SUP Supervision manual

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SUP 2

Information gathering by the FSA on its own initiative

SUP 2.1

Application and purpose

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Application

SUP 2.1.1

handbook-rule
The application of this chapter is the same as the application of Principle 11 (Relations with regulators).

SUP 2.2

Information gathering by the appropriate regulator on its own initiative: background

Link to the statutory information gathering and investigation powers

SUP 2.2.1

handbook-guidance
Breaching Principle 11, or the rules in this chapter, makes a firm liable to regulatory sanctions, including discipline under Part XIV of the Act (Disciplinary Measures), and may be relevant to the use of the appropriate regulator's other powers, including the statutory information gathering and investigation powers (see further PRIN 1.1.7 G to PRIN 1.1.9 G). But, unlike a breach of a requirement imposed under the statutory powers listed in SUP 2.1.5 G, a breach of Principle 11 or a rule:
(1) is not a criminal offence; and
(2) cannot lead to a person being treated as if in contempt of court (see section 177 of the Act (Offences).

SUP 2.2.2

handbook-guidance
Neither Principle 11 nor SUP 2.3.5 R (1) (Access to premises) enable the appropriate regulator to force access to premises.

Banking confidentiality and legal privilege

SUP 2.2.3A

handbook-guidance
The PRA would not normally seek to gather information using the methods described in SUP 2.3 in a situation where the PRA could not have obtained it under the powers in Part XI of the Act (Information Gathering and Investigations). In particular, the limitations in the following sections of the Act are relevant to this chapter:
(1) section 175(5) (Information and documents: supplementary powers) under which no person may be required under Part XI of the Act (Information Gathering and Investigations) to disclose information or produce a document subject to banking confidentiality (with exceptions); the PRA would not normally seek such information using the methods described in SUP 2.3; and
(2) section 413 (Protected items), under which no person may be required under the Act to produce, disclose or permit the inspection of protected items; a firm would not breach Principle 11 or the rules in this chapter by not producing such items.
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Confidentiality of information

SUP 2.2.4A

handbook-guidance
When the PRA obtains confidential information using the methods of information gathering described in SUP 2.3, it is obliged under Part XXIII of the Act (Public Record, Disclosure of Information and Co-operation) to treat that information as confidential. The PRA will not disclose confidential information without lawful authority, for example if an exception applies under the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 (SI 2001/2188) or with the consent of the person from whom that information was received and (if different) to whom the information relates.
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Admissibility of information in proceedings

SUP 2.2.5A

handbook-guidance
Information obtained by the PRA using the methods described in SUP 2.3 is admissible in evidence in any proceedings, so long as it complies with any requirements governing the admissibility of evidence in the circumstances in question.
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SUP 2.3

Information gathering by the appropriate regulator on its own initiative: cooperation by firms

Introduction: Methods of information gathering requiring cooperation

SUP 2.3.2

handbook-guidance
The appropriate regulator expects to request meetings or access to business premises during reasonable business hours. The appropriate regulator also normally expects to be able to give reasonable notice to a firm or connected person when it seeks information, documents, meetings or access to business premises. On rare occasions, however, the appropriate regulator may seek access to premises without notice. The prospect of unannounced visits is intended to encourage firms to comply with the requirements and standards under the regulatory system at all times.

Access to a firm's documents and personnel

SUP 2.3.3

handbook-guidance
In complying with Principle 11, the appropriate regulator considers that a firm should, in relation to the discharge by the appropriate regulator of its functions under the Act:
(1) make itself readily available for meetings with representatives or appointees of the appropriate regulator as reasonably requested;
(2) give representatives or appointees of the appropriate regulator reasonable access to any records, files, tapes or computer systems, which are within the firm's possession or control, and provide any facilities which the representatives or appointees may reasonably request;
(3) produce to representatives or appointees of the appropriate regulator specified documents, files, tapes, computer data or other material in the firm's possession or control as reasonably requested;
(4) print information in the firm's possession or control which is held on computer or on microfilm or otherwise convert it into a readily legible document or any other record which the appropriate regulator may reasonably request;
(5) permit representatives or appointees of the appropriate regulator to copy documents or other material on the premises of the firm at the firm's reasonable expense and to remove copies and hold them elsewhere, or provide any copies, as reasonably requested; and
(6) answer truthfully, fully and promptly all questions which are reasonably put to it by representatives or appointees of the appropriate regulator .

SUP 2.3.4

handbook-guidance
In complying with Principle 11, the appropriate regulator considers that a firm should take reasonable steps to ensure that the following persons act in the manner set out in SUP 2.3.3 G:
(1) its employees, agents and appointed representatives; and
(2) any other members of its group, and their employees and agents.
(See also, in respect of appointed representatives, SUP 12.5.3 G (2)).

Access to premises

SUP 2.3.5

handbook-rule
(1) A firm must permit representatives of the appropriate regulator, or persons appointed for the purpose by the appropriate regulator, to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the appropriate regulator's functions under the Act or its obligations under the short selling regulation.
(2) A firm must take reasonable steps to ensure that its agents, suppliers under material outsourcing arrangements and appointed representatives permit such access to their business premises. (See also, in respect of appointed representatives, SUP 12.5.3 G (2)).

SUP 2.3.6

handbook-guidance
The appropriate regulator normally expects to give reasonable notice of a visit (See SUP 2.3.2 G).

Suppliers under material outsourcing arrangements

SUP 2.3.7

handbook-rule
A firm must take reasonable steps to ensure that each of its suppliers under material outsourcing arrangements deals in an open and cooperative way with the appropriate regulator in the discharge of its functions under the Act in relation to the firm.

SUP 2.3.8

handbook-guidance
The cooperation that a firm is expected to procure from such suppliers is similar to that expected of the firm, in the light of the guidance in SUP 2.3.3 G to SUP 2.3.4 G, but does not extend to matters outside the scope of the appropriate regulator's functions in relation to the firm. SUP 2.3.5 R (2) also requires a firm to take reasonable steps regarding access to the premises of such suppliers.

SUP 2.3.9

handbook-guidance
When a firm appoints or renews the appointment of a supplier under a material outsourcing arrangement, it should satisfy itself that the terms of its contract with the supplier require the supplier to give the appropriate regulator access to its premises as described in SUP 2.3.5 R (2), and to cooperate with the appropriate regulator as described in SUP 2.3.7 R. The appropriate regulator does not consider that the 'reasonable steps' in SUP 2.3.7 R would require a firm to seek to change a contract, already in place eitherwhen that rule: (1) was made by the appropriate regulator on 21 June 2001; or (2) was designated by the appropriate regulator, until renewal of the contract.

SUP 2.3.10

handbook-guidance
The appropriate regulator will normally seek information from the firm in the first instance, but reserves the right to seek it from a supplier under a material outsourcing arrangement if the appropriate regulator considers it appropriate.

Information requested on behalf of other regulators

SUP 2.3.11

handbook-guidance
The appropriate regulator may ask a firm to provide it with information at the request of or on behalf of other regulators to enable them to discharge their functions properly. Those regulators may include overseas regulators or the Takeover Panel. The appropriate regulator may also, without notifying a firm, pass on to those regulators information which it already has in its possession. The appropriate regulator's disclosure of information to other regulators is subject to the obligation described in SUP 2.2.4 G (Confidentiality of information).

SUP 2.3.12B

handbook-guidance
In complying with Principle 11, the PRA considers that a firm should cooperate with it in providing information for other regulators. Sections 169 (Investigations etc. in support of overseas regulator) and 169A (Support of overseas regulator with respect to financial stability) of the Act give the PRA certain statutory powers to obtain information and appoint investigators for overseas regulators if required (see FINMAR 1).
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Export chapter as

SUP 3

Auditors

SUP 3.1

Application

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SUP 3.1.1

handbook-rule
This chapter applies to:
(1) every firm within a category listed in column (1) of the table in SUP 3.1.2 R; and
(2) the external auditor of such a firm (if appointed under SUP 3.3 or appointed under or as a result of a statutory provision other than in the Act);
in accordance with column (2) or (3) of that table, except as described in the remainder of this section.

SUP 3.1.2

handbook-rule

Applicable sections (see SUP 3.1.1 R)

SUP 3.1.2A

handbook-guidance
If a firm falls within more than one row in column (1) of the table in SUP 3.1.2 R, SUP 3.1.1 R requires the firm and its external auditor to comply with all the sections referred to in column (2) or (3).

Incoming firms

SUP 3.1.3

handbook-rule
This chapter appliesto an incoming EEA firm(and the auditor of such a firm) only if it has a top-up permission .

SUP 3.1.4

handbook-guidance
The application of SUP 3.10 to the auditor of an incoming EEA firm with a top-up permission is qualified in SUP 3.10.3 R.

SUP 3.1.5

handbook-rule
This chapter does not apply to an incoming Treaty firm, which:
(1) does not have a top-up permission; and
(2) is not required to comply with the client asset rules.

SUP 3.1.6

handbook-guidance
The application of SUP 3.7 to an incoming Treaty firm or an auditor of such a firm is further qualified in SUP 3.7.1 G.

Material elsewhere in the Handbook

SUP 3.1.9

handbook-guidance
A firm which is a friendly society or other insurer, investment management firm, personal investment firm or a securities and futures firm , should see the Prudential Standards part of the Handbookfor further provisions on auditors as set out in SUP 3.1.10 G. For the categorisations employed in SUP 3.1.2 R and SUP 3.1.10 G see SUP App 1.

SUP 3.1.10

handbook-guidance

Enabling provision and application

SUP 3.1.11

handbook-guidance
The insurance market direction in this chapter is given under section 316(1) of the Act (Direction by a regulator) and applies to members.

Purpose

SUP 3.1.12

handbook-guidance
The insurance market direction in this chapter is intended to enable the rules in SUP 3 and SUP 4 to be applied to a managing agent in respect of the insurance business of each syndicate which it manages.

