ENF 4
Intervention against incoming firms
ENF 4.1
Application and purpose
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Application
ENF 4.1.1
See Notes
This
chapter applies to incoming
firms. An incoming
firm is:
(1) an EEA
firm; or
(2) a Treaty
firm;
which is exercising,
or has exercised, its right to carry on a regulated activity in the United Kingdom under Schedule 3 (EEA passport rights) or
Schedule 4 (Treaty rights)
to the Act.- 01/12/2004
Purpose
ENF 4.1.2
See Notes
The chapter contains a statement of the FSA's policy on how it
will use its power to intervene against incoming
firms under section 196 of the Act. It outlines:
(1) the FSA's power
to intervene against incoming
firms under section 196 of the Act (The power
of intervention);
(2) the grounds for exercising that power
(both generally and in support of overseas
regulators); and
(3) the FSA's policy
on the exercise of that power.
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ENF 4.1.3
See Notes
The FSA has
related powers to impose limitations and requirements on firms that have Part IV permission, and ENF 3 (Variation of permission on
the FSA's own
initiative) contains a statement of the FSA's policy
on how it will use those powers. This chapter refers where appropriate to
the policy in ENF 3.
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ENF 4.2
The FSA's power to intervene against incoming firms
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ENF 4.2.1
See Notes
The FSA's power
to intervene against incoming
firms, and the grounds for exercising that power, are contained
in sections 194 to 196 of the Act.
Section 196 (The power of intervention) identifies the types of requirements the FSA may impose when it
exercises its power of
intervention against an incoming
firm. Section 195 (Exercise of power in support of overseas
regulator) gives the FSA power
to intervene against an incoming
firm in support of an overseas
regulator and section 194 (General grounds on which power of
intervention is exercisable) relates to all other circumstances.
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Requirements that the FSA may impose on incoming firms
ENF 4.2.2
See Notes
Under section 196, where the FSA is entitled to exercise
its power of intervention in
respect of an incoming
firm, it may impose any requirement on
the firm which
it could impose if:
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ENF 4.2.3
See Notes
Paragraphs ENF 3.2.8 G to ENF 3.2.10 G explain and provide
examples of the requirements the FSA may impose when it
exercises its power to vary permission.
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ENF 4.3
Grounds for exercising the power of intervention against incoming firms
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ENF 4.3.1
See Notes
Section 194 of the Act (General grounds on which power of intervention
is exercisable) sets out the general grounds on which the FSA may exercise its power of intervention. Section 195 (Exercise
of power in support of overseas regulator) relates to the exercise of the
power on behalf of an overseas
regulator.
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General grounds for exercising the power against incoming firms
ENF 4.3.2
See Notes
Under section 194(1) the FSA may exercise the power of intervention if
it appears to it that:
(1) an incoming
firm has contravened, or is likely to contravene, a requirement
which is imposed on it by or under the Act (in
a case where the FSA is
responsible for enforcing compliance in the United Kingdom); or
(2) an incoming
firm has, in purported compliance with any requirement imposed
by or under the Act,
knowingly or recklessly given the FSA information
which is false or misleading in a material particular; or
(3) it is desirable to exercise the power
in order to protect the interests of actual or potential customers in relation to a regulated activity carried on by the firm.
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ENF 4.3.3
See Notes
Under section 194(3) the FSA may exercise the power
if it receives certain information from the Director General of Fair Trading.
Section 194(3) applies to an incoming
EEA firm that is either:exercising an EEA right to carry on
Consumer Credit Act business in the United
Kingdom (see section 194(2) and paragraph 5(a) and (b) of Schedule
3 to the Act (EEA
Passport Rights)).
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ENF 4.3.4
See Notes
Section 194(3) permits the FSA to exercise its power of intervention in
respect of the incoming
firm if the Director General of Fair Trading has informed the FSA that:
(1) the firm concerned;
or
(3) if the firm is a body corporate, a controller of the authorised person or an associate of such a controller; has done any of the things specified
in paragraphs (a) to (d) of section 25(2) of the Consumer Credit Act 1974,
that is has:
(a) committed any offence involving fraud
or other dishonesty, or violence; or
(b) Contravened any provision made by or
under that Act,
or by or under any other enactment regulating the provision of credit to individuals
or other transactions with
individuals; or
(c) practised discrimination on grounds of
sex, colour, race or ethnic or national origins in, or in connection with,
the carrying on of any business; or
(d) engaged in business practices appearing
to the Director to be deceitful or oppressive, or otherwise unfair or improper
(whether lawful or not).
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Grounds for exercising the power on behalf of an overseas regulator
ENF 4.3.5
See Notes
(1) Under section 195(1) of the Act (Exercise of power
in support of overseas regulator), the FSA may
exercise its power of intervention in
respect of an incoming
firm at the request of an overseas
regulator.
(2) Paragraph (1) applies whether or not
the FSA's power of intervention is
also exercisable as a result of section 194 (see ENF
4.3.2 G to ENF
4.3.4 G).
(3) If:
(a) a Home
State regulator in pursuance of a Community obligation has made
a request to the FSA for
the exercise of the power; or
(b) a Home
State regulator has notified the FSA that it has withdrawn an EEA firm's EEA authorisation;
then, when the FSA decides whether to
exercise its power of intervention,
it must consider whether it is necessary to exercise the power in order to
comply with a Community obligation (See ENF 3.5.19 G for examples
of relevant Community obligations).(4) When the FSA decides in any case that the exercise
of its power is not necessary to comply with a Community obligation, it may
take into account, in particular, the factors that are set out in ENF 3.3.6 G.
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ENF 4.4
The FSA's policy on exercising its power of intervention against incoming firms
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ENF 4.4.1
See Notes
The FSA's power of intervention and
its own-initiative power to
vary permission are
similar in that:
(1) in both cases the FSA may impose requirements on firms (see ENF 3.2.8 G to ENF 3.2.10 G and ENF
4.2.2 G);
(2) in both cases the power may be exercised
on similar grounds (see ENF 3.3.2 G (3) and ENF 4.3.2 G (3));
(3) the statutory procedure and the FSA's decision making
processes are similar (although there are additional procedures for the FSA to follow in certain
cases where the FSA intervenes
against EEA firms)
(see ENF 3.6 and ENF 4.5);
(4) In both cases, the FSA may exercise its power so that the action
takes effect immediately, or on a specified date, or when the matter is no
longer open to review (see
section 197(1) of the Act (Procedure
on exercise of power of intervention) in relation to the FSA's power
of intervention); and
(5) In both cases, the FSA may only state that the action will have
effect immediately, or on a specified date, if the FSA reasonably considers that it is necessary
for the action to take effect immediately or on that specified date, having
regard to the ground on which it is exercising its power (see section 197(2)
of the Act in
relation to requirements imposed
by power of intervention).
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ENF 4.4.2
See Notes
The FSA will
adopt a similar approach to the exercise of its power of intervention as it does to its own-initiative powers to
vary permission,
but with suitable modification for the differences in the statutory grounds
for exercising the powers (for example, see ENF
4.3.4 G).
Consequently the factors and considerations set out in ENF 3.5.2 G to ENF 3.5.28 G are also likely
to be relevant when the FSA is
considering regulatory concerns about incoming
firms.
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ENF 4.4.3
See Notes
The FSA will
seek, and take account of, the views of the firm's Home
State regulator when it is considering action against an incoming firm.
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ENF 4.5
Statutory procedure and FSA's decision making processes
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Section 197 procedure and additional and supplemental procedures
ENF 4.5.1
See Notes
When the FSA uses, or proposes to use, its power of intervention to
impose a requirement on
an incoming firm,
it is required to follow the supervisory
notice procedure contained in section 197 of the Act (Procedure on exercise
of power of intervention). DEC 3 (Statutory notice procedure:
Supervisory notice procedure) sets out this procedure in detail and describes
the content of the notices that the FSA is
required to give to the firm concerned. DEC 4 (The decision maker) also deals with decision making
by the RDC (by
full or modified procedure) in cases where the requirement on the incoming firm would have an effect equivalent
to a fundamental change to the nature of a firm's Part
IV permission; and with decision making by executive procedures in other intervention
cases against incoming
firms.
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ENF 4.5.2
See Notes
In addition, in certain cases relating
to EEA firms,
the FSA is
required to follow the additional procedure contained in section 199 of the Act (Additional procedure
for EEA firms in certain cases). Details of this procedure are set out in ENF
4.5.4 G to ENF
4.5.7 G.
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ENF 4.5.3
See Notes
Section 200 of the Act (Rescission and variation of requirements)
contains supplemental procedure that the FSA must
follow when it is considering rescinding or varying those requirements that it has imposed on an incoming
firm by exercise of the power
of intervention. Details of this procedure are set out in ENF
4.5.8 G to ENF
4.5.10 G.
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Section 199 additional procedure for EEA firms in certain cases
ENF 4.5.4
See Notes
The additional procedure in section 199
applies where it appears to the FSA that
its power of intervention is
exercisable:
(1) in relation to an incoming EEA firm; and
(2) in respect of the contravention of a
relevant requirement.
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ENF 4.5.5
See Notes
A requirement is relevant if:
(2) With respect to its contravention, any
of the Single Market Directives provides
that a procedure of the following kind applies:
(b) if the firm fails to comply with that requirement
within a reasonable time, the FSA must
inform the firm's Home State regulator of
this and request it to:
(i) take all appropriate measures to remedy
the situation; and
(ii) inform the FSA of the measures it proposes to take,
or has taken, or the reasons why it has not taken or will not take such measures.
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ENF 4.5.6
See Notes
Examples of relevant requirements are
the requirements contained in COB.
All of the chapters of COB apply
to incoming EEA firms.
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ENF 4.5.7
See Notes
The additional procedure also differs
between urgent and other cases, as follows.
(1) Except as mentioned in (2) the FSA may not exercise its power of intervention in
these cases, unless it is satisfied that:
(a) the firm's Home State regulator has
failed or refused to take appropriate measures to remedy the situation; or
(b) the measures taken by the Home State regulator have
proved inadequate for that purpose.
(2) If the FSA decides it should, as a matter of urgency,
exercise its power of intervention to
protect the interests of consumers,
it may exercise the power:
(a) before complying with the procedure described
in ENF 4.5.5 G (2); or
(b) Where it has complied with that procedure,
before it is satisfied as mentioned in (1).
(3) If it exercises its power of intervention in this way, as a matter
of urgency the FSA must,
at the earliest opportunity, inform the firm's Home State regulator and
the European Commission.
If the Commission decides,
under any of the Single
Market Directives, that the FSA must rescind or vary any requirement imposed by
it in this way, the FSA must
do so.
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Section 200 procedure for rescission and variation of requirements
ENF 4.5.8
See Notes
Under section 200 of the Act (Rescission and variation
of requirements), the FSA may
rescind or vary a requirement it
imposed when exercising its power
of intervention, either on its own initiative or on the application
of the person subject
to the requirement.
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ENF 4.5.9
See Notes
The following procedure applies where
the FSA on
its own initiative rescinds or varies an existing requirement.
(1) The FSA may
rescind a requirement on
its own initiative by giving written notice to the person concerned. The rescission or variation
takes effect on the date specified in the notice.
(2) The FSA may
vary a requirement on
its own initiative by giving a supervisory
notice to the person concerned
and following the procedure in section 197 of the Act (see ENF
4.5.1 G and DEC 3 (Statutory notice procedure: Supervisory notice procedure)).
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ENF 4.5.10
See Notes
The following procedure applies where
the FSA proposes
to refuse an application to rescind or vary an existing requirement.
(2) If the FSA decides to refuse the application:
(a) it must give the applicant a decision notice;
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ENF 4.5.11
See Notes
DEC 2 (Statutory notice procedure:
warning notice and decision notice procedure) contains a detailed statement
of the FSA's procedure
for deciding whether to give warning
notices and decision
notices.
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