Applications for Part IV permission

Part

AUTH Authorisation (to see AUTH derivations and destinations tables, go to Useful links)

Chapter

Applications for Part IV permission

Printed on: 01/11/2024

Rulebook at: 06/04/2005

AUTH 3

Applications
for Part IV permission

AUTH 3.1

Application and purpose

01/12/2004

Application

AUTH 3.1.1

This chapter applies to:

(1) an individual, a body corporate (including a branch of a body corporate), a partnership or an unincorporated association which is not an authorised person and which wishes to apply for Part IV permission to carry on regulated activities in the United Kingdom;

(2) an EEA firm or a Treaty firm seeking to carry on regulated activities in the United Kingdom other than through the exercise of an EEA right or Treaty right;

(3) an EEA firm, Treaty firm or UCITS qualifier wishing to apply for a top-up permission to carry on any regulated activity.

03/09/2001

Purpose

AUTH 3.1.2

This chapter gives guidance to applicants on how the FSA will exercise the powers granted to it in Part IV of the Act (Permission to carry on regulated activities) to determine an application and give Part IV permission. In particular, the chapter gives guidance on:

(1) permission under Part IV of the Act;

(2) the procedures, under section 51 of the Act (Application under this Part), for making an application to the FSA for Part IV permission;

(3) when and how the FSA will determine applications under section 52 of the Act (Determination of applications); and

(4) when and how a person becomes authorised under the Act.

03/09/2001

AUTH 3.2

Introduction

01/12/2004

AUTH 3.2.1

(1) With certain exceptions (for example, EEA firms), a person wanting to carry on any one or more regulated activities must apply to the FSA for Part IV permission. If the FSA gives an applicant such permission, the applicant will become an authorised person.

(2) Authorisation gives a firm the ability to carry on regulated activities without breaching the general prohibition and incurring criminal liability (see AUTH 2.2.1 G ). A firm may, however, be subject to regulatory action if it does not have the necessary Part IV permission for each regulated activity it carries on (see AUTH 3.3.3 G).

21/02/2002

AUTH 3.2.2

AUTH 3 Annex 1 G gives an overview of the application process from receipt of the application by the FSA.

03/09/2001

AUTH 3.3

When is Part IV permission required and what does it contain?

01/12/2004

AUTH 3.3.1

A person will, broadly speaking, be treated as carrying on a regulated activity in the United Kingdom (and so, under section 20(1), need permission), where it is carried on in the circumstances described in AUTH 2.4 (Link between activities and the United Kingdom). A Part IV permission under Part IV of the Act is required before the person carries on regulated activities unless the person has permission resulting from any other provisions in the Act (see AUTH 2.10 (Persons carrying on regulated activities who do not need authorisation)).

03/09/2001

AUTH 3.3.2

Under section 20(1) of the Act (Requirement for permission), a firm must not carry on a regulated activity in the United Kingdom (or purport to do so) otherwise than in accordance with its permission.

03/09/2001

AUTH 3.3.3

Following a successful application to the FSA, an applicant will be given Part IV permission. The Part IV permission will specify all or some of the following elements:

(1) a description of the activities the firm can carry on (see AUTH 3.4), including any limitations (see AUTH 3.6);

(2) the specified investments involved (see AUTH 3.5); and

(3) if appropriate, requirements (see AUTH 3.7).

03/09/2001

AUTH 3.3.4

(1) Section 42(6) of the Act (Giving permission) requires the FSA to describe the regulated activities for which a firm is given Part IV permission; this description may include limitations (see AUTH 3.6). The Part IV permission may also include requirements (see AUTH 3.7).

(2) After being given Part IV permission, a firm can apply at any time to have a limitation or a requirement varied or removed, following the procedures in SUP 6 (Application to vary or cancel Part IV permission).

03/09/2001

AUTH 3.3.5

Under section 51(3) of the Act, an application for permission must be made in such manner as the FSA directs (see AUTH 3.9.3 D).

03/09/2001

AUTH 3.4

Activities

01/12/2004

AUTH 3.4.1

(1) The activities for which an applicant may apply for Part IV permission are listed in AUTH 2 Annex 2 G (Regulated activities and the permission regime). The FSA has described these activities in the same way as regulated activities are specified in the Regulated Activities Order (see AUTH 2.7 to AUTH 2.8 ) but with three sub-divisions.

(2) The sub-divisions are that:

(a) advising on pension transfers and pension opt-outs is a separate category from advising on other investments; this distinction has been made because pension transfers and pension opt-outs are considered to be transactions which are high risk to consumers and it is appropriate to differentiate advice on them from other forms of advice;

(b) establishing, operating or winding up a collective investment scheme been sub-divided to distinguish regulated collective investment schemes from unregulated ones; this is because of the different regulatory requirements and risk characteristics of the two types of scheme; and

(c) safeguarding and administering investments has been divided into safeguarding and administration of assets (without arranging) and arranging safeguarding and administration of assets; this is because some firms arrange the provision of safe custody for clients instead of providing the facilities themselves.

03/09/2001

AUTH 3.4.2

It should be noted that some combinations of regulated activities are restricted by other legislation, such as the UCITS Directive and the Insurance Directives. In addition, applicants seeking to carry on specified activities in certain business areas, for example, ISA management, will be required to demonstrate that they satisfy additional regulatory obligations. Details of these restrictions and obligations are in AUTH 3.11 to AUTH 3.17.

03/09/2001

AUTH 3.4.3

If an applicant is uncertain whether the FSA will give Part IV permission for a particular combination of activities, it should seek professional advice and discuss the matter with the FSA before making a formal application for Part IV permission. These discussions with the FSA will not be part of the formal application process.

03/09/2001

AUTH 3.5

Specified investments

01/12/2004

AUTH 3.5.1

The specified investments for which an applicant may apply for Part IV permission are listed in AUTH 2 Annex 2 G . In general, the FSA has described these specified investments in a way that mirrors the activities specified in the Regulated Activities Order (see AUTH 2.6 ). The FSA has, however, sub-divided certain specified investments in the Regulated Activities Order to distinguish those investments which, among other things, are considered to have significantly different risk profiles. These are:

(1) commodity futures and commodity options and options on commodity futures, which have been distinguished from other futures and options;

(2) spread bets, which have been distinguished from other contracts for differences; and

(3) rolling spot forex contracts, which have been distinguished from other contracts for differences and futures.

03/09/2001

AUTH 3.6

Limitations

01/12/2004

AUTH 3.6.1

The FSA may include appropriate limitations in a description of the regulated activities in a Part IV permission.

03/09/2001

AUTH 3.6.2

Generally speaking, a limitation limits, in some way, a particular regulated activity. Unlike requirements (see AUTH 3.7), each limitation is specific to a particular regulated activity (either to the specified activity, the specified investments or both). This is why the Act refers to a limitation being incorporated within the actual description of the regulated activity.

03/09/2001

AUTH 3.6.3

As part of its application for Part IV permission, an applicant may wish to apply for certain limitations (details of which are given in the application pack). Alternatively, the FSA may impose a limitation where it considers it appropriate after reviewing the application. Examples of limitations which may be applied for or imposed include:

(1) a limit on the types of client that a firm may deal with; this would be used either where an applicant's business plan makes it clear that it only intends to provide services for specific types of clients (for example, see AUTH 3.6.4 G) or where the FSA wishes to limit the types of clients a firm can deal with; or

(2) a limit on the number of clients with whom a firm may carry on a particular regulated activity during, for example, an initial period of operation; this might be used where, for example, a firm's systems are not yet adequate to be able to process a high volume of transactions; or

(3) a limit on the types of specified investments that a firm can deal in; this would be used either where an applicant's business plan makes it clear that it only intends to provide services in respect of certain specified investments or where the FSA wishes to limit the categories of specified investments a firm can deal with; or

(4) a limit on the type of insurance business which a firm may carry on in connection with certain categories of specified investments for which Part IV permission may be granted; for example, a limitation specifying that only reinsurance business may be carried on in relation to certain specified investments; (note that for direct insurance business, the Insurance Directives restrict the ability of the FSA to impose limitations on an individual class of specified investment).

18/10/2001

AUTH 3.6.4

(1) In relation to the carrying on of designated investment business (and related ancillary activities, including communication and approval of related financial promotions), COB 4.1.4 R (Requirement to classify) requires a firm to classify a client before conducting designated investment business with him or for him and that classification is relevant to the application of Principles 6,7,8 and 9. The classification of clients is used to apply appropriately differentiated market conduct and conduct of business provisions based on the expertise of the different clients. An applicant may, therefore, wish to apply to carry on designated investment business in respect of one or more of the following classifications:

(a) private customer;

(b) intermediate customer;

(2) In practice, a firm may be permitted to carry on regulated activities that fall within the definition of designated investment business with one, or more, of these client categories.