Insurance market direction on rules concerning auditors and actuaries

SUP 3.1.13

handbook-directions
(1) With effect from 1 January 2005, Part XXII of the Act (Auditors and Actuaries) applies to the carrying on of insurance business by members as modified by paragraph (3).
(2) For the purposes of (1) "insurance business" means the regulated activities of effecting or carrying out contracts of insurance written at Lloyd's.
(3) Regulations made by the Treasury under section 342(5) and section 343(5) of Part XXII of the Act apply only to actuaries appointed by a managing agent in respect of the insurance business of a syndicate, in relation to the long-term insurance business of that syndicate.
(4) In Part XXII of the Act (Auditors and Actuaries) as applied by this insurance market direction:
(a) a reference to an auditor of an authorised person is to be read as including an auditor appointed by a managing agent in respect of the insurance business of a syndicate; and
(b) a reference to an actuary acting for an authorised person is to be read as including an actuary appointed by a managing agent in respect of the insurance business of a syndicate.

SUP 3.1.14

handbook-guidance
Part XXII (Auditors and Actuaries) is a core provision mentioned in section 317(1) of the Act (The core provisions).

SUP 3.1.15

handbook-guidance
Section 317(2) of the Act (The core provisions) provides that references in an applied core provision to an authorised person are to be read as references to a person in the class to which the insurance market direction applies. The effect of this, and of the insurance market direction set out at SUP 3.1.13 D, is that Part XXII of the Act (Auditors and Actuaries), applies also to auditors and actuaries who are appointed to report on the underwriting business of members. Part XXII is modified in its application to members by paragraph (3) of SUP 3.1.13 D with the effect that the regulations made under sections 342(5) and 343(5) of the Act relating to communications by actuaries will only apply where the actuary is appointed to evaluate the long-term insurance business of the syndicate. The regulations made under sections 342(5) and 343(5) in relation to communications by auditors will apply in relation to both general insurance business and long-term insurance business.

SUP 3.1.16

handbook-guidance
SUP 3.3 sets out rules the effect of which is to require a managing agent to appoint an auditor in respect of its own business and the insurance business of each syndicate which it manages.

SUP 3.1.17

handbook-guidance
References in SUP 3, as applied by SUP 3.1.2 R, to a firm include, where appropriate:
(1) a managing agent; and
(2) one or more members carrying on insurance business at Lloyd's through a syndicate,
and references to an actuary of a firm should be read accordingly.

SUP 3.1.18

handbook-guidance
SUP 4.6 sets out rules the effect of which is to require a managing agent to appoint an actuary in respect of the insurance business of each syndicate which it manages.

SUP 3.2

Purpose

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Purpose: general

SUP 3.2.1

handbook-guidance
This chapter sets out rules and guidance on the role auditors play in the appropriate regulator's monitoring of firms' compliance with the requirements and standards under the regulatory system. In determining whether a firm satisfies the threshold conditions, the appropriate regulator has regard to whether the firm has appointed auditors with sufficient experience in the areas of business to be conducted by the firm. Auditors act as a source of information for the appropriate regulator in its supervision. They report, where required, on the financial resources of the firm, the accuracy of its reports to the appropriate regulator and its compliance with particular rules, such as the Client asset rules.

SUP 3.2.2

handbook-guidance
The Act, together with other legislation such as the Companies Acts 1985, 1989 and 2006, the Building Societies Act 1986 and the Friendly Societies Act 1992, provides the statutory framework for firms' and auditors' obligations.

Rights and duties of auditors

SUP 3.2.6A

handbook-guidance
The rights and duties of auditors are set out in SUP 3.8 (Rights and duties of all auditors). SUP 3.8.10 G includes the auditor's statutory duty to report certain matters to the PRA imposed by regulations made by the Treasury under sections 342(5) and 343(5) of the Act (information given by auditor or actuary to a regulator).
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SUP 3.3

Appointment of auditors

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Purpose

SUP 3.3.1

handbook-guidance
This section requires a firm to appoint an auditor and supply the appropriate regulator with information about its auditor. The appropriate regulator requires such information to ensure that the firm has an auditor.

Appointment by firms

SUP 3.3.2

handbook-rule
A firm to which this section applies (see SUP 3.1) must:
(1) appoint an auditor;
(2) notify the appropriate regulator, without delay, on the form in SUP 15 Ann 3 (Standing data form), in accordance with the instructions on the form, when it is aware that a vacancy in the office of auditor will arise or has arisen, giving the reason for the vacancy;
(3) appoint an auditor to fill any vacancy in the office of auditor which has arisen;
(4) ensure that the replacement auditor can take up office at the time the vacancy arises or as soon as reasonably practicable after that; and
(5) notify the appropriate regulator of the appointment of an auditor, on the form in SUP 15 Ann 3 (Standing data form), in accordance with the instructions on the form, advising the appropriate regulator of the name and business address of the auditor appointed and the date from which the appointment has effect.

SUP 3.3.3

handbook-guidance
(1) SUP 3.3.2 R applies to every firm to which this section applies. That includes a firm which is under an obligation to appoint an auditor under an enactment other than the Act, such as the Companies Act 1985 or the Companies Act 2006, as appropriate. Such a firm is expected to wish to have a single auditor who is appointed to fulfil both obligations. SUP 3.3.2 R is made under section 137F of the Act (The PRA's general rules), in relation to such firms, and under section 340(1) (Appointment) in relation to other firms.
(2) Building societies and friendly societies are reminded that they are subject to the provisions of Schedule 11 to the Building Societies Act 1986 and Schedule 14 to the Friendly Societies Act 1992 relating to auditors, in addition to the provisions in this chapter. In relation to SUP 3.3.2 R (2), such firms may give the PRA a single notification of a vacancy in the office of auditor provided that the notification complies with the requirements of the relevant Act and SUP 3.3.2 R (2).

Appointment by the appropriate regulator

SUP 3.3.7

handbook-rule
(1) Paragraph (2) applies to a firm which is not under an obligation to appoint an auditor imposed by an enactment other than the Act.
(2) If a firm fails to appoint an auditor within 28 days of a vacancy arising, the appropriate regulator may appoint an auditor for it on the following terms:
(a) the auditor to be remunerated by the firm on the basis agreed between the auditor and firm or, in the absence of agreement, on a reasonable basis; and
(b) the auditor to hold office until he resigns or the firm appoints another auditor.

SUP 3.3.8

handbook-guidance
In addition, in the case of a building society or friendly society, Schedule 11 of the Building Societies Act 1986 and Schedule 14 of the Friendly Societies Act 1992 allow the PRA to appoint an auditor if this is not done at the society's annual general meeting.

SUP 3.3.9

handbook-guidance
SUP 3.3.7 R allows but does not require the appropriate regulator to appoint an auditor if the firm has failed to do so within the 28 day period. When it considers whether to use this power, the appropriate regulator will take into account the likely delay until the firm can make an appointment and the urgency of any pending duties of the appointed auditor.

SUP 3.3.10

handbook-rule
A firm must comply with and is bound by the terms on which an auditor has been appointed by the appropriate regulator , whether under SUP 3.3.7 R, the Building Societies Act 1986 or the Friendly Societies Act 1992.

SUP 3.4

Auditors' qualifications

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Purpose

SUP 3.4.1

handbook-guidance
The appropriate regulator is concerned to ensure that the auditor of a firm has the necessary skill and experience to audit the business of the firm to which he has been appointed. This section sets out the appropriate regulator's rules and guidance aimed at achieving this.

Qualifications

SUP 3.4.2

handbook-rule
Before a firm, to which SUP 3.3.2 R applies, appoints an auditor, it must take reasonable steps to ensure that the auditor has the required skill, resources and experience to perform his functions under the regulatory system and that the auditor:
(1) is eligible for appointment as an auditor under Part II of the Companies Act 1989 or Part III of the Companies (Northern Ireland) Order 1990 (Eligibility for appointment) where applicable, otherwise Chapters 1, 2 and 6 of Part 42 of the Companies Act 2006 ; or
(2) if appointed under an obligation in another enactment, is eligible for appointment as an auditor under that enactment; or
(3) in the case of an overseas firm, is eligible for appointment as an auditor under any applicable equivalent laws of that country or territory.

SUP 3.4.3

handbook-guidance
Enactments within SUP 3.4.2 R (2) include the Building Societies Act 1986 and the Friendly Societies Act 1992.

SUP 3.4.4

handbook-guidance
An auditor which a firm proposes to appoint should have skills, resources and experience commensurate with the nature, scale and complexity of the firm's business and the requirements and standards under the regulatory system to which it is subject. A firm should have regard to whether its proposed auditor has expertise in the relevant requirements and standards (which may involve access to UK expertise) and possesses or has access to appropriate specialist skill, for example actuarial expertise in carrying out audits of insurance companies or friendly societies where appropriate. The firm should seek confirmation of this from the auditor concerned as appropriate.

Disqualified auditors

SUP 3.4.5

handbook-rule
A firm must not appoint as auditor a person who is disqualified under Part XXII of the Act (Auditors and Actuaries) from acting as an auditor either for that firm or for a relevant class of firm.

SUP 3.4.6

handbook-guidance
If it appears to the appropriate regulator that an auditor of a firm has failed to comply with a duty imposed on him under the Act, it may have the power to andmay disqualify him under section 345 or 345A, respectively, of the Act. A list of persons who are disqualified may be found on the FCA's website (www.fca.org.uk).

Requests for information on qualifications by the appropriate regulator

SUP 3.4.7

handbook-rule
A firm must take reasonable steps to ensure that an auditor, which it is planning to appoint or has appointed, provides information to the appropriate regulator about the auditor's qualifications, skills, experience and independence in accordance with the reasonable requests of the appropriate regulator .

SUP 3.4.8

handbook-guidance
To enable it to assess the ability of an auditor to audit a firm, the appropriate regulator may seek information about the auditor's relevant experience and skill. The appropriate regulator will normally seek information by letter from an auditor who has not previously audited any firm. The firm should instruct the auditor to reply fully to the letter (and should not appoint an auditor who does not reply to the appropriate regulator ). The appropriate regulator may also seek further information on a continuing basis from the auditor of a firm (see also the auditor's duty to cooperate under SUP 3.8.2 R).

