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AUTH 1

Introduction to the Authorisation manual

AUTH 1.1

Application and purpose

Application

AUTH 1.1.1

See Notes

handbook-guidance
This manual applies to:
(1) a person which is considering carrying on activities in the United Kingdom which may fall within the scope of the Act and is seeking guidance on whether it needs to be an authorised person;
(2) a person which seeks to become an authorised person under the Act and which is, or is considering, applying to the FSA for Part IV permission to carry on regulated activities in the United Kingdom;
(3) an EEA firm, a Treaty firm or a UCITS qualifier that wishes to establish a branch or provide cross-border services into the United Kingdom using EEA rights, Treaty rights or UCITS Directive rights, or apply for a top-up permission;
(4) a candidate for approval under Part V of the Act, but only in respect of AUTH 6 (Approved persons), which is of general relevance; and
(5) persons generally.

Purpose

AUTH 1.1.2

See Notes

handbook-guidance
The purpose of:
(1) authorisation is to allow only persons which satisfy the necessary conditions (relating, for example, to adequate resources and suitability - see COND) to engage in a regulated activity; and
(2) approval of persons (generally individuals) is to seek to ensure that only fit and proper persons perform controlled functions in the financial services industry.

AUTH 1.1.3

See Notes

handbook-guidance
The purpose of this manual is to give guidance about:
(1) the circumstances in which authorisation is required, or exempt person status is available, including guidance on the activities which are regulated under the Act and the exclusions which are available; see PERG 2 (Authorisation and regulated activities);
(2) the procedures by which a person can apply for, or obtain, permission under the Act to carry on these regulated activities and become an authorised person and any fees payable; see AUTH 3 (Applications for Part IV permission), AUTH 4 (Authorisation Fees) and AUTH 5 (Qualifying for authorisation under the Act).
(3) the procedures by which a person seeking to become an authorised person can obtain approval for persons to perform controlled functions under the approved persons regime; see AUTH 6 (Approved persons); and
(4) the FSA's powers in relation to authorisation and how it will use them (see AUTH 3 and AUTH 5).

AUTH 1.2

Introduction

AUTH 1.2.1

See Notes

handbook-guidance
(1) The Financial Services and Markets Act 2000 (the Act) is the UK legislation under which bodies corporate, partnerships, individuals and unincorporated associations are permitted by the FSA to carry on various financial activities which are subject to regulation (referred to as regulated activities).
(2) The activities which are regulated activities are specified in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (the Regulated Activities Order): for example, accepting deposits, managing investments, effecting contracts of insurance, dealing in investments as agent. In general terms, a regulated activity is an activity, specified in the Order, carried on in relation to one or more of the investments specified in the Order. PERG 2 gives further guidance on regulated activities and specified investments.

AUTH 1.2.2

See Notes

handbook-guidance
In order to carry on a regulated activity in the United Kingdom, or even "purport to do so", section 19 of the Act (The general prohibition) provides that a person must be either authorised under the Act (an authorised person) or exempt from its provisions (an exempt person). In this context, a "person" includes both a legal person, for example a body corporate, and a natural person, that is, an individual.

AUTH 1.2.3

See Notes

handbook-guidance
Exempt persons are persons falling within the following groups:
(2) a person, or class of persons, specified in secondary legislation; for example, the Bank of England is specified in the Financial Services and Markets Act 2000 (Exemption) Order 2001 (the Exemption Order);
(3) a recognised investment exchange or a recognised clearing house (for more information on being a recognised body see REC).
Further information on exempt persons is given in PERG 2.10G (Persons carrying on regulated activities who do not need authorisation).

AUTH 1.2.4

See Notes

handbook-guidance
Members of the Society of Lloyd's are not required to obtain authorisation to carry out certain insurance market activities unless so directed by the FSA (see PERG 2.10.9G). In addition, certain professional firms (solicitors, accountants and actuaries) are allowed under Part XX of the Act (Provision of Financial Services by Members of the Professions) to carry on certain regulated activities without authorisation subject to their complying with specified conditions (see PERG 2.10.12G and PROF).

AUTH 1.2.5

See Notes

handbook-guidance
Before any person carries on in the United Kingdom, by way of business, activities that are regulated activities, it will generally need to be an authorised person (see PERG 2.2). There are two main kinds of authorised person under the Act: a person who is authorised because it has a Part IV permission (see AUTH 1.2.5 G (2)) and a person which qualifies for authorisation (see AUTH 1.2.5 G (1)). It is important that a person considering carrying on a regulated activity in the United Kingdom determines which type of authorisation is required.
(1) A person from another EEA State which is authorised in its Home State may be entitled to establish a branch in, or provide cross border services into, the United Kingdom under the Single Market Directives, the Treaty or the UCITS Directive (this is often known as passporting). The process by which that person can qualify for authorisation under Schedules 3, 4 and 5 to the Act is described in AUTH 5 .
(2) Other persons wishing to carry on regulated activities in the United Kingdom must obtain permission from the FSA under Part IV of the Act (this is known as Part IV permission). Such persons will become authorised persons if the FSA gives them permission. AUTH 1.6 outlines the process of applying for Part IV permission, the formal elements are described in more detail in AUTH 3. At the same time, the applicant will need to apply for certain persons to become approved persons (see AUTH 6).

AUTH 1.2.6

See Notes

handbook-guidance
(1) Electronic commerce activities, other than insurance business falling within the scope of the Insurance Directives, carried on by an incoming ECA provider are excluded from being regulated activities. The provider does not require authorisation if it does not carry on any other regulated activities in the United Kingdom (see PERG 2.9.18G).
(2) An outgoing ECA provider providing electronic commerce activities that are regulated activities from an establishment in the United Kingdom is regarded as carrying on such activities in the United Kingdom regardless of whether they are provided to an EEA ECA recipient or a UK ECA recipient (see PERG 2.4.3G(5)). The provider should be authorised before it starts providing the services.
(3) ECO sets out rules and guidance that apply to both incoming and outgoing ECA providers.

AUTH 1.3

The Authorisation manual

AUTH 1.3.1

See Notes

handbook-guidance
(1) The Authorisation manual (AUTH), the Supervision manual (SUP), the Enforcement manual (ENF) and the Decision making manual (DEC) form the Regulatory Processes part of the Handbook.
(2) AUTH sets out the relationships between the FSA and applicants for Part IV permission and persons wishing to exercise EEA rights, Treaty rights or UCITS Directive rights. SUP sets out the relationship between the FSA and authorised persons (referred to in the Handbook as firms). As a general rule, material that is of continuing relevance after authorisation is in SUP.
(3) ENF describes the FSA's enforcement powers under the Act and sets out its policies for using these powers.
(4) DEC is principally concerned with, and sets out, the FSA's decision making procedures for decisions that involve the giving of statutory notices.

AUTH 1.3.2

See Notes

handbook-guidance
The procedures for applying for Part IV permission, for approval of a person under section 59 of the Act and for qualifying for authorisation under Schedules 3, 4 and 5 to the Act are derived from the Act. AUTH gives guidance on the Act and the FSA's procedures. It also contains directions to applicants on the manner of making applications (see AUTH 3.9.3 D and AUTH 6.3.2 G) and rules on fees (see AUTH 4 (Authorisation fees)).

AUTH 1.3.3

See Notes

handbook-guidance
(1) A Reader's Guide gives an introduction to the Handbook and is a key navigational aid for Handbook users. The guide explains the format, layout and workings of the Handbook, including the status and definitions of its components such as directions, rules and guidance.
(2) We recommend that readers consult this Guide before or while reading AUTH.

AUTH 1.3.4

See Notes

handbook-guidance
(1) The Act, and the secondary legislation made under the Act, is complex. Although AUTH gives guidance to those considering or seeking authorisation, it does not aim to be exhaustive.
(2) References have been made to relevant provisions in the Act or secondary legislation. However, since reproducing an entire statutory provision would sometimes require a lengthy quotation, or considerable further explanation, many provisions of the Act, or secondary legislation made under the Act, are summarised. For the precise details of the legislation, readers of the manual should, therefore, refer to the Act and the secondary legislation itself, as well as the manual.
(3) The Act and the Explanatory Notes are available from the Stationery Office (the Act, ISBN 0-10-540800-X, £21.70; and the Explanatory Notes, ISBN 0-10-560800-9, £14.50). Secondary legislation made by the Treasury under the Act can be obtained from the Stationery Office or can be accessed through the Treasury's website (www.hm-treasury.gov.uk).

AUTH 1.3.5

See Notes

handbook-guidance
Guidance on the Act or secondary legislation made under the Act represents the FSA's view and does not bind the Courts. In the event of any discrepancy between the manual and the Act or that secondary legislation, the provisions of the Act or the secondary legislation prevail. It remains each person's responsibility to ensure that, at all times, his activities comply with the Act and with other relevant provisions (including general requirements such as company law or consumer credit) and to take all necessary steps to satisfy himself of this, including where necessary by seeking his own legal advice.

AUTH 1.3.6

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handbook-guidance
AUTH uses words and phrases that have specific meanings in the Handbook or in legislation; these may be different from, or more precise than, their usual dictionary meanings. Defined terms used in the text of the Handbook are shown in italics. For the meanings of defined terms used in AUTH, see the Glossary (either the extracts at the end of AUTH or the consolidated Glossary). It is essential that readers refer to these definitions.

AUTH 1.3.7

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handbook-guidance
AUTH 1.3.9 G summarises AUTH and parts of PERG. Readers should note that in a cross-reference, as explained in Chapter 6 of the Reader's Guide, the code letters of the manual or sourcebook immediately precede the chapter number. For example, AUTH 1 is the first chapter of the Authorisation manual.

AUTH 1.3.8

See Notes

handbook-guidance
The FSA is keen to encourage an interactive authorisation process. With this in mind, AUTH gives specific contact points in the FSA from which an applicant can get help with questions about its application. To help readers, the contact points are listed at AUTH 1.9.2 G.

AUTH 1.3.9

See Notes

handbook-guidance

Summary of AUTH and parts of PERG

This table belongs to AUTH 1.3.7 G

AUTH 1.4

The FSA's approach to applications for Part IV permission: an overview

AUTH 1.4.1

See Notes

handbook-guidance
(1) Under the Act, there is a single process for applications for Part IV permission. However, the amount of detailed information that an applicant will have to submit as part of its application will be related to the risks posed to the FSA's regulatory objectives by the regulated activities and any unregulated activities that the applicant intends to carry on. Thus the information requested will depend on, and be proportional to, the nature of the application.
(2) This proportionality is reflected in the design of the application pack. Although all applicants have to complete certain standard sections, other sections of the pack are specific to certain types of business such as insurance business. In completing the relevant sections of the pack, the level of detailed information an applicant will be required to provide varies according to the nature of the application. Thus, for example, the FSA will require an applicant which seeks to carry on low-risk designated investment business activities to submit, among other things, a business plan and other information which is proportional and relevant to the applicant's size and the scope of its proposed business.

AUTH 1.4.2

See Notes

handbook-guidance
(1) To gain, and retain, the status of an authorised person, an applicant must satisfy and continue to satisfy certain minimum requirements, laid down in the Act. These are known as threshold conditions and further guidance is given in AUTH 3.8 and COND.
(2) The FSA will assess each application against the threshold conditions. During this assessment, the FSA may require further information from applicants to address any concerns. If an applicant can satisfy the threshold conditions in part only, the FSA may impose a limitation or a requirement on the Part IV permission applied for to enable the applicant to satisfy the threshold conditions.

AUTH 1.4.3

See Notes

handbook-guidance
(1) An applicant for Part IV permission will be expected to demonstrate to the FSA that it is ready, willing and organised to comply, and continue to comply, with the regulatory obligations that are relevant to the regulated activities it seeks Part IV permission to carry on.
(2) To do this, an applicant will need to familiarise itself with the relevant Principles, other rules and guidance that apply to the regulated activities it proposes to carry on. AUTH is designed as a guide, but it cannot alone equip applicants with all the detail of the regulatory obligations for a proposed business. Such detail is in the other parts of the Handbook.

The FSA's approach to risk assessment

AUTH 1.4.4

See Notes

handbook-guidance
(1) Alongside the assessment of the threshold conditions, described in AUTH 1.4.2 G (2), the FSA will operate its risk assessment process. This process enables the FSA to be proportional in its procedures, both in terms of the information which it seeks from an applicant and in the allocation of its own resources. The outcome of this process will help determine the relationship the FSA will seek to have with the applicant if it gives it Part IV permission.
(2) The process will include assessing the risks posed by the applicant against a number of probability and impact factors. The probability factors relate to the likelihood of an event happening, and the impact factors indicate the scale and significance of the problem if it occurred. For further details of the process see SUP 1.3 (The FSA's risk based approach to supervision). The FSA intends to communicate the outcome of its risk assessment to the firm (see SUP 1.3.10 G).

AUTH 1.5

Understanding the requirements and standards of the regulatory system

AUTH 1.5.1

See Notes

handbook-guidance
The requirements and standards of the regulatory system, with which an authorised person must comply, vary depending on both the nature of the firm and the regulated activities it has permission to carry on. As part of preparing an application for Part IV permission, an applicant will need to familiarise itself with the rules, regulations and standards that would apply to the business it proposes to carry on. An applicant will then have to demonstrate how it proposes to comply, for example, with the high level systems and controls requirements in SYSC and, where relevant, the applicable rules in COB. EEA firms, Treaty firms or UCITS qualifiers which qualify for authorisation should also familiarise themselves with the relevant regulatory obligations before carrying on regulated activities in the United Kingdom.

AUTH 1.5.2

See Notes

handbook-guidance
(1) An EEA firm will be informed of any relevant regulatory obligations (known as applicable provisions) by the FSA or, in the case of an EEA firm which is an insurer, its Home State regulator, as part of the process of qualifying for authorisation.
(2) An applicant for Part IV permission should consult the notes to the application pack. They cross-refer to relevant parts of the Handbook, and this will help applicants to respond to certain questions.

AUTH 1.5.3

See Notes

handbook-guidance
As a general guide, all applicants for Part IV permission should be familiar with the threshold conditions (COND) and the Principles for Businesses (PRIN) in the High Level Standards part of the Handbook. To complete an application for Part IV permission, an applicant will also need to have regard to the following matters:
(1) Prudential requirements:
(a) the high level requirement for adequate resources, which is applicable to all firms, described in COND; and
(b) the detailed prudential requirements in the Interim Prudential Sourcebooks (collectively referred to as IPRU) and in the Integrated Prudential Sourcebook (PRU) in the Business Standards part of the Handbook. In addition to PRUThere are five interim sourcebooks that apply, respectively, to banks (IPRU(BANK)), building societies (IPRU(BSOC)), friendly societies (IPRU(FSOC)), insurance companies (IPRU(INS)) and investment business firms (IPRU(INV)). Guidance is given to applicants in AUTH 3 Annex 2 on determining which prudential category, and which sourcebook of IPRU, or section of PRU will apply.
An applicant will need to confirm that it will have adequate resources in place to meet the applicable requirements.
(2) Systems, controls and internal arrangements:
(a) the high level requirement for all firms to maintain adequate resources (including systems and human resources) described in COND and the high level standards for all firms in Senior management arrangements, systems and controls (SYSC); and
(b) the detailed requirements, many of which are regulated activity specific, in the sourcebooks in the Business Standards part of the Handbook; for example, in IPRU, PRU, the Training and Competence sourcebook (TC), the Money Laundering sourcebook (ML) and Conduct of Business sourcebook (COB); and the reporting requirements for firms in SUP 16 (Reporting requirements) and SUP 17 (Transaction reporting).
Before the FSA gives a Part IV permission, an applicant will need to confirm that it will have the necessary systems and controls in place.
(3) Approved persons:
(a) the high level standards contained in the Fit and Proper test for approved persons (FIT) and the Statements of Principle and Code of Practice for Approved Persons (APER); and
(b) the detailed rules about controlled functions and other matters in SUP 10 (Approved persons).
An applicant will need to identify the persons that will require approval from the FSA in conjunction with its application for permission. This approval is required before a person may perform a controlled function.
(4) Other regulatory obligations:
(a) the detailed regulatory obligations that apply to certain types of firm or regulated activity in COB, ICOB, MCOB, CASS, the Market Conduct sourcebook (MAR) and SUP;
(b) the obligations in Dispute resolution: Complaints (DISP) and Compensation (COMP); and
(c) the specialist sourcebooks included in the Handbook such as, for example, those for collective investment schemes, exempt professional firms and the market at Lloyd's.