(3) As explained in PRIN 1.2.4 G, a firm carrying on business other than designated investment business may choose to distinguish between customers and market counterparties in complying with the Principles. An applicant may, therefore, wish to apply to carry on business only with market counterparties.

(4) In relation to accepting deposits, the limitations which may be applied for or imposed include a limitation that the firm may accepting deposits from wholesale depositors only. A firm with such a limitation may receive less intensive supervision by the FSA, because of the reduced risk it poses to the regulatory objective of protecting consumers. However, the precise arrangements that would apply would be determined case by case and would be based on an assessment of the risks the firm posed to all four of the regulatory objectives.

(5) COB 4.1.4 R does not apply to a firm which, in relation to any customer, intends only to provide advice on a stakeholder product.

06/04/2005

AUTH 3.6.5

If, after reviewing an application, the FSA proposes to impose a limitation, the applicant will be advised formally (that is, the applicant will be sent a warning notice) and given an opportunity to make representations before the FSA reaches a final decision. For an overview of how the FSA determines applications and a summary of the FSA's decision-making procedures, see AUTH 8 (Determining applications).

03/09/2001

AUTH 3.6.6

After the FSA gives a Part IV permission, a firm can apply at any time to vary that Part IV permission, including any limitation, following the procedures set out in SUP 6.

03/09/2001

AUTH 3.7

Requirements

01/12/2004

AUTH 3.7.1

(1) Section 43 of the Act (Imposition of requirements) gives the FSA power to include any requirements in a Part IV permission that it considers appropriate. A requirement may be imposed on a firm to:

(a) take a particular action; or

(b) refrain from taking a particular action.

(2) The requirement may extend to activities which are not regulated activities (for example, see AUTH 3.7.6 G (3)) and the FSA may set a time at which the requirement expires.

(3) As part of its application for Part IV permission, an applicant may wish to apply for certain requirements (details of which are given in the application pack).

03/09/2001

AUTH 3.7.2

Generally speaking, a requirement will either be unrelated to the performance of regulated activities (for example, a requirement that relates to reporting) or will relate to all, or a number of, the regulated activities which an applicant wishes to carry on. This can be contrasted with a limitation, which is specific to one particular regulated activitiy (either to the specified activity, the specified investments or both), as in AUTH 3.6.

03/09/2001

AUTH 3.7.3

(1) Requirements can, among other things, be used by the FSA to control the performance of certain business activities which are not in themselves regulated activities; although in many cases a firm will require permission for a combination of regulated activities before the business activity can be carried on. The business activities controlled in this way are those which, in the interests of consumer protection, have certain minimum standards, for example in respect of the systems and controls required to meet regulatory or other obligations (for example, see the client money rules in CASS 4).

(2) As a result, applicants will be asked to specify as part of their application whether or not they wish to carry on business activities that include:

(a) the holding or controlling of client money; or

(b) ISA, PEP, or CTF management (including, in the case of CTF management, details of any third party administrator that it engages and with details of whether it intends to offer Revenue allocated CTF's and whether it intends to provide its own stakeholder CTF); or

(d) management of a broker fund.

(3) As part of demonstrating that it can satisfy and continue to satisfy the threshold conditions in respect of the regulated activities it wishes to carry on, an applicant will be expected to demonstrate that it is ready, willing and organised to satisfy, and continue to satisfy, any relevant regulatory obligations that would apply to any business activities it wishes to carry on (for example, CASS 4 (Client money)). An applicant that does not wish to engage in these activities should apply for a requirement to exclude performance of these activities from the scope of its Part IV permission.

13/02/2004

AUTH 3.7.4

(1) A requirement can also be used by the FSA to define the scope of a number of regulated activities carried on by a firm so that a particular differentiated regulatory regime applies. Examples of such regimes include those for oil market participants, energy market participants, locals, venture capital firms, corporate finance advisory firms and service companies. Where this is relevant, an applicant may wish to apply for Part IV permission which includes a requirement defining the scope of each of its regulated activities.

(2) As an example, an applicant wishing to act as a corporate finance advisory firm may be given Part IV permission to carry on the activities of advising on investments and arranging (arranging (bringing about) deals in investments), subject to a requirement that the firm carries on these activities only within the definition of a corporate finance advisory firm.

(3) As part of the application pack, an applicant will be asked whether it wishes to apply for a requirement to define the scope of its Part IV permission. An applicant that applies for Part IV permission with a requirement to reduce the scope of that permission will only be required to demonstrate to the FSA that it is able to satisfy, and continue to satisfy, the threshold conditions in respect of the reduced scope.

21/02/2002

AUTH 3.7.5

As part of the application process, an applicant will need to determine which prudential category it falls into and, in some cases, which sub-category (see AUTH 3.8.5 G). In some cases, a requirement may form part of the description of such a category or sub-category, in which case the applicant may wish to apply for Part IV permission subject to appropriate requirements. The FSA may also impose a requirement on a firm to require it to comply with certain financial requirements (see SUP 7.4 (Individual requirements)).

03/09/2001

AUTH 3.7.6

Examples of requirements which may be applied by the FSA in particular circumstances, include:

(1) a requirement, imposed under section 48 of the Act (Prohibitions and restrictions), that a firm given Part IV permission obtain the approval of the FSA before payment of a dividend; or

(2) a requirement to submit financial returns more often than normal, for example during the firm's first months or years of business; or

(3) a requirement to submit audited financial accounts of a parent company; or

(4) a requirement, on the permission of an insurer, to carry on only reinsurance business; or

(5) a requirement to submit periodic independent compliance reviews, performed by an appropriate person, during the first months or years of business.

03/09/2001

AUTH 3.7.7

If, after reviewing an application, the FSA proposes to impose a requirement, the applicant will be advised formally (that is, the applicant will be sent a warning notice) and given an opportunity to make representations before the FSA reaches a final decision. For an overview of how the FSA determines applications and a summary of the FSA's decision making procedures, see AUTH 8.

03/09/2001

AUTH 3.7.8

Following the giving of a Part IV permission, a firm can apply, at any time, to vary that Part IV permission, including any requirement or limitation, following the procedures in SUP 6.

03/09/2001

AUTH 3.8

The threshold conditions and financial resources

01/12/2004

The threshold conditions

AUTH 3.8.1

(1) Under section 41(2) of the Act (The threshold conditions), the FSA is required, in giving Part IV permission or imposing any requirement, to ensure that the applicant satisfies, and will continue to satisfy, the threshold conditions in relation to all the regulated activities for which it has or will have permission. The threshold conditions are in Schedule 6 to the Act.

(2) The FSA has provided guidance on the threshold conditions in COND. This guidance is not exhaustive and is written at a high level of generality as satisfaction of the threshold conditions is considered on a case-by-case basis, in relation to each regulated activity an applicant is seeking to carry on.

03/09/2001

AUTH 3.8.2

(1) There are six threshold conditions and certain additional conditions applying to a firm with Part IV permission:

(a) threshold condition 1 (Legal status) sets out the legal status that the applicant must have if it wishes to carry on certain regulated activities;

(b) threshold condition 2 (Location of offices) provides that:

(i) a body corporate constituted under the law of any part of the United Kingdom must have its head office and, if it has one, its registered office, in the United Kingdom; and

(ii) a non body corporate with its head office in the United Kingdom must carry on business in the United Kingdom;

(ca) threshold condition 2A (Appointment of claims representatives) provides that if it appears to the FSA that any person is seeking to carry on, or carrying on, motor vehicle liability insurance business, that person must have a claims representative in each EEA State other than the United Kingdom;

(d) threshold condition 4 (Adequate resources) relates to the adequacy of an applicant's resources;

(e) threshold condition 5 (Suitability) relates to the suitability of the applicant;

(f) additional conditions apply to non-EEA insurers (see COND 2.6 (Additional Conditions)).

(2) Threshold conditions 2A, 3, 4, and 5 enable the FSA to assess the applicant in the light of the activities it wishes to carry on and, in particular, make it clear that suitability to carry on one regulated activity does not mean that the applicant is suitable to carry on all regulated activities. Threshold conditions 3, 4 and 5 do not apply to Swiss general insurance companies.

(3) An incoming firm applying for a top-up permission must also satisfy the threshold conditions with the exception of threshold condition 2 (Location of offices): see COND 1.1 Application) and paragraphs 6 and 7 of Schedule 6 to the Act.

(4) The application of the threshold conditions to Swiss general insurance companies was varied by the Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001.