SUP 3.5

Auditors' independence

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Purpose

SUP 3.5.1

handbook-guidance
If an auditor is to carry out his duties properly, he needs to be independent of the firm he is auditing, so that he is not subject to conflicts of interest. Many firms are also subject to requirements under the Companies Act 1989, or the Companies Act 2006, the Building Societies Act 1986 or the Friendly Societies Act 1992 on auditor's independence.

Independence

SUP 3.5.2

handbook-rule
A firm must take reasonable steps to ensure that the auditor which it appoints is independent of the firm.

SUP 3.5.3

handbook-rule
If a firm becomes aware at any time that its auditor is not independent of the firm, it must take reasonable steps to ensure that it has an auditor independent of the firm. The firm must notify the FCA and the PRA (if it is a PRA-authorisedfirm) or the FCA (in all other cases) if independence is not achieved within a reasonable time.

SUP 3.5.4

handbook-guidance
The appropriate regulator will regard an auditor as independent if his appointment or retention does not breach the ethical guidance in current issue from the auditor's recognised supervisory body on the appointment of an auditor in circumstances which could give rise to conflicts of interest.

SUP 3.5.5

handbook-guidance
Firms are reminded that the Building Societies Act 1986 and Friendly Societies Act 1992 provide that an auditor who is ineligible under section 27 of the Companies Act 1989 where applicable, otherwise sections 1214 and 1215 of the Companies Act 2006 for appointment as auditor of a company (which is a subsidiary undertaking of a building society or a subsidiary of a friendly society) is ineligible for appointment as auditor to the building society or friendly society concerned.

SUP 3.6

Firms' cooperation with their auditors

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SUP 3.6.1

handbook-rule
A firm must cooperate with its auditor in the discharge of his duties under this chapter.

Auditor's access to accounting records

SUP 3.6.2

handbook-guidance
In complying with SUP 3.6.1 R, a firm should give a right of access at all times to the firm's accounting and other records, in whatever form they are held, and documents relating to its business. A firm should allow its auditor to copy documents or other material on the premises of the firm and to remove copies or hold them elsewhere, or give him such copies on request.

SUP 3.6.3

handbook-guidance
Section 341 of the Act (Access to books etc.) provides that an auditor of a firm appointed under SUP 3.3.2 R:
(1) has a right of access at all times to the firm's books, accounts and vouchers; and
(2) is entitled to require from the firm's officers such information and explanations as he reasonably considers necessary for the performance of his duties as auditor.

SUP 3.6.4

handbook-guidance
Section 389A of the Companies Act 1985 where applicable, otherwise sections 499 and 500 of the Companies Act 2006, section 79 of the Building Societies Act 1986 and section 75 of the Friendly Societies Act 1992 give similar rights to auditors of companies, building societies and friendly societies respectively.

SUP 3.6.5

handbook-guidance
Section 413 (Protected items), under which no person may be required under the Act to produce, disclose or permit the inspection of protected items, is relevant to SUP 3.6.1 R and SUP 3.6.3 G.

Access and cooperation: appointed representatives, material outsourcing, employees

SUP 3.6.6

handbook-guidance
In complying with SUP 3.6.1 R, a firm should take reasonable steps to ensure that each of its appointed representativesor, where applicable, tied agents gives the firm's auditor the same rights of access to the books, accounts and vouchers of the appointed representative or tied agent and entitlement to information and explanations from the appointed representative's or tied agent's officers as are given in respect of the firm by section 341 of the Act (see also SUP 12.5.5 R (3)).

SUP 3.6.7

handbook-guidance
In complying with SUP 3.6.1 R, a firm should take reasonable steps to ensure that each of its suppliers under a material outsourcing arrangement gives the firm's auditor the same rights of access to the books, accounts and vouchers of the firm held by the supplier, and entitlement to information and explanations from the supplier's officers as are given in respect of the firm by section 341 of the Act.

SUP 3.6.8

handbook-guidance
In complying with SUP 3.6.1 R, a firm should take reasonable steps to ensure that all its employees cooperate with its auditor in the discharge of his duties under this chapter.

Provision of false or misleading information to auditors

SUP 3.6.9

handbook-guidance
Firms and their officers, managers and controllers are reminded that, under section 346 of the Act (Provision of false or misleading information to auditor or actuary), knowingly or recklessly giving false information to an auditor appointed under SUP 3.3.2 R constitutes an offence in certain circumstances, which could render them liable to prosecution. This applies even when an auditor is also appointed under an obligation in another enactment.

SUP 3.7

Notification of matters raised by auditor

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Application

SUP 3.7.1

handbook-guidance
SUP 3.7 does not apply to an incoming Treaty firm which does not have a top-up permission.

Notification

SUP 3.7.2

handbook-guidance
A firm should consider whether it should notify the FCA and the PRA (if it is a PRA-authorised firm) or the FCA (in all other cases) under Principle 11 if:
(1) the firm expects or knows its auditor will qualify his report on the audited annual financial statements or add an explanatory paragraph; or
(2) the firm receives a written communication from its auditor commenting on internal controls (see also SUP 15.3).

SUP 3.8

Rights and duties of auditors

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Purpose

SUP 3.8.1

handbook-guidance
The auditor of a firm has various rights and duties to obtain information from the firm and both to enable and to require him to pass information to the appropriate regulator in specified circumstances. This section imposes or gives guidance on those rights and duties.

Cooperation with the appropriate regulator

SUP 3.8.2

handbook-rule
An auditor of a firm must cooperate with the appropriate regulator in the discharge of its functions under the Act.

SUP 3.8.3

handbook-guidance
The appropriate regulator may ask the auditor to attend meetings and to supply it with information about the firm. In complying with SUP 3.8.2 R, the auditor should attend such meetings as the appropriate regulator requests and supply it with any information the appropriate regulator may reasonably request about the firm to enable the appropriate regulator to discharge its functions under the Act.

SUP 3.8.4

handbook-rule
An auditor of a firm must give any skilled person appointed by the firm all assistance that person reasonably requires (see SUP 5 and section 166(5) of the Act (Reports by skilled persons)).

Auditor's independence

SUP 3.8.5

handbook-rule
An auditor of a firm must be independent of the firm in performing his duties in respect of that firm.

SUP 3.8.6

handbook-rule
An auditor of a firm must take reasonable steps to satisfy himself that he is free from any conflict of interest in respect of that firm from which bias may reasonably be inferred. He must take appropriate action where this is not the case.

SUP 3.8.7

handbook-guidance
SUP 3.5.4 G explains that an auditor whose appointment does not breach the ethical guidance in current issue from the auditor's recognised supervisory body will be regarded as independent by the appropriate regulator .

Auditors' rights to information

SUP 3.8.8

handbook-guidance
SUP 3.6.1 R requires a firm to cooperate with its auditor. SUP 3.6.3 G refers to the rights to information which an auditor is granted by the Act. SUP 3.6.4 G refers to similar rights granted by the Companies Act 1985 or where applicable, the Companies Act 2006, the Building Societies Act 1986 and the Friendly Societies Act 1992.

Communication between the appropriate regulator, the firm and the auditor

SUP 3.8.9

handbook-guidance
Within the legal constraints that apply, the appropriate regulator may pass on to an auditor any information which it considers relevant to his function. An auditor is bound by the confidentiality provisions set out in Part XXIII of the Act (Public record, disclosure of information and cooperation) in respect of confidential information he receives from the appropriate regulator . An auditor may not pass on such confidential information without lawful authority, for example if an exception applies under the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 (SI 2001/2188) or with the consent of the person from whom that information was received and (if different) to whom the information relates.

Auditors' statutory duty to report

SUP 3.8.10

handbook-guidance
(1) Auditors are subject to regulations made by the Treasury under sections 342(5) and 343(5) of the Act (Information given by auditor or actuary to a regulator). Section 343 and the regulations also apply to an auditor of an authorised person in his capacity as an auditor of a person who has close links with the authorised person.
(2) These regulations oblige auditors to report certain matters to the appropriate regulator. Sections 342(3) and 343(3) of the Act provide that an auditor does not contravene any duty by giving information or expressing an opinion to the appropriate regulator , if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any functions of the appropriate regulator . These provisions continue to have effect after the end of the auditor's term of appointment.

In relation to Lloyd's, an effect of the insurance market direction set out at SUP 3.1.13 D is that sections 342(5) and 343(5) of the Act (Information given by an auditor or actuary to a regulator) apply also to auditors appointed to report on the insurance business of members.

Termination of term of office, disqualification

SUP 3.8.11

handbook-rule
An auditor must notify the appropriate regulator without delay if he:
(1) is removed from office by a firm; or
(2) resigns before his term of office expires; or
(3) is not re-appointed by a firm.

SUP 3.8.12

handbook-rule
If an auditor ceases to be, or is formally notified that he will cease to be, the auditor of a firm, he must notify the appropriate regulator without delay:
(1) of any matter connected with his so ceasing which he thinks ought to be drawn to the appropriate regulator's attention; or
(2) that there is no such matter.

Export chapter as

SUP 4

Actuaries

SUP 4.1

Application

  • 31/12/2004

SUP 4.1.1

handbook-rule
This chapter applies to:
(1) every firm within a category listed in column (1) of the table in SUP 4.1.3 R; and
(2) every actuary appointed under this chapter;
in accordance with column (2) of that table.

SUP 4.1.2

handbook-guidance
This chapter applies to long-term insurers (including friendly societies) and other friendly societies and to the Society of Lloyd's and managing agents at Lloyd's. This chapter does not apply to actuaries advising the auditors of long-term insurers under IPRU(INS) 9.35(1A) or IPRU(FSOC) 5.11(2A), as they are not appointed to act on behalf of the firm.

SUP 4.1.3

handbook-rule

Applicable sections

SUP 4.2

Purpose

  • 31/12/2004

SUP 4.2.1

handbook-guidance
Section 340 of the Act gives the PRA power to make rules requiring an authorised person, or an authorised person falling into a specified class, to appoint an actuary . Section 340 further empowers the PRA to make rules governing the manner, timing and notification of such an appointment and, where an appointment is not made, for the PRA to make an appointment on the firm's behalf. The rule-making powers of the PRA and FCAunder section 340 of the Act also extend to an actuary's duties.

