Introduction

Part

COND Threshold Conditions

Chapter

Introduction

Printed on: 14/12/2024

Rulebook at: 06/11/2008

COND 1

Introduction

COND 1.1

Application

01/12/2004

Who?

COND 1.1.1

COND applies to every firm, except that:

(1) for an incoming EEA firm or an incoming Treaty firm only threshold conditions 1, 3, 4 and 5 apply and only in so far as relevant to:

(a) an application for a top-up permission under Part IV of the Act (that is, permission to carry on regulated activities in addition to those permitted through the incoming firm's authorisation under Schedule 3 (EEA Passport Rights) or 4 (Treaty Rights) to the Act); and
(b) the exercise of the FSA's own-initiative power under section 45 of the Act (Variation etc on the FSA's own initiative) in relation to the top-up permission;

(2) COND also applies to an applicant for Part IV permission;
(3) threshold conditions 3, 4 and 5 do not apply to a Swiss General Insurance Company; and
(4) COND 2.6 (Additional conditions) is only relevant to non-EEA insurers.

03/09/2001

COND 1.1.2

In COND, 'firm' includes an applicant for Part IV permission unless the context otherwise requires.

03/09/2001

What?

COND 1.1.3

COND applies in relation to all of the regulated activities for which a firm has, or will have, permission, except as stated in COND 1.1.1 G (1).

03/09/2001

Where?

COND 1.1.4

COND applies in relation to all of the regulated activities wherever they are carried on, except as stated in COND 1.1.1 G (1).

03/09/2001

COND 1.2

Purpose

01/12/2004

COND 1.2.1

COND gives guidance on the threshold conditions set out in or under Schedule 6 to the Act (Threshold conditions). The threshold conditions represent the minimum conditions which a firm is required to satisfy, and continue to satisfy, in order to be given and to retain Part IV permission.

03/09/2001

Applications for Part IV permission or variation of Part IV permission

COND 1.2.2

(1) Under section 41(2) of the Act (The threshold conditions), in giving or varying a Part IV permission or imposing or varying any requirement, the FSA must ensure that the firm concerned will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which it has or will have permission.
(2) If, however, the applicant for permission is an incoming firm seeking top-up permission, or variation of top-up permission, under Part IV of the Act (Permission to carry on regulated activities), then under paragraphs 6 and 7 of Schedule 6 to the Act, the FSA will have regard only to satisfaction of threshold conditions 1, 3, 4 and 5, as relevant to the regulated activities for which the applicant has, or will have, Part IV permission.

03/09/2001

Exercise of the FSA's own-initiative power

COND 1.2.3

(1) If, among other things, a firm is failing to satisfy any of the threshold conditions, or is likely to fail to do so, section 45 of the Act (Variation etc. on the FSA's own initiative) states that the FSA may exercise its own-initiative power . Use of the FSA's own-initiative power is explained in SUP 7 (Individual requirements), and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms).
(2) If, when exercising its own-initiative power under section 45(1) of the Act, the FSA varies a firm's permission, or imposes or varies a requirement, then, under section 41(1) of the Act, the FSA must ensure that the firm concerned will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which it has or will have permission. However, section 41(2) of the Act states that the duty imposed by section 41(1) of the Act does not prevent the FSA taking such steps as it considers necessary in relation to a particular firm in order to secure its regulatory objective of consumer protection.
(3) The FSA can also exercise its own-initiative power under section 45 of the Act in relation to the top-up permission of an incoming firm. But this is only on the grounds that the incoming firm is failing, or likely to fail, to satisfy threshold conditions 1, 3, 4 or 5 in relation to that permission.

28/08/2007

Approval of acquisitions or increases of control

COND 1.2.4

(1) Under section 186(3) of the Act (Objection to acquisition of control), in deciding whether the approval requirements for a proposed acquisition or increase of control are satisfied, the FSA must have regard, in relation to the control that the acquirer:

(a) has over the firm; or
(b) will have over the firm if the proposal which has been notified to the FSA is carried out;

to its general duty to ensure that the firm will continue to satisfy the threshold conditions.
(2) The FSA must also have regard to the threshold conditions in imposing any conditions on its approval of an acquisition or increase of control (section 185(2) of the Act (Conditions attached to approval)). See SUP 11.7.3 G (Acquisition or increase of control: procedures).

03/09/2001

COND 1.3

General

01/12/2004

An overview of the threshold conditions is given in COND 1 Annex 1 G.

COND 1.3.1

The guidance in COND 2 explains each threshold condition in Part I of Schedule 6 (threshold conditions) to the Act and how the FSA will interpret it in practice. An overview of the threshold conditions is given in COND 1 Annex 1 G. This guidance is not, however, exhaustive and is written in very general terms. A firm will need to have regard to the obligation placed upon the FSA under section 41 (the threshold conditions) of the Act; that is, the FSA must ensure that the firm will satisfy, and continue to satisfy, the threshold conditions in relation to each regulated activity for which it has, or will have, permission.

03/09/2001

COND 1.3.2

(1) The FSA will consider whether a firm satisfies, and will continue to satisfy, the threshold conditions in the context of the size, nature, scale and complexity of the business which the firm carries on or will carry on if the relevant application is granted.
(2) In relation to threshold conditions 4 and 5, the FSA will consider whether a firm is ready, willing and organised to comply, on a continuing basis, with the requirements and standards under the regulatory system which apply to the firm, or will apply to the firm, if it is granted Part IV permission , or a variation of its permission. These matters will also be considered if the FSA is exercising its own-initiative power (see COND 1.2.3 G). Guidance to firms on the implications of this is given under each of those threshold conditions.

03/09/2001

COND 1.3.3

Although the FSA may consider that a matter is relevant to its assessment of a firm, the fact that a matter is disclosed to the FSA , for example in an application, does not necessarily mean that the firm will fail to satisfy the threshold conditions. The FSA will consider each matter in relation to the regulated activities for which the firm has, or will have, permission, having regard to the regulatory objectives set out in section 2 of the Act (The FSA's general duties). A firm should disclose each relevant matter but, if it is appropriate to do so, it is encouraged to discuss it with the FSA . This will enable the FSA to consider fully how material or significant the matter is and how it affects the ability of the firm to satisfy, and continue to satisfy, the threshold conditions (see also COND 2.3.5 G, COND 2.4.4 G (3) and COND 2.5.4 G (3)).

03/09/2001

Statutory quotations

COND 1.3.4

(1) For ease of reference, the threshold conditions in or under Schedule 6 to the Act have been quoted in full in COND 2.
(2) As these provisions impose obligations, they are printed in bold type. The use of bold type is not intended to indicate that these quotations are rules made by the FSA .
(3) Where words have been substituted for the text of these provisions the substitutions are enclosed in square brackets ([ ]). However, none of the changes made by the FSA in these quotations for the purpose of the text in COND can supersede or alter the meaning of the statutory provision concerned.

03/09/2001

COND 1 Annex 1

Introduction

01/12/2004

19/01/2003

COND 1 Annex 2

Overview of the threshold conditions (COND 1.3.1 G) applicable to Non-EEA Insurers

01/12/2004

03/09/2001