19/01/2003

AUTH 3.8.3

The FSA, in making a determination whether an applicant satisfies and will continue to satisfy the threshold conditions under section 41(2) of the Act, will consider whether an applicant can demonstrate that it is ready, willing and organised so as to enable it to comply with the specific regulatory obligations that will apply to the applicant if it is given Part IV permission to carry on the regulated activities referred to in its application.

03/09/2001

Financial resources

AUTH 3.8.4

(1) As part of its application, an applicant will be required to demonstrate that it has adequate financial resources to meet the financial resources requirement for its prudential category.

(2) The Single Market Directives, the Capital Adequacy Directive and the E-Money Directive set out minimum financial requirements for all firms which carry on banking, issuing e-money, insurance or investment services within the scope of the Single Market Directives and the E-Money Directive, that is, most firms that are credit institutions, financial institutions, insurance undertakings or investment firms as defined in these Directives. These requirements are reflected in PRU or in the relevant IPRU for each type of firm.

31/12/2004

AUTH 3.8.5

(1) An applicant will need to determine its prudential category and, in some cases, its sub-category. The application pack and AUTH 3 Annex 2 G give further details.

(2) In determining its prudential sub-category, an applicant may need to consider whether it falls under the scope of a Single Market Directive or the E-Money Directive, for example whether it will be an investment firm as defined in the ISD.

(3) However, an applicant which falls outside the Single Market Directive or the E-Money Directive will not have a right to passport into the EEA and will be subject to separate prudential requirements.

27/04/2002

AUTH 3.8.6

An applicant in the prudential category of bank or insurer should note that the FSA will give it individual guidance on its likely capital requirements: for example, the individual capital ratios for a bank (see IPRU(BANK) CO 4.1.1 (Individual capital ratios)) or the capital resources requirements of an insurer (see PRU 2.1)) during pre-application discussions (see AUTH 3.9.2 G).

31/12/2004

AUTH 3.8.7

Applicants should note that the prudential category and, where relevant, sub-category, not only determines which provisions in the relevant IPRU or PRU will apply, but which provisions on auditors, financial reporting and transaction reporting in SUP will apply.

31/01/2005

AUTH 3.8.8

An applicant that is a member of a group should note that the FSA may take into consideration the impact of other members of the group on the adequacy of its resources (see the relevant sections of PRU or IPRU).

31/12/2004

AUTH 3.9

Procedures in relation to applications for Part IV permission

01/12/2004

Pre-application meetings

AUTH 3.9.1

All applicants for Part IV permission are encouraged to contact the Authorisation and Approvals Department of the FSA to discuss their application before they send in an application form.

01/07/2003

AUTH 3.9.2

(1) If an applicant's plans are complex (for example, including insurance business or accepting deposits and some designated investment business), high risk or innovative (for example, raising new or unusual issues), the FSA will expect the applicant to discuss its plans with them before submitting an application for Part IV permission.

(2) FSA staff will be available to attend a pre-application meeting with such applicants to discuss the application and any issues or problem areas. If appropriate, for example in the case of an application to carry on insurance business or accepting deposits, FSA staff may, by agreement with the applicant discuss aspects of the application during its preparation, for example, the applicant's draft business plan or other relevant documentation. If relevant, FSA staff will discuss likely capital and, where relevant, liquidity ratios with the applicant to enable the applicant to prepare capital adequacy projections.

(3) Applicants should note that:

(a) a pre-application meeting is not a substitute for an applicant obtaining any professional assistance;

(b) a pre-application meeting is to give informal assistance to applicants (as set out in AUTH 3.9.2 G). A meeting might, for example, be used to help an applicant prepare its formal application for Part IV permission and to identify and address issues or problem areas at an early stage before time and costs are incurred in preparing a complete application. This assistance is not part of the application process outlined in the rest of AUTH 3.9.

(c) the submission of an incomplete application will start the formal application process, including the time limits for determination of incomplete applications (see AUTH 3.9.31 G) and the requirements for a fee (see AUTH 3.9.4 G (1)).

03/09/2001

The application for permission

AUTH 3.9.3

(1) An applicant for Part IV permission, except in so far as the FSA may direct in an individual case, must apply in writing in the manner directed, and with the information required, in the application pack provided by the FSA.

(2) The application for Part IV permission must be:

(a) given to a member of, or addressed for the attention of, the Authorisation and Approvals Department; and

(b) delivered to the FSA by one of the methods in (3).

(3) The application may be delivered by:

(a) post to the address in (4);

(b) leaving the application at the address in (4) and obtaining a time-stamped receipt; or

(4) The address for applications is: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.

(5) Until the application has been determined, an applicant which submits an application for Part IV permission must inform the FSA of any significant change to the information given in the application immediately it becomes aware of the change.

01/07/2003

AUTH 3.9.4

(1) An application should be accompanied by the application fee set by the FSA (see AUTH 4 (Authorisation Fees)).

(2) The application pack and accompanying guidance notes are available on www.fsa.gov.uk or from the Authorisation and Approvals Department of the FSA. To contact the Authorisation and Approvals Department:

(a) telephone on 020 7066 3954; or

(b) write to the Authorisation and Approvals Department at the address in AUTH 3.9.3 D (4); or

01/07/2003

AUTH 3.9.5

The application pack is made up of several sections and the ones which need to be completed will depend on the category of applicant. For example, the insurance sections will contain different application questions according to the type of applicant (for example, matters needing to be addressed vary for overseas applicants and Swiss general insurance companies). In addition, applicants will need to submit forms for approved persons (see AUTH 6 (Approved persons)) and controllers as part of the pack (see AUTH 3.9.24 G).

03/09/2001

Information to be supplied to the FSA

AUTH 3.9.6

Under section 51(1)(b) of the Act, an application for Part IV permission must give an address in the United Kingdom for service of any document required by the Act.

03/09/2001

AUTH 3.9.7

The application forms ask for general information about the applicant, its intended activities and any proposed or current unregulated activities. They also ask for details of how the applicant plans to comply with the FSA's regulatory obligations relating to the activities it seeks Part IV permission to carry on. The forms contain notes on completion and details of how the FSA can help.

03/09/2001

AUTH 3.9.8

In addition to the information in the application pack, the FSA may require the applicant to provide such further information as it reasonably considers necessary to enable it to determine the application, and to verify it as the FSA directs. This may include the provision of documents. The FSA may request such additional information during a pre-application meeting or after reviewing a submitted application pack. Should the FSA require further information on reviewing an application pack, the applicant will be advised in writing as early as possible.

03/09/2001

AUTH 3.9.9

The FSA will assess the applicant having regard to the regulatory objectives and will, therefore, be proportional in its procedures, including in the information which it seeks from applicants (see AUTH 1.4.4 G). Thus the nature of the information and documents requested by the FSA, either in the application pack or subsequently, will be proportional to the nature of the business the applicant intends to carry on. For example, a small company seeking to carry on low risk business will be required to submit a business plan and other information relevant to its size and the scope of the proposed business. Information which is requested from applicants as part of the application pack includes but is not limited to the following.

(1) A business plan which describes the regulated activities and any unregulated activities (except where not permitted, for example see AUTH 3.12.2 G) which the applicant proposes to carry on, the management and organisational structure of the applicant and details of any proposed outsourcing arrangements. The level of detail required in the business plan will be appropriate to the risks to consumers arising from the proposed regulated and unregulated activities. For an applicant seeking to carry on insurance business, the business plan should include a scheme of operations in accordance with SUP App 2 (Insurer and friendly societies: schemes of operation).

(2) Appropriately analysed financial budget and projections which demonstrate that the applicant expects to comply with the relevant financial resources requirements appropriate to the applicant's prudential category (and in some cases sub-category).

(3) Details of systems to be used (which do not have to be in place at the time of initial application), compliance procedures and documentation.

(4) Details of the individuals to be involved in running the proposed business (such as directors, partners and members of the governing body, all of whom will be performing controlled functions) and any connected persons (see AUTH 3.9.23 G). AUTH 6 gives guidance on the approved person regime and the procedures for approval.

03/09/2001

AUTH 3.9.10

(1) The application pack should be accompanied by such other information as the applicant reasonably considers the FSA should be aware of for the purposes of determining the application. Any relevant supporting documentation should also be enclosed. The guidance notes to the application pack give further details about information to be provided by applicants, to enable them to answer the questions.

(2) In certain circumstances, the interests of the customers of an applicant would be significantly affected by the death or incapacity of an individual within the applicant. If this is the case, the applicant will be required to provide information on its arrangements to protect the interests of customers in that event. Examples include arrangements to enable urgent transactions to be carried out and unfinished transactions to be completed. The information should include the name and address, and such other details as the FSA may reasonably require, of an authorised person with whom arrangements have been made for the protection of customers. The guidance notes to the application pack give further details.