SUP 4.2.2

handbook-guidance

This chapter defines the relationship between firms and their actuaries and clarifies the role which actuaries play in the appropriate regulator's monitoring of firms' compliance with the requirements and standards under the regulatory system. The chapter sets out rules and guidance on the appointment of actuaries, and the termination of their term of office, as well as setting out their respective rights and duties. The purpose of the chapter is to ensure that:

  1. (1) long-term insurers (other than certain friendly societies) have access to adequate actuarial advice, both in valuing their liabilities to policyholders and in exercising discretion affecting the interests of their with-profits policyholders; and
  2. (2) other friendly societies carrying on insurance business (and which have traditionally relied upon actuarial expertise) employ or use an actuary of appropriate seniority and experience to evaluate the liabilities of that business; and
  3. (3) managing agents of Lloyd's syndicates employ or use an actuary of appropriate seniority and experience to evaluate the liabilities associated with insurance business carried on at Lloyd's.

SUP 4.2.3

handbook-guidance
The functions described by SUP 4.2.2.G (1) are performed by one or more actuaries who are required to hold office continuously and must be approved persons. The principal duty of an actuary appointed to perform these functions is to advise the firm (see SUP 4.3.13 R to SUP 4.3.18 G for the rights and duties of such an actuary).

SUP 4.2.4

handbook-guidance
The function described by SUP 4.2.2 G (2) is performed by an appropriate actuary who is appointed to prepare the triennial investigation and interim certificate or statement required by IPRU(FSOC) 5.2(1) (see SUP 4.4.6 R and SUP 4.5.12 G to SUP 4.5.14 G for the rights and duties of an appropriate actuary).

SUP 4.2.5

handbook-guidance
Actuaries act as a valuable source of information to the appropriate regulator in carrying out its functions. For example, in determining whether a firm satisfies the threshold conditions, the appropriate regulator has regard to whether the firm has appointed an actuary with sufficient experience in the areas of business to be conducted by the firm.

SUP 4.2.6

handbook-guidance
In making appointments under this chapter and in allocating duties to actuaries, firms are reminded of their obligation under SYSC 2.1.1 R to maintain a clear and appropriate apportionment of significant responsibilities so that it is clear who has which of those responsibilities and that the business and affairs of the firm can be adequately monitored and controlled by the directors, relevant senior managers and governing body of the firm.

SUP 4.3

Appointment of actuaries

  • 31/12/2004

Appointment by firms

SUP 4.3.1

handbook-rule
A firm to which this section applies (see SUP 4.1) must:
(1) appoint one or more actuaries to perform:
(a) the actuarial function (see SUP 4.3.13 R) in respect of all classes of its long-term insurance business; and
(b) the with-profits actuary function (see SUP 4.3.16A R) in respect of all classes of its with-profits business (if any);
(2) notify the PRA , without delay, when it is aware that a vacancy in the office of any such actuary will arise or has arisen, giving the reason for the vacancy;
(3) appoint an actuary to fill any such vacancy that has arisen; and
(4) ensure a replacement actuary can take up office at the time the vacancy arises or as soon as is reasonably practicable after that.

SUP 4.3.2

handbook-guidance
The provisions relating to the duties of an actuary appointed to perform these functions are set out in SUP 4.3.13 R to SUP 4.3.18 G. The functions performed by actuaries appointed by a firm under SUP 4.3.1 R are specified as controlled functions (CF 12, the actuarial function, and CF 12A, the with-profits actuary function) in SUP 10B ( PRA- Approved persons). As a result, an application must be made to the PRA under section 60 of the Act (Applications for approval) for approval by the PRA with the consent of the FCA of the person proposing to take up such an appointment. Section 61(3) of the Act (Determination of applications) gives the PRA three months to grant its approval or give a warning notice that it proposes to refuse the application. A firm should not appoint an actuary until the PRA with the consent of the FCA has approved the actuary. In order to comply with SUP 4.3.1 R, a firm should ensure it applies to the PRA as soon as practicable before the date when it needs the actuary to take office. The PRA will need time to consider the application before deciding whether to grant approval. See SUP 10B ( PRA- Approved persons).

Appointment by the FCA

SUP 4.3.3

handbook-rule
If a firm, which is required to appoint one or more actuaries under SUP 4.3.1 R, fails to do so within 28 days of a vacancy arising, the PRA may appoint one or more actuaries to perform any function corresponding to the actuarial function or the with-profits actuary function on the following terms:
(1) the actuary to be remunerated by the firm on the basis agreed between the actuary and the firm or, in the absence of agreement, on a reasonable basis; and
(2) the actuary to hold office until he resigns or the firm appoints another actuary.

SUP 4.3.4

handbook-guidance
SUP 4.3.3 R allows but does not require the PRA to appoint an actuary if the firm has failed to do so within the 28 day period. When it considers whether to use this power, the PRA will take into account the likely delay until the firm can make an appointment and the urgency of any pending duties of the actuary.

SUP 4.3.5

handbook-guidance
The PRA will not normally seek to appoint an actuary under SUP 4.3.3 R if a notification under SUP 10B ( PRA- Approved persons) has been received from the firm in relation to a proposed appointment of an actuary under SUP 4.3.1 R, and that application is still being considered.

SUP 4.3.6

handbook-rule
A firm must comply with and is bound by the terms on which an actuary has been appointed by the PRA under SUP 4.3.3 R.

SUP 4.3.7

handbook-guidance
If the PRA appoints an actuary under SUP 4.3.3 R, he will not be an approved person (not being appointed under SUP 4.3.1 R). However, the firm is still under an obligation to appoint an actuary under SUP 4.3.1 R and will need to seek prior approval of that person (even if the individual it proposes to appoint is the person who has been appointed by the PRA under SUP 4.3.3 R).

Actuaries' qualifications

SUP 4.3.8

handbook-guidance
The appropriate regulator is concerned to ensure that every actuary appointed by a firm under this section has the necessary skill and experience to provide the firm with appropriate actuarial advice. SUP 4.3.9 R to SUP 4.3.10 G set out the appropriate regulator's rules and guidance aimed at achieving this.

SUP 4.3.9

handbook-rule
Before a firm applies for approval of the person it proposes to appoint as an actuary under SUP 4.3.1 R, it must take reasonable steps to ensure that the actuary:
(1) has the required skill and experience to perform his functions under the regulatory system; and
(2) is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

SUP 4.3.10

handbook-guidance
To comply with SUP 4.3.9 R and Principle 3, before an actuary takes up his appointment the firm should ensure that the actuary:
(1) has skills and experience appropriate to the nature, scale and complexity of the firm's business and the requirements and standards under the regulatory system to which it is subject; and
(2) has adequate qualifications and experience, which includes holding an appropriate practising certificate under the rules of the Institute of Actuaries or the Faculty of Actuaries;
and seek confirmation of these from the actuary, or the actuary's current and previous employers, as appropriate.

Disqualified actuaries

SUP 4.3.11

handbook-rule
A firm must not appoint under SUP 4.3.1 R an actuary who is disqualified by the FCA under section 345 of the Act (Disciplinary measures: FCA) or the PRA under section 345A of the Act (Disciplinary measures: PRA) from acting as an actuary either for that firm or for a relevant class of firm.

SUP 4.3.12

handbook-guidance
If it appears to the FCA or PRA that an actuary has failed to comply with a duty imposed on him under the Act, it have the power to and may disqualify him under section 345 or 345A respectively of the Act. A list of actuaries who are disqualified may be found on the FCA website ( http://www.fca.org.uk ).

SUP 4.3.12A

handbook-rule
A firm must take reasonable steps to ensure that an actuary who is to be, or has been, appointed under SUP 4.3.1 R:
(1) does not perform the function of chairman or chief executive of the firm, or does not, if he is to perform the with-profits actuary function, become a member of the firm's governing body; and
(2) does not perform any other function on behalf of the firm which could give rise to a significant conflict of interest.

SUP 4.3.12B

handbook-guidance
Both the actuarial function and the with-profits actuary function may be performed by employees of the firm or by external consultants, and performing other functions on behalf of the firm will not necessarily give rise to a significant conflict of interest. However, being a director, or a senior manager responsible, say, for sales or marketing in a firm (or for finance in a proprietary firm), is likely to give rise to a significant conflict of interest for an actuary performing the with-profits actuary function. He nevertheless retains direct access to the firm's governing body under SUP 4.3.17 R (2).

The actuarial function

SUP 4.3.13

handbook-rule
An actuary appointed to perform the actuarial function must, in respect of those classes of the firm's long-term insurance business which are covered by his appointment:
(1) advise the firm's management, at the level of seniority that is reasonably appropriate, on the risks the firm runs in so far as they may have a material impact on the firm's ability to meet liabilities to policyholders in respect of long-term insurance contracts as they fall due and on the capital needed to support the business, including regulatory capital requirements;
(2) monitor those risks and inform the firm's management, at the level of seniority that is reasonably appropriate, if he has any material concerns or good reason to believe that the firm:
(a) is not meeting liabilities to policyholders under long-term insurance contracts as they fall due, or may not be doing so, or might not have done so, or might, in reasonably foreseeable circumstances, not do so;
(b) is, or may be, effecting new long-term insurance contracts on terms under which the resulting income earned is insufficient, under reasonable actuarial methods and assumptions, and taking into account the other financial resources that are available for the purpose, to enable the firm to meet its liabilities to policyholders as they fall due (including reasonable bonus expectations);
(c) does not, or may not, have sufficient financial resources to meet liabilities to policyholders as they fall due (including reasonable bonus expectations) and the capital needed to support the business, including regulatory capital requirements or, if the firm currently has sufficient resources, might, in reasonably foreseeable circumstances, not continue to have them;
(3) advise the firm's governing body on the methods and assumptions to be used for the investigations required by IPRU(INS) 9.4R or IPRU(FSOC) 5.1R and the calculation of the with-profits insurance capital component under INSPRU 1.3 as applicable;
(4) perform those investigations and calculations in (3), in accordance with the methods and assumptions determined by the firm'sgoverning body;
(5) report to the firm's governing body on the results of those investigations and calculations in (3); and
(6) in the case of a friendly society to which this section applies, perform the functions of the appropriate actuary under section 87 (Actuary's report as to margin of solvency) of the Friendly Societies Act 1992.

