Part

ENF Enforcement

Chapter

Cancellation of Part IV permission on the FSA's own initiative

Printed on: 15/11/2024

Rulebook at: 01/01/2007

ENF 5

Cancellation
of Part IV permission on the FSA's own initiative

ENF 5.1

Application and purpose

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Application

ENF 5.1.1

handbook-guidance
This chapter applies to all firms that have a Part IV permission.
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Purpose

ENF 5.1.2

handbook-guidance
The chapter contains a statement of the FSA's policy on how it will use its own-initiative power to cancel a firm's Part IV permission. The FSA has related powers to vary a Part IV permission on its own-initiative and to intervene against incoming firms. These powers are dealt with in ENF 3 (Variation of Part IV permission on the FSA's own initiative) and ENF 4 (Intervention against incoming firms).
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ENF 5.2

Introduction

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ENF 5.2.1

handbook-guidance
The chapter outlines:
(1) the FSA's own-initiative power to cancel Part IV permission under sections 45 (Variation etc on the FSA's own initiative) and 47 (Exercise of power in support of overseas regulator) of the Act and its duty to withdraw authorisation under section 33 (Withdrawal of authorisation by the FSA);
(2) the procedure for exercising those powers; and
(3) the FSA's policy in relation to the exercise of those powers.
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ENF 5.2.2

handbook-guidance
The statement of policy in this chapter applies to circumstances where the FSA is considering using its own-initiative power to cancel a firm's Part IV permission (and subsequently to withdraw authorisation). The FSA also has power under section 44 of the Act (Variation etc at the request of authorised person) to cancel a Part IV permission at the request of a firm. SUP 6 (Applications to vary and cancel Part IV permission) contains a statement of the FSA's policy in relation to that power. In this chapter cancellation of Part IV permission means cancellation of Part IV permission on the FSA's own initiative.
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ENF 5.3

The FSA's powers to cancel Part IV permission and withdraw authorisation

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ENF 5.3.1

handbook-guidance
The FSA'sown-initiative power to cancel Part IV permission is contained in section 45 of the Act (Variation etc on the FSA'sown initiative). Section 45 also sets out the general grounds for exercising the power. Section 47 (Exercise of power in support of overseas regulator) sets out the grounds for exercising the power on behalf of an overseas regulator.
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ENF 5.3.2

handbook-guidance
Section 45 of the Act empowers the FSA to vary, or alternatively to cancel, a firm'sPart IV permission. The general statutory grounds for exercising those powers are the same. They are set out in section 45(1) Cases A to C (see ENF 3.3.2 G). The FSA also has a duty, once it is satisfied that it is no longer necessary to keep the permission in force, to cancel a firm's Part IV permission when it has varied a firm'sPart IV permissionto such an extent that there are no longer any regulated activities for which the firm has a Part IV permission.
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ENF 5.3.3

handbook-guidance
Under section 47(1) of the Act, the FSA may exercise its own-initiative power to cancel a Part IV permission at the request of, or for the purpose of assisting, a regulator who is:
(1) outside the United Kingdom; and
(2) of a kind prescribed in regulations made by the Treasury.
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ENF 5.3.4

handbook-guidance
Section 47(1) applies whether or not the FSA has powers which it can exercise in relation to the firm under any provision of Part XIII of the Act, (Incoming firms: Intervention by FSA) (see ENF 4). The detailed provisions of section 47 are set out in ENF 3.3.3 G to ENF 3.3.7 G.
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ENF 5.4