AUTH 1.6

Applying for Part IV permission: overview of the process

AUTH 1.6.1

See Notes

handbook-guidance
The formal procedures for applying for Part IV permission are described in AUTH 3. The application process is, however, interactive and includes discussions and, in some circumstances, an initial meeting with a potential applicant before it submits a completed application form. This section, therefore, outlines how the application process is likely to proceed in practice.

AUTH 1.6.2

See Notes

handbook-guidance
(1) Although the FSA does not require all applicants to appoint professional advisers to help with the application process, reports from professionals will be required in respect of some applications for Part IV permission (see AUTH 3.9.16 G and AUTH 3.9.17 G).
(2) In addition, a potential applicant should consider at an early stage whether, given the nature of the proposed business it is seeking to carry on and its own experience, it is appropriate to seek professional advice in connection with its application. For example, an applicant may need to seek professional advice from lawyers, auditors or reporting accountants, consultants, actuaries or its professional body, before making a formal application to the FSA.
(3) SUP 9 (Individual guidance) describes how a person may apply to the FSA for individual guidance which relates to its own particular circumstances or plans. Applicants should note, in particular, SUP 9.2.5 G, which states that the FSA will expect a person to have taken reasonable steps to research and analyse a topic before approaching the FSA for individual guidance. SUP 9.2.5 G also cautions that the FSA should not be viewed as a first port of call, except where only the FSA can give guidance.

AUTH 1.6.3

See Notes

handbook-guidance
Before beginning discussions with the FSA, an applicant for Part IV permission should have completed its business planning to determine what activities it proposes to undertake and the resources it will need to do so.

AUTH 1.6.4

See Notes

handbook-guidance
(1) An applicant should also have determined and established the appropriate legal entity through which the proposed activities are to be conducted - that is, whether it wishes to trade on its own account, or establish:
(a) a body corporate - for example, a limited company, which can be public or private and limited by shares or by guarantee, or a friendly society; or
(b) a partnership; or
(c) an unincorporated association; or
(d) a UK branch.
(2) A limited liability partnership (regardless of the jurisdiction of incorporation) is a body corporate and does not fall within the definition of partnership, except in relation to SUP 10 (Approved persons). Most limited liability partners will be either directors or senior managers, but this will depend on the constitution of the limited liability partnership.

AUTH 1.6.5

See Notes

handbook-guidance
The legal status of an insurer and an applicant which seeks to carry on the regulated activity of accepting deposits is specified by threshold condition 1 (Legal status) (see COND 2.1).

AUTH 1.6.6

See Notes

handbook-guidance
The first stage in the application process is to establish whether the proposed business will carry on regulated activities requiring permission under Part IV of the Act (Permission to carry on regulated activities). PERG 2 gives a high-level guide to the activities that are regulated under the Act and those that are excluded (but this is not a substitute for consulting the legislation itself); further queries may be referred to the FSA's Authorisation Enquiries team (see AUTH 1.9.2 G).

AUTH 1.6.7

See Notes

handbook-guidance
Once an applicant has determined that it needs to apply for Part IV permission, it should begin to gather the information needed for the formal application. At this stage, applicants are encouraged to begin discussion with the FSA's Enquiries and Applications Department (Applications team) about their plans and the application (see AUTH 1.9).

AUTH 1.6.8

See Notes

handbook-guidance
The FSA's application pack (that is, the set of forms for an application for Part IV permission, and the notes for their completion) and approved persons forms are available from the FSA website or by contacting the Enquiries and Applications Department (Applications team) (see AUTH 1.9.2 G).

AUTH 1.6.9

See Notes

handbook-guidance
Among other things, the applicant will need to:
(1) determine the precise scope of the permission it wishes to apply for; this should include the regulated activities (the specified activities and the specified investments in respect of which the activities are carried on: see PERG 2 Annex 2G) and any limitations and requirements the applicant wishes to apply for to refine the scope of the regulated activities; an example includes a limitation on the types of client it wishes to carry on business with or a requirement not to hold or control client money;
(2) determine whether it needs to apply to the Society of Lloyd's for admission to the register of underwriting agents or to any other bodies; the timing of these applications should be included in the applicant's plans;
(3) determine which prudential category (and, if relevant, sub-category) will apply, and therefore its minimum regulatory financial requirements;
(4) determine the rules in the Handbook which will apply to the activities it proposes to carry on, and take all reasonable steps to ensure that it is ready, willing and organised to comply with those rules;
(5) determine the systems and controls necessary both to support its activities and to comply with the relevant rules, and have plans to implement and test these systems before the FSA determines its application;
(6) prepare a business plan setting out the planned activities (and related risks), budget and resources (human, systems and capital);
(7) determine which persons will fall under the FSA's approved persons regime and apply for the necessary approval; and
(8) obtain any auditors' or reporting accountants' reports that are required to support its application or have been requested by the FSA; the auditors or other professionals should be involved early in the process to ensure that the planned work on the application will be sufficient to enable them to provide any opinions required.

AUTH 1.6.10

See Notes

handbook-guidance
(1) It is in the interests of the applicant and the FSA that the application pack, when submitted, should be fully completed and address any areas of potential regulatory concern.
(2) If an applicant's plans are complex (for example, if they include insurance business, accepting deposits or certain types of designated investment business), high risk or innovative (for example, if they raise new or unusual issues), then the FSA would expect to be in discussion with the applicant while the applicant is developing the material needed for the formal application.
(3) Where appropriate - for example in an application for Part IV permission including insurance business or accepting deposits - FSA staff may, by agreement with the applicant, arrange a pre-application meeting or discuss aspects of the applicant's draft business plan or other relevant documents while the application is being prepared. This will help the FSA develop its knowledge of the applicant and the proposed business.

AUTH 1.6.11

See Notes

handbook-guidance
In addition, all applicants are encouraged to take the opportunity to discuss particular issues with the FSA as they arise, with a view to tackling them before submitting the completed application pack. Applicants are also advised to review the application pack before submission and check that they have provided adequate responses to all questions (that is, responses appropriate to the scope and scale of their activities and the risks they may pose to consumers).

AUTH 1.6.12

See Notes

handbook-guidance
After receiving the application pack, the FSA will begin its formal process of consideration. The FSA Applications and Individual Approvals teams will review the application pack and approved persons regime forms respectively. During this process, the FSA may ask for additional information and is likely to meet the applicant's management and visit its premises before determining the application.

AUTH 1.7

Appointed representatives

AUTH 1.7.1

See Notes

handbook-guidance
An applicant for Part IV permission, an EEA firm or Treaty firm which is seeking to carry on designated investment business may wish to consider appointing an appointed representative if they become authorised.

AUTH 1.7.2

See Notes

handbook-guidance
(1) An appointed representative is a person who, as a result of satisfying conditions in section 39 of the Act (Exemption of appointed representatives) is an exempt person in respect of certain business which it carries on for an authorised person. The Act states that a person who is an authorised person cannot also be an appointed representative.
(2) The business for which an appointed representative may be exempt is specified in the Appointed Representatives Regulations. The business which an appointed representative carries on for a firm must fall within the scope of the firm's own permission.
(3) SUP 12 (Appointed representatives) contains guidance on the conditions in the Act, the Appointed Representatives Regulations and the FSA's rules and guidance which apply to a firm which is appointed or has appointed an appointed representative. An applicant for Part IV permission can notify the FSA of the persons it wishes to appoint as appointed representatives in the application pack.

AUTH 1.8

What other general guidance is available from the FSA?

AUTH 1.8.1

See Notes

handbook-guidance
It will not always be clear to a person whether or not its prospective business activities will be such that it requires authorisation. The FSA has established an Authorisation Enquiries team to help in such cases.

AUTH 1.8.2

See Notes

handbook-guidance
The Authorisation Enquiries team gives assistance by:
(1) producing guidance for persons who wish to find out whether they need to be authorised (see PERG 2);
(2) publishing guidance about areas where persons may have difficulty deciding whether or not authorisation or exemption is needed (this is included in AUTH App X [to be added at later date]); and
(3) responding to oral and written enquiries from applicants, prospective applicants, EEA firms, Treaty firms or prospective UCITS qualifiers (or their professional advisers) about their particular position under the Act.

AUTH 1.8.3

See Notes

handbook-guidance
The Authorisation Enquiries team also handles enquiries about financial promotions. Under the Act, the communication of a financial promotion by an unauthorised person is prohibited, unless its contents have been approved by an authorised person, or an exemption applies.

AUTH 1.8.4

See Notes

handbook-guidance
As well as being included as an appendix to AUTH, copies of all current guidance issued by Authorisation Enquiries are available separately from the FSA website at www.fsa.gov.uk or through the FSA's Publications Enquiries department on 020 7066 3298. The Authorisation Enquiries team will be pleased to clarify or discuss any aspects of the guidance in more detail. Enquiries about the scope of the Act may be made to the Authorisation Enquiries helpline by telephone on 020 7066 0082 or by e-mail to authorisationenquiries@fsa.gov.uk.

AUTH 1.8.5

See Notes

handbook-guidance
The FSA will review its guidance from time to time and may need to amend or withdraw published or written guidance in the light of changing circumstances, developing business practices, or case law. For the status of guidance issued by the FSA, see Chapter 6 of the Reader's Guide.

AUTH 1.9

Next steps?

AUTH 1.9.1

See Notes

handbook-guidance
To find out where next to look in the Authorisation manual, see AUTH 1 Annex 1 G. To find out who to contact at the FSA see AUTH 1.9.2 G.

AUTH 1.9.2

See Notes

handbook-guidance

Who to contact at the FSA

This table belongs to AUTH 1.9.1 G

AUTH 1 Annex 1

Introduction to the Authorisation Manual

AUTH 1 Ann 1

See Notes

handbook-guidance

AUTH 3

Applications
for Part IV permission

AUTH 3.1

Application and purpose

Application

AUTH 3.1.1

See Notes

handbook-guidance
This chapter applies to:
(1) an individual, a body corporate (including a branch of a body corporate), a partnership or an unincorporated association which is not an authorised person and which wishes to apply for Part IV permission to carry on regulated activities in the United Kingdom;
(2) an EEA firm or a Treaty firm seeking to carry on regulated activities in the United Kingdom other than through the exercise of an EEA right or Treaty right;
(3) an EEA firm, Treaty firm or UCITS qualifier wishing to apply for a top-up permission to carry on any regulated activity.

Purpose

AUTH 3.1.2

See Notes

handbook-guidance
This chapter gives guidance to applicants on how the FSA will exercise the powers granted to it in Part IV of the Act (Permission to carry on regulated activities) to determine an application and give Part IV permission. In particular, the chapter gives guidance on:
(1) permission under Part IV of the Act;
(2) the procedures, under section 51 of the Act (Application under this Part), for making an application to the FSA for Part IV permission;
(3) when and how the FSA will determine applications under section 52 of the Act (Determination of applications); and
(4) when and how a person becomes authorised under the Act.

AUTH 3.2

Introduction

AUTH 3.2.1

See Notes

handbook-guidance
(1) With certain exceptions (for example, EEA firms), a person wanting to carry on any one or more regulated activities must apply to the FSA for Part IV permission. If the FSA gives an applicant such permission, the applicant will become an authorised person.
(2) Authorisation gives a firm the ability to carry on regulated activities without breaching the general prohibition and incurring criminal liability (see PERG 2.2.1G). A firm may, however, be subject to regulatory action if it does not have the necessary Part IV permission for each regulated activity it carries on (see AUTH 3.3.3 G).

AUTH 3.2.2

See Notes

handbook-guidance
AUTH 3 Annex 1 G gives an overview of the application process from receipt of the application by the FSA.

AUTH 3.3

When is Part IV permission required and what does it contain?

AUTH 3.3.1

See Notes

handbook-guidance
A person will, broadly speaking, be treated as carrying on a regulated activity in the United Kingdom (and so, under section 20(1), need permission), where it is carried on in the circumstances described in PERG 2.4 (Link between activities and the United Kingdom). A Part IV permission under Part IV of the Act is required before the person carries on regulated activities unless the person has permission resulting from any other provisions in the Act (see PERG 2.10 (Persons carrying on regulated activities who do not need authorisation)).

AUTH 3.3.2

See Notes

handbook-guidance
Under section 20(1) of the Act (Requirement for permission), a firm must not carry on a regulated activity in the United Kingdom (or purport to do so) otherwise than in accordance with its permission.

AUTH 3.3.3

See Notes

handbook-guidance
Following a successful application to the FSA, an applicant will be given Part IV permission. The Part IV permission will specify all or some of the following elements:
(1) a description of the activities the firm can carry on (see AUTH 3.4), including any limitations (see AUTH 3.6);
(2) the specified investments involved (see AUTH 3.5); and
(3) if appropriate, requirements (see AUTH 3.7).

AUTH 3.3.4

See Notes

handbook-guidance
(1) Section 42(6) of the Act (Giving permission) requires the FSA to describe the regulated activities for which a firm is given Part IV permission; this description may include limitations (see AUTH 3.6). The Part IV permission may also include requirements (see AUTH 3.7).
(2) After being given Part IV permission, a firm can apply at any time to have a limitation or a requirement varied or removed, following the procedures in SUP 6 (Application to vary or cancel Part IV permission).

AUTH 3.3.5

See Notes

handbook-guidance
Under section 51(3) of the Act, an application for permission must be made in such manner as the FSA directs (see AUTH 3.9.3 D).

AUTH 3.4

Activities

AUTH 3.4.1

See Notes

handbook-guidance
(1) The activities for which an applicant may apply for Part IV permission are listed in PERG 2 Annex 2G (Regulated activities and the permission regime). The FSA has described these activities in the same way as regulated activities are specified in the Regulated Activities Order (see PERG 2.7 to PERG 2.8) but with three sub-divisions.
(2) The sub-divisions are that:
(a) advising on pension transfers and pension opt-outs is a separate category from advising on other investments; this distinction has been made because pension transfers and pension opt-outs are considered to be transactions which are high risk to consumers and it is appropriate to differentiate advice on them from other forms of advice;
(b) establishing, operating or winding up a collective investment scheme been sub-divided to distinguish regulated collective investment schemes from unregulated ones; this is because of the different regulatory requirements and risk characteristics of the two types of scheme; and
(c) safeguarding and administering investments has been divided into safeguarding and administration of assets (without arranging) and arranging safeguarding and administration of assets; this is because some firms arrange the provision of safe custody for clients instead of providing the facilities themselves.