SUP 4.3.14

handbook-guidance
IPRU(INS) 9.4R and IPRU(FSOC) 5.1R require firms to which this section applies to cause an investigation to be made at least yearly by the actuary or actuaries appointed to perform the actuarial function, and to report on the result of that investigation. INSPRU 1.3 requires realistic basis life firms to calculate the with-profits insurance component as part of their capital resources requirements.The firm is responsible for the methods and assumptions used to determine the liabilities attributable to its long-term insurance business. The obligation on friendly societies to obtain a report from the 'appropriate actuary' under section 87 of the Friendly Societies Act 1992 applies to a friendly society which is to receive a transfer of engagements under section 86 (transfer of engagements to or by a friendly society). The 'appropriate actuary' in this context is the actuary appointed to perform the actuarial function, rather than the appropriate actuary under SUP 4.4 (Appropriate actuaries).

SUP 4.3.15

handbook-guidance
SUP 4.3.13 R is not intended to be exhaustive of the professional advice that a firm should take whether from an actuary appointed under this chapter or from any other actuary acting for the firm. Firms should consider what systems and controls are needed to ensure that they obtain appropriate professional advice on financial and risk analysis; for example:
(1) risk identification, quantification and monitoring;
(2) stress and scenario testing;
(3) ongoing financial conditions;
(4) financial projections for business planning;
(5) investment strategy and asset-liability matching;
(6) individual capital assessment;
(7) pricing of business, including unit pricing;
(8) variation of any charges for benefits or expenses;
(9) discretionary surrender charges; and
(10) adequacy of reinsurance protection.

The with-profits actuary function

SUP 4.3.16

handbook-rule
An actuary appointed to perform the with-profits actuary functions must:
(1) advise the firm's management, at the level of seniority that is reasonably appropriate, on key aspects of the discretion to be exercised affecting those classes of the with-profits business of the firm in respect of which he has been appointed;
(2) where the firm is a realistic basis life firm advise the firm's governing body as to whether the assumptions used to calculate the with-profits insurance component under INSPRU 1.3 are consistent with the firm's PPFM in respect of those classes of the firm's with-profits business;
(3) at least once a year, report to the firm's governing body on key aspects (including those aspects of the firm's application of its Principles and Practices of Financial Management on which the advice described in (1) has been given) of the discretion exercised in respect of the period covered by his report affecting those classes of with-profits business of the firm;
(4) request from the firm such information and explanations as he reasonably considers necessary to enable him properly to perform the duties in (1) to (3);
(5) advise the firm as to the data and systems that he reasonably considers necessary to be kept and maintained to provide the duties in (4); and
(6) in the case of a friendly society to which this section applies, perform the function of appropriate actuary under section 12 (Reinsurance) of the Friendly Societies Act 1992 or section 23A (Reinsurance) of the Friendly Societies Act 1974 as applicable, in respect of those classes of its with-profits business covered by his appointment.
  • 01/04/2013

SUP 4.4

Appropriate actuaries

  • 01/12/2004

Appointment of an appropriate actuary

SUP 4.4.1

handbook-rule
A firm to which this section applies (see SUP 4.1) and required by IPRU(FSOC) 5.2(1) to ensure that an investigation is carried out must:
(1) appoint an actuary (the "appropriate actuary") to carry out the triennial investigation and prepare an abstract of the report as required by IPRU(FSOC) 5.2(2) and provide the interim certificate or statement as required by IPRU(FSOC) 5.2(3); and
(2) appoint a replacement for that actuary if he ceases to hold office before he has carried out the duty described in (1).

Appropriate actuaries' qualifications

SUP 4.4.2

handbook-rule
Before a friendly society appoints an appropriate actuary, it must take reasonable steps to ensure that the actuary is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

SUP 4.4.3

handbook-guidance
An appropriate actuary should have skills and experience appropriate to the nature, scale and complexity of the firm's business and the requirements and standards under the regulatory system to which it is subject. In complying with Principle 3, a firm should have regard to whether its proposed appropriate actuary has adequate qualifications and experience, and seek confirmation of this from the actuary, or the actuary's current and previous employers, as appropriate.

SUP 4.4.4

handbook-rule
A firm must not appoint as appropriate actuary an actuary who has been disqualified by the FCA under section 345 of the Act (Disciplinary measures: FCA) or the PRA under section 345A of the Act (Disciplinary measures: PRA) from acting as an actuary either for that firm or for a relevant class of firm.

SUP 4.4.5

handbook-guidance
If it appears to the FCA or PRA that an appropriate actuary has failed to comply with a duty imposed on him under the Act, it may have the power to and may disqualify him under section 345 or 345A respectivelyof the Act. A list of actuaries who have been disqualified may be found on the FCA website ( http://www.fca.org.uk ).

Specific duties of the appropriate actuary

SUP 4.4.6

handbook-rule
An appropriate actuary must carry out the triennial investigation and prepare an abstract of the report as required by IPRU(FSOC) 5.2(2) and provide the interim certificate or statement as required by IPRU(FSOC) 5.2(3).

SUP 4.5

Provisions applicable to all actuaries

  • 31/12/2004

Objectivity

SUP 4.5.1

handbook-rule
An actuary appointed under this chapter must be objective in performing his duties.

SUP 4.5.2

handbook-guidance
Objectivity requires the actuary to perform his duties in such a manner that he can have an honest belief in his work and does not compromise the quality of his work or his judgment. An actuary should not allow himself to be placed in situations where he feels unable to make objective professional judgments.

SUP 4.5.3

handbook-rule
An actuary appointed under this chapter must take reasonable steps to satisfy himself that he is free from bias, or from any conflict of interest from which bias may reasonably be inferred. He must take appropriate action where this is not the case.

SUP 4.5.4

handbook-guidance
The appropriate action may include asking the firm's governing body to re-assign temporarily some or all of his duties to another competent actuary. Where this is insufficient, the actuary should resign his office.

SUP 4.5.5

handbook-guidance
If the actuary is an employee of the firm, the ordinary incentives of employment, including profit-related pay, share options or other financial interests in the firm or any associate, give rise to a conflict of interest only where they are disproportionate, or exceptional, relative to those of other employees of equivalent seniority.

SUP 4.5.6

handbook-guidance
The guidance and professional conduct standards in current issue from the Institute of Actuaries and the Faculty of Actuaries are relevant to compliance with SUP 4.5.1 R and SUP 4.5.3 R.

Actuaries' statutory duty to report

SUP 4.5.7

handbook-guidance
(1) Actuaries appointed under this chapter made by the Treasury under sections 342(5) and 343(5) of the Act (Information given by auditor or actuary to a regulator). Section 343 and the regulations also apply to an actuary of an authorised person in his capacity as an actuary of a person with close links with the authorised person.
(2) These regulations oblige actuaries to report certain matters to the appropriate regulator. Sections 342(3) and 343(3) of the Act provide that an actuary does not contravene any duty by giving information or expressing an opinion to the appropriate regulator, if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any functions of the appropriate regulator. These provisions continue to have effect after the end of the actuary's term of appointment.

SUP 4.5.7A

handbook-guidance
In relation to Lloyd's, an effect of the insurance market direction set out at SUP 3.1.13 D is that sections 342(5) and 343(5) of the Act (Information given by auditor or actuary to a regulator) apply also to actuaries who are appointed to evaluate the long-term insurance business of a syndicate.

Termination of term of office

SUP 4.5.8

handbook-guidance
SUP 4.5.9 R to SUP 4.5.11 G apply to a person who is or has been an actuary appointed under this chapter.

SUP 4.5.9

handbook-rule
An actuary appointed under this chapter must notify the appropriate regulator without delay if he:
(1) is removed from office by a firm; or
(2) resigns before his term of office expires; or
(3) is not reappointed by a firm.

SUP 4.5.10

handbook-rule
An actuary who has ceased to be appointed under this chapter, or who has been formally notified that he will cease to be so appointed, must notify the appropriate regulator without delay:
(1) of any matter connected with the cessation which he thinks ought to be drawn to the appropriate regulator's attention; or
(2) that there is no such matter.

SUP 4.5.11

handbook-guidance
When an actuary appointed under SUP 4.3.1 R ceases to hold office, he ceases to perform a controlled function. A firm is therefore required under SUP 10B.12.10 R to tell the PRA within seven business days of its actuary ceasing to hold office and to complete a withdrawal form (Form C, SUP 10A Annex 6 R). Note also the requirement of SUP 10B.12.12 R in relation to qualified withdrawals.

Rights and duties

SUP 4.5.12

handbook-guidance
Section 341 of the Act (Access to books etc.) provides that an actuary appointed under or as a result of the Act:
(1) has a right of access at all times to the firm's books, accounts and vouchers; and
(2) is entitled to require from the firm's officers such information and explanation as he reasonably considers necessary to perform his duties as actuary.

SUP 4.5.13

handbook-rule
When carrying out his duties, an actuary appointed under this chapter must pay due regard to generally accepted actuarial practice.

SUP 4.5.14

handbook-guidance
The standards and guidance issued from time to time by the Institute of Actuariesandthe Faculty of Actuaries are important sources of generally accepted actuarial practice.

SUP 4.6

Lloyd's

  • 01/01/2005

Appointment of the Lloyd's actuary and syndicate actuaries

SUP 4.6.1

handbook-rule
The Society must:
(1) appoint an actuary to perform the Lloyd's actuary function ;
(2) notify the PRA, without delay, when it is aware that a vacancy in the office of Lloyd's actuary will arise or has arisen, giving the reason for the vacancy;
(3) appoint an actuary to fill any vacancy in the office of Lloyd's actuary that has arisen; and
(4) ensure that the replacement actuary can take up office at the time the vacancy arises or as soon as reasonably practicable after that.

