The FSA's duties and powers

Part

PROF Professional Firms

Chapter

The FSA's duties and powers

Printed on: 29/10/2024

Rulebook at: 01/12/2004

PROF 3

The FSA's duties and powers

PROF 3.1

The FSA's duty to keep itself informed

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PROF 3.1.1

Section 325 of the Act (Authority's general duty) imposes on the FSA a duty to keep itself informed about:

(1) the way in which designated professional bodies supervise and regulate the carrying on of exempt regulated activities by exempt professional firms; and
(2) the way in which exempt professional firms carry on exempt regulated activities.

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PROF 3.1.2

The FSA keeps itself informed in a number of ways. A designated professional body has a duty under section 325(4) of the Act to cooperate with the FSA. Article 94 of the Regulated Activities Order requires each designated professional body to provide the FSA with the information it needs to maintain a public record of persons that are registered with the FSA to conduct insurance mediation activity. The FSA has made arrangements with each of the designated professional bodies about the information they provide to it, to include information about:

(1) complaints and redress arrangements;
(2) complaints volumes and their analysis;
(3) disciplinary action;
(4) supervisory activity;
(5) the activities carried on by exempt professional firms, the risks arising from them and how they are mitigated, for example by monitoring activity or training and competence arrangements; and
(6) the names and addresses of each of their exempt professional firms that carry on, or are proposing to carry on, insurance mediation activity, together with the details of the individuals within the management of the exempt professional firms who are responsible for the insurance mediation activity and, where relevant, the passporting information required by the FSA for the purposes of paragraph 25 of Schedule 3 to the Act (EEA Passport Rights).

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PROF 3.1.3

Information may also be obtained from exempt professional firms, government departments, trade bodies, consumer organisations and clients of exempt professional firms. The FSA may also commission or carry out reviews of the supervisory and regulatory activities of a designated professional body and commission or carry out research about, or surveys of, exempt professional firms or their clients.

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PROF 3.2

The FSA's power to make a direction

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PROF 3.2.1

Section 328 of the Act (Directions in relation to the general prohibition) gives the FSA power to make a direction that the exemption under section 327 of the Act (see PROF 2.1.3 G) does not apply to the extent specified in the direction. Section 328 allows the FSA to make a direction in relation to different classes of person or different descriptions of regulated activity. Section 325(3) of the Act requires the FSA to keep under review the desirability of exercising its powers under Part XX of the Act (Provision of Financial Services by Members of the Professions), including its direction powers under section 328 of the Act.

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PROF 3.2.2

If the FSA gives a direction in relation to specified classes of person, then any person within those classes may be in contravention of the general prohibition unless:

(1) it ceases to carry on regulated activities; or
(2) it is an authorised person; or
(3) it is an exempt person.

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PROF 3.2.3

A direction might also cover classes of persons who are members of different designated professional bodies.

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PROF 3.2.4

Were the FSA to give a direction in relation to a description of regulated activity (for example, dealing in investments as agent), then that activity could no longer be carried on within the terms of the exemption.

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PROF 3.2.5

(1) The FSA may exercise its direction powers under section 328(6) of the Act in two situations, as set out in (2) and (3).
(2) First, the FSA may exercise its direction power under section 328(6)(a) of the Act if it is satisfied that it is desirable in order to protect the interests of clients. In considering whether it is satisfied, the FSA is required by section 328(7) of the Act to have regard, among other things, to the effectiveness of any arrangements made by a designated professional body:

(a) for securing compliance with rules made under section 332(1) of the Act (see PROF 4.1.1 G);
(b) for dealing with complaints against its members in relation to the carrying on by them of exempt regulated activities (see PROF 4.1.4 G (2)(d));
(c) in order to offer redress to clients who suffer, or claim to have suffered, loss as a result of misconduct by its members in their carrying on of exempt regulated activities (see PROF 4.1.4 G (2)(d)); and
(d) for cooperating with the FSA under section 325(4) of the Act (see PROF 3.1.2 G).

(3) Second, the FSA may exercise its direction power under section 328(6)(b) of the Act if it is satisfied that it is necessary to do so in order to comply with an obligation imposed by the IMD. For example, the FSA might wish to do so if it was not receiving from a designated professional body the information it needs to maintain the FSA Register (see PROF 7.1).

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PROF 3.2.6

Section 330 of the Act (Consultation) sets out procedures which the FSA must follow if it wishes to make a direction under section 328(6)(a) or (b). Except as specifically provided in section 330:

(1) the FSA must consult publicly on its proposed direction;
(2) the FSA must have regard to any representations made in response to the consultation; and
(3) if the FSA then gives the proposed direction, it must publish an account of the representations made and its response to them.

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PROF 3.2.7

The directions the FSA has made under section 328 (6)(a) are set out in PROF 3 Annex 1 G. Directions made by the FSA under section 328(6)(b) of the Act are listed in (The FSA's duties and powers).

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PROF 3 Annex 1

The FSA's duties and powers G

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Directions made by the FSA under section 328(6)(a) of the Act (see )

As at 21 June 2001, the FSA had made no directions under section 328 of the Act.

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