AUTH 3.4.2

See Notes

handbook-guidance
It should be noted that some combinations of regulated activities are restricted by other legislation, such as the UCITS Directive and the Insurance Directives. In addition, applicants seeking to carry on specified activities in certain business areas, for example, ISA management, will be required to demonstrate that they satisfy additional regulatory obligations. Details of these restrictions and obligations are in AUTH 3.11 to AUTH 3.17.

AUTH 3.4.3

See Notes

handbook-guidance
If an applicant is uncertain whether the FSA will give Part IV permission for a particular combination of activities, it should seek professional advice and discuss the matter with the FSA before making a formal application for Part IV permission. These discussions with the FSA will not be part of the formal application process.

AUTH 3.5

Specified investments

AUTH 3.5.1

See Notes

handbook-guidance
The specified investments for which an applicant may apply for Part IV permission are listed in PERG 2 Annex 2G. In general, the FSA has described these specified investments in a way that mirrors the activities specified in the Regulated Activities Order (see PERG 2.6). The FSA has, however, sub-divided certain specified investments in the Regulated Activities Order to distinguish those investments which, among other things, are considered to have significantly different risk profiles. These are:
(1) commodity futures and commodity options and options on commodity futures, which have been distinguished from other futures and options;
(2) spread bets, which have been distinguished from other contracts for differences; and
(3) rolling spot forex contracts, which have been distinguished from other contracts for differences and futures.

AUTH 3.6

Limitations

AUTH 3.6.1

See Notes

handbook-guidance
The FSA may include appropriate limitations in a description of the regulated activities in a Part IV permission.

AUTH 3.6.2

See Notes

handbook-guidance
Generally speaking, a limitation limits, in some way, a particular regulated activity. Unlike requirements (see AUTH 3.7), each limitation is specific to a particular regulated activity (either to the specified activity, the specified investments or both). This is why the Act refers to a limitation being incorporated within the actual description of the regulated activity.

AUTH 3.6.3

See Notes

handbook-guidance
As part of its application for Part IV permission, an applicant may wish to apply for certain limitations (details of which are given in the application pack). Alternatively, the FSA may impose a limitation where it considers it appropriate after reviewing the application. Examples of limitations which may be applied for or imposed include:
(1) a limit on the types of client that a firm may deal with; this would be used either where an applicant's business plan makes it clear that it only intends to provide services for specific types of clients (for example, see AUTH 3.6.4 G) or where the FSA wishes to limit the types of clients a firm can deal with; or
(2) a limit on the number of clients with whom a firm may carry on a particular regulated activity during, for example, an initial period of operation; this might be used where, for example, a firm's systems are not yet adequate to be able to process a high volume of transactions; or
(3) a limit on the types of specified investments that a firm can deal in; this would be used either where an applicant's business plan makes it clear that it only intends to provide services in respect of certain specified investments or where the FSA wishes to limit the categories of specified investments a firm can deal with; or
(4) a limit on the type of insurance business which a firm may carry on in connection with certain categories of specified investments for which Part IV permission may be granted; for example, a limitation specifying that only reinsurance business may be carried on in relation to certain specified investments; (note that for direct insurance business, the Insurance Directives restrict the ability of the FSA to impose limitations on an individual class of specified investment).

AUTH 3.6.4

See Notes

handbook-guidance
(1) In relation to the carrying on of designated investment business (and related ancillary activities, including communication and approval of related financial promotions), COB 4.1.4 R (Requirement to classify) requires a firm to classify a client before conducting designated investment business with him or for him and that classification is relevant to the application of Principles 6,7,8 and 9. The classification of clients is used to apply appropriately differentiated market conduct and conduct of business provisions based on the expertise of the different clients. An applicant may, therefore, wish to apply to carry on designated investment business in respect of one or more of the following classifications:
(2) In practice, a firm may be permitted to carry on regulated activities that fall within the definition of designated investment business with one, or more, of these client categories.
(3) As explained in PRIN 1.2.4 G, a firm carrying on business other than designated investment business may choose to distinguish between customers and market counterparties in complying with the Principles. An applicant may, therefore, wish to apply to carry on business only with market counterparties.
(4) In relation to accepting deposits, the limitations which may be applied for or imposed include a limitation that the firm may accepting deposits from wholesale depositors only. A firm with such a limitation may receive less intensive supervision by the FSA, because of the reduced risk it poses to the regulatory objective of protecting consumers. However, the precise arrangements that would apply would be determined case by case and would be based on an assessment of the risks the firm posed to all four of the regulatory objectives.
(5) COB 4.1.4 R does not apply to a firm which, in relation to any customer, intends only to provide advice on a stakeholder product.

AUTH 3.6.5

See Notes

handbook-guidance
If, after reviewing an application, the FSA proposes to impose a limitation, the applicant will be advised formally (that is, the applicant will be sent a warning notice) and given an opportunity to make representations before the FSA reaches a final decision.

AUTH 3.6.6

See Notes

handbook-guidance
After the FSA gives a Part IV permission, a firm can apply at any time to vary that Part IV permission, including any limitation, following the procedures set out in SUP 6.

AUTH 3.7

Requirements

AUTH 3.7.1

See Notes

handbook-guidance
(1) Section 43 of the Act (Imposition of requirements) gives the FSA power to include any requirements in a Part IV permission that it considers appropriate. A requirement may be imposed on a firm to:
(a) take a particular action; or
(b) refrain from taking a particular action.
(2) The requirement may extend to activities which are not regulated activities (for example, see AUTH 3.7.6 G (3)) and the FSA may set a time at which the requirement expires.
(3) As part of its application for Part IV permission, an applicant may wish to apply for certain requirements (details of which are given in the application pack).

AUTH 3.7.2

See Notes

handbook-guidance
Generally speaking, a requirement will either be unrelated to the performance of regulated activities (for example, a requirement that relates to reporting) or will relate to all, or a number of, the regulated activities which an applicant wishes to carry on. This can be contrasted with a limitation, which is specific to one particular regulated activitiy (either to the specified activity, the specified investments or both), as in AUTH 3.6.

AUTH 3.7.3

See Notes

handbook-guidance
(1) Requirements can, among other things, be used by the FSA to control the performance of certain business activities which are not in themselves regulated activities; although in many cases a firm will require permission for a combination of regulated activities before the business activity can be carried on. The business activities controlled in this way are those which, in the interests of consumer protection, have certain minimum standards, for example in respect of the systems and controls required to meet regulatory or other obligations (for example, see the client money rules in CASS 4).
(2) As a result, applicants will be asked to specify as part of their application whether or not they wish to carry on business activities that include:
(a) the holding or controlling of client money; or
(b) ISA, PEP, or CTF management (including, in the case of CTF management, details of any third party administrator that it engages and with details of whether it intends to offer Revenue allocated CTF's and whether it intends to provide its own stakeholder CTF); or
(c) operating an investment trust savings scheme; or
(d) management of a broker fund.
(3) As part of demonstrating that it can satisfy and continue to satisfy the threshold conditions in respect of the regulated activities it wishes to carry on, an applicant will be expected to demonstrate that it is ready, willing and organised to satisfy, and continue to satisfy, any relevant regulatory obligations that would apply to any business activities it wishes to carry on (for example, CASS 4 (Client money)). An applicant that does not wish to engage in these activities should apply for a requirement to exclude performance of these activities from the scope of its Part IV permission.

AUTH 3.7.4

See Notes

handbook-guidance
(1) A requirement can also be used by the FSA to define the scope of a number of regulated activities carried on by a firm so that a particular differentiated regulatory regime applies. Examples of such regimes include those for oil market participants, energy market participants, locals, venture capital firms, corporate finance advisory firms and service companies. Where this is relevant, an applicant may wish to apply for Part IV permission which includes a requirement defining the scope of each of its regulated activities.
(2) As an example, an applicant wishing to act as a corporate finance advisory firm may be given Part IV permission to carry on the activities of advising on investments and arranging (arranging (bringing about) deals in investments), subject to a requirement that the firm carries on these activities only within the definition of a corporate finance advisory firm.
(3) As part of the application pack, an applicant will be asked whether it wishes to apply for a requirement to define the scope of its Part IV permission. An applicant that applies for Part IV permission with a requirement to reduce the scope of that permission will only be required to demonstrate to the FSA that it is able to satisfy, and continue to satisfy, the threshold conditions in respect of the reduced scope.

AUTH 3.7.5

See Notes

handbook-guidance
As part of the application process, an applicant will need to determine which prudential category it falls into and, in some cases, which sub-category (see AUTH 3.8.5 G). In some cases, a requirement may form part of the description of such a category or sub-category, in which case the applicant may wish to apply for Part IV permission subject to appropriate requirements. The FSA may also impose a requirement on a firm to require it to comply with certain financial requirements (see SUP 7.4 (Individual requirements)).

AUTH 3.7.6

See Notes

handbook-guidance
Examples of requirements which may be applied by the FSA in particular circumstances, include:
(1) a requirement, imposed under section 48 of the Act (Prohibitions and restrictions), that a firm given Part IV permission obtain the approval of the FSA before payment of a dividend; or
(2) a requirement to submit financial returns more often than normal, for example during the firm's first months or years of business; or
(3) a requirement to submit audited financial accounts of a parent company; or
(4) a requirement, on the permission of an insurer, to carry on only reinsurance business; or
(5) a requirement to submit periodic independent compliance reviews, performed by an appropriate person, during the first months or years of business.

AUTH 3.7.7

See Notes

handbook-guidance
If, after reviewing an application, the FSA proposes to impose a requirement, the applicant will be advised formally (that is, the applicant will be sent a warning notice) and given an opportunity to make representations before the FSA reaches a final decision.

AUTH 3.7.8

See Notes

handbook-guidance
Following the giving of a Part IV permission, a firm can apply, at any time, to vary that Part IV permission, including any requirement or limitation, following the procedures in SUP 6.

AUTH 3.8

The threshold conditions and financial resources

The threshold conditions

AUTH 3.8.1

See Notes

handbook-guidance
(1) Under section 41(2) of the Act (The threshold conditions), the FSA is required, in giving Part IV permission or imposing any requirement, to ensure that the applicant satisfies, and will continue to satisfy, the threshold conditions in relation to all the regulated activities for which it has or will have permission. The threshold conditions are in Schedule 6 to the Act.
(2) The FSA has provided guidance on the threshold conditions in COND. This guidance is not exhaustive and is written at a high level of generality as satisfaction of the threshold conditions is considered on a case-by-case basis, in relation to each regulated activity an applicant is seeking to carry on.

AUTH 3.8.2

See Notes

handbook-guidance
(1) There are six threshold conditions and certain additional conditions applying to a firm with Part IV permission:
(a) threshold condition 1 (Legal status) sets out the legal status that the applicant must have if it wishes to carry on certain regulated activities;
(b) threshold condition 2 (Location of offices) provides that:
(i) a body corporate constituted under the law of any part of the United Kingdom must have its head office and, if it has one, its registered office, in the United Kingdom; and
(ii) a non body corporate with its head office in the United Kingdom must carry on business in the United Kingdom;
(c) threshold condition 3 (Close links) relates to the effect of close links on supervisability;
(ca) threshold condition 2A (Appointment of claims representatives) provides that if it appears to the FSA that any person is seeking to carry on, or carrying on, motor vehicle liability insurance business, that person must have a claims representative in each EEA State other than the United Kingdom;
(d) threshold condition 4 (Adequate resources) relates to the adequacy of an applicant's resources;
(e) threshold condition 5 (Suitability) relates to the suitability of the applicant;
(f) additional conditions apply to non-EEA insurers (see COND 2.6 (Additional Conditions)).
(2) Threshold conditions 2A, 3, 4, and 5 enable the FSA to assess the applicant in the light of the activities it wishes to carry on and, in particular, make it clear that suitability to carry on one regulated activity does not mean that the applicant is suitable to carry on all regulated activities. Threshold conditions 3, 4 and 5 do not apply to Swiss general insurance companies.
(3) An incoming firm applying for a top-up permission must also satisfy the threshold conditions with the exception of threshold condition 2 (Location of offices): see COND 1.1 Application) and paragraphs 6 and 7 of Schedule 6 to the Act.
(4) The application of the threshold conditions to Swiss general insurance companies was varied by the Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001.

AUTH 3.8.3

See Notes

handbook-guidance
The FSA, in making a determination whether an applicant satisfies and will continue to satisfy the threshold conditions under section 41(2) of the Act, will consider whether an applicant can demonstrate that it is ready, willing and organised so as to enable it to comply with the specific regulatory obligations that will apply to the applicant if it is given Part IV permission to carry on the regulated activities referred to in its application.

Financial resources

AUTH 3.8.4

See Notes

handbook-guidance
(1) As part of its application, an applicant will be required to demonstrate that it has adequate financial resources to meet the financial resources requirement for its prudential category.
(2) The Single Market Directives, the Capital Adequacy Directive and the E-Money Directive set out minimum financial requirements for all firms which carry on banking, issuing e-money, insurance or investment services within the scope of the Single Market Directives and the E-Money Directive, that is, most firms that are credit institutions, financial institutions, insurance undertakings or investment firms as defined in these Directives. These requirements are reflected in PRU or in the relevant IPRU for each type of firm.

AUTH 3.8.5

See Notes

handbook-guidance
(1) An applicant will need to determine its prudential category and, in some cases, its sub-category. The application pack and AUTH 3 Annex 2 G give further details.
(2) In determining its prudential sub-category, an applicant may need to consider whether it falls under the scope of a Single Market Directive or the E-Money Directive, for example whether it will be an investment firm as defined in the ISD.
(3) However, an applicant which falls outside the Single Market Directive or the E-Money Directive will not have a right to passport into the EEA and will be subject to separate prudential requirements.

AUTH 3.8.6

See Notes

handbook-guidance
An applicant in the prudential category of bank or insurer should note that the FSA will give it individual guidance on its likely capital requirements: for example, the individual capital ratios for a bank (see IPRU(BANK) CO 4.1.1 (Individual capital ratios)) or the capital resources requirements of an insurer (see PRU 2.1)) during pre-application discussions (see AUTH 3.9.2 G).

AUTH 3.8.7

See Notes

handbook-guidance
Applicants should note that the prudential category and, where relevant, sub-category, not only determines which provisions in the relevant IPRU or PRU will apply, but which provisions on auditors, financial reporting and transaction reporting in SUP will apply.

AUTH 3.8.8

See Notes

handbook-guidance
An applicant that is a member of a group should note that the FSA may take into consideration the impact of other members of the group on the adequacy of its resources (see the relevant sections of PRU or IPRU).

AUTH 3.9

Procedures in relation to applications for Part IV permission

Pre-application meetings

AUTH 3.9.1

See Notes

handbook-guidance
All applicants for Part IV permission are encouraged to contact the Authorisation and Approvals Department of the FSA to discuss their application before they send in an application form.