03/09/2001

AUTH 3.9.11

The application forms also require a statement from one or more members of the applicant's governing body confirming, to the best of their knowledge, the completeness and accuracy of information supplied.

03/09/2001

AUTH 3.9.12

Applicants should be aware that there may be a delay in processing applications if the information given to the FSA is inaccurate or incomplete; for example, if the business plan for an applicant does not describe in adequate detail the regulated activities for which the applicant seeks Part IV permission. Applicants should discuss any problems with the Enquiries and Applications Department (Applications team) before submitting the application or, if necessary, consider seeking appropriate professional advice.

01/07/2003

AUTH 3.9.13

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

03/09/2001

AUTH 3.9.14

While applicants will often wish to discuss applications with the Enquiries and Applications Department (Applications team) during the application process; similarly, the FSA will often need to discuss and clarify information that has been submitted within the application pack. The exchange of information during the application process is viewed as important by the FSA, since the final decision about an application needs to be based on as complete a picture of the application as possible.

01/07/2003

AUTH 3.9.15

In addition, in considering the application, the FSA may:

(1) carry out any enquiries which it considers appropriate, for example, discussions with other regulators or exchanges;

(2) ask the applicant, or any specified representative of the applicant, to attend meetings at the FSA to give further information and explain any matter the FSA considers relevant to the application;

(3) require any information given by the applicant to be verified in such a way as the FSA may specify (for example, see AUTH 3.9.16 G);

(4) take into account any information which it considers appropriate in relation to the application, for example any unregulated activities which the applicant carries on or proposes to carry on;

(5) visit the premises which the applicant intends to use as its place of business.

03/09/2001

Reports from third parties

AUTH 3.9.16

Under section 51(6) of the Act, the FSA may require the applicant to verify information provided in such a way as the FSA directs. Thus, as part of the application, the FSA may require the applicant to provide, at its own expense, a report by an auditor, reporting accountant, actuary or other qualified person approved by the FSA. The report may be on such aspects of the information provided, or to be provided, by the applicant as the FSA may specify.

03/09/2001

AUTH 3.9.17

Applicants seeking to carry on long-term insurance business are also required to provide a certificate from an actuary confirming the appropriateness of the projections for the long-term insurance business and, in particular, the adequacy of premium rates and technical provisions and margin of solvency and how quickly capital strains from effecting new business will be overcome.

03/09/2001

AUTH 3.9.18

If an applicant appoints a reporting accountant other than its own auditor to report on an application for Part IV permission, the applicant is directed to take reasonable steps to ensure that the reporting accountant satisfies the qualification and independence tests, as relevant, in SUP 3.4 (Auditor's qualifications) and SUP 3.5 (Auditor's independence).

03/09/2001

AUTH 3.9.19

If an applicant appoints an actuary, to report on an application for Part IV permission, the applicant is directed to take reasonable steps to ensure that the actuary satisfies the qualification tests in SUP 4.3.8 G (actuaries' qualifications).

31/12/2004

AUTH 3.9.20

Occasionally, the FSA may identify a need for an independent report on specific areas of an application; for example, a report from the auditors of an applicant seeking to carry on regulated activities which include accepting deposits where the applicant's business plan is innovative, complex or raises concerns as a result of matrix management. Such reports will usually be discussed and agreed with the applicant as part of the pre-application meeting (see AUTH 3.9.2 G).

03/09/2001

Applications to other bodies

AUTH 3.9.21

In addition to applying to the FSA for Part IV permission:

(1) an applicant which will need permission from the Council of the Society of Lloyd's to conduct business as underwriting agents should apply for that permission at the same time as its application to the FSA; and

(2) an applicant should also determine whether it needs to apply to any other bodies, for example, to any exchanges or to other bodies for membership, the Office of Fair Trading for a consumer credit licence or to court for licences such as a gaming licence; the applicant should check when any such applications should be made.

03/09/2001

Connected persons

AUTH 3.9.22

(1) Under section 49 of the Act (Persons connected with an application), in considering an application for Part IV permission, the FSA may have regard to any person appearing to it to be, or likely to be, in a relationship with the applicant which is relevant.

(1A) The Financial Groups Directive Regulations make special provision where the FSA is exercising its functions under Part IV of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary provision. Broadly, where the FSA, in the course of carrying on supplementary supervision, is considering varying the Part IV permission of a person who is a member of a group which is a financial conglomerate, the consultation provision in section 49(2) 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.

(2) A person in, or likely to be in, a relationship with an applicant which is relevant is known as a connected person. The FSA will assess whether a particular relationship is relevant in the light of the particular circumstances of each application. Examples of persons who might be considered connected with an applicant include, but are not limited to:

(a) a controller of the applicant; or

(b) an applicant's directors, partners or members of its governing body; or

(d) a person with whom the applicant intends to enter into a material outsourcing agreement; or

(e) any other person who may exert influence on the applicant which might pose a risk to the applicant satisfying or continuing to satisfy the threshold conditions.

03/09/2001

AUTH 3.9.23

As a result, as part of the application process, the FSA may request information about any other person who the FSA determines is in a relationship with an applicant which is relevant. The FSA may request information from the applicant on persons who are connected persons or are likely to become connected persons under any proposed transactions or relationships.

03/09/2001

AUTH 3.9.24

(1) As part of the application process, the FSA may request information on an applicant's controllers, directors, partners or members of its governing body. The FSA will assess whether:

(a) the applicant's controller is a fit and proper person to have control over the firm;

(b) the applicant's directors, partners and members of the governing body who will be performing controlled functions are fit and proper persons to be granted approval under the approved persons regime (see AUTH 6).

(2) An applicant (other than a Swiss general insurance company seeking to establish an agency or branch in the United Kingdom or an EEA firm, or a Treaty firmin the circumstances set out in AUTH 3.1.1 G (2) and in AUTH 3.1.1 G (3)) will be required to provide the following information about its controllers:

(a) in the case of a controller who is not an authorised person, the information required in Controllers Form A SUP 11 Annex 4) and one or more of Controllers Form B SUP 11 Annex 5) in accordance with SUP 11.3.8 D and SUP 11.3.9 D; or

(b) in all other cases, the information required in Controllers Form A, sections 1, 5 and 6 SUP 11 Annex 4).

03/09/2001

Commencing regulated activities

AUTH 3.9.25

(1) If Part IV permission is given, the FSA will expect a firm to commence its regulated activity in line with its current business plan. Applicants should take this into consideration when determining when to make an application to the FSA.

(2) Applicants should be aware that the FSA may exercise its own-initiative powers to vary or cancel a Part IV permission once granted if they do not:

(a) commence a regulated activity for which they have Part IV permission within a period of at least twelve months from the date the permission was given; or

(b) carry on a regulated activity for which they have Part IV permission for a period of at least twelve months (irrespective of the date of the grant of permission).

(3) If FSA considers that it may be appropriate to exercise its own-initiative powers to vary or cancel a firm's Part IV permission, FSA staff will discuss the proposed action with the firm and ascertain the firm's reasons for not commencing or carrying on the regulated activities concerned. Applicants are advised to discuss any problems about commencing a regulated activity with the Enquiries and Applications Department (Applications team).

01/07/2003

When will the FSA grant an application for Part IV permission?

AUTH 3.9.26

(1) The FSA will assess the information provided in the application process. As noted in AUTH 3.8.1 G, the FSA is required, by section 41(2) of the Act, to ensure that an applicant will satisfy, and continue to satisfy, the threshold conditions in relation to all the regulated activities for which the applicant is seeking Part IV permission. However, section 41(3) of the Act states that the FSA's duty under section 41(2) 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 applicant, to secure the consumer protection objective.

(2) As part of the assessment of whether an applicant satisfies and will continue to satisfy the threshold conditions, the FSA will consider whether the applicant is ready, willing and organised to comply with the regulatory requirements to which it will be subject if it is granted Part IV permission to carry on the regulated activities referred to in its application.

(3) The FSA will give Part IV permission in respect of some categories of regulated activity only if the applicant can meet specific requirements. For example, Part IV permission including advising on pension transfers and pension opt-outs and will only be granted to applicants that will have persons (or individuals) qualified to advise in this area.

03/09/2001

AUTH 3.9.27

As noted in AUTH 3.6 and AUTH 3.7, the FSA may decide to grant an application for Part IV permission including appropriate limitations or requirements. Where the FSA imposes limitationsor requirements on a Part IV permission that were not applied for by the applicant, their precise nature will depend on the circumstances of each application. During the application process, the FSA will discuss with applicants any limitations or requirements it is considering imposing but which they have not applied for. The applicant may ask the FSA to reconsider its preliminary views on any such limitations or requirements in the course of the application process.