SUP 4.6.2

handbook-guidance
The functions performed by the actuary appointed as the Lloyd's actuary under SUP 4.6.1 R are specified as controlled functions in SUP 10B ( PRA- Approved persons ). As a result, an application must be made to the PRA under section 60 of the Act (Applications for approval) for approval of the person proposing to take up such an appointment. Section 61(3) of the Act (Determination of applications) gives the PRA three months to grant its approval or give a warning notice that it proposes to refuse the application. An actuary should not be appointed until the PRA with the consent of the FCA has approved the actuary. In order to comply with SUP 4.6.1 R, the Society should ensure it applies to the PRA as soon as practicable before the date when it needs the actuary to take office. The PRA will need time to consider the application before deciding whether to grant approval.

Qualifications

SUP 4.6.3

handbook-rule
Before the Society applies for approval of its proposed appointment of the Lloyd's actuary under SUP 4.6.1 R, it must take reasonable steps to ensure that the actuary:
(1) has the required skill and experience to perform his functions under the regulatory system; and
(2) is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

SUP 4.6.4

handbook-guidance
To comply with SUP 4.6.3 R and Principle 3, before the Lloyd's actuary takes up his appointment the Society should ensure that the actuary:
(1) has skills and experience appropriate to the nature, scale and complexity of the Society's business and the requirements and standards under the regulatory system to which it is subject; and
(2) has adequate qualifications and experience, which includes holding an appropriate practising certificate under the rules of the Institute of Actuaries or the Faculty of Actuaries;

and seek confirmation of these from the actuary, or the actuary's current and previous employers, as appropriate.

Disqualified actuaries

SUP 4.6.5

handbook-rule
The Society must not appoint under SUP 4.6.1 R as Lloyd's actuary an actuary who is disqualified by the FCA under section 345 of the Act (Disciplinary measures: FCA) or the PRA under section 345A of the Act (Disciplinary measures: PRA) from acting:
(1) as an actuary for the Society; or
(2) as a syndicate actuary; or
(3) as an actuary for any other relevant class of firm.

SUP 4.6.6

handbook-guidance
If it appears to the FCA or PRA that an actuary has failed to comply with a duty imposed on him under the Act, it may have the power to and may disqualify him under section 345 or 345A respectively of the Act. A list of actuaries who are disqualified may be found on the FCA website.

Conflicts of interest

SUP 4.6.7

handbook-rule
The Society must take reasonable steps to ensure that an actuary who is to be, or has been, appointed under SUP 4.6.1 R:
(1) does not perform the function of chairman or chief executive of the Society; and
(2) does not perform any other function on behalf of the Society which could give rise to a significant conflict of interest.

The Lloyd's actuary function

SUP 4.6.8

handbook-rule
An actuary who has been appointed to perform the Lloyd's actuary function must:
(1) prepare the statement required under IPRU(INS) 9.58 (1) to be annexed to the Lloyd's Return; and
(2) take reasonable steps to ensure that the general insurance business technical provisions for each syndicate year have been reviewed by the syndicate actuary and that an appropriate opinion has been obtained under SUP 4.6.15 R; and
(3) where a syndicate actuary's opinion has not been provided, sets appropriate technical provisions and, within six months of the end of the financial year, submits a report to the PRA on the setting of those technical provisions.

Appointment of syndicate actuaries

SUP 4.6.9

handbook-rule
Each managing agent must, in respect of each syndicate it manages:
(1) appoint an actuary (the "syndicate actuary") to carry out the duties described in SUP 4.6.15 R or SUP 4.6.16 R; and
(2) appoint a replacement for that actuary if he ceases to hold office before he has carried out the duties described in SUP 4.6.15 R or SUP 4.6.16 R; and
(3) ensure that the replacement syndicate actuary can take up office at the time the vacancy arises or as soon as reasonably practicable after that.

SUP 4.6.10

handbook-guidance
(1) The insurance market direction and guidance set out in SUP 3.1.4 G to SUP 3.1.15 G is relevant to actuaries appointed to report on the insurance business of members.
(2) References in SUP 4, as applied by SUP 4.1.3 R, to a firm include, where appropriate:
(a) a managing agent; and
(b) one or more member carrying on insurance business at Lloyd's policy through a syndicate;

and references to an actuary of a firm should be read accordingly.

Syndicate actuaries' qualifications

SUP 4.6.11

handbook-rule
Before a managing agent appoints a syndicate actuary, it must take reasonable steps to ensure that the syndicate actuary:
(1) has the required skill and experience to perform his duties; and
(2) is a fellow of an actuarial body or (except for a syndicate actuary of a long-term insurance business syndicate) is a fellow of the Casualty Actuarial Society who is a member of an actuarial body.

SUP 4.6.12

handbook-guidance
To comply with SUP 4.6.11 R and Principle 3, before a syndicate actuary takes up his appointment a managing agent should ensure that the syndicate actuary:
(1) has skills and experience appropriate to the nature, scale and complexity of a syndicate's business and the requirements and standards under the regulatory system applicable to the activities of managing agents in relation to each syndicate which they manage; and
(2) has adequate qualifications and experience, which includes holding an appropriate practising certificate under the rules of the Institute of Actuaries or the Faculty of Actuaries;

and seeks confirmation of these from the syndicate actuary, or the syndicate actuary's current and previous employers, as appropriate.

Disqualified actuaries

SUP 4.6.13

handbook-rule
A managing agent must not appoint under SUP 4.6.9 R as syndicate actuary an actuary who is disqualified by the FCA under section 345 of the Act (Disciplinary measures: FCA) or the PRA under section 345A of the Act (Disciplinary measures: PRA) from acting:
(1) as a syndicate actuary; or
(2) as a Lloyd's actuary; or
(3) as an actuary for a relevant class of firm.

SUP 4.6.14

handbook-guidance
If it appears to the FCA or PRA that an actuary has failed to comply with a duty imposed on him under the Act, it may have the power to and may disqualify him under section 345 or 345A respectively of the Act. A list of actuaries who are disqualified may be found on the FCA website.

Duties of syndicate actuaries

SUP 4.6.15

handbook-rule
The syndicate actuary of a long-term insurance business syndicate must:
(1) make an investigation at the end of each financial year into the financial condition of the business carried on through each syndicate year (other than a closed year);
(2) make an abstract of his report of the investigation; and
(3) prepare the certificate required under IPRU(INS) 9.58 (3) to be annexed to the Lloyd's Return.

SUP 4.6.16

handbook-rule
The syndicate actuary of a general insurance business syndicate must:
(1) review the technical provisions (both gross and net of reinsurance recoveries) of each syndicate year (other than a closed year); and
(2) provide his opinion confirming that the technical provisions for each syndicate year are no less prudent than his best estimate of the amounts required.

SUP 4.6.17

handbook-rule
If a managing agent becomes aware that the syndicate actuary of a general insurance business syndicate will or may be unable to produce an unqualified opinion under SUP 4.6.16 R, the managing agent must promptly inform the PRA that this is the case.

SUP 4.6.18

handbook-rule
In carrying out his duties a syndicate actuary must pay due regard to generally accepted actuarial best practice.

SUP 4.6.19

handbook-guidance
The standards and guidance issued by the Institute of Actuaries and the Faculty of Actuaries are important sources of actuarial best practice.

Export chapter as

SUP 5

Reports by skilled persons

SUP 5.1

Application and purpose

  • 01/12/2004

Application

SUP 5.1.1

handbook-rule
(1) This chapter applies to every firm.
(2) The rules, and the guidance on rules in SUP 5.5 (Duties of firms), do not apply to a UCITS qualifier.

SUP 5.1.2

handbook-guidance
This chapter (other than the rules, and guidance on rules, in SUP 5.5 (Duties of firms)) is also relevant to certain unauthorised persons within the scope of section 166 of the Act (Reports by skilled persons) (see SUP 5.2.1 G).

Purpose

SUP 5.1.3

handbook-guidance
The purpose of this chapter is to give guidance on the appropriate regulator's use of the power in section 166 (Reports by skilled persons) and section 166A (Appointment of skilled person to collect and update information) of the Act. The purpose is also to make rules requiring a firm to give assistance to a skilled person and, where a firm is required to appoint a skilled person, to include certain provisions in its contract with a skilled person. These rules are designed to ensure that the appropriate regulator receives certain information from a skilled person and that a skilled person receives assistance from a firm.

SUP 5.2

The appropriate regulator's power

Who may be required to provide a report?

SUP 5.2.1

handbook-guidance
Under section 166 of the Act (Reports by skilled persons), the appropriate regulator may, by giving a written notice, itself appoint a skilled person to provide it with a report, or require any of the following persons to provide it with a report by a skilled person:
(1) a firm;
(2) any other member of the firm'sgroup;
(3) a partnership of which the firm is a member;
(4) a person who has at any relevant time been a person falling within (1), (2) or (3);
but only if the person is, or was at the relevant time, carrying on a business.

SUP 5.2.2

handbook-guidance
Under section 166A of the Act (Appointment of skilled person to collect and update information), the appropriate regulator may require a firm to appoint, or itself appoint, a skilled person to collect or update information.
  • 01/04/2013

SUP 5.3

Policy on the use of skilled persons

  • 01/12/2004

SUP 5.3.1

handbook-guidance
The appointment of a skilled person to produce a report under section 166 of the Act (Reports by skilled persons) is one of the appropriate regulator's regulatory tools. The tool may be used:
(1) for diagnostic purposes, to identify, assess and measure risks;
(2) for monitoring purposes, to track the development of identified risks, wherever these arise;
(3) in the context of preventative action, to limit or reduce identified risks and so prevent them from crystallising or increasing; and
(4) for remedial action, to respond to risks when they have crystallised.

SUP 5.3.2

handbook-guidance
The decision by the appropriate regulator to require a report by a skilled personunder section 166 of the Act (Reports by skilled persons) will normally be prompted by a specific requirement for information, analysis of information, assessment of a situation, expert advice or recommendations or by a decision to seek assurance in relation to a regulatory return. It may be part of the risk mitigation programme applicable to a firm, or the result of an event or development relating or relevant to a firm, prompted by a need for verification of information provided to the appropriate regulator or part of the appropriate regulator's regular monitoring of a firm.