AUTH 3.9.2

See Notes

handbook-guidance
(1) If an applicant's plans are complex (for example, including insurance business or accepting deposits and some designated investment business), high risk or innovative (for example, raising new or unusual issues), the FSA will expect the applicant to discuss its plans with them before submitting an application for Part IV permission.
(2) FSA staff will be available to attend a pre-application meeting with such applicants to discuss the application and any issues or problem areas. If appropriate, for example in the case of an application to carry on insurance business or accepting deposits, FSA staff may, by agreement with the applicant discuss aspects of the application during its preparation, for example, the applicant's draft business plan or other relevant documentation. If relevant, FSA staff will discuss likely capital and, where relevant, liquidity ratios with the applicant to enable the applicant to prepare capital adequacy projections.
(3) Applicants should note that:
(a) a pre-application meeting is not a substitute for an applicant obtaining any professional assistance;
(b) a pre-application meeting is to give informal assistance to applicants (as set out in AUTH 3.9.2 G). A meeting might, for example, be used to help an applicant prepare its formal application for Part IV permission and to identify and address issues or problem areas at an early stage before time and costs are incurred in preparing a complete application. This assistance is not part of the application process outlined in the rest of AUTH 3.9.
(c) the submission of an incomplete application will start the formal application process, including the time limits for determination of incomplete applications (see AUTH 3.9.31 G) and the requirements for a fee (see AUTH 3.9.4 G (1)).

The application for permission

AUTH 3.9.3

See Notes

handbook-directions
(1) An applicant for Part IV permission, except in so far as the FSA may direct in an individual case, must apply in writing in the manner directed, and with the information required, in the application pack provided by the FSA.
(2) The application for Part IV permission must be:
(a) given to a member of, or addressed for the attention of, the Authorisation and Approvals Department; and
(b) delivered to the FSA by one of the methods in (3).
(3) The application may be delivered by:
(a) post to the address in (4);
(b) leaving the application at the address in (4) and obtaining a time-stamped receipt; or
(c) hand delivery to a member of the Authorisation and Approvals Department.
(4) The address for applications is: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.
(5) Until the application has been determined, an applicant which submits an application for Part IV permission must inform the FSA of any significant change to the information given in the application immediately it becomes aware of the change.

AUTH 3.9.4

See Notes

handbook-guidance
(1) An application should be accompanied by the application fee set by the FSA (see AUTH 4 (Authorisation Fees)).
(2) The application pack and accompanying guidance notes are available on www.fsa.gov.uk or from the Authorisation and Approvals Department of the FSA. To contact the Authorisation and Approvals Department:
(a) telephone on 020 7066 3954; or
(b) write to the Authorisation and Approvals Department at the address in AUTH 3.9.3 D (4); or
(c) email corporate.authorisation@fsa.gov.uk.

AUTH 3.9.5

See Notes

handbook-guidance
The application pack is made up of several sections and the ones which need to be completed will depend on the category of applicant. For example, the insurance sections will contain different application questions according to the type of applicant (for example, matters needing to be addressed vary for overseas applicants and Swiss general insurance companies). In addition, applicants will need to submit forms for approved persons (see AUTH 6 (Approved persons)) and controllers as part of the pack (see AUTH 3.9.24 G).

Information to be supplied to the FSA

AUTH 3.9.6

See Notes

handbook-guidance
Under section 51(1)(b) of the Act, an application for Part IV permission must give an address in the United Kingdom for service of any document required by the Act.

AUTH 3.9.7

See Notes

handbook-guidance
The application forms ask for general information about the applicant, its intended activities and any proposed or current unregulated activities. They also ask for details of how the applicant plans to comply with the FSA's regulatory obligations relating to the activities it seeks Part IV permission to carry on. The forms contain notes on completion and details of how the FSA can help.

AUTH 3.9.8

See Notes

handbook-guidance
In addition to the information in the application pack, the FSA may require the applicant to provide such further information as it reasonably considers necessary to enable it to determine the application, and to verify it as the FSA directs. This may include the provision of documents. The FSA may request such additional information during a pre-application meeting or after reviewing a submitted application pack. Should the FSA require further information on reviewing an application pack, the applicant will be advised in writing as early as possible.

AUTH 3.9.9

See Notes

handbook-guidance
The FSA will assess the applicant having regard to the regulatory objectives and will, therefore, be proportional in its procedures, including in the information which it seeks from applicants (see AUTH 1.4.4 G). Thus the nature of the information and documents requested by the FSA, either in the application pack or subsequently, will be proportional to the nature of the business the applicant intends to carry on. For example, a small company seeking to carry on low risk business will be required to submit a business plan and other information relevant to its size and the scope of the proposed business. Information which is requested from applicants as part of the application pack includes but is not limited to the following.
(1) A business plan which describes the regulated activities and any unregulated activities (except where not permitted, for example see AUTH 3.12.2 G) which the applicant proposes to carry on, the management and organisational structure of the applicant and details of any proposed outsourcing arrangements. The level of detail required in the business plan will be appropriate to the risks to consumers arising from the proposed regulated and unregulated activities. For an applicant seeking to carry on insurance business, the business plan should include a scheme of operations in accordance with SUP App 2 (Insurer and friendly societies: schemes of operation).
(2) Appropriately analysed financial budget and projections which demonstrate that the applicant expects to comply with the relevant financial resources requirements appropriate to the applicant's prudential category (and in some cases sub-category).
(3) Details of systems to be used (which do not have to be in place at the time of initial application), compliance procedures and documentation.
(4) Details of the individuals to be involved in running the proposed business (such as directors, partners and members of the governing body, all of whom will be performing controlled functions) and any connected persons (see AUTH 3.9.23 G). AUTH 6 gives guidance on the approved person regime and the procedures for approval.

AUTH 3.9.10

See Notes

handbook-guidance
(1) The application pack should be accompanied by such other information as the applicant reasonably considers the FSA should be aware of for the purposes of determining the application. Any relevant supporting documentation should also be enclosed. The guidance notes to the application pack give further details about information to be provided by applicants, to enable them to answer the questions.
(2) In certain circumstances, the interests of the customers of an applicant would be significantly affected by the death or incapacity of an individual within the applicant. If this is the case, the applicant will be required to provide information on its arrangements to protect the interests of customers in that event. Examples include arrangements to enable urgent transactions to be carried out and unfinished transactions to be completed. The information should include the name and address, and such other details as the FSA may reasonably require, of an authorised person with whom arrangements have been made for the protection of customers. The guidance notes to the application pack give further details.

AUTH 3.9.11

See Notes

handbook-guidance
The application forms also require a statement from one or more members of the applicant's governing body confirming, to the best of their knowledge, the completeness and accuracy of information supplied.

AUTH 3.9.12

See Notes

handbook-guidance
Applicants should be aware that there may be a delay in processing applications if the information given to the FSA is inaccurate or incomplete; for example, if the business plan for an applicant does not describe in adequate detail the regulated activities for which the applicant seeks Part IV permission. Applicants should discuss any problems with the Enquiries and Applications Department (Applications team) before submitting the application or, if necessary, consider seeking appropriate professional advice.

AUTH 3.9.13

See Notes

handbook-guidance
At any time after receiving an application and before determining it, the FSA may give notice to the applicant to require it to provide additional information or documents. The circumstances of each application will determine what additional information or procedures are appropriate.

AUTH 3.9.14

See Notes

handbook-guidance
While applicants will often wish to discuss applications with the Enquiries and Applications Department (Applications team) during the application process; similarly, the FSA will often need to discuss and clarify information that has been submitted within the application pack. The exchange of information during the application process is viewed as important by the FSA, since the final decision about an application needs to be based on as complete a picture of the application as possible.

AUTH 3.9.15

See Notes

handbook-guidance
In addition, in considering the application, the FSA may:
(1) carry out any enquiries which it considers appropriate, for example, discussions with other regulators or exchanges;
(2) ask the applicant, or any specified representative of the applicant, to attend meetings at the FSA to give further information and explain any matter the FSA considers relevant to the application;
(3) require any information given by the applicant to be verified in such a way as the FSA may specify (for example, see AUTH 3.9.16 G);
(4) take into account any information which it considers appropriate in relation to the application, for example any unregulated activities which the applicant carries on or proposes to carry on;
(5) visit the premises which the applicant intends to use as its place of business.

Reports from third parties

AUTH 3.9.16

See Notes

handbook-guidance
Under section 51(6) of the Act, the FSA may require the applicant to verify information provided in such a way as the FSA directs. Thus, as part of the application, the FSA may require the applicant to provide, at its own expense, a report by an auditor, reporting accountant, actuary or other qualified person approved by the FSA. The report may be on such aspects of the information provided, or to be provided, by the applicant as the FSA may specify.

AUTH 3.9.17

See Notes

handbook-guidance
Applicants seeking to carry on long-term insurance business are also required to provide a certificate from an actuary confirming the appropriateness of the projections for the long-term insurance business and, in particular, the adequacy of premium rates and technical provisions and margin of solvency and how quickly capital strains from effecting new business will be overcome.

AUTH 3.9.18

See Notes

handbook-directions
If an applicant appoints a reporting accountant other than its own auditor to report on an application for Part IV permission, the applicant is directed to take reasonable steps to ensure that the reporting accountant satisfies the qualification and independence tests, as relevant, in SUP 3.4 (Auditor's qualifications) and SUP 3.5 (Auditor's independence).

AUTH 3.9.19

See Notes

handbook-directions
If an applicant appoints an actuary, to report on an application for Part IV permission, the applicant is directed to take reasonable steps to ensure that the actuary satisfies the qualification tests in SUP 4.3.8 G (actuaries' qualifications).

AUTH 3.9.20

See Notes

handbook-guidance
Occasionally, the FSA may identify a need for an independent report on specific areas of an application; for example, a report from the auditors of an applicant seeking to carry on regulated activities which include accepting deposits where the applicant's business plan is innovative, complex or raises concerns as a result of matrix management. Such reports will usually be discussed and agreed with the applicant as part of the pre-application meeting (see AUTH 3.9.2 G).

Applications to other bodies

AUTH 3.9.21

See Notes

handbook-guidance
In addition to applying to the FSA for Part IV permission:
(1) an applicant which will need permission from the Council of the Society of Lloyd's to conduct business as underwriting agents should apply for that permission at the same time as its application to the FSA; and
(2) an applicant should also determine whether it needs to apply to any other bodies, for example, to any exchanges or to other bodies for membership, the Office of Fair Trading for a consumer credit licence or to court for licences such as a gaming licence; the applicant should check when any such applications should be made.

Connected persons

AUTH 3.9.22

See Notes

handbook-guidance
(1) Under section 49 of the Act (Persons connected with an application), in considering an application for Part IV permission, the FSA may have regard to any person appearing to it to be, or likely to be, in a relationship with the applicant which is relevant.
(1A) The Financial Groups Directive Regulations make special provision where the FSA is exercising its functions under Part IV of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary provision. Broadly, where the FSA, in the course of carrying on supplementary supervision, is considering varying the Part IV permission of a person who is a member of a group which is a financial conglomerate, the consultation provision in section 49(2) of the Act are disapplied. In their place, the regulations impose special obligations, linked to the Financial Groups Directive, to obtain the consent of the relevant competent authorities, to consult those authorities and to consult with the group itself.
(2) A person in, or likely to be in, a relationship with an applicant which is relevant is known as a connected person. The FSA will assess whether a particular relationship is relevant in the light of the particular circumstances of each application. Examples of persons who might be considered connected with an applicant include, but are not limited to:
(a) a controller of the applicant; or
(b) an applicant's directors, partners or members of its governing body; or
(c) a company in the same group as the applicant; or
(d) a person with whom the applicant intends to enter into a material outsourcing agreement; or
(e) any other person who may exert influence on the applicant which might pose a risk to the applicant satisfying or continuing to satisfy the threshold conditions.

AUTH 3.9.23

See Notes

handbook-guidance
As a result, as part of the application process, the FSA may request information about any other person who the FSA determines is in a relationship with an applicant which is relevant. The FSA may request information from the applicant on persons who are connected persons or are likely to become connected persons under any proposed transactions or relationships.

AUTH 3.9.24

See Notes

handbook-guidance
(1) As part of the application process, the FSA may request information on an applicant's controllers, directors, partners or members of its governing body. The FSA will assess whether:
(a) the applicant's controller is a fit and proper person to have control over the firm;
(b) the applicant's directors, partners and members of the governing body who will be performing controlled functions are fit and proper persons to be granted approval under the approved persons regime (see AUTH 6).
(2) An applicant (other than a Swiss general insurance company seeking to establish an agency or branch in the United Kingdom or an EEA firm, or a Treaty firmin the circumstances set out in AUTH 3.1.1 G (2) and in AUTH 3.1.1 G (3)) will be required to provide the following information about its controllers:
(a) in the case of a controller who is not an authorised person, the information required in Controllers Form A SUP 11 Annex 4) and one or more of Controllers Form B SUP 11 Annex 5) in accordance with SUP 11.3.8 D and SUP 11.3.9 D; or
(b) in all other cases, the information required in Controllers Form A, sections 1, 5 and 6 SUP 11 Annex 4).

Commencing regulated activities

AUTH 3.9.25

See Notes

handbook-guidance
(1) If Part IV permission is given, the FSA will expect a firm to commence its regulated activity in line with its current business plan. Applicants should take this into consideration when determining when to make an application to the FSA.
(2) Applicants should be aware that the FSA may exercise its own-initiative powers to vary or cancel a Part IV permission once granted if they do not:
(a) commence a regulated activity for which they have Part IV permission within a period of at least twelve months from the date the permission was given; or
(b) carry on a regulated activity for which they have Part IV permission for a period of at least twelve months (irrespective of the date of the grant of permission).
(3) If FSA considers that it may be appropriate to exercise its own-initiative powers to vary or cancel a firm's Part IV permission, FSA staff will discuss the proposed action with the firm and ascertain the firm's reasons for not commencing or carrying on the regulated activities concerned. Applicants are advised to discuss any problems about commencing a regulated activity with the Enquiries and Applications Department (Applications team).

When will the FSA grant an application for Part IV permission?

AUTH 3.9.26

See Notes

handbook-guidance
(1) The FSA will assess the information provided in the application process. As noted in AUTH 3.8.1 G, the FSA is required, by section 41(2) of the Act, to ensure that an applicant will satisfy, and continue to satisfy, the threshold conditions in relation to all the regulated activities for which the applicant is seeking Part IV permission. However, section 41(3) of the Act states that the FSA's duty under section 41(2) of the Act does not prevent it, having regard to that duty, from taking such steps as it considers necessary in relation to a particular applicant, to secure the consumer protection objective.
(2) As part of the assessment of whether an applicant satisfies and will continue to satisfy the threshold conditions, the FSA will consider whether the applicant is ready, willing and organised to comply with the regulatory requirements to which it will be subject if it is granted Part IV permission to carry on the regulated activities referred to in its application.
(3) The FSA will give Part IV permission in respect of some categories of regulated activity only if the applicant can meet specific requirements. For example, Part IV permission including advising on pension transfers and pension opt-outs and will only be granted to applicants that will have persons (or individuals) qualified to advise in this area.

AUTH 3.9.27

See Notes

handbook-guidance
As noted in AUTH 3.6 and AUTH 3.7, the FSA may decide to grant an application for Part IV permission including appropriate limitations or requirements. Where the FSA imposes limitationsor requirements on a Part IV permission that were not applied for by the applicant, their precise nature will depend on the circumstances of each application. During the application process, the FSA will discuss with applicants any limitations or requirements it is considering imposing but which they have not applied for. The applicant may ask the FSA to reconsider its preliminary views on any such limitations or requirements in the course of the application process.