03/09/2001

AUTH 3.9.28

In some cases, the FSA would be minded to grant an application for Part IV permission as long as certain conditions are fulfilled. As an example, the FSA may advise an applicant that it is minded to grant its application subject to the applicant providing proof that its share capital or its required financial resources are in place or that it has satisfied an outstanding element of its business plan. Part IV permission will not, however, be given until the FSA is content that its conditions have been satisfied by the applicant and, as a result, the applicant satisfies the threshold conditions. Applicants are welcome to discuss with the Enquiries and Applications Department (Applications team) the circumstances in which the FSA may be prepared to determine an application subject to such conditions being met.

01/07/2003

Other powers relating to the scope of Part IV permission

AUTH 3.9.29

(1) In determining an application for Part IV permission, the FSA may:

(a) specify a narrower or wider description of regulated activity than that for which Part IV permission was originally sought; or

(b) give Part IV permission for a regulated activity which was not originally applied for.

(2) Occasionally, the FSA expects to use its power to give Part IV permission for an applicant to carry on a regulated activity for which it did not originally apply. This might happen when, as a result of correspondence and discussion with an applicant, it becomes clear that it needs Part IV permission to carry on different categories of activities or activities relating to different categories of specified investments than those it had originally applied for.

(3) The Insurance Directives set out minimum information requirements for an application for authorisation which include information on the specified investments the applicant proposes to deal in. If these requirements are not met, the FSA may not be able to use the power described in AUTH 3.9.29 G (1)(b).

03/09/2001

How long will an application take?

AUTH 3.9.30

(1) Under Part IV of the Act, the FSA has six months from the date of receipt of a completed application to make its determination.

(2) When the FSA receives an application which is incomplete, that is, when information or documents required to be submitted as part of the application are not provided, Part IV of the Act requires the FSA to determine that incomplete application, in any event, within twelve months of the initial receipt of the application.

(3) Within these time limits, however, the length of the process will relate directly to the complexity of the application. The FSA publishes standard response times on its web site at www.fsa.gov.uk, setting out how long the application process is expected to take in practice, and, from time to time, the FSA publishes its performance against these times.

(4) Unless it considers it is appropriate to do so, the FSA will not grant an application for Part IV permission until it has had the opportunity to review all the information and documents which it has requested in connection with the application (whether as part of the application or at a later date).

03/09/2001

How will FSA make the decision?

AUTH 3.9.31

AUTH 8 (Determining applications) gives an overview of how the FSA will determine an application. The FSA's decision making procedures are in DEC and include the procedures the FSA will follow if it proposes to refuse an application for Part IV permission or grant an application subject to limitations or requirements not applied for.

03/09/2001

Withdrawal of applications

AUTH 3.9.32

An applicant may withdraw its application at any time before the application is granted or refused by giving written notice to the FSA. This written notice should be signed by a person with appropriate authority to bind the applicant.

03/09/2001

Authorised status

AUTH 3.9.33

(1) The Act states that an applicant which does not qualify for automatic authorisation by, or under, the Act, becomes authorised automatically if the FSA grants it Part IV permission.

(2) When the FSA grants an application for Part IV permission, it will inform the applicant by written notice, stating the date on which the permission takes effect.

03/09/2001

AUTH 3.10

The FSA register

01/12/2004

AUTH 3.10.1

(1) Section 347 of the Act (The record of authorised persons etc) requires the FSA to maintain a public record containing certain details about all firms, including information as to the services they hold themselves out as able to provide.

(2) When the FSA grants an application for Part IV permission, it will update the FSA Register with a general description of the regulated activities the firm has permission to carry on.

(3) The FSA register can be accessed at www.fsa.gov.uk.

03/09/2001

AUTH 3.11

Specific obligations: partnerships or unincorporated associations

01/12/2004

AUTH 3.11.1

Section 32 of the Act (Partnerships and unincorporated associations) treats all partnerships and unincorporated associations as if they were legal persons for the purposes of the grant of Part IV permission (Scottish partnerships already have the status of a legal person as have limited liability partnerships). So, where a partnership or unincorporated association proposes to carry on a regulated activity, the application for Part IV permission should be made in the name of the partnership or unincorporated association. However, a partnership should consider by whom the regulated activity will be carried on. If a partner carries on the regulated activity independently from the partnership, and not in his capacity as a partner, that person would need authorisation in his own right. The person may, for example, manage the assets of the partnership in his own name rather than in the name of the partnership. In such cases, the authorisation of the partnership itself would not, or may not, be necessary.

01/07/2003

AUTH 3.11.2

(1) Once a partnership or an unincorporated association is authorised by the FSA, then under section 32 of the Act:

(a) it is authorised to carry on the regulated activities concerned in the name of the partnership or unincorporated association; and

(b) its authorisation is not affected by any change in its membership as long as the substantive continuity test described in (2) is met.

(2) If a partnership or unincorporated association is dissolved, its authorisation continues to have effect in relation to any partnership or unincorporated association which succeeds to the business of the dissolved partnership or unincorporated association, as long as:

(a) the members of the resulting partnership or unincorporated association are substantially the same as those of the dissolved partnership or unincorporated association; and

(b) the succession is to the whole or substantially the whole of the business of the dissolved partnership or unincorporated association.

03/09/2001

AUTH 3.11.3

The treatment of partnerships described in AUTH 3.11.1 G and AUTH 3.11.2 G does not apply to a partnership which is a body corporate, that is, a limited liability partnership or any other partnership which is a body corporate and is constituted under the law of any place outside the United Kingdom.

03/09/2001

AUTH 3.11.4

Further guidance on the specific issues that arise for applicants that are limited partnerships under the Limited Partnerships Act 1907 or limited liability partnerships is in AUTH 3.22 (Specific issues: applicants that are limited partnerships under the Limited Partnerships Act 1907) and AUTH 3.23 (Specific issues: applicants that are limited liability partnerships).

01/07/2003

AUTH 3.12

Specific obligations: applicants seeking to carry on insurance business

01/12/2004

AUTH 3.12.1

Under threshold condition 1 (Legal status) (see COND) and additional restrictions imposed under the Insurance Directives, an applicant seeking Part IV permission to carry on the regulated activities of effecting or carrying out contracts of insurance must be an incorporated company other than a limited liability partnership, a registered friendly society or a registered industrial and provident society.

15/11/2001

AUTH 3.12.2

An applicant seeking to carry on insurance business should note the restrictions in PRU 7.6.13 R which relate to the carrying on of other commercial business.

31/12/2004

AUTH 3.12.3

(1) As a result of these restrictions, the FSA will grant an applicant seeking to carry on insurance business Part IV permission for insurance business, and any other regulated activities, only to the extent they are not restricted under PRU.

(2) For example, it may be appropriate for an applicant to apply for the regulated activity of accepting deposits. Also, an applicant seeking to carry on long-term insurance business may need to apply for certain designated investment business activities arising directly from the long-term insurance business it proposes to carry on. If the FSA gives an applicant Part IV permission for insurance business and other regulated activities, these other regulated activities will be subject to limitations, as appropriate, so as to comply with PRU 7.6.13 R.

31/12/2004

AUTH 3.12.4

Applicants should also be aware that the FSA will not grant Part IV permission to carry on both long-term and general insurance business, unless:

(1) the applicant's business will be restricted to reinsurance; or

(2) the applicant's general insurance business will be restricted to accident or sickness contracts (or both).

03/09/2001

Friendly societies and reinsurance

AUTH 3.12.5

Friendly societies are subject to the conditions and restrictions on reinsurance business under the Friendly Societies Act 1974 (registered friendly societies) and the Friendly Societies Act 1992 (incorporated friendly societies). A registered friendly society or an incorporated friendly society may only effect and carry out contracts of reinsurance if the conditions and restrictions set out in the relevant Friendly Societies Act are met. These include that:

(1) the approval of the actuary of the friendly society (A) is required;

(2) the friendly society is carrying on (and continues to carry on) direct insurance business of the same class; and

(3) the reinsurance is provided only to another friendly society (B).

The FSA will, therefore, not grant a friendly society a Part IV permission to carry on pure reinsurance business.

03/09/2001

Contracts written on an ancillary and supplementary basis

AUTH 3.12.6

Part IV permission to effect or carry out certain classes of contracts of insurance includes permission to effect or carry out certain classes of general insurance contracts on an ancillary or supplementary basis. In applying for Part IV permission to carry on insurance business, applicants will need to determine the specified investments for which Part IV permission 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. If they do, there is no need to apply for Part IV permission to effect or carry out those contracts (that is, the contracts which are eligible to be effected or carried out on an ancillary or supplementary basis) and an applicant should not do so.