SUP 5.3.2A

handbook-guidance
The decision by the appropriate regulator to require the collection or updating of information by a skilled person under section 166A of the Act (Appointment of skilled person to collect and update information) will be prompted where the appropriate regulator considers there has been a breach of a requirement by a firm to collect, and keep up to date, information of a description specified in the appropriate regulator'srules.
  • 01/04/2013

SUP 5.3.3

handbook-guidance
When making the decision to require a report by a skilled person under section 166 (Reports by skilled persons) or the collection or updating of information by a skilled person under section 166A (Appointment of skilled person to collect and update information) of the Act, the appropriate regulator will have regard, on a case-by-case basis, to all relevant factors. Those are likely to include:
(1) circumstances relating to the firm;
(2) alternative tools available, including other statutory powers;
(3) legal and procedural considerations;
(4) the objectives of the appropriate regulator's enquiries;
(5) cost considerations; and
(6) considerations relating to appropriate regulator's resources.
SUP 5.3.4 G to SUP 5.3.10 G give further guidance on these listed factors.

Circumstances relating to the firm

SUP 5.3.4

handbook-guidance
The appropriate regulator will have regard to circumstances relating to the firm, for example:
(1) attitude of the firm: whether the firm is being cooperative;
(2) history of similar issues: whether similar issues have arisen in the past and, if so, whether timely corrective action was taken;
(3) quality of a firm's systems and records: whether the appropriate regulator has confidence that the firm has the ability to provide the required information;
(4) objectivity: whether the appropriate regulator has confidence in the firm's willingness and ability to deliver an objective report;
(5) conflicts of interest: whether the subject matter of the enquiries or the report involves actual or potential misconduct and it would be inappropriate for the appropriate regulator to rely on the firm itself to enquire into the matter; and
(6) knowledge or expertise available to the firm: whether it would be appropriate to involve a third party with the required technical expertise.

Alternative tools available, including other statutory powers

SUP 5.3.5

handbook-guidance
The appropriate regulator will have regard to alternative tools that may be available, including for example:
(1) obtaining what is required without using specific statutory powers (for example, by a visit by staff of the appropriate regulator or a request for information on an informal basis);
(2) requiring information from firms and others, including authorising an agent to require information, under section 165 of the Act (Power to require information);
(3) appointing investigators to carry out general investigations under section 167 of the Act (Appointment of investigator in general cases) (see EG 3 for the appropriate regulator's policy on the use of this power); and
(4) appointing investigators to carry out investigations in particular cases under section 168 of the Act (Appointment of investigator in specific cases) (see EG 3 for the appropriate regulator's policy on the use of this power).

Legal and procedural considerations

SUP 5.3.6

handbook-guidance
The appropriate regulator will have regard to legal and procedural considerations including:
(1) statutory powers: whether one of the other available statutory powers is more appropriate for the purpose than the power in section 166 (Reports by skilled persons) or section 166A (Appointment of skilled person to collect and update information) of the Act;
(2) subsequent proceedings: whether it is desirable to obtain an authoritative and independent report for use in any subsequent proceedings; and
(3) application of the Handbookrules: whether it is important that the relevant rules in the Handbook should apply, for example SUP 5.5.1 R which obliges the firm to require and permit the skilled person to report specified matters to the appropriate regulator.

The objectives of the appropriate regulator's enquiries

SUP 5.3.7

handbook-guidance
The appropriate regulator will have regard to the objectives of its enquiries, and the relative effectiveness of its available powers to achieve those objectives. For example:
(1) historic information or evidence: if the objectives are limited to gathering historic information, or evidence for determining whether enforcement action may be appropriate, the appropriate regulator's information gathering and investigation powers under sections 165 (Power to require information), 167 (Appointment of investigator in general cases) and 168 (Appointment of investigator in specific cases) of the Act are likely to be more appropriate than the power in section 166 (Reports by skilled persons) or section 166A (Appointment of skilled person to collect and update information) of the Act; and
(2) expert analysis or recommendations: if the objectives include obtaining expert analysis or recommendations (or both) for diagnostic, monitoring, preventative or remedial purposes, the section 166 power (Reports by skilled persons) may be an appropriate power to use, instead of, or in conjunction with, the appropriate regulator's other available powers.

Cost considerations

SUP 5.3.8

handbook-guidance
In accordance with its general policy the appropriate regulator will have regard to the question of cost, which is particularly pertinent in relation to skilled persons because:
(1) if the appropriate regulator uses the section 166 power (Reports by skilled persons) or the section 166A power (Appointment of skilled person to collect and update information), either the firm will appoint, and will have to pay for the services of, the skilled person, or the appropriate regulator will appoint, and will require under FEES 3.2.7 R (zp) or FEES 3.2.7 R (zq) that the relevant firm pays for the services of, the skilled person;
(2) if the appropriate regulator uses its other information gathering and investigation powers, it will either authorise or appoint its own staff to undertake the information gathering or investigation (or both), or it will pay for the services of external competent persons to do so; in either case the costs will be recovered under the appropriate regulator's general fee scheme.

SUP 5.3.9

handbook-guidance
In having regard to the cost implications of using the section 166 power (Reports by skilled persons) or the section 166A power (Appointment of skilled person to collect and update information) alternative options (such as visits) or other powers, the appropriate regulator will take into account relevant factors, including:
(1) whether the firm may derive some benefit from the work carried out and recommendations made by the skilled person, for instance a better understanding of its business and its risk profile, or the operation of its information systems, or improvements to its systems and controls;
(2) whether the work to be carried out by the skilled person is work that should reasonably have been carried out by the firm, or by persons instructed by the firm on its own initiative; for instance a compliance review or the development of new systems;
(3) whether the firm's record-keeping and management information systems are poor and:
(a) the required information and documents are not readily available; or
(b) an analysis of the required information cannot readily be performed without expert assistance;
(4) whether the firm appears to have breached requirements or standards under the regulatory system or otherwise put the interests of consumers at risk, and it is unable or unwilling to review and remedy the matters of concern, or the appropriate regulator considers that it cannot rely on the firm to do so; and
(5) the perceived probability and seriousness of possible breaches of regulatory requirements and the possible need for further action.

Considerations relating to appropriate regulator resources

SUP 5.3.10

handbook-guidance
The appropriate regulator will have regard to appropriate regulator -related considerations including:
(1) appropriate regulator expertise: whether the appropriate regulator has the necessary expertise; and
(2) appropriate regulator resources: whether the resources required to produce a report or to make enquiries or to appoint a skilled person itself are available within the appropriate regulator , or whether the exercise will be the best use of the appropriate regulator's resources at the time.

SUP 5.4

Appointment and reporting process

  • 01/12/2004

Scope of report

SUP 5.4.1

handbook-guidance
Where the appropriate regulator requires a report by a skilled person under section 166 of the Act (Reports by skilled persons), the appropriate regulator will send a notice in writing requiring the person in SUP 5.2.1 G to provide a report by a skilled person, or notifying the person in SUP 5.2.1 G in writing of the appropriate regulator's appointment of a skilled person to provide a report, on any matter if it is reasonably required in connection with the exercise of its functions conferred by or under the Act. The appropriate regulator may require the report to be in whatever form it specifies in the notice.

SUP 5.4.1A

handbook-guidance
Where the appropriate regulator requires the updating or collection of information by a skilled person under section 166A of the Act (Appointment of skilled person to collect and update information), the appropriate regulator will send a notice in writing requiring the firm to appoint a skilled person, or notifying the firm of the appropriate regulator's appointment of a skilled person, to collect or update the relevant information.
  • 01/04/2013

SUP 5.4.2

handbook-guidance
As part of the decision making process the appropriate regulator will normally contact the person in SUP 5.2.1 G or in SUP 5.2.2 G to discuss its needs before finalising its decision to require a report or the updating or collection of information by a skilled person. This will provide an opportunity for discussion about the appointment, whether an alternative means of obtaining the information would be better, what the scope of a report should be, who should be appointed, who should appoint, and the likely cost.

SUP 5.4.3

handbook-guidance
The appropriate regulator will give written notification to the person in SUP 5.2.1 G or SUP 5.2.2 G of the purpose of the report or collection or updating of information, its scope, the timetable for completion and any other relevant matters. The appropriate regulator will state the matters which the report is to contain, or the information which is to be collected or updated, as well as any requirements as to the report's format. For example, a report on controls may be required to address key risks, key controls and the control environment. The appropriate regulator attaches importance to there being a timetable for each report and to the skilled person, with the cooperation of the person in SUP 5.2.1 G or the firm in SUP 5.2.2 G, as relevant, keeping to that timetable.

SUP 5.4.4

handbook-guidance
The written notification in SUP 5.4.3 G may be preceded or followed by a discussion of the appropriate regulator's requirements and the reasons for them. This may involve the appropriate regulator, the person in SUP 5.2.1 G or in SUP 5.2.2 G and the person who has been, or is expected to be, appointed as the skilled person. The appropriate regulator recognises that there will normally be value in holding discussions involving the skilled person at this stage. These discussions may include others if appropriate.

SUP 5.4.5

handbook-guidance
The appropriate regulator will wish to conduct the discussion with the firm, its skilledperson and any others within a timescale appropriate to the circumstances of the case.

Appointment process

SUP 5.4.6

handbook-guidance
Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, the appropriate regulator will normally seek to agree in advance with the person in SUP 5.2.1 G or SUP 5.2.2 G, the appropriate regulatorthe skilled person who will make the reportor collect or update the relevant information. The Act requires that such skilled person be nominated or approved by the appropriate regulator:
(1) if the appropriate regulator decides to nominate the skilled person who is to make the reportor collect or update the information, it will notify the person in SUP 5.2.1 Gor SUP 5.2.2 G accordingly; and
(2) alternatively, if the appropriate regulator is content to approve a skilled person selected by the person in SUP 5.2.1 G or SUP 5.2.2 G, it will notify the latter person of that fact.
The appropriate regulator may give the person in SUP 5.2.1 G or SUP 5.2.2 G a shortlist from which to choose.

SUP 5.4.7

handbook-guidance
A skilled person must appear to the appropriate regulator to have the skills necessary to make a report on the matter concerned or collect or update the relevant information. A skilled person may be an accountant, lawyer, compliance consultant, actuary or person with relevant business, technical or technological skills.