AUTH 3.9.28

See Notes

handbook-guidance
In some cases, the FSA would be minded to grant an application for Part IV permission as long as certain conditions are fulfilled. As an example, the FSA may advise an applicant that it is minded to grant its application subject to the applicant providing proof that its share capital or its required financial resources are in place or that it has satisfied an outstanding element of its business plan. Part IV permission will not, however, be given until the FSA is content that its conditions have been satisfied by the applicant and, as a result, the applicant satisfies the threshold conditions. Applicants are welcome to discuss with the Enquiries and Applications Department (Applications team) the circumstances in which the FSA may be prepared to determine an application subject to such conditions being met.

Other powers relating to the scope of Part IV permission

AUTH 3.9.29

See Notes

handbook-guidance
(1) In determining an application for Part IV permission, the FSA may:
(a) specify a narrower or wider description of regulated activity than that for which Part IV permission was originally sought; or
(b) give Part IV permission for a regulated activity which was not originally applied for.
(2) Occasionally, the FSA expects to use its power to give Part IV permission for an applicant to carry on a regulated activity for which it did not originally apply. This might happen when, as a result of correspondence and discussion with an applicant, it becomes clear that it needs Part IV permission to carry on different categories of activities or activities relating to different categories of specified investments than those it had originally applied for.
(3) The Insurance Directives set out minimum information requirements for an application for authorisation which include information on the specified investments the applicant proposes to deal in. If these requirements are not met, the FSA may not be able to use the power described in AUTH 3.9.29 G (1)(b).

How long will an application take?

AUTH 3.9.30

See Notes

handbook-guidance
(1) Under Part IV of the Act, the FSA has six months from the date of receipt of a completed application to make its determination.
(2) When the FSA receives an application which is incomplete, that is, when information or documents required to be submitted as part of the application are not provided, Part IV of the Act requires the FSA to determine that incomplete application, in any event, within twelve months of the initial receipt of the application.
(3) Within these time limits, however, the length of the process will relate directly to the complexity of the application. The FSA publishes standard response times on its web site at www.fsa.gov.uk, setting out how long the application process is expected to take in practice, and, from time to time, the FSA publishes its performance against these times.
(4) Unless it considers it is appropriate to do so, the FSA will not grant an application for Part IV permission until it has had the opportunity to review all the information and documents which it has requested in connection with the application (whether as part of the application or at a later date).

How will FSA make the decision?

AUTH 3.9.31

See Notes

handbook-guidance
The FSA's decision making procedures are in DEC and include the procedures the FSA will follow if it proposes to refuse an application for Part IV permission or grant an application subject to limitations or requirements not applied for.

Withdrawal of applications

AUTH 3.9.32

See Notes

handbook-guidance
An applicant may withdraw its application at any time before the application is granted or refused by giving written notice to the FSA. This written notice should be signed by a person with appropriate authority to bind the applicant.

Authorised status

AUTH 3.9.33

See Notes

handbook-guidance
(1) The Act states that an applicant which does not qualify for automatic authorisation by, or under, the Act, becomes authorised automatically if the FSA grants it Part IV permission.
(2) When the FSA grants an application for Part IV permission, it will inform the applicant by written notice, stating the date on which the permission takes effect.

AUTH 3.10

The FSA register

AUTH 3.10.1

See Notes

handbook-guidance
(1) Section 347 of the Act (The record of authorised persons etc) requires the FSA to maintain a public record containing certain details about all firms, including information as to the services they hold themselves out as able to provide.
(2) When the FSA grants an application for Part IV permission, it will update the FSA Register with a general description of the regulated activities the firm has permission to carry on.
(3) The FSA register can be accessed at www.fsa.gov.uk.

AUTH 3.11

Specific obligations: partnerships or unincorporated associations

AUTH 3.11.1

See Notes

handbook-guidance
Section 32 of the Act (Partnerships and unincorporated associations) treats all partnerships and unincorporated associations as if they were legal persons for the purposes of the grant of Part IV permission (Scottish partnerships already have the status of a legal person as have limited liability partnerships). So, where a partnership or unincorporated association proposes to carry on a regulated activity, the application for Part IV permission should be made in the name of the partnership or unincorporated association. However, a partnership should consider by whom the regulated activity will be carried on. If a partner carries on the regulated activity independently from the partnership, and not in his capacity as a partner, that person would need authorisation in his own right. The person may, for example, manage the assets of the partnership in his own name rather than in the name of the partnership. In such cases, the authorisation of the partnership itself would not, or may not, be necessary.

AUTH 3.11.2

See Notes

handbook-guidance
(1) Once a partnership or an unincorporated association is authorised by the FSA, then under section 32 of the Act:
(a) it is authorised to carry on the regulated activities concerned in the name of the partnership or unincorporated association; and
(b) its authorisation is not affected by any change in its membership as long as the substantive continuity test described in (2) is met.
(2) If a partnership or unincorporated association is dissolved, its authorisation continues to have effect in relation to any partnership or unincorporated association which succeeds to the business of the dissolved partnership or unincorporated association, as long as:
(a) the members of the resulting partnership or unincorporated association are substantially the same as those of the dissolved partnership or unincorporated association; and
(b) the succession is to the whole or substantially the whole of the business of the dissolved partnership or unincorporated association.

AUTH 3.11.3

See Notes

handbook-guidance
The treatment of partnerships described in AUTH 3.11.1 G and AUTH 3.11.2 G does not apply to a partnership which is a body corporate, that is, a limited liability partnership or any other partnership which is a body corporate and is constituted under the law of any place outside the United Kingdom.

AUTH 3.11.4

See Notes

handbook-guidance
Further guidance on the specific issues that arise for applicants that are limited partnerships under the Limited Partnerships Act 1907 or limited liability partnerships is in AUTH 3.22 (Specific issues: applicants that are limited partnerships under the Limited Partnerships Act 1907) and AUTH 3.23 (Specific issues: applicants that are limited liability partnerships).

AUTH 3.12

Specific obligations: applicants seeking to carry on insurance business

AUTH 3.12.1

See Notes

handbook-guidance
Under threshold condition 1 (Legal status) (see COND) and additional restrictions imposed under the Insurance Directives, an applicant seeking Part IV permission to carry on the regulated activities of effecting or carrying out contracts of insurance must be an incorporated company other than a limited liability partnership, a registered friendly society or a registered industrial and provident society.

AUTH 3.12.2

See Notes

handbook-guidance
An applicant seeking to carry on insurance business should note the restrictions in PRU 7.6.13 R which relate to the carrying on of other commercial business.

AUTH 3.12.3

See Notes

handbook-guidance
(1) As a result of these restrictions, the FSA will grant an applicant seeking to carry on insurance businessPart IV permission for insurance business, and any other regulated activities, only to the extent they are not restricted under PRU.
(2) For example, it may be appropriate for an applicant to apply for the regulated activity of accepting deposits. Also, an applicant seeking to carry on long-term insurance business may need to apply for certain designated investment business activities arising directly from the long-term insurance business it proposes to carry on. If the FSA gives an applicant Part IV permission for insurance business and other regulated activities, these other regulated activities will be subject to limitations, as appropriate, so as to comply with PRU 7.6.13 R.

AUTH 3.12.4

See Notes

handbook-guidance
Applicants should also be aware that the FSA will not grant Part IV permission to carry on both long-term and general insurance business, unless:
(1) the applicant's business will be restricted to reinsurance; or
(2) the applicant's general insurance business will be restricted to accident or sickness contracts (or both).

Friendly societies and reinsurance

AUTH 3.12.5

See Notes

handbook-guidance
Friendly societies are subject to the conditions and restrictions on reinsurance business under the Friendly Societies Act 1974 (registered friendly societies) and the Friendly Societies Act 1992 (incorporated friendly societies). A registered friendly society or an incorporated friendly society may only effect and carry out contracts of reinsurance if the conditions and restrictions set out in the relevant Friendly Societies Act are met. These include that:
(1) the approval of the actuary of the friendly society (A) is required;
(2) the friendly society is carrying on (and continues to carry on) direct insurance business of the same class; and
(3) the reinsurance is provided only to another friendly society (B).
The FSA will, therefore, not grant a friendly society a Part IV permission to carry on pure reinsurance business.

Contracts written on an ancillary and supplementary basis

AUTH 3.12.6

See Notes

handbook-guidance
Part IV permission to effect or carry out certain classes of contracts of insurance includes permission to effect or carry out certain classes of general insurance contracts on an ancillary or supplementary basis. In applying for Part IV permission to carry on insurance business, applicants will need to determine the specified investments for which Part IV permission will be necessary, having regard to whether certain classes of contract may qualify to be effected or carried out on an ancillary or supplementary basis. If they do, there is no need to apply for Part IV permission to effect or carry out those contracts (that is, the contracts which are eligible to be effected or carried out on an ancillary or supplementary basis) and an applicant should not do so.

AUTH 3.12.7

See Notes

handbook-guidance
Part IV permission to effect or carry out life and annuity contracts includes permission to effect or carry out accident or sickness contracts (or both) on a supplementary basis (see article 1(1)(c) of the First Life Directive).

AUTH 3.12.8

See Notes

handbook-guidance
Part IV permission to effect or carry out any class of general insurance contract includes permission to effect or carry out any other class of general insurance contract on an ancillary basis other than credit, suretyship or, except as provided in AUTH 3.12.9 G, legal expenses insurance (see part C of the Annex to the First Non-Life Directive). However, a friendly society may not effect or carry out any general insurance contracts, whether or not on an ancillary basis, other than those permitted under the Friendly Societies Act 1992.

AUTH 3.12.9

See Notes

handbook-guidance
Part IV permission to effect or carry out any class of general insurance contract includes permission to effect or carry out legal expenses contracts when AUTH 3.12.10 G is met and:
(1) if the main risk relates solely to the provision of assistance provided for persons who fall into difficulties while travelling, while away from home or while away from their permanent residence; or
(2) where it concerns disputes or risks arising out of, or in connection with, the use of sea-going vessels.

AUTH 3.12.10

See Notes

handbook-guidance
A contract of insurance will qualify to be effected or carried out on an ancillary basis if:
(1) the business in question is to be the subject of the same contract as the principal business and concerns the same object; and
(2) the risks covered are connected to the principal risk.

AUTH 3.12.11

See Notes

handbook-guidance
In determining the classes of specified investments for which Part IV permission is required, and those which may qualify to be written on an ancillary or supplementary basis, an applicant may need to take professional advice and may also wish to discuss this with a member of the Enquiries and Applications Department (Applications team).

AUTH 3.12.12

See Notes

handbook-guidance
The application for Part IV permission will need to provide information about the insurance business to be carried on by the applicant in the classes of specified investments for which Part IV permission is requested and also that qualifying to be carried on on an ancillary or supplementary basis.

Reporting requirements

AUTH 3.12.13

See Notes

handbook-guidance
An applicant for Part IV permission which includes insurance business should be aware that specific reporting requirements apply during its first three years of operation (see SUP App 2)

Applicants seeking to carry on insurance business with a head office outside the United Kingdom (other than EEA firms or Treaty firms)

AUTH 3.12.14

See Notes

handbook-guidance
In addition to AUTH 3.18, where an applicant for Part IV permission which has its head office outside the United Kingdom seeks to carry on insurance business in the United Kingdom, the following guidance is of relevance.

AUTH 3.12.15

See Notes

handbook-guidance
An applicant which has its head office outside the United Kingdom (other than an EEA firm, Treaty firm or a Swiss general insurance company) should note the requirement in IPRU(INS) 8.3R to appoint a chief executive (that is, the person who alone or jointly with one or more others, is responsible for the conduct of its business in the United Kingdom) and an authorised UK representative (see COND 2.6 (Additional Conditions) for the additional conditions which apply to non-EEA insurers and SUP 15.4 (Notified persons) for rules on notifications by overseas firms).

AUTH 3.12.16

See Notes

handbook-guidance
A Swiss general insurance company seeking to establish a branch in the United Kingdom should note the requirement referred to in COND 2.6.1 D to appoint an authorised UK representative for the United Kingdom.

AUTH 3.12.17

See Notes

handbook-guidance
An applicant with its head office outside the United Kingdom (other than an EEA firm or a Treaty firm) seeking permission to carry on direct or both direct and reinsurance business in the United Kingdom should note that specific prudential requirements apply PRU).

AUTH 3.13

Specific obligations: applicants seeking to carry on the regulated activities of accepting deposits or issuing electronic money

AUTH 3.13.1

See Notes

handbook-guidance
Under threshold condition 1 (Legal status), an applicant who seeks to carry on the regulated activities of accepting deposits or issuing electronic money must be either a body corporate or a partnership (see COND).

AUTH 3.14

Specific obligations: applicants seeking to hold or control client money

AUTH 3.14.1

See Notes

handbook-guidance
Unlike safeguarding and administering assets, holding or controlling client money is not a regulated activity in the Regulated Activities Order. As in AUTH 3.7.3 G, the FSA controls this activity by using requirements on a firm's Part IV permission.

AUTH 3.14.2

See Notes

handbook-guidance
(1) An applicant seeking to hold or control client money must complete the relevant sections of the application forms for Part IV permission. The applicant must be able to demonstrate to the FSA that it can satisfy, and continue to satisfy, the threshold conditions (see AUTH 3.8.1 G to AUTH 3.8.3 G) should the application for Part IV permission be granted. This will include demonstrating that it is ready, willing and organised to comply with the relevant requirements in CASS 4 (Client money).
(2) If an applicant is not able to demonstrate to the FSA that it can satisfy, and continue to satisfy, the threshold conditions to hold or control client money, but its application for Part IV permission is granted, the FSA will impose a requirement on the permission to the effect that the firm will not be able to hold, or control, client money.

AUTH 3.15

Specific obligations: applicants seeking to manage PEPS or ISAS

AUTH 3.15.1

See Notes

handbook-guidance
Management of PEPs and ISAs, in themselves, are not regulated activities in the Regulated Activities Order although the activities carried on by a firm in relation to PEP and ISA management constitute regulated activities. As a result, where the firm has Part IV permission which includes the regulated activities which would otherwise permit the firm to manage a PEP or an ISA, the FSA controls participation in these activities by using requirements on the firm's permission (see AUTH 3.7.3 G).

AUTH 3.15.2

See Notes

handbook-guidance
(1) An applicant seeking to manage PEPs or ISAs must complete the relevant sections of the application forms for Part IV permission, specifying the types of ISA and their constituent components which it intends to manage. An applicant should check that the regulated activities for which it is seeking permission will permit it to carry on the proposed activities in respect of the component concerned (for example, one of the sub categories of safeguarding and administering assets of the component includes equities) and:
(a) consider whether it needs to hold or control client money (see AUTH 3.14) if it has not applied for permission including accepting deposits; or
(b) have plans to put in place contractual provisions under which it will receive client money as agent for an approved bank so that any loss in relation to the ISA cash component will be compensated for by that approved bank or the compensation scheme.
(2) Cash ISAs raise particular issues. Applicants may find it helpful to seek an independent legal opinion on their proposals before they proceed and may wish to discuss their proposals with the FSA.

AUTH 3.15.3

See Notes

handbook-guidance
Applicants should also be aware that a firm wishing to act as an ISA or PEP manager will have to obtain approval from HM Revenue and Customs as an account manager under the HM Revenue and Customs regulations.