03/09/2001

AUTH 3.12.7

Part IV permission to effect or carry out life and annuity contracts includes permission to effect or carry out accident or sickness contracts (or both) on a supplementary basis (see article 1(1)(c) of the First Life Directive).

03/09/2001

AUTH 3.12.8

Part IV permission to effect or carry out any class of general insurance contract includes permission to effect or carry out any other class of general insurance contract on an ancillary basis other than credit, suretyship or, except as provided in AUTH 3.12.9 G, legal expenses insurance (see part C of the Annex to the First Non-Life Directive). However, a friendly society may not effect or carry out any general insurance contracts, whether or not on an ancillary basis, other than those permitted under the Friendly Societies Act 1992.

03/09/2001

AUTH 3.12.9

Part IV permission to effect or carry out any class of general insurance contract includes permission to effect or carry out legal expenses contracts when AUTH 3.12.10 G is met and:

(1) if the main risk relates solely to the provision of assistance provided for persons who fall into difficulties while travelling, while away from home or while away from their permanent residence; or

(2) where it concerns disputes or risks arising out of, or in connection with, the use of sea-going vessels.

03/09/2001

AUTH 3.12.10

A contract of insurance will qualify to be effected or carried out on an ancillary basis if:

(1) the business in question is to be the subject of the same contract as the principal business and concerns the same object; and

(2) the risks covered are connected to the principal risk.

03/09/2001

AUTH 3.12.11

In determining the classes of specified investments for which Part IV permission is required, and those which may qualify to be written on an ancillary or supplementary basis, an applicant may need to take professional advice and may also wish to discuss this with a member of the Enquiries and Applications Department (Applications team).

01/07/2003

AUTH 3.12.12

The application for Part IV permission will need to provide information about the insurance business to be carried on by the applicant in the classes of specified investments for which Part IV permission is requested and also that qualifying to be carried on on an ancillary or supplementary basis.

03/09/2001

Reporting requirements

AUTH 3.12.13

An applicant for Part IV permission which includes insurance business should be aware that specific reporting requirements apply during its first three years of operation (see SUP App 2)

03/09/2001

Applicants seeking to carry on insurance business with a head office outside the United Kingdom (other than EEA firms or Treaty firms)

AUTH 3.12.14

In addition to AUTH 3.18, where an applicant for Part IV permission which has its head office outside the United Kingdom seeks to carry on insurance business in the United Kingdom, the following guidance is of relevance.

03/09/2001

AUTH 3.12.15

An applicant which has its head office outside the United Kingdom (other than an EEA firm, Treaty firm or a Swiss general insurance company) should note the requirement in IPRU(INS) 8.3R to appoint a chief executive (that is, the person who alone or jointly with one or more others, is responsible for the conduct of its business in the United Kingdom) and an authorised UK representative (see COND 2.6 (Additional Conditions) for the additional conditions which apply to non-EEA insurers and SUP 15.4 (Notified persons) for rules on notifications by overseas firms).

31/12/2004

AUTH 3.12.16

A Swiss general insurance company seeking to establish a branch in the United Kingdom should note the requirement referred to in COND 2.6.1 D to appoint an authorised UK representative for the United Kingdom.

31/12/2004

AUTH 3.12.17

An applicant with its head office outside the United Kingdom (other than an EEA firm or a Treaty firm) seeking permission to carry on direct or both direct and reinsurance business in the United Kingdom should note that specific prudential requirements apply PRU).

31/12/2004

AUTH 3.13

Specific obligations: applicants seeking to carry on the regulated activities of accepting deposits or issuing electronic money

01/12/2004

AUTH 3.13.1

Under threshold condition 1 (Legal status), an applicant who seeks to carry on the regulated activities of accepting deposits or issuing electronic money must be either a body corporate or a partnership (see COND).

27/04/2002

AUTH 3.14

Specific obligations: applicants seeking to hold or control client money

01/12/2004

AUTH 3.14.1

Unlike safeguarding and administering assets, holding or controlling client money is not a regulated activity in the Regulated Activities Order. As in AUTH 3.7.3 G, the FSA controls this activity by using requirements on a firm's Part IV permission.

03/09/2001

AUTH 3.14.2

(1) An applicant seeking to hold or control client money must complete the relevant sections of the application forms for Part IV permission. The applicant must be able to demonstrate to the FSA that it can satisfy, and continue to satisfy, the threshold conditions (see AUTH 3.8.1 G to AUTH 3.8.3 G) should the application for Part IV permission be granted. This will include demonstrating that it is ready, willing and organised to comply with the relevant requirements in CASS 4 (Client money).

(2) If an applicant is not able to demonstrate to the FSA that it can satisfy, and continue to satisfy, the threshold conditions to hold or control client money, but its application for Part IV permission is granted, the FSA will impose a requirement on the permission to the effect that the firm will not be able to hold, or control, client money.

03/09/2001

AUTH 3.15

Specific obligations: applicants seeking to manage PEPS or ISAS

01/12/2004

AUTH 3.15.1

Management of PEPs and ISAs, in themselves, are not regulated activities in the Regulated Activities Order although the activities carried on by a firm in relation to PEP and ISA management constitute regulated activities. As a result, where the firm has Part IV permission which includes the regulated activities which would otherwise permit the firm to manage a PEP or an ISA, the FSA controls participation in these activities by using requirements on the firm's permission (see AUTH 3.7.3 G).

03/09/2001

AUTH 3.15.2

(1) An applicant seeking to manage PEPs or ISAs must complete the relevant sections of the application forms for Part IV permission, specifying the types of ISA and their constituent components which it intends to manage. An applicant should check that the regulated activities for which it is seeking permission will permit it to carry on the proposed activities in respect of the component concerned (for example, one of the sub categories of safeguarding and administering assets of the component includes equities) and:

(a) consider whether it needs to hold or control client money (see AUTH 3.14) if it has not applied for permission including accepting deposits; or

(b) have plans to put in place contractual provisions under which it will receive client money as agent for an approved bank so that any loss in relation to the ISA cash component will be compensated for by that approved bank or the compensation scheme.

(2) Cash ISAs raise particular issues. Applicants may find it helpful to seek an independent legal opinion on their proposals before they proceed and may wish to discuss their proposals with the FSA.

03/09/2001

AUTH 3.15.3

Applicants should also be aware that a firm wishing to act as an ISA or PEP manager will have to obtain approval from the Inland Revenue as an account manager under the Inland Revenue regulations.

03/09/2001

AUTH 3.15.4

To manage ISAs or PEPs, an applicant must be able to demonstrate to the FSA that it can satisfy and continue to satisfy the threshold conditions should the application for Part IV permission be granted. This will include demonstrating that it is ready, willing and organised to comply with the relevant regulatory and Inland Revenue requirements.

03/09/2001

AUTH 3.15.5

If an applicant is not able to demonstrate to the FSA that it is able to comply with those obligation, the FSA will impose a requirement on the firm's permission to the effect that the firm will not be able to manage PEPs or ISAs.

03/09/2001

AUTH 3.16

Specific obligations: applicants seeking to establish, operate or wind up a stakeholder pension scheme

01/12/2004

AUTH 3.16.1

Applicants should be aware that, in addition to requiring permission from the FSA to establish, operate or wind up a stakeholder pension scheme, a firm will need to obtain exempt approval of the stakeholder pension scheme from the Inland Revenue and to register the scheme with the Occupational Pensions Regulatory Authority.

03/09/2001

AUTH 3.16.2

Establishment and operation of a stakeholder pension scheme may involve heavy investment in new systems or changes to existing systems which, in view of the limit on charges, might not be recovered for some time. So, the FSA will normally require an applicant wishing to establish, operate or wind up a stakeholder pension scheme to provide financial projections for the whole period up to the point at which the new business is expected to break even. The applicant must also be able to demonstrate to the FSA that it is ready, willing and organised to comply with the requirements (including those in COB 5, COB 6 and TC 2) applicable to operation of a stakeholder pension scheme.

03/09/2001

AUTH 3.17

Specific obligations: applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme

01/12/2004

AUTH 3.17.1

An applicant seeking to establish a collective investment scheme should consult COLL and CIS for detailed requirements and guidance. Applicants should note that until 12 February 2007 they may elect to comply with COLL or CIS, although qualified investor schemes have to comply with COLL.

01/04/2004

AUTH 3.17.2

Applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme should note the rules in COLL 6.3.9 (Plan registers) and CIS 6.5 (Plan registers), which implements article 6 of the UCITS Directive and restrict the activities of a manager of an authorised unit trust which is a UCITS scheme.

01/04/2004

AUTH 3.17.3

An applicant which wishes to act as a UCITS management company should note the restriction on the activities it may engage in (see COLL 6.9.9 Restrictions of business of UCITS management companies) and CIS 16.5 (Restrictions of business of UCITS management companies).

01/04/2004

AUTH 3.17.4

A firm which is subject to the rule in COLL 6.9.9 or CIS 16.5 may, in addition, carry on 'connected activities' referred to in COLL 6.6.11 and CIS 16.5, which include management of PEPs, ISAs and stakeholder pension schemes, as long as they are dedicated to investments in unit trusts and OEICs for which the firm acts as manager or ACD. The Enquiries and Applications Department (Applications team) would be pleased to discuss any other activities which potential applicants consider may be connected.

01/04/2004

AUTH 3.18

Specific obligations: additional considerations for applicants (other than EEA firms or Treaty firms) with a head office in a country of territory outside the United Kingdom seeking to establish a branch in the United Kingdom

01/12/2004

AUTH 3.18.1

This section applies to applicants identified in AUTH 3.1.1 G (1) (excluding a Swiss general insurance company). The exercise of EEA rights or Treaty rights by EEA firms or Treaty firms is dealt with separately in AUTH 5.

03/09/2001

AUTH 3.18.2

The FSA must always assess whether an applicant for Part IV permission as a whole will satisfy, and continue to satisfy, the threshold conditions. This applies even though an applicant for Part IV permission may have its head office outside the United Kingdom. In other words, the FSA will not just assess the circumstances of any proposed branch in the United Kingdom. In making this assessment of the applicant for Part IV permission as a whole, the FSA will take into account all relevant matters, including the extent to which the applicant is regulated in its home state. The FSA would seek to liaise with any home state regulator and would take into account information from it with respect to, for example, the adequacy of the applicant's resources and the applicant's suitability, having regard to the need to ensure that the applicant's affairs are conducted soundly and prudently. Information with respect to the conduct of the applicant's affairs would extend in particular to the adequacy of the internal control systems under SYSC.

03/09/2001

AUTH 3.18.3

The FSA's regulatory requirements, including PRU and IPRU, will apply to a firm in full and worldwide, unless otherwise stated. Where necessary, waivers, limitations and requirements will be used to ensure that appropriate prudential requirements apply to the branch, taking into account the home state supervisory arrangements and the particular circumstances of an applicant.

31/12/2004

AUTH 3.18.4

If the FSA considers that the applicant may be unable to satisfy the threshold conditions and that this cannot be addressed by the use of limitations and requirements, the FSA would have to conclude that a branch presence in the United Kingdom would be inappropriate. In such circumstances, the applicant may wish to consider forming a UK incorporated subsidiary as an alternative method of obtaining a presence in the United Kingdom.

03/09/2001

AUTH 3.19

Specific obligations: applications in connection with group-restructuring

01/12/2004

AUTH 3.19.1

Where an application for Part IV permission is to be made as part of the restructuring of a group which includes, or will include, one or more firms, the group's plans should be discussed with the supervisor or lead supervisor for the group at the FSA. This is particularly important where a group intends to transfer business into a new entity from a firm in its group and then wishes to apply for cancellation of that firm's Part IV permission.

03/09/2001

AUTH 3.19.2

The application for Part IV permission for the new entity should be submitted to the Enquiries and Applications Department (Applications team) with details of the group and any business the group proposes to transfer. Applicants should note that particular requirements apply to transfers of insurance business, or if the business includes accepting deposits.

01/07/2003

AUTH 3.19.3

If applications for Part IV permission and for cancellation of Part IV permission (see SUP 6) have been submitted, then the Enquiries and Applications Department (Applications team) will liaise with the lead supervisor, who will liaise with the group in respect of its applications. Although the group will need to obtain Part IV permission for the new entity first, the FSA will endeavour to process, if possible, the other applications at the same time.

01/07/2003

AUTH 3.19.4

Statutory procedures apply to the transfer of insurance business or banking business (see SUP 18).

03/09/2001

AUTH 3.20

Specific obligations: applicants seeking to establish a branch in, or provide services into, another EEA State

01/12/2004

AUTH 3.20.1

Certain firms (known as UK firms) may establish branches in, or provide cross border services into, other EEA States exercising rights under one of the Single Market Directives (this is often referred to as passporting). A firm may also have rights under the Treaty.

03/09/2001

AUTH 3.20.2

An applicant for Part IV permission that wishes, if the FSA grants the permission, to passport into another EEA State on, or shortly after, being given permission, is advised to contact the Corporate Authorisation department to discuss its plans (see AUTH 3.9.4 G (2) for contact details).

01/07/2003

AUTH 3.20.3

(1) SUP 13 (Exercise of passport rights by UK firms) gives guidance on the procedures to be followed by a UK firm to establish a branch in, or provide cross border services into, another EEA State. SUP 13 Annex 3 contains guidance on the Single Market Directives, including guidance on which firms are entitled to passport.

(2) COLLG 2 and CIS 2.3.4 G gives guidance when an operator of a UCITS wishes to market its scheme in another EEA State.

(3) Firms wishing to exercise rights under the Treaty in another EEA State should seek guidance from the FSA in the first instance.

01/04/2004

AUTH 3.20.4

An applicant may submit a separate notice of intention to passport (see SUP 13.6.4 G and SUP 13.7.3 G) with its application for Part IV permission. The notice of intention will be reviewed with the application for Part IV permission. The FSA is not, however, able to issue a consent notice (see SUP 13.6.10 G), or send a notice of intention (see SUP 13.7.9 G), to the relevant Host State regulators unless or until an applicant is authorised. As a result, an applicant seeking to establish a branch in another EEA State will not be able to satisfy the conditions in the Act for establishing a branch (see SUP 13.6.2 G) until after authorisation.

01/07/2003

AUTH 3.20.5

An applicant should note, however, that the business plans and financial projections and, where relevant, scheme of operations submitted with its application for Part IV permission should reflect any passported activity (and any branches outside the EEA) that the firm plans to commence in the immediate future.

03/09/2001

AUTH 3.21

Treaty firms applying for Part IV Permission

01/12/2004

AUTH 3.21.1

The Treaty establishing the European Community provides firms with rights of establishment, under article 43, and the right to provide services under article 49. These rights can be exercised anywhere in any other State in the EEA.

21/02/2002

AUTH 3.21.2

Treaty firms which do not have, or do not wish to exercise, a treaty right to carry on a regulated activity in the United Kingdom, and which do not have an EEA right to passport in relation to that activity, must seek Part IV permission to do so (see AUTH 5.4.3 G to AUTH 5.3.13 G).

21/02/2002

AUTH 3.21.3

Where such a treaty firm has received Home State authorisationto carry on the regulated activities that it seeks to carry on under the Part IV permission, the FSA will take this into account when considering the application.

21/02/2002

AUTH 3.21.4

These applications will be considered on a case by case basis. Applicants should contact the Enquiries and Applications Department (Applications team) (see AUTH 3.9.4 G (2) for contact details) at an early stage to discuss their plans.

01/07/2003

AUTH 3.22

Specific issues: applicants that are limited partnerships under the Limited Partnerships Act 1907

01/12/2004

AUTH 3.22.1

Limited partnerships are formed under the Limited Partnerships Act 1907, which also governs aspects of their operation. A limited partnership differs from a normal partnership in that not all the partners will be liable for all the debts and obligations of the partnership, though there must be at least one partner (the general partner) who is. The other partners (limited partners) are not permitted to be active in managing the day-to-day business of the limited partnership but may be involved only in its constitutional affairs (see section 6(1) of the Limited Partnerships Act 1907 (Modifications of general law in case of limited partnerships)).

01/07/2003

AUTH 3.22.2

Applications for Part IV permission should be in the name of the partnership (see AUTH 3.11.1 G and sections 32 (Partnerships and unincorporated associations) and 40(1)(c) (Application for permission) of the Act). This permission, if granted, will then cover the business to be carried on. Authorisation of the limited partnership will, in effect, authorise the partners when conducting the business of the partnership. However, if a partner conducts regulated activities separately from the limited partnership, this may trigger a need for the partner to seek authorisation independently. Thus, if the general partner seeks to manage the assets of the limited partnership by conducting business in his name (rather than as a partner in the name of the limited partnership), the general partner will need to be authorised . This is if the activities he carries on amount to managing investments or another regulated activity. In the case of a limited partnership therefore, the authorisation of the partnership itself may not always be appropriate or sufficient. The key question is how and by whom the regulated activities will be carried on. So, the scope of the application will differ depending on which regulated activities the applicant wishes to undertake (see AUTH 3.22.3 G to AUTH 3.22.4 G).

01/07/2003

AUTH 3.22.3

The limited partnership may be set up to invest the funds of the partners, for example, in the way of a venture capital fund. If so, it will usually be a collective investment scheme. The partnership will not require authorisation simply for being a collective investment scheme as this is not a regulated activity. It will also often be the case that the partnership, in investing its assets, will be excluded from the regulated activity of dealing in investments as principal (see AUTH 2.8.4 G (Dealing in investments as principal)). However, it is likely that the general partner will require permission from the FSA to establish, operate or wind up a collective investment scheme (see AUTH 3.17 (Specific obligations: applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme) and COLL and CIS). If the general partner delegates responsibility for operating a limited partnership that is a collective investment scheme to another person on behalf of the partnership, that other person will require authorisation from the FSA (whether or not the general partner also requires authorisation).

01/04/2004

AUTH 3.22.4

Where the limited partnership intends to manage the investments of third parties rather than the capital contributions of the partners, the limited partnership itself may require permission from the FSA. This is because it is likely to be carrying on the regulated activity of managing investments and may be carrying on other regulated activities as well. A typical example of this kind of limited partnership would be a hedge fund scheme.

01/07/2003

AUTH 3.22.5

If the limited partnership is a collective investment scheme, neither the limited partnership itself (if authorised) nor the general partner (if authorised) will be within the scope of the ISD in respect of its management of the scheme assets. So, neither of them will be an ISD investment firm. This is because the ISD specifically excludes from its scope collective investment undertakings and their managers and depositaries. This includes operators who manage both the scheme and its assets. However, where the management of the scheme and the assets are split, the activities of the asset manager will fall under the ISD.

01/07/2003

AUTH 3.23

Specific issues: applicants that are limited liability partnerships

01/12/2004

AUTH 3.23.1

A limited liability partnership is a body corporate incorporated under either the Limited Liability Partnerships Act 2000 or other legislation having the same effect as the Limited Liability Partnerships Act 2000. So, a limited liability partnership is a body corporate and exists as a legal person separate from its members. Any limited liability partnership that wishes to carry on a regulated activity must make its application for Part IV permission in its own name. Consequently, unlike partners in a partnership , the members of the limited liability partnership do not personally become authorised . So, the members do not have permission to conduct regulated activities in their own names. The regulated activities must be carried on by the limited liability partnership itself.

01/07/2003

AUTH 3.23.2

A limited liability partnership has some features of a limited company and some of a partnership. For example, it can have the organisational flexibility of, and is subject to a taxation regime similar to that of, a partnership. However, although the partners of a general partnership are liable personally for the obligations of the partnership, a limited liability partnership (like a limited company) is a separate legal entity that is owned by its members. It is this structure that allows members to protect their personal assets from the liabilities of the body corporate .

01/07/2003

AUTH 3.23.3

The organisational flexibility available to a limited liability partnership means that all of the members can be involved in the day-to-day management and operations of the business. This is so, even though they have limited their liability for the limited liability partnership's obligations. This may be contrasted with the position of limited partners in a limited partnership.

01/07/2003

AUTH 3.23.4

A consequence of the organisational flexibility available to a limited liability partnership is the potential for widely differing organisational structures. This means that the proposed organisational structure for an applicant for Part IV permission will need to be explained fully in the application. This will allow the FSA to give proper consideration, with the applicant, to the way in which the approved persons and financial resource requirements will apply to it. All limited liability partnerships that are making an application for Part IV permission, whether or not they have been formed under the Limited Liability Partnerships Act 2000, will need to supply this information.

01/07/2003

AUTH 3.23.5

Authorised persons wishing to exchange their existing status to that of a limited liability partnership will need to make an application for Part IV permission in the name of the new entity, and will be expected to complete an application pack for Part IV permission. A firm considering changing its existing status should contact the Enquiries and Applications Department (Applications team) (see AUTH 1.9.2 G) at an early stage for advice on what will be required.

01/07/2003

AUTH 3.24

Specific obligations: applicants wishing to operate an ATS

01/12/2004

AUTH 3.24.1

If an applicant who wishes to operate an ATS intends to assume responsibility for the clearing or settlement of transactions effected using the ATS, the applicant should provide sufficient information with its application to demonstrate that it has adequate arrangements in place to ensure efficient clearing or settlement (as the case may be) of the transactions.

01/04/2004

AUTH 3 Annex 1

Application for Part IV Permission

01/12/2004

AUTH 3 Annex 1.1

03/09/2001

AUTH 3 Annex 2

01/12/2004

AUTH 3 Annex 2.1

CHAPTER OF IPRU(INV) THAT REQUIREMENT ON PERMISSION REQUIRES THE FIRM TO COMPLY WITH

FIRM'S PRUDENTIAL CATEGORY

Chapter 3

Securities and futures firm

Chapter 5

Investment management firm

Chapter 10

Securities and futures firm

Chapter 13

Personal investment firm

The table below shows how a firm's main regulated activities determine its prudential category. A firm's 'main regulated activities' in this context are the regulated activities included in the firm's Part IV permission from which the firm derives or is expected to derive the most substantial part of its gross income, including commissions. The aggregate gross income from all of the activities listed against each prudential category should be considered to determine which source is the most substantial.
The gross income is based on the business plan submitted as part of the firm's application for a Part IV permission.

ACTIVITIES FROM WHICH THE MOST SUBSTANTIAL PART OF THE FIRM'S GROSS INCOME, INCLUDING COMMISSIONS, FROM REGULATED ACTIVITIES IS DERIVED

FIRM'S PRUDENTIAL CATEGORY

(i) Managing investments other than for private customers or where the assets managed are primarily derivatives;
(ii) OPS activity;
(iii) acting as the manager or trustee of an AUT;
(iv) acting as the ACD or depositary of an ICVC;
(v) establishing, operating or winding up a collective investment scheme other than an AUT or ICVC; and
(vi) safeguarding and administering investments.

Investment management firm

(i) Advising on investments, or arranging (bringing about) deals in investments in relation to, packaged products; and
(ii) managing investments for private customers.

Personal investment firm

ACTIVITIES FROM WHICH THE MOST SUBSTANTIAL PART OF THE FIRM'S GROSS INCOME, INCLUDING COMMISSIONS, FROM REGULATED ACTIVITIES IS DERIVED

FIRM'S PRUDENTIAL CATEGORY

(i) An activity carried on as a member of an exchange;
(ii) making a market in securities or derivatives;
(iii) corporate finance business;
(iv) dealing, or arranging (bringing about) deals in investments, in securities or derivatives;
(v) the provision of clearing services as a clearing firm;
(vi) managing investments where the assets managed are primarily derivatives; and
(vii) activities relating to spread bets;

Securities and futures firm

27/04/2002

AUTH 3 Annex 3

Determination of an applicant's prudential category

01/12/2004

AUTH 3 Annex 3.1

03/09/2001

AUTH Authorisation (to see AUTH derivations and destinations tables, go to Useful links)

Applications for Part IV permission

Applicationsfor Part IV permission

Application and purpose

Application

Purpose

Introduction

When is Part IV permission required and what does it contain?

Activities

Specified investments

Limitations

Requirements

The threshold conditions and financial resources

The threshold conditions

Financial resources

Procedures in relation to applications for Part IV permission

Pre-application meetings

The application for permission

Information to be supplied to the FSA

Reports from third parties

Applications to other bodies

Connected persons

Commencing regulated activities

When will the FSA grant an application for Part IV permission?

Other powers relating to the scope of Part IV permission

How long will an application take?

How will FSA make the decision?

Withdrawal of applications

Authorised status

The FSA register

Specific obligations: partnerships or unincorporated associations

Specific obligations: applicants seeking to carry on insurance business

Friendly societies and reinsurance

Contracts written on an ancillary and supplementary basis

Reporting requirements

Applicants seeking to carry on insurance business with a head office outside the United Kingdom (other than EEA firms or Treaty firms)

Specific obligations: applicants seeking to carry on the regulated activities of accepting deposits or issuing electronic money

Specific obligations: applicants seeking to hold or control client money

Specific obligations: applicants seeking to manage PEPS or ISAS

Specific obligations: applicants seeking to establish, operate or wind up a stakeholder pension scheme

Specific obligations: applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme

Specific obligations: additional considerations for applicants (other than EEA firms or Treaty firms) with a head office in a country of territory outside the United Kingdom seeking to establish a branch in the United Kingdom

Specific obligations: applications in connection with group-restructuring

Specific obligations: applicants seeking to establish a branch in, or provide services into, another EEA State

Treaty firms applying for Part IV Permission

Specific issues: applicants that are limited partnerships under the Limited Partnerships Act 1907

Specific issues: applicants that are limited liability partnerships

Specific obligations: applicants wishing to operate an ATS

Application for Part IV Permission

Determination of an applicant's prudential category

Applications
for Part IV permission