visit early on in the enforcement process. The FCA's policy in regulatory investigations under the MCDO is to use powers to compel information, in the same way as
EG 19.23.11RP
1Certain FCA decisions (for example the cancellation of an authorisation or the imposition of a financial penalty) may be referred to the Tribunal by an aggrieved party.
EG App 2.1.9RP
2The following are indicators of whether action by the FCA or one of the other agencies is more appropriate. They are not listed in any particular order or ranked according to priority. No single feature of the case should be considered in isolation, but rather the whole case should be considered in the round.(a) 2 Tending towards action by the FCAWhere the suspected conduct in question gives rise to concerns regarding market confidence or protection of consumers of services regulated
EG App 2.1.13RP
2The agencies will consider, as necessary, and keep under review whether an investigation has reached the point where it is appropriate to commence proceedings. Where agencies are deciding whether to institute criminal proceedings, they will have regard to the usual codes or guidance relevant to that decision. For example, agencies other than the PPS or COPFS will have regard to the Code for Crown Prosecutors (Note: Different guidance applies to the PPS and COPFS. All criminal
EG 10.4.2RP
1When, in relation to firms, the FCA applies the broad test outlined in paragraph 10.2.2, it will consider the relative effectiveness of the other powers available to it, compared with injunctive relief. For example, where the FCA has concerns about whether a firm will comply with restrictions that the FCA could impose by exercising its own-initiative powers, it may decide it would be more appropriate to seek an injunction. This is because breaching any requirement imposed by
EG 8.5.2RP
1The grounds on which the FCA may exercise its power to cancel an authorised person's permission under section 55J of the Act are the same as the grounds for variation and for imposition of requirements. They are set out in section 55J(1) and section 55L(2) and described in EG 8.1.1. Examples of the types of circumstances in which the FCA may cancel a firm'sPart 4A permission include: (1) non-compliance with a Financial Ombudsman Service award against the
EG 8.5.5RP
1However, where the FCA has cancelled a firm'sPart 4A permission, it is required by section 33 of the Act to go on to give a direction withdrawing the firm'sauthorisation. Accordingly, the FCA may decide to keep a firm'sPart 4A permission in force to maintain the firm's status as an authorised person and enable it (the FCA) to monitor the firm's activities. An example is where the FCA needs to supervise an orderly winding down of the firm's regulated business (see SUP 6.4.22 (When
DEPP 6.7.1GRP
Persons subject to enforcement action may be prepared to agree the amount of any financial penalty, or the length of any period of suspension, restriction, condition,5 limitation or disciplinary prohibition5 (see DEPP 6A)4, and other conditions which the FCA seeks to impose by way of such action. These4 conditions might include, for example, the amount or mechanism for the payment of compensation to consumers. The FCA recognises the benefits of such agreements, as4 they offer
DEPP 6.7.4GRP
(1) Any settlement agreement6 between the FCA3 and the person concerned will therefore need to include a statement as to the appropriate penalty discount in accordance with this procedure.3(2) In certain circumstances the person concerned may consider that it would have been possible to reach a settlement at an earlier stage in the action, and argue that it should be entitled to a greater percentage reduction in penalty than is suggested by the table at DEPP 6.7.3G (3). It may
EG 2.9.2RP
1Guidance is not binding on those to whom the FCA'srules apply. Nor are the variety of materials (such as case studies showing good or bad practice, FCA speeches, and generic letters written by the FCA to Chief Executives in particular sectors) published to support the rules and guidance in the Handbook. Rather, such materials are intended to illustrate ways (but not the only ways) in which a person can comply with the relevant rules.
EG 2.9.4RP
1Guidance and supporting materials are, however, potentially relevant to an enforcement case and a decision maker may take them into account in considering the matter. Examples of the ways in which the FCA may seek to use guidance and supporting materials in an enforcement context include: (1) To help assess whether it could reasonably have been understood or predicted at the time that the conduct in question fell below the standards required by the Principles.(2) To explain the
DEPP 6A.2.3GRP
The FCA1 will consider it appropriate to impose a suspension, restriction, condition,3 limitation3 or disciplinary prohibition3 where it believes that such action will be a more effective and persuasive deterrent than the imposition of a financial penalty alone. This is likely to be the case where the FCA1 considers that direct and visible action in relation to a particular breach is necessary. Examples of circumstances where the FCA1 may consider it appropriate to take such
DEPP 6A.2.4GRP
The FCA1 expects usually to impose a suspension, restriction, condition or limitation in relation to4 activities directly linked to the breach. However, in certain circumstances the FCA1 may also impose a suspension, restriction, condition or limitation in relation to4 activities that are not directly linked to the breach, for example, where an authorised person's relevant business area no longer exists or has been restructured.11
PRIN 1.1.5GRP
Principles 3 (Management and control), 4 (Financial prudence) and (in so far as it relates to disclosing to the FCA11 ) 11 (Relations with regulators) take into account the activities of members of a firm's group. This does not mean that, for example, inadequacy of a group member's risk management systems or resources will automatically lead to a firm contravening Principle 3 or 4. Rather, the potential impact of a group member's activities (and, for example, risk management systems
PRIN 1.1.7GRP
Breaching a Principle makes a firm liable to disciplinary sanctions. In determining whether a Principle has been breached it is necessary to look to the standard of conduct required by the Principle in question. Under each of the Principles the onus will be on the FCA11 to show that a firm has been at fault in some way. What constitutes "fault" varies between different Principles. Under Principle 1 (Integrity), for example, the FCA11 would need to demonstrate a lack of integrity
EG 8.4.2RP
1Examples of the limitations that the FCA may impose when exercising its own-initiative variation power in support of its enforcement function include limitations on: the number, or category, of customers that a firm can deal with; the number of specified investments that a firm can deal in; and the activities of the firm so that they fall within specific regulatory regimes (for example, so that oil market participants,2corporate finance advisory firms and service
EG 8.4.4RP
1Examples of requirements that the FCA may consider imposing when exercising its own-initiative power in support of its enforcement function are: a requirement not to take on new business; a requirement not to hold or control client money; a requirement not to trade in certain categories of specified investment; a requirement that prohibits the disposal of, or other dealing with, any of the firm’s assets (whether in the United Kingdom or elsewhere) or restricts
ICOBS 8.4.5GRP
(1) For the purposes of ICOBS 8.4.4R (2)(c) and ICOBS 8.4.4R (2)(d), a firm may put in place appropriate screening on its employers’ liability register to monitor:(a) requests for information and searches to ensure that they are being made for a legitimate purpose by persons falling into one of the categories in ICOBS 8.4.4R (2)(c); and(b) requests from tracing offices to ensure that the information is necessary, and will only be used by the tracing office, for the purposes of
EG 19.33.4RP
For example, the FCA will notify the subject of the investigation that it has appointed investigators to carry out an investigation and the reasons for the appointment. The FCA's policy in regulatory investigations under the Regulations is to use powers to compel information, in the same way as it would in the course of an investigation under the Act.
SUP 5.5.3GRP
If the FCA3 is considering asking for the information specified in SUP 5.5.2 G it will take into consideration the cost of the skilled person complying with the request, and the benefit that the FCA3 may derive from the information. For example, in most cases, the FCA3 will not need to request a skilled person to give it source data, documents and working papers. However, the FCA3 may do so when it reasonably believes that this information will be relevant to any investigation
SUP 10C.9.9GRP

Table: Examples of how the need for dual FCA and PRA approval in relation to PRA-authorised persons is reduced

1Example

Whether FCA approval required

Whether PRA approval required

Comments

(1) A is appointed as chief risk officer and an executive director.

No. He is not treated as performing the executive director function.

Yes

Chief risk officer is a PRA-designated senior management function. A’s functions as a director will be included in the PRA-designated senior management function. To avoid the need for FCA approval, A’s appointment as director should not take effect before PRA approval for the chief risk officer role.

(2) Same as example (1), except that A will take up the role as an executive director slightly later because the approval is needed from the firm's shareholders or governing body.

No

Yes

The answer for (1) applies. The arrangements in this section apply if the application to the PRA says that A will start to perform the potential FCA governing function around the time of the PRA approval as well as at that time.

(3) Same as example (1) but the application to the PRA does not mention that it is also intended that A is to be an executive director.

Yes, to perform the executive director function.

Yes

SUP 10C.9.8R does not apply if the application for PRA approval does not say that A will also be performing what would otherwise be an FCA governing function.

(4) A is to be appointed as chief executive and an executive director.

No. A is not treated as performing the executive director function.

Yes

Being a chief executive is a PRA-designated senior management function. A’s functions as a director will be included in the PRA controlled function.

(5) A is appointed as chief risk officer. Later, A is appointed as an executive director while carrying on as chief risk officer.

Yes, when A takes up the director role. The executive director function applies.

Yes, when A takes up the chief risk officer role.

SUP 10C.9.8R does not apply because, when the firm applied for approval for A to perform the PRA chief risk officer designated senior management function, there was no plan for A also to perform the executive director function.

(6) A is appointed as an executive director. Later, A takes on the chief risk officer function and remains as an executive director.

Yes, when A is appointed as director. The executive director function applies.

Yes, when A takes up the chief risk officer role.

When A is appointed as chief risk officer, A is still treated as carrying on the executive director function. A retains the status of an FCA-approved person.

(7) A is appointed as chief risk officer. A then stops performing that role and for a while does not perform any controlled function for that firm. Later, A is appointed as an executive director with the same firm.

Yes, when A is appointed as an executive director. The executive director function applies.

Yes, when A takes up the chief risk officer role.

SUP 10C.9.8R does not apply because there is no current PRA approval when A is being appointed as a director.

(8) A is appointed as an executive director and chief risk officer at the same time. Later, A gives up the role as chief risk officer but remains as an executive director.

No, on A’s first appointment (see example (1)). But when A gives up the role as chief risk officer, FCA approval is needed to perform the executive director function.

Form E should be used. The application should state that it is being made as a result of A ceasing to perform a PRA-designated senior management function.

Form A should be used if there have been changes in A’s fitness (SUP 10C.10.9D(4))

Yes, on A’s first appointment.

When A stops being a chief risk officer, A stops performing a PRA-designated senior management function. However, being an executive director requires FCA approval. A does not have that approval because A did not need it when A was first appointed.

The combined effect of SUP 10C.9.8R and the relevant PRA rules is that the firm has three months to secure approval by the FCA. During that interim period, A keeps the status of a PRA approved person performing the director element of the PRA chief risk designated senior management function - which is included in that function under relevant PRA rules. The relevant PRA rules say that, during this transitional period, A is still treated as performing the PRA chief risk designated senior management function and SUP 10C.9.8R says that, for as long as A is performing a PRA-designated senior management function, A does not perform the executive director function.

(9) A is appointed as the chief finance officer and an executive director at the same time. Later, A switches to being chief risk officer while remaining as an executive director.

No

Yes

The arrangements in SUP 10C.9.8R continue to apply, even though A switches between PRA-designated senior management function after the PRA's first approval.

(10) A is appointed chief risk officer and an executive director. A goes on temporary sick leave. A takes up his old job when he comes back.

No, neither on A’s first appointment nor when A comes back from sick leave.

Yes

SUP 10C.9.8R still applies on A’s return because A does not stop performing either the PRA's chief risk function or what would otherwise have been the executive director function just because A goes on temporary sick leave.

(11) A is appointed to be chairman of the governing body and chairman of the nomination committee at the same time.

No. A does not need approval to perform the chair of the nomination committee function.

Yes, on first appointment.

Being chairman of the governing body is a PRA-designated senior management function. Therefore, the answer for example (1) applies.

2(12) ‘A’ is to be appointed to perform the Head of Overseas Branch PRA-designated senior management function (SMF19) for a third-country relevant authorised person. A is also an executive director of that firm’sUKbranch.

No. A is not treated as performing the executive3director function.

Yes

A’s functions as a director will be included in the PRA controlled function.

Note: The relevant PRA rules can be found in Chapter 2 of the part of the PRA rulebook called ‘Senior Management Functions’