SUP 5.4.8

handbook-guidance
When considering whether to nominate, approve or appoint a skilled person to make a report or collect or update information, the appropriate regulator will have regard to the circumstances of the case, including whether the proposed skilled person appears to have:
(1) the skills necessary to make a report on the matter concerned or collect or update the relevant information;
(2) the ability to complete the report or collect or update the information within the time expected by the appropriate regulator;
(3) any relevant specialised knowledge, for instance of the person in SUP 5.2.1 G or SUP 5.2.2 G, the type of business carried on by the person in SUP 5.2.1 G or SUP 5.2.2 G, or the matter to be reported on or information to be collected or updated;
(4) any professional difficulty or potential conflict of interest in reviewing the matters to be reported on, or the information to be collected or updated, for instance because it may involve questions reflecting on the quality or reliability of work previously carried out by the proposed skilled person; and
(5) enough detachment, bearing in mind the closeness of an existing professional or commercial relationship, to be able to collect or update the information or to give an objective opinion on matters such as:
(a) matters already reported on by the skilled person (for example, on the financial statements of the person in SUP 5.2.1 G or in SUP 5.2.2 G or in relation to their systems and controls); or
(b) matters that are likely to be contentious and may result in disciplinary or other enforcement action against the person in SUP 5.2.1 G or SUP 5.2.2 G, its management, shareholders or controllers; or
(c) matters that the skilled person has been involved in, in another capacity (for example, when a skilled person has been involved in developing an information system it may not be appropriate for him to provide a subsequent opinion on the adequacy of the system).

SUP 5.4.9

handbook-guidance
In appropriate circumstances, it may be cost effective for the appropriate regulator to nominate or approve the appointment of, or appoint itself, a skilled person who has previously acted for, or advised, the person in SUP 5.2.1 G or SUP 5.2.2 G. For example, the appropriate regulator may nominate or approve the appointment of, or appoint, the auditor of a person in SUP 5.2.1 G or SUP 5.2.2 G to prepare a report or collect or update the information taking into account, where relevant, the considerations set out in SUP 5.4.7 G.

Reporting process

SUP 5.4.10

handbook-guidance
Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, the appropriate regulator will normally require the skilled person to be appointed to report to the appropriate regulator through that person. In the normal course of events the appropriate regulator expects that the person in SUP 5.2.1 G or SUP 5.2.2 G will be given the opportunity to provide written comments on the report or the collection of the relevant information prior to its submission to the appropriate regulator.

SUP 5.4.10A

handbook-guidance
Where the skilled person is to be appointed by the appropriate regulator itself, the skilled person will report directly to the appropriate regulator.
  • 01/04/2013

SUP 5.4.11

handbook-guidance
The appropriate regulator may enter into a dialogue with the skilled person, and is ready to discuss matters relevant to the report or the collection or updating of the relevant information with him, during the preparation of the report or the collection or updating of the relevant information. Such discussions may involve or be through the person in SUP 5.2.1 G or SUP 5.2.2 G.

SUP 5.4.12

handbook-guidance
The appropriate regulator will normally specify a time limit within which it expects the skilled person to deliver the report or collect or update the relevant information. Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, the skilled person should, in complying with its contractual duty under SUP 5.5.1 R, take reasonable steps to achieve delivery by that time. If the skilled person becomes aware that the report may not be delivered, or collection or updating of the relevant information may not be, on time, he should inform the appropriate regulator and the person in SUP 5.2.1 G or SUP 5.2.2 G as soon as possible. Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, if the skilled person becomes aware that there may be difficulties delivering the report or collecting or updating the relevant information within cost estimates, he will no doubt wish to advise the firm.

SUP 5.4.13

handbook-guidance
The appropriate regulator may meet with the person in SUP 5.2.1 G or SUP 5.2.2 G and the skilled person together to discuss the final report. The appropriate regulator may also wish to discuss the final report with the skilled person present but without the person in SUP 5.2.1 G or SUP 5.2.2 G.

SUP 5.5

Duties of firms

  • 01/12/2004

Contract with the skilled person

SUP 5.5.1

handbook-rule
When a firm appoints a skilled person to provide a report under section 166 (Reports by skilled persons) or collect or update information under section 166A (Appointment of skilled person to collect and update information) of the Act, the firm must, in a contract with the skilled person:
(1) require and permit the skilled person during and after the course of his appointment:
(a) to cooperate with the appropriate regulator in the discharge of its functions under the Act in relation to the firm; and
(b) to communicate to the appropriate regulator information on, or his opinion on, matters of which he has, or had, become aware in his capacity as skilled person reporting on the firm in the following circumstances:
(i) the skilled person reasonably believes that, as regards the firm concerned (A) there is or has been, or may be or may have been, a contravention of any relevant requirement that applies to the firm concerned; and (B) that the contravention may be of material significance to the appropriate regulator in determining whether to exercise, in relation to the firm concerned, any functions conferred on the appropriate regulator by or under any provision of the Act other than Part VI. (Official Listing); or
(ii) the skilled person reasonably believes that the information on, or his opinion on, those matters may be of material significance to the appropriate regulator in determining whether the firm concerned satisfies and will continue to satisfy the threshold conditions; or
(iii) the skilled person reasonably believes that firm is not, may not be or may cease to be a going concern;
(2) require the skilled person to prepare a report or collect or update information, as notified to the firm by the appropriate regulator, within the time specified by the appropriate regulator; and
(3) waive any duty of confidentiality owed by the skilled person to the firm which might limit the provision of information or opinion by that skilled person to the appropriate regulator in accordance with (1) or (2). (See also SUP 5.5.13 G and SUP 5.6)

SUP 5.5.2

handbook-guidance
In complying with the contractual duty in SUP 5.5.1 R (1) the appropriate regulator expects that a skilled person appointed by a firm under section 166 (Reports by skilled persons) or section 166A (Appointment of skilled person to collect and update information) of the Act will cooperate with the appropriate regulator by, amongst other things, providing information or documentation about the planning and progress of the report and its findings and conclusions, if requested to do so. A firm should therefore ensure that the contract it makes with the skilled person requires and permits the skilled person to provide the following to the appropriate regulator if requested to do so:
(1) interim reports;
(2) source data, documents and working papers;
(3) copies of any draft reports given to the firm; and
(4) specific information about the planning and progress of the work to be undertaken (which may include project plans, progress reports including percentage of work completed, details of time spent, costs to date, and details of any significant findings and conclusions).

SUP 5.5.3

handbook-guidance
If the appropriate regulator is considering asking for the information specified in SUP 5.5.2 G it will take into consideration the cost of the skilled person complying with the request, and the benefit that the appropriate regulator may derive from the information. For example, in most cases, the appropriate regulator will not need to request a skilled person to give it source data, documents and working papers. However, the appropriate regulator may do so when it reasonably believes that this information will be relevant to any investigation it may be conducting, or any action it may need to consider taking against the firm.

SUP 5.5.4

handbook-guidance
In complying with the contractual duty in SUP 5.5.1 R, the appropriate regulator expects that, in the case of substantial or complex reports, the skilled person will give a periodic update on progress and issues to allow for a re-focusing of the report if necessary. The channel of communication would normally be directly between the skilled person and the appropriate regulator . However, the appropriate regulator would also expect firms normally to be informed about the passage of information, and the skilled person would usually be expected to keep the firm informed of any communication between the skilled person and the appropriate regulator.

SUP 5.5.5

handbook-rule
A firm must ensure that the contract required by SUP 5.5.1 R:
(1) is governed by the laws of a part of the United Kingdom;
(2) expressly
(a) provides that the appropriate regulator. has a right to enforce the provisions included in the contract under SUP 5.5.1 R and SUP 5.5.5 R (2);
(b) provides that, in proceedings brought by the appropriate regulator for the enforcement of those provisions, the skilled person is not to have available by way of defence, set-off or counterclaim any matter that is not relevant to those provisions;
(c) (if the contract includes an arbitration agreement) provides that the appropriate regulator is not, in exercising the right in (a), to be treated as a party to, or bound by, the arbitration agreement; and
(d) provides that the provisions included in the contract under SUP 5.5.1 R and SUP 5.5.5 R (2) are irrevocable and may not be varied or rescinded without the appropriate regulator's consent; and
(3) is not varied or rescinded in such a way as to extinguish or alter the provisions referred to in (2)(d).

SUP 5.5.6

handbook-guidance
The Contracts (Rights of Third Parties) Act 1999, or Scots common law, enables the appropriate regulator to enforce the rights conferred on it under the contract required by SUP 5.5.1 R against the skilled person.

SUP 5.5.7

handbook-guidance
If the appropriate regulator considers it appropriate, it may request the firm to give it a copy of the draft contract required by SUP 5.5.1 R before it is made with the skilled person. The appropriate regulator will inform the firm of any matters that it considers require further clarification or discussion before the contract is finalised.

SUP 5.5.8

handbook-guidance
The appropriate regulator expects the firm, including where applicable in complying with Principle 11, to give the appropriate regulator information about the cost of the skilled persons report. This may include both an initial estimate of the cost as well as the cost of the completed report. This information is required to help inform the appropriate regulator's decision making in the choice of regulatory tools. Information about the number and cost of reports by skilled persons will be published by the appropriate regulator.

Assisting the skilled person

SUP 5.5.9

handbook-rule
A firm must provide all reasonable assistance to any skilled person appointed to provide a report under section 166 (Reports by skilled persons) or to collect or update information under section 166A (Appointment of skilled person to collect and update information) of the Act.

SUP 5.5.10

handbook-guidance
In providing reasonable assistance under SUP 5.5.9 R, a firm should take reasonable steps to ensure that, when reasonably required by the skilled person, each of its appointed representatives or, where applicable, tied agents waives any duty of confidentiality and provides reasonable assistance as though SUP 5.5.1 R (3) and SUP 5.5.9 R applied directly to the appointed representative or tied agent.

SUP 5.5.11

handbook-guidance
Reasonable assistance in SUP 5.5.9 R should include:
(1) access at all reasonable business hours for the skilled person to the firm's accounting and other records in whatever form;
(2) providing such information and explanations as the skilled person reasonably considers necessary or desirable for the performance of his duties; and
(3) permitting a skilled person to obