Prudential Regulation Authority Rulebook

Firms that want authorisation to carry out regulated activities will need to:

Our assessment at the authorisation stage aims to allow only those firms and individuals satisfying the necessary criteria (including honesty, competence and financial soundness) to engage in a regulated activity. These criteria are called the threshold conditions.

The Authorisation manual (AUTH) sets out the background to the authorisation and approval processes and provides guidance on how we authorise firms. This chapter explains in general terms what we will consider in deciding whether to authorise a firm.

If your firm wishes to apply for authorisation, you can find application packs at: www.fsa.gov.uk/pages/Library/Communication/Forms/sfpack.shtml.

What is the FSA's approach to the authorisation and approval process?

We:
•authorise firms that satisfy the necessary conditions (the threshold conditions) by granting permission to carry on specified regulated activities;
•approve individuals to carry on controlled functions in firms as being fit and proper to carry out these functions;
•answer technical enquiries about whether firms require authorisation or individuals require approval;
•seek to ensure that regulated activities are not being carried out by unauthorised firms; and
•collect and maintain intelligence information about authorised firms and individuals so that, for example, we can take action if a firm's authorisation should be removed.

Before applying for authorisation you should decide whether your firm will carry on regulated activities for which it requires permission. If your firm will carry on regulated activities and you wish to seek authorisation your firm's application will need to specify the regulated activities you are applying for permission to carry on. The table below sets out the regulated activities that relate to mortgage and insurance mediation activities:

Regulated activities - mortgage and insurance mediation activities:

Regulated activities - mortgage mediation activities
• Arranging regulated mortgage contracts
• Making arrangements with a view to transactions in regulated mortgage contracts
• Advising on regulated mortgage contracts
Regulated activities - insurance mediation activities
• Arranging deals in non-investment insurance contracts
• Making arrangements with a view to transactions in non-investment insurance contracts
• Advising on non-investment insurance contracts
• Dealing as agent in non-investment insurance contracts
• Assisting in the administration and performance of non-investment insurance contracts
Regulated activities - mortgage and insurance mediation activities
• Agreeing to carry on a regulated activity

We have produced guidance to help firms decide whether or not they need to be authorised and, if so, what regulated activities they need to apply for permission to carry on.

Before granting a permission for a firm to carry on regulated activities we must be satisfied that the firm meets (and will continue to meet) a set of criteria known as the threshold conditions. The threshold conditions are set out in Schedule 6 of the FSMA, and there is guidance on them in the Threshold Conditions sourcebook (COND). The threshold conditions that are relevant to mortgage and insurance intermediaries are in the table below. If your firm submits an application, you will need to provide us with certain information about your firm and the individuals who want to be approved persons so that we can assess whether your firm satisfies the threshold conditions.

The threshold conditions:

1. Location of offices
•	For mortgage intermediaries:
	-	If your firm is a body corporate formed in the UK the head office and registered office must be in the UK.
	-	If your firm is not a body corporate and has its head office in the UK, it must carry on business in the UK.
•	For insurance intermediaries
	-	If your firm is a body corporate formed in the UK the registered office or, if it has no registered office, the head office must be in the UK.
	-	If your firm is not a body corporate and has its head office in the UK, it must carry on business in the UK.
2. Close links
•	Close links between the firm and other persons must not prevent us from effectively supervising that firm.
3. Adequate resources
•	A firm must have adequate resources, both financial and non-financial.
4. Suitability
•	The applicant and the persons connected to the applicant, must be fit and proper.

As part of the FSA's function of monitoring a firm's continuing satisfaction of the threshold conditions, we need to consider those persons closely linked with a firm. COND 2.3 explains what is meant by 'close links'. Similarly, the FSA needs to consider those persons who have control over firms. 'Controller' is defined in the Handbook Glossary. The FSA requires all firms, including sole traders, to submit certain information on their close links and individual controllers on the relevant Small Firms Controllers forms when they apply for authorisation. Questions on close links are included in the body of the main application form. The form to be completed for each Controller is explained and available on the FSA website at: www.fsa.gov.uk/pages/Library/Communication/Forms/sfpack.shtml. In addition, once they are authorised, all firms need to notify us of changes in the close links and the controllers of the firm, as well as of existing controllers of the firm changing their level of control through specified thresholds. Details of the change of control and close links requirements are in SUP 11. Further information about the notification requirements that apply to your firm is in Part I, Chapter 11.2.

Your firm is responsible for ensuring that it continues to meet the threshold conditions in order to keep its authorisation and scope of permission.

Following a successful application, we will grant a firm permission (see AUTH 3.3 ). The scope of your firm's permission will be set out in a Scope of Permission Notice. This will define the scope in terms of regulated activities together with any limitations and any other requirements or restrictions that may be applied. Limitations are explained in AUTH 3.6, requirements in AUTH 3.7. An example of a limitation is where a limit is placed on the number of clients a firm can deal with during an initial period until its systems are proven. An example of a requirement is the requirement that a firm does not hold client money.

Your firm is responsible for ensuring that it continues to hold the correct permission that includes the regulated activities it wishes to carry out.

We maintain a public register (the FSA Register) which lists, amongst others, all FSA authorised firms, appointed representatives and approved persons. Firms and consumers may access the FSA Register to check your firm's permission, for example. When we grant an application for authorisation, we update the FSA Register with the activities the firm has permission to carry on. You can access the FSA Register at http://www.fsa.gov.uk/Pages/register/.

Both AUTH and the Supervision manual (SUP) are relevant. AUTH contains:

After a permission has been granted, a firm can apply to vary or cancel that permission, including any limitation or requirement, at any time. The procedures that need to be followed are set out in full in SUP 6 and are summarised in Part I, Chapter 16 of this Guide.

You can find factsheets that give further details on authorisation requirements for both mortgage and insurance intermediaries at www.fsa.gov.uk/Pages/Doing/Info/MGI/Factsheets/index.shtml.

Authorisation application packs are available to view online at www.fsa.gov.uk/pages/Library/Communication/Forms/sfpack.shtml, where you can also register to receive an application pack for your firm. Alternatively you can order a copy of an application pack by telephoning 020 7066 3954.

The following chapters of this Guide are also relevant:

•	FSA supervision of small firms - Part I, Chapter 10
•	Approved persons - Part I, Chapter 6
•	Variation and cancellation of permission - Part I, Chapter 16
•	Fees - Part I, Chapter 19