AUTH 3.15.4

See Notes

handbook-guidance
To manage ISAs or PEPs, an applicant must be able to demonstrate to the FSA that it can satisfy and continue to satisfy the threshold conditions should the application for Part IV permission be granted. This will include demonstrating that it is ready, willing and organised to comply with the relevant regulatory and HM Revenue and Customs requirements.

AUTH 3.15.5

See Notes

handbook-guidance
If an applicant is not able to demonstrate to the FSA that it is able to comply with those obligation, the FSA will impose a requirement on the firm's permission to the effect that the firm will not be able to manage PEPs or ISAs.

AUTH 3.16

Specific obligations: applicants seeking to establish, operate or wind up a stakeholder pension scheme

AUTH 3.16.1

See Notes

handbook-guidance
Applicants should be aware that, in addition to requiring permission from the FSA to establish, operate or wind up a stakeholder pension scheme, a firm will need to obtain exempt approval of the stakeholder pension scheme from HM Revenue and Customs and to register the scheme with the Pensions Regulator.

AUTH 3.16.2

See Notes

handbook-guidance
Establishment and operation of a stakeholder pension scheme may involve heavy investment in new systems or changes to existing systems which, in view of the limit on charges, might not be recovered for some time. So, the FSA will normally require an applicant wishing to establish, operate or wind up a stakeholder pension scheme to provide financial projections for the whole period up to the point at which the new business is expected to break even. The applicant must also be able to demonstrate to the FSA that it is ready, willing and organised to comply with the requirements (including those in COB 5, COB 6 and TC 2) applicable to operation of a stakeholder pension scheme.

AUTH 3.17

Specific obligations: applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme

AUTH 3.17.1

See Notes

handbook-guidance
An applicant seeking to establish a collective investment scheme should consult COLL and CIS for detailed requirements and guidance. Applicants should note that until 12 February 2007 they may elect to comply with COLL or CIS, although qualified investor schemes have to comply with COLL.

AUTH 3.17.2

See Notes

handbook-guidance
Applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme should note the rules in COLL 6.3.9 (Plan registers) and CIS 6.5 (Plan registers), which implements article 6 of the UCITS Directive and restrict the activities of a manager of an authorised unit trust which is a UCITS scheme.

AUTH 3.17.3

See Notes

handbook-guidance
An applicant which wishes to act as a UCITS management company should note the restriction on the activities it may engage in (see COLL 6.9.9 Restrictions of business of UCITS management companies) and CIS 16.5 (Restrictions of business of UCITS management companies).

AUTH 3.17.4

See Notes

handbook-guidance
A firm which is subject to the rule in COLL 6.9.9 or CIS 16.5 may, in addition, carry on 'connected activities' referred to in COLL 6.6.11 and CIS 16.5, which include management of PEPs, ISAs and stakeholder pension schemes, as long as they are dedicated to investments in unit trusts and OEICs for which the firm acts as manager or ACD. The Enquiries and Applications Department (Applications team) would be pleased to discuss any other activities which potential applicants consider may be connected.

AUTH 3.18

Specific obligations: additional considerations for applicants (other than EEA firms or Treaty firms) with a head office in a country of territory outside the United Kingdom seeking to establish a branch in the United Kingdom

AUTH 3.18.1

See Notes

handbook-guidance
This section applies to applicants identified in AUTH 3.1.1 G (1) (excluding a Swiss general insurance company). The exercise of EEA rights or Treaty rights by EEA firms or Treaty firms is dealt with separately in AUTH 5.

AUTH 3.18.2

See Notes

handbook-guidance
The FSA must always assess whether an applicant for Part IV permission as a whole will satisfy, and continue to satisfy, the threshold conditions. This applies even though an applicant for Part IV permission may have its head office outside the United Kingdom. In other words, the FSA will not just assess the circumstances of any proposed branch in the United Kingdom. In making this assessment of the applicant for Part IV permission as a whole, the FSA will take into account all relevant matters, including the extent to which the applicant is regulated in its home state. The FSA would seek to liaise with any home state regulator and would take into account information from it with respect to, for example, the adequacy of the applicant's resources and the applicant's suitability, having regard to the need to ensure that the applicant's affairs are conducted soundly and prudently. Information with respect to the conduct of the applicant's affairs would extend in particular to the adequacy of the internal control systems under SYSC.

AUTH 3.18.3

See Notes

handbook-guidance
The FSA's regulatory requirements, including PRU and IPRU, will apply to a firm in full and worldwide, unless otherwise stated. Where necessary, waivers, limitations and requirements will be used to ensure that appropriate prudential requirements apply to the branch, taking into account the home state supervisory arrangements and the particular circumstances of an applicant.

AUTH 3.18.4

See Notes

handbook-guidance
If the FSA considers that the applicant may be unable to satisfy the threshold conditions and that this cannot be addressed by the use of limitations and requirements, the FSA would have to conclude that a branch presence in the United Kingdom would be inappropriate. In such circumstances, the applicant may wish to consider forming a UK incorporated subsidiary as an alternative method of obtaining a presence in the United Kingdom.

AUTH 3.19

Specific obligations: applications in connection with group-restructuring

AUTH 3.19.1

See Notes

handbook-guidance
Where an application for Part IV permission is to be made as part of the restructuring of a group which includes, or will include, one or more firms, the group's plans should be discussed with the supervisor or lead supervisor for the group at the FSA. This is particularly important where a group intends to transfer business into a new entity from a firm in its group and then wishes to apply for cancellation of that firm's Part IV permission.

AUTH 3.19.2

See Notes

handbook-guidance
The application for Part IV permission for the new entity should be submitted to the Enquiries and Applications Department (Applications team) with details of the group and any business the group proposes to transfer. Applicants should note that particular requirements apply to transfers of insurance business, or if the business includes accepting deposits.

AUTH 3.19.3

See Notes

handbook-guidance
If applications for Part IV permission and for cancellation of Part IV permission (see SUP 6) have been submitted, then the Enquiries and Applications Department (Applications team) will liaise with the lead supervisor, who will liaise with the group in respect of its applications. Although the group will need to obtain Part IV permission for the new entity first, the FSA will endeavour to process, if possible, the other applications at the same time.

AUTH 3.19.4

See Notes

handbook-guidance
Statutory procedures apply to the transfer of insurance business or banking business (see SUP 18).

AUTH 3.20

Specific obligations: applicants seeking to establish a branch in, or provide services into, another EEA State

AUTH 3.20.1

See Notes

handbook-guidance
Certain firms (known as UK firms) may establish branches in, or provide cross border services into, other EEA States exercising rights under one of the Single Market Directives (this is often referred to as passporting). A firm may also have rights under the Treaty.

AUTH 3.20.2

See Notes

handbook-guidance
An applicant for Part IV permission that wishes, if the FSA grants the permission, to passport into another EEA State on, or shortly after, being given permission, is advised to contact the Corporate Authorisation department to discuss its plans (see AUTH 3.9.4 G (2) for contact details).

AUTH 3.20.3

See Notes

handbook-guidance
(1) SUP 13 (Exercise of passport rights by UK firms) gives guidance on the procedures to be followed by a UK firm to establish a branch in, or provide cross border services into, another EEA State. SUP 13 Annex 3 contains guidance on the Single Market Directives, including guidance on which firms are entitled to passport.
(2) COLLG 2 and CIS 2.3.4 G gives guidance when an operator of a UCITS wishes to market its scheme in another EEA State.
(3) Firms wishing to exercise rights under the Treaty in another EEA State should seek guidance from the FSA in the first instance.

AUTH 3.20.4

See Notes

handbook-guidance
An applicant may submit a separate notice of intention to passport (see SUP 13.6.4 G and SUP 13.7.3 G) with its application for Part IV permission. The notice of intention will be reviewed with the application for Part IV permission. The FSA is not, however, able to issue a consent notice (see SUP 13.6.10 G), or send a notice of intention (see SUP 13.7.9 G), to the relevant Host State regulators unless or until an applicant is authorised. As a result, an applicant seeking to establish a branch in another EEA State will not be able to satisfy the conditions in the Act for establishing a branch (see SUP 13.6.2 G) until after authorisation.

AUTH 3.20.5

See Notes

handbook-guidance
An applicant should note, however, that the business plans and financial projections and, where relevant, scheme of operations submitted with its application for Part IV permission should reflect any passported activity (and any branches outside the EEA) that the firm plans to commence in the immediate future.

AUTH 3.21

Treaty firms applying for Part IV Permission

AUTH 3.21.1

See Notes

handbook-guidance
The Treaty establishing the European Community provides firms with rights of establishment, under article 43, and the right to provide services under article 49. These rights can be exercised anywhere in any other State in the EEA.

AUTH 3.21.2

See Notes

handbook-guidance
Treaty firms which do not have, or do not wish to exercise, a treaty right to carry on a regulated activity in the United Kingdom, and which do not have an EEA right to passport in relation to that activity, must seek Part IV permission to do so (see AUTH 5.4.3 G to AUTH 5.3.13 G).

AUTH 3.21.3

See Notes

handbook-guidance
Where such a treaty firm has received Home State authorisationto carry on the regulated activities that it seeks to carry on under the Part IV permission, the FSA will take this into account when considering the application.

AUTH 3.21.4

See Notes

handbook-guidance
These applications will be considered on a case by case basis. Applicants should contact the Enquiries and Applications Department (Applications team) (see AUTH 3.9.4 G (2) for contact details) at an early stage to discuss their plans.

AUTH 3.22

Specific issues: applicants that are limited partnerships under the Limited Partnerships Act 1907

AUTH 3.22.1

See Notes

handbook-guidance
Limited partnerships are formed under the Limited Partnerships Act 1907, which also governs aspects of their operation. A limited partnership differs from a normal partnership in that not all the partners will be liable for all the debts and obligations of the partnership, though there must be at least one partner (the general partner) who is. The other partners (limited partners) are not permitted to be active in managing the day-to-day business of the limited partnership but may be involved only in its constitutional affairs (see section 6(1) of the Limited Partnerships Act 1907 (Modifications of general law in case of limited partnerships)).

AUTH 3.22.2

See Notes

handbook-guidance
Applications for Part IV permission should be in the name of the partnership (see AUTH 3.11.1 G and sections 32 (Partnerships and unincorporated associations) and 40(1)(c) (Application for permission) of the Act). This permission, if granted, will then cover the business to be carried on. Authorisation of the limited partnership will, in effect, authorise the partners when conducting the business of the partnership. However, if a partner conducts regulated activities separately from the limited partnership, this may trigger a need for the partner to seek authorisation independently. Thus, if the general partner seeks to manage the assets of the limited partnership by conducting business in his name (rather than as a partner in the name of the limited partnership), the general partner will need to be authorised . This is if the activities he carries on amount to managing investments or another regulated activity. In the case of a limited partnership therefore, the authorisation of the partnership itself may not always be appropriate or sufficient. The key question is how and by whom the regulated activities will be carried on. So, the scope of the application will differ depending on which regulated activities the applicant wishes to undertake (see AUTH 3.22.3 G to AUTH 3.22.4 G).

AUTH 3.22.3

See Notes

handbook-guidance
The limited partnership may be set up to invest the funds of the partners, for example, in the way of a venture capital fund. If so, it will usually be a collective investment scheme. The partnership will not require authorisation simply for being a collective investment scheme as this is not a regulated activity. It will also often be the case that the partnership, in investing its assets, will be excluded from the regulated activity of dealing in investments as principal (see AUTH 2.8.4 G (Dealing in investments as principal)). However, it is likely that the general partner will require permission from the FSA to establish, operate or wind up a collective investment scheme (see AUTH 3.17 (Specific obligations: applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme) and COLL and CIS). If the general partner delegates responsibility for operating a limited partnership that is a collective investment scheme to another person on behalf of the partnership, that other person will require authorisation from the FSA (whether or not the general partner also requires authorisation).

AUTH 3.22.4

See Notes

handbook-guidance
Where the limited partnership intends to manage the investments of third parties rather than the capital contributions of the partners, the limited partnership itself may require permission from the FSA. This is because it is likely to be carrying on the regulated activity of managing investments and may be carrying on other regulated activities as well. A typical example of this kind of limited partnership would be a hedge fund scheme.

AUTH 3.22.5

See Notes

handbook-guidance
If the limited partnership is a collective investment scheme, neither the limited partnership itself (if authorised) nor the general partner (if authorised) will be within the scope of the ISD in respect of its management of the scheme assets. So, neither of them will be an ISD investment firm. This is because the ISD specifically excludes from its scope collective investment undertakings and their managers and depositaries. This includes operators who manage both the scheme and its assets. However, where the management of the scheme and the assets are split, the activities of the asset manager will fall under the ISD.

AUTH 3.23

Specific issues: applicants that are limited liability partnerships

AUTH 3.23.1

See Notes

handbook-guidance
A limited liability partnership is a body corporate incorporated under either the Limited Liability Partnerships Act 2000 or other legislation having the same effect as the Limited Liability Partnerships Act 2000. So, a limited liability partnership is a body corporate and exists as a legal person separate from its members. Any limited liability partnership that wishes to carry on a regulated activity must make its application for Part IV permission in its own name. Consequently, unlike partners in a partnership , the members of the limited liability partnership do not personally become authorised . So, the members do not have permission to conduct regulated activities in their own names. The regulated activities must be carried on by the limited liability partnership itself.

AUTH 3.23.2

See Notes

handbook-guidance
A limited liability partnership has some features of a limited company and some of a partnership. For example, it can have the organisational flexibility of, and is subject to a taxation regime similar to that of, a partnership. However, although the partners of a general partnership are liable personally for the obligations of the partnership, a limited liability partnership (like a limited company) is a separate legal entity that is owned by its members. It is this structure that allows members to protect their personal assets from the liabilities of the body corporate .

AUTH 3.23.3

See Notes

handbook-guidance
The organisational flexibility available to a limited liability partnership means that all of the members can be involved in the day-to-day management and operations of the business. This is so, even though they have limited their liability for the limited liability partnership's obligations. This may be contrasted with the position of limited partners in a limited partnership.

AUTH 3.23.4

See Notes

handbook-guidance
A consequence of the organisational flexibility available to a limited liability partnership is the potential for widely differing organisational structures. This means that the proposed organisational structure for an applicant for Part IV permission will need to be explained fully in the application. This will allow the FSA to give proper consideration, with the applicant, to the way in which the approved persons and financial resource requirements will apply to it. All limited liability partnerships that are making an application for Part IV permission, whether or not they have been formed under the Limited Liability Partnerships Act 2000, will need to supply this information.

AUTH 3.23.5

See Notes

handbook-guidance
Authorised persons wishing to exchange their existing status to that of a limited liability partnership will need to make an application for Part IV permission in the name of the new entity, and will be expected to complete an application pack for Part IV permission. A firm considering changing its existing status should contact the Enquiries and Applications Department (Applications team) (see AUTH 1.9.2 G) at an early stage for advice on what will be required.

AUTH 3.24

Specific obligations: applicants wishing to operate an ATS

AUTH 3.24.1

See Notes

handbook-guidance
If an applicant who wishes to operate an ATS intends to assume responsibility for the clearing or settlement of transactions effected using the ATS, the applicant should provide sufficient information with its application to demonstrate that it has adequate arrangements in place to ensure efficient clearing or settlement (as the case may be) of the transactions.

AUTH 3 Annex 1

Application for Part IV Permission

AUTH 3 Annex 1.1

See Notes

handbook-guidance

AUTH 3 Annex 2

AUTH 3 Annex 2.1

See Notes

handbook-guidance

AUTH 3 Annex 3

Determination of an applicant's prudential category

AUTH 3 Annex 3.1

See Notes

handbook-guidance

AUTH 4

Authorisation
Fees

AUTH 4.1

Introduction

Application

AUTH 4.1.1

See Notes

handbook-rule
This chapter applies to:
(1) every applicant for Part IV permission (including an incoming firm applying for top-up permission);
(2) every Treaty firm that wishes to exercise a Treaty right to qualify for authorisation under Schedule 4 to the Act (Treaty rights) in respect of regulated activities for which it does not have an EEA right; and
(3) an applicant for a certificate under article 54 of the Regulated Activities Order.

AUTH 4.1.2

See Notes

handbook-guidance
This chapter does not apply to:
(1) an EEA firm that wishes to exercise an EEA right; or
(2) an ICVC; or

Purpose

AUTH 4.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out the requirements on applicants for Part IV permission, and Treaty firms qualifying for authorisation under Schedule 4 to the Act (Treaty rights), to pay fees.

Background

AUTH 4.1.4

See Notes

handbook-guidance
GEN 3 (FSA Fees - General Provisions) applies to fees required by this chapter.

AUTH 4.1.5

See Notes

handbook-guidance
Most of the detail of what fees are payable by applicants and Treaty firms is set out in AUTH 4 Annex 1.

AUTH 4.1.5A

See Notes

handbook-guidance
AUTH 4 Annex 2 R contains details of the application fees payable by applicants seeking to obtain permission to carry out any of the activities included in the A.2 (mortgage lenders and administrators), A.18 (mortgage lenders, advisers and arrangers) and A.19 (general insurance mediation) activity groups, for the period before these activities begin to be subject to regulation.

AUTH 4.1.6

See Notes

handbook-guidance
The rates set for authorisation fees represent an appropriate proportion of the costs of the FSA in processing the application or exercise of Treaty rights.

AUTH 4.1.7

See Notes

handbook-guidance
Except as set out in AUTH 4.1.7A G, applications (and exercises of Treaty rights) are categorised by the FSA for the purpose of fee raising as complex, moderately complex and straightforward as identified in AUTH 4 Annex 1. This differentiation is based on the permitted activities sought and does not reflect the FSA's risk assessment of the applicant (or Treaty firm).

AUTH 4.1.7A

See Notes

handbook-guidance
For the period before the activities referred to in AUTH 4.1.5A G are subject to regulation, applications for the A.2 (mortgage lenders and administrators), A.18 (mortgage lenders, advisers and arrangers) and A.19 (general insurance mediation) activity groups are categorised by the FSA for the purpose of fee raising using a measure of the amount of business being undertaken by the person, as detailed in AUTH 4 Annex 2 R.

AUTH 4.1.8

See Notes

handbook-guidance
A potential applicant (or Treaty firm) has the opportunity to discuss its proposed application (or exercise of Treaty rights) with the FSA before submitting it formally (see AUTH 3.9.1 G). If an applicant (or Treaty firm) does so, the FSA will be able to use that dialogue to make an initial assessment of the fee categorisation and therefore indicate the authorisation fee that should be paid.

AUTH 4.1.9

See Notes

handbook-guidance
See AUTH 3.9 in relation to the procedures for making applications for Part IV permission and AUTH 5 for procedures for the exercise of Treaty rights by Treaty firms.

AUTH 4.1.10

See Notes

handbook-guidance
Authorisation fees are not refundable.

AUTH 4.2

Obligation to Pay Authorisation Fees

General

AUTH 4.2.1

See Notes

handbook-rule
A person to whom this chapter applies must pay to the FSA an authorisation fee for each application made (or exercise of a Treaty right), as set out in AUTH 4 Annex 1 and AUTH 4 Annex 2 R.

Amount

AUTH 4.2.2

See Notes

handbook-rule
In respect of a particular application (or exercise) the authorisation fee referred to in AUTH 4.2.1 R is the highest of the tariffs set out in part 1 of AUTH 4 Annex 1 and part 2 of AUTH 4 Annex 2 R which apply to that application (or exercise).

AUTH 4.2.3

See Notes

handbook-guidance
If an application (or exercise of a Treaty right) falls within more than one category, only one fee is payable. That fee is the one for the category to which the highest fee tariff applies.

Due date and method of payment

AUTH 4.2.4

See Notes

handbook-rule
The sum payable under AUTH 4.2.2 R must be paid:
(1) by bankers draft, cheque or other payable order;
(2) in full without deduction; and
(3) on or before the date on which the application is made (or notice of exercise is given).

AUTH 4.2.5

See Notes

handbook-guidance
The appropriate authorisation fee is an integral part of an application for Part IV permission. Any application pack received by the FSA without the accompanying appropriate authorisation fee, in full and without deduction (see AUTH 4.2.4 R), will not be treated as an application made, incomplete or otherwise, in accordance with section 51(3)(a) of the Act. Where this is the case, the FSA will contact the applicant to point out that the application cannot be progressed until the appropriate fee has been received. In the event that the appropriate authorisation fee, in full and without deduction, is not forthcoming, the application pack will be returned to the applicant and no application will have been made.

Modification for certain Treaty firms

AUTH 4.2.6

See Notes

handbook-rule
If a certificate has been issued under paragraph 3(4) of schedule 4 to the Act in respect of an exercise of a Treaty right, no sum payable under AUTH 4.2.2 R.

AUTH 4.2.7

See Notes

handbook-rule
If no certificate has been issued under paragraph 3(4) of schedule 4 to the Act in respect of an exercise of a Treaty right, the sum payable is as specified in Part 4 of AUTH 4 Annex 1.

AUTH 4.3

Obligation to pay certification fees

General

AUTH 4.3.1

See Notes

handbook-rule
An applicant for a certificate under article 54 of the Regulated Activities Order must pay to the FSA the application fee specified in Part 6 of AUTH 4 Annex 1.

Due date and method of payment

AUTH 4.3.2

See Notes

handbook-rule
The application fee must be paid:
(1) by bankers draft, cheque or other payable order;
(2) in full without deduction; and
(3) on or before the date on which the application is made.

AUTH 4.3.3

See Notes

handbook-guidance
An application for an article 54 certificate will be treated as incomplete until the application fee has been paid.

AUTH 4 Annex 1

Authorisation fees payable

See Notes

handbook-rule

AUTH 4 Annex 2

Authorisation fees payable in relation to the A.2 and A.18 activity groups up to and including 30 October 2004 and the A.19 activity group up to and including 13 January 2005

See Notes

handbook-guidance

AUTH 5

Qualifying for authorisation under the Act

AUTH 5.1

Application and purpose

Application

AUTH 5.1.1

See Notes

handbook-guidance
(1) This chapter applies to an EEA firm that wishes to exercise an entitlement to establish a branch in, or provide cross border services into, the United Kingdom under a Single Market Directive. (The Act refers to such an entitlement as an EEA right and its exercise is referred to in the Handbook as "passporting"). (See SUP App 3 (Guidance on passporting issues) for further guidance on passporting).
(2) The chapter also applies to:
(a) a Treaty firm that wishes to exercise rights under the Treaty in respect of regulated activities not covered by the Single Market Directives and qualify for authorisation under Schedule 4 to the Act (Treaty Rights); and
(b) a UCITS qualifier, that is, an operator, trustee or depositary of a recognised collective investment scheme, constituted in another EEA State, and which qualifies for authorisation under Schedule 5 to the Act (Persons concerned in collective investment schemes).
(3) The provisions implementing the Single Market Directives are within the coordinated field (see PERG 2.9.18G(1)). So, where an incoming ECA provider intends to provide electronic commerce activity that consist of activities that fall within one of the Single Market Directives, the passporting requirements on exercising an EEA right in this chapter will apply.

AUTH 5.1.2

See Notes

handbook-guidance
This chapter does not apply to:
(1) an EEA firm that wishes to carry on in the United Kingdom activities which are outside the scope of its EEA right and the scope of a permission granted under Schedule 4 to the Act; in this case the EEA firm requires a "top-up permission" under Part IV of the Act and `should refer to AUTH 3 (Applications for Part IV permission); or
(2) a person participating in a community co-insurance operation by the provision of services and otherwise than as leading insurer, carrying on any insurance activity; by virtue of Article 11 of the Regulated Activities OrderCommunity co-insurance operation is treated as authorised on completion by the leading insurer of the requirements of Schedule 3 to the Act.
(3) a Treaty firm that wishes to provide electronic commerce activities into the United Kingdom.

AUTH 5.1.3

See Notes

handbook-guidance
(1) Under The Gibraltar Order made under section 409 of the Act (Gibraltar), a Gibraltar firm is treated as an EEA firm under Schedule 3 to the Act if it is:
(a) authorised in Gibraltar under the Insurance Directives; or
(b) authorised in Gibraltar under the Banking Consolidation Directives.
(2) A Gibraltar insurance company is allowed to passport its services into the United Kingdom if it complies with the relevant notification procedures. Similarly, a Gibraltar credit institution is allowed to passport into the United Kingdom to provide banking services provided those services fall within items 1 to 6 in Annex 1 to the Banking Consolidation Directive. So, any references in this chapter to EEA State or EEA right include references to Gibraltar and the entitlement under the Gibraltar Order where appropriate.
(3) The entitlement in the Gibraltar Order does not, however, extend to investment services as Gibraltar investment firms have not been granted the right to passport into the United Kingdom.

Purpose

AUTH 5.1.4

See Notes

handbook-guidance
(1) This chapter explains how an EEA firm and a Treaty firm can qualify for authorisation under Schedules 3 and 4 to the Act and how a UCITS qualifier is authorised under Schedule 5 to the Act.
(2) This chapter also provides guidance on Schedule 3 to the Act for an incoming EEA firm that wishes to establish a branch in the United Kingdom instead of, or in addition to, providing cross border services into the United Kingdom or vice versa.

AUTH 5.1.5

See Notes

handbook-guidance
(1) EEA firms should note that the chapter only addresses the procedures which the FSA will follow under the Act after it has received a consent notice or been notified of an EEA firm's intentions by its Home State regulator. So, an EEA firm should consider this guidance in conjunction with the requirements with which it will have to comply in its Home State.
(2) The guidance in this chapter represents the FSA's interpretation of the Single Market Directives the Act and the secondary legislation made under the Act. The guidance is not exhaustive and should not be seen as a substitute for a person consulting the legislation or taking legal advice.

AUTH 5.2

EEA firms and Treaty firms

AUTH 5.2.1

See Notes

handbook-guidance
A person will only be an EEA firm or a Treaty firm if it has its head office in an EEA State other than the United Kingdom. EEA firms and Treaty firms are entitled to exercise both the right of establishment and the freedom to provide services under the Treaty. The difference, however, is that an EEA firm has a right to passport under a Single Market Directive, whereas a Treaty firm carries on activities which do not fall within the scope of a Single Market Directive. An EEA firm may also be a Treaty firm if it carries on such activities. A person may be a Treaty firm, where, for example, it carries on business that:
(1) comprises regulated activities, such as reinsurance, which are not covered by any Single Market Directives; or
(2) includes regulated activities which do not fall within the scope of the Single Market Directive under which it is entitled to exercise an EEA right.

AUTH 5.2.2

See Notes

handbook-guidance
An EEA firm may passport those activities which fall within the scope of the relevant Single Market Directive as long as they are included in its Home State authorisation.

AUTH 5.3

Qualification for authorisation under the Act

EEA firms

AUTH 5.3.1

See Notes

handbook-guidance
Section 31 of the Act (Authorised persons) states that an EEA firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 3 to the Act (EEA Passport Rights). Under paragraph 12 of Part II of that Schedule, an EEA firm qualifies for authorisation if:
(1) it is seeking to establish a branch in the United Kingdom in exercise of an EEA right and satisfies the establishment conditions (see AUTH 5.4.2 G); or
(2) it is seeking to provide cross border services into the United Kingdom in exercise of an EEA right and satisfies the service conditions (see AUTH 5.5.3 G).

AUTH 5.3.2

See Notes

handbook-guidance
  1. (1) On qualifying for authorisation, subject to AUTH 5.3.2 G (1A), an EEA firm will have permission to carry on each permitted activity (see (2) below) which is a regulated activity:
    1. (a) through its UK branch (if it satisfies the establishment conditions); or
    2. (b) by providing cross border services into the United Kingdom (if it satisfies the service conditions).
  2. (1A)
    1. (a) Paragraph (1) does not apply to the activity of dealing in units in a collective investment scheme in the United Kingdom where:
      1. (i) the firm is an EEA UCITS management company;
      2. (ii) the firm satisfies the establishment conditions in AUTH 5.4.2 G; and
      3. (iii) the FSA notifies the EEA firm and the EEA firm's Home State regulator that the way in which it intends to market a relevant scheme in the United Kingdom does not comply with the law in force in the United Kingdom.
    2. (b) The FSA's notice under (1A)(a)(iii) has to be given to the EEA firm within two months of receiving the consent notice (AUTH 5.4.2 G(1)) and will be similar to a warning notice.
    3. (c) For details of the FSA's procedures for the giving of warning notices and references to the Tribunal, see DEC 2.2 (Statutory notice procedure: Warning notice and decision notice procedure) and DEC 5 (References to the Tribunal, publication and services of notices).
  3. (2) The permitted activities of EEA firm are those activities identified in the consent notice, regulator's notice or notice of intention. Permitted activities may include activities that are within the scope of a Single Market Directive but which are unregulated activity in the United Kingdom.
  4. (3) Paragraph 15(2) of Part II of Schedule 3 to the Act states that this permission is treated as being on terms equivalent to those appearing in the consent notice, regulator's notice or notice of intention. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

AUTH 5.3.3

See Notes

handbook-guidance
An EEA firm which has qualified for authorisation is referred to in the Handbook as an incoming EEA firm.

Treaty firms

AUTH 5.3.4

See Notes

handbook-guidance
Under section 31 of the Act, a Treaty firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 4 (Treaty Rights), that is:
(1) the Treaty firmis seeking to carry on a regulated activity; and
(2) the conditions set out in paragraph 3(1) of Schedule 4 to the Act are satisfied.

AUTH 5.3.5

See Notes

handbook-guidance
The conditions in paragraph 3(1) of Schedule 4 to the Act are that:
(1) the Treaty firm has received authorisation under the law of its Home State to carry on the regulated activities it seeks to carry on (under paragraph 3(2)). A Treaty firm is not to be regarded as so authorised unless its Home State regulator has so informed the FSA in writing); and
(2) the relevant provisions of the law of the firm'sHome State:
(a) afford equivalent protection (see AUTH 5.3.6 G); or
(b) satisfy the conditions laid down by a Community instrument for the co-ordination or approximation of laws, regulations, or administrative provisions of EEA States relating to the carrying on of that activity; and
(3) the Treaty firm has no EEA right to passport in relation to that activity under one of the Single Market Directives in respect of that activity.

AUTH 5.3.6

See Notes

handbook-guidance
Paragraph 3(3) of Schedule 4 to the Act states that Home State provisions afford equivalent protection if, in relation to the Treaty firm carrying on of the regulated activity, they afford consumers protection which is at least equivalent to that afforded by or under the Act in relation to that activity. A certificate issued by the Treasury that the provisions of the law of a particular EEA State afford equivalent protection in relation to the activities specified in the certificate is conclusive evidence of that fact.

AUTH 5.3.7

See Notes

handbook-guidance
On qualifying for authorisation a Treaty firm will have permission to carry on each permitted activity which is a regulated activity. This permission will be treated on the same terms as those which apply to the Treaty firm'sHome State authorisation. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

AUTH 5.3.8

See Notes

handbook-guidance
The effect of paragraph 5(1) and 5(2) of Schedule 4 to the Act is that a Treaty firm which qualifies for authorisation under that Schedule must, at least seven days before it carries on any of the regulated activities covered by its permission, give the FSA written notice of its intention to do so. Failure to do so is a criminal offence under paragraph 6(1) of that Schedule.

AUTH 5.3.9

See Notes

handbook-directions
(1) A notice from a Treaty firm under paragraph 5 (2) of the Schedule 4 to the Act must be given in writing in the manner directed, and with the information required, in the information pack provided by the FSA.
(2) The notice must be:
(a) given to a member of, or addressed for the attention of, the Enquiries and Application Department (Applications team); and
(b) delivered to the FSA by one of the methods in (3).
(3) The notice may be delivered by:
(a) post to the address in AUTH 5.3.11 G below; or
(b) leaving the application at the address in AUTH 5.3.11 G below and obtaining a time-stamped receipt; or
(c) hand delivery to a member of the Enquiries and Applications Department (Applications team).

AUTH 5.3.10

See Notes

handbook-guidance
(1) The information pack required by AUTH 5.3.9 D should be accompanied by confirmation of the Treaty firm's authorisation from the Home State regulator, as referred to in AUTH 5.3.5 G (1).
(2) An information pack may be obtained from the Authorisation and Approvals Department (Authorisation teams).

AUTH 5.3.11

See Notes

handbook-guidance
(1) To contact the Authorisation and Approvals Department (Authorisation teams):
(a) telephone on +4420 7066 3954 or fax on +4420 7066 xxxx; or
(b) write to: Authorisation and Approvals Department (Authorisation teams), The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS; or
(c) email corporate.authorisation@fsa.gov.uk

AUTH 5.3.12

See Notes

handbook-guidance
(1) The guidance in PERG 2 (Authorisation and regulated activities) is relevant to Treaty firms to help them determine if they require authorisation under the Act.
(2) A Treaty firm which qualifies for authorisation is referred to in the Handbook as an incoming Treaty firm. It has, for each regulated activity for which the conditions in AUTH 5.3.5 G are satisfied, permission, under paragraph 4 of Schedule 4 to theAct, to carry it on through its UK branch or by providing cross border services into the United Kingdom.

AUTH 5.3.13

See Notes

handbook-guidance
(1) An EEA firm that is carrying on both direct insurance and reinsurance business will be entitled to passport under Schedule 3 to the Act in relation to the direct insurance business. It will also have a Treaty right under Schedule 4 to the Act. Such EEA firms are advised to discuss their particular circumstances with the Enquiries and Applications Department (Applications team) before sending in their notification under AUTH 5.5.3 G.
(2) An insurance company with its head office in an EEA State other than the United Kingdom that is carrying on pure reinsurance business in that State, and which wishes to carry on such business in the United Kingdom, is advised to discuss its particular requirements with the Enquiries and Applications Department (Applications team). It may be entitled to exercise a Treaty right provided it satisfies the conditions in paragraph 3(1) of Schedule 4 to the Act (see AUTH 5.3.5 G). Otherwise, it will have to seek a Part IV permission (see AUTH 3 (Applications for Part IV Permission)).

UCITS qualifiers

AUTH 5.3.14

See Notes

handbook-guidance
Under Schedule 5 to the Act (Persons concerned in collective investment schemes), a person who for the time being is an operator, trustee or depository of a scheme which is a recognised scheme under section 264 of the Act is an authorised person. Such a person is referred to in the Handbook as a UCITS qualifier.

AUTH 5.3.15

See Notes

handbook-guidance
A UCITS qualifier has permission under paragraph 2 of Schedule 5 to the Act, to carry on, as far as is appropriate to the capacity in which it acts in relation to the scheme:
(1) the establishing, operating or winding up of a collective investment scheme, and
(2) any activity in connection with, or for the purposes of, the scheme.

AUTH 5.3.16

See Notes

handbook-guidance
A UCITS qualifier should refer to COLLG or to the following sections of COLL and CIS for requirements for recognised schemes:
(1) COLLG 9.2.1G and CIS 16.1.8 G for guidance on notifications;
(2) COLLG 9.2.1G and CIS 17.2 for guidance on information and documentation requirements; and
(3) COLL 9.4 and CIS 17.4 which includes guidance on what facilities need to be maintained.

AUTH 5.4

EEA firms establishing a branch in the United Kingdom

What constitutes a branch?

AUTH 5.4.1

See Notes

handbook-guidance
There is guidance for UK firms in SUP 13 Annex X [to be added later] on what constitutes a branch. EEA firms may find this of interest although they should follow the guidance of their Home State regulators.

The conditions for establishing a branch

AUTH 5.4.2

See Notes

handbook-guidance
Before an EEA firm exercises an EEA right to establish a branch in the United Kingdom other than under the Insurance Mediation Directive, the Act requires it to satisfy the establishment conditions, as set out in paragraph 13(1), Part II of Schedule 3 to the Act (EEA Rights). These conditions are that:
(1) the FSA has received notice (a consent notice) from the EEA firm's Home State regulator that it has given the EEA firm consent to establish a branch in the United Kingdom;
(2) the consent notice:
(a) is given in accordance with the relevant Single Market Directive;
(b) identifies the activities to which the consent relates; and
(c) includes the information prescribed under regulation 2 of the EEA Passport Rights Regulations (see AUTH 5 Annex 1 G);
(3) the EEA firm has been informed of the applicable provisions or two months have elapsed beginning with the date on which the FSA received the consent notice.

AUTH 5.4.2A

See Notes

handbook-guidance
Where an EEA firm exercises its EEA right to establish a branch in the United Kingdom under the Insurance Mediation Directive, the Act requires it to satisfy the establishment conditions, as set out in paragraph 13(1A) Part II of Schedule 3 to the Act (EEA Rights). These conditions are that:
(1) the EEA firm has given its Home State regulator notice of its intention to establish a branch in the United Kingdom;
(2) the FSA has received notice ("a regulator's notice") from the EEA firm'sHome State regulator that the EEA firm intends to establish a branch in the United Kingdom;
(3) the EEA firm's Home State regulator has informed the EEA firm that the regulator's notice has been sent to the FSA; and
(4) one month has elapsed beginning with the date when the EEA firm's Home State regulator informed the EEA firm that it had sent the regulator's notice to the FSA.

AUTH 5.4.3

See Notes

handbook-guidance
For the purposes of paragraph 13 of Part II of Schedule 3 to the Act, the applicable provisions may include FSArules. The EEA firm is required to comply with relevant rules when carrying on a passported activity through a branch in the United Kingdom as well as with relevant UK legislation.

The notification procedure

AUTH 5.4.4

See Notes

handbook-guidance
(1) When the FSA receives a consent notice from the EEA firm'sHome State regulator, it will, under paragraphs 13(2)(b), (c) and 13(3) of Part II of Schedule 3 to the Act, notify the applicable provisions (if any) to:
(a) the EEA firm; and
(b) in the case of an EEA firm passporting under Insurance Directives, the Home State regulator;
within two months of the date on which the FSA received the consent notice.
(2) Although the FSA is not required to notify the applicable provisions to an EEA firm passporting under the Insurance Mediation Directive, these provisions are set out in AUTH 5 Annex 3 G (Application of the Handbook to Incoming EEA Firms).

AUTH 5.5

EEA firms providing cross border services into the United Kingdom

Is the service provided within the United Kingdom?

AUTH 5.5.1

See Notes

handbook-guidance
There is guidance for UK firms in SUP 13 Annex X on when a service is provided cross border [to be added later]. EEA firms may find this of interest although they should follow the guidance of their Home State regulators.

AUTH 5.5.2

See Notes

handbook-guidance
An EEA firm should note that the requirement under the Single Market Directives to give a notice of intention to provide cross border services applies whether or not:
(1) it has established a branch in the United Kingdom; or

The conditions for providing cross border services into the United Kingdom

AUTH 5.5.3

See Notes

handbook-guidance
Before an EEA firm exercises an EEA right to provide cross border services into the United Kingdom, the Act requires it to satisfy the service conditions, as set out in paragraph 14 of Part II of Schedule 3 to the Act. These conditions are that:
(1) the EEA firm has given its Home State regulator notice of its intention to provide cross border services into the United Kingdom (a notice of intention);
(2) if the EEA firm is passporting under the Investment Services Directive, the Insurance Directives, or the Insurance Mediation Directive, the FSA has received notice ("a regulator's notice") from the EEA firm'sHome State regulator containing the information prescribed under regulation 3 of the EEA Passport Rights Regulations (see AUTH 5 Annex 2 G);
(3) if the EEA firm is passporting under the Insurance Directives or the Insurance Mediation Directive, its Home State regulator has informed the EEA firm that it has sent the regulator's notice to the FSA; and
(4) if the EEA firm is passporting under the Insurance Mediation Directive, one month has elapsed beginning with the date when the EEA firm's Home State regulator informed the EEA firm that it had sent the regulator's notice to the FSA.

The notification procedure

AUTH 5.5.4

See Notes

handbook-guidance
(1) Unless the EEA firm is passporting under the Insurance Mediation Directive, if the FSA receives a regulator's notice or, where no notice is required (in the case of an EEA firm passporting under the Banking Consolidation Directive), is informed of the EEA firm's intention to provide cross border services into the United Kingdom, the FSA will, under paragraphs 14(2)(b) and 14(3) of Part II of Schedule 3 to the Act, notify the EEA firm of the applicable provisions (if any) within two months of the day on which the FSA received the regulator's notice or was informed of the EEA firm's intention.
(2) Although the FSA is not required to notify the applicable provisions to an EEA firm passporting under the Insurance Mediation Directive, these provisions are set out in AUTH 5 Annex 3 G (Application of the Handbook to Incoming EEA Firms).

AUTH 5.5.5

See Notes

handbook-guidance
An EEA firm that has satisfied the service conditions in AUTH 5.5.3 G is entitled to start providing cross border services into the United Kingdom. However, a EEA firm that wishes to start providing cross border services but has not yet received notification of the applicable provisions may wish to contact the FSA's Passport Notification Unit (see AUTH 5.8.1 G (2)).

AUTH 5.6

Which rules will an incoming EEA firm be subject to?

AUTH 5.6.1

See Notes

handbook-guidance
AUTH 5 Annex 3 G summarises how the Handbook applies to incoming EEA firms.

AUTH 5.6.2

See Notes

handbook-guidance
An incoming EEA firm or incoming Treaty firm carrying on business in the United Kingdom must comply with the applicable provisions (see AUTH 5.5.4 G) and other relevant UK legislation. For example where the business includes:
(1) business covered by the Consumer Credit Act 1974, then an incoming EEA firm or incoming Treaty firm must comply with the provisions of that Act, as modified by paragraph 15(3) of Schedule 3 to the Act; or
(2) effecting or carrying out contracts covering motor vehicle third party liability risks as part of direct insurance business, then an incoming EEA firm or incoming Treaty firm is required to become a member of the Motor Insurers' Bureau.

AUTH 5.6.3

See Notes

handbook-guidance
In particular, an EEA firm or Treaty firm must comply with the applicable provisions in SUP 10 (Approved persons). An EEA firm or Treaty firm should read AUTH 6 (Approved persons) but also refer to SUP 10.1 (Application) which sets out the territorial provisions of the approved persons regime.

AUTH 5.6.4

See Notes

handbook-guidance
Under the EEA Passport Rights Regulations, references in section 60 of the Act (applications for approval for persons to perform controlled functions) to "the authorised person concerned" include an EEA firm with respect to which the FSA has received a consent notice or regulator's notice under paragraph 13 of Schedule 3 to the Act (see AUTH 5.4.2 G (1) and AUTH 5.4.2A G (2)) or a regulator's notice under paragraph 14 of that Schedule (see AUTH 5.5.3 G (2)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule.

AUTH 5.6.5

See Notes

handbook-guidance
AUTH 5 Annex 3 G does not apply to incoming ECA providers. Such persons should refer to ECO for information on how the Handbook applies to them.

AUTH 5.7

Top-up permission

AUTH 5.7.1

See Notes

handbook-guidance
If a person established in the EEA:
(1) does not have an EEA right;
(2) does not have permission as a UCITS qualifier; and
(3) does not have, or does not wish to exercise, a Treaty right (see AUTH 5.3.4 G to AUTH 5.3.9 D);
to carry on a particular regulated activity in the United Kingdom, it must seek Part IV permission from the FSA to do so (see AUTH 3). This might arise if the activity itself is outside the scope of the Single Market Directives, or where the activity is included in the scope of a Single Market Directive but is not covered by the EEA firm'sHome State authorisation. If a person also qualifies for authorisation under Schedules 3, 4 or 5 of the Act as a result of its other activities, the Part IV permission is referred to in the Handbook as a top-up permission.

AUTH 5.7.2

See Notes

handbook-guidance
Where the FSA grants a top-up permission to an incoming EEA firm to carry on regulated activities for which it has neither an EEA right nor a Treaty right, the FSA is responsible for the prudential supervision of the incoming EEA firm, to the extent that the responsibility is not reserved to the incoming EEA firm'sHome State regulator.

AUTH 5.7.3

See Notes

handbook-guidance
Top-up permission will normally be required, for example, for:
(1) the marketing of life insurance contracts by intermediaries; and
(2) designated investment business activities carried on in relation to commodity derivatives.

AUTH 5.7.4

See Notes

handbook-guidance
For guidance on how to apply for Part IV permission under the Act, see AUTH 3 (Applications for Part IV permission). If an EEA firm or Treaty firm wishes to make any subsequent changes to its top-up permission, it can make an application for variation of that permission (see SUP 6 (Applications to vary and cancel Part IV permission)).

AUTH 5.8

Sources of further information

AUTH 5.8.1

See Notes

handbook-guidance

For further information on UK regulation, an EEA firm, aTreaty firm or a UCITS qualifier should contact the Authorisation and Approvals Department (Authorisation Enquiries) at the FSA. Questions about the passporting notification procedures can be addressed to the Passport Notification Unit.

  1. (1) To contact the Authorisation Enquiries team:
    1. (a) telephone on +44 20 7066 0082 or fax on +44 20 7066 9719;
    2. (b) write to: Authorisation and Approvals Department (Authorisation Enquiries), The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.
  2. (2) To contact the Passport Notification Unit:
    1. (a) telephone on +44 20 7066 1000 or fax on +44 20 7066 xxxx;
    2. (b) write to: Passport Notification Unit, The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS;
    3. (c) email: passport.notifications@ fsa.gov.uk.

AUTH 5 Annex 1

Establishment of a branch: Contents of Consent Notice G

See Notes

handbook-guidance

AUTH 5 Annex 2

Provision of services: Contents of regulator's notice G

See Notes

handbook-guidance

AUTH 5 Annex 3

Application of the Handbook to Incoming EEA Firms G

See Notes

handbook-guidance