Procedure

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ENF 5.4.1

handbook-guidance
When it proposes to cancel the Part IV permission of a firm under sections 45 (Variation etc on the FSA's own initiative) or 47 (Exercise of power in support of overseas regulator) of the Act, the FSA is required to follow the statutory procedure set out in section 54 of the Act (Cancellation of Part IV permission: procedure).
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ENF 5.4.2

handbook-guidance
Under section 54(1), if the FSA proposes to cancel a firm'sPart IV permission otherwise than at the firm's request, it must give the firm a warning notice, and under section 54(2), if it then decides to cancel the firm'sPart IV permission, it must give the firm a decision notice.
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ENF 5.4.3

handbook-guidance
DEC 2 (Statutory notice procedure: warning notice and decision notice procedure) and DEC 4 (The decision maker) contain a detailed statement of the FSA's procedure for deciding whether to issue warning notices and decision notices.
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ENF 5.5

The FSA's policy for exercising its power to cancel Part IV permission

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ENF 5.5.1

handbook-guidance
The FSA will consider cancelling a firm'sPart IV permission in two main circumstances:
(1) where the FSA has very serious concerns about a firm, or the way its business is or has been conducted;
(2) where the firm'sregulated activities have come to an end and it has not applied for cancellation of its Part IV permission.
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ENF 5.5.2

handbook-guidance
Examples of these circumstances are set out in ENF 3.3.2 G.
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ENF 5.5.3

handbook-guidance
The FSA'sown-initiative powers to vary and to cancel Part IV permission are similar to each other. The FSA may exercise the powers on the same grounds (see ENF 5.3.2 G) and where appropriate the FSA may impose a variation of Part IV permission which, by removing all regulated activities from the Part IV permission, has a similar effect to cancelling it. However the statutory procedure is different and this may determine how the FSA acts in any particular case. Of greater significance, however, the FSA may impose a variation of Part IV permission either with immediate effect, or on a date specified by it (see ENF 3.5.9 G). In contrast a cancellation of Part IV permission only becomes effective on completion of the statutory procedure, or subsequent referral to the Tribunal, or completion of the appeal process.
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ENF 5.5.4

handbook-guidance
Depending on the circumstances, the FSA may need to consider whether it should first use its own-initiative powers to vary a firm'sPart IV permission before going on to cancel it. Circumstances in which the FSA will consider using its own-initiative power to vary a firm'sPart IV permission are set out in ENF 3.5. Amongst other circumstances, the FSA may use this power where it considers it needs to take immediate action against a firm because of the urgency and seriousness of the situation (see in particular ENF 3.5.9 G to ENF 3.5.11 G).
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ENF 5.5.5

handbook-guidance
Where the situation appears so urgent and serious that the firm should immediately cease to carry on all regulated activities, the FSA may first vary the firm'sPart IV permission so that there is no longer any regulated activity for which the firm has a Part IV permission. If it does this, the FSA will then have a duty to cancel the firm'sPart IV permission - once it is satisfied that it is no longer necessary to keep the Part IV permission in force (See ENF 5.3.2 G).
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ENF 5.5.6

handbook-guidance
However, where the FSA has cancelled a firm'sPart IV permission, it is required by section 33 of the Act (Withdrawal of authorisation by the Authority) to go on to give a direction withdrawing the firm'sauthorisation. Accordingly, the FSA may decide to keep a firm'sPart IV permission in force to maintain the firm's status as an authorised person and enable it (the FSA) to monitor the firm's activities. For example, where the FSA needs to supervise an orderly winding down of the firm's regulated business (see SUP 6.4.22(When will the FSA grant an application for cancellation of permission)). Alternatively, the FSA may decide to keep a firm'sPart IV permission in force to maintain the firm's status as an authorised person to use administrative enforcement powers against the firm. For example, where the FSA proposes to impose a financial penalty on the firm under section 206 of the Act (Financial penalties) (see ENF 13).
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ENF 5.5.7

handbook-guidance
The circumstances in which the FSA may consider cancelling a firm'sPart IV permission in support of an overseas regulator depend on whether or not the FSA is required to consider exercising the power in order to comply with a Community obligation. The FSA will consider the factors set out in ENF 3.5.14 G to ENF 3.5.26 G in relation to variation of Part IV permission and any specific request made to it by the overseas regulator to cancel, rather than vary, the firm'sPart IV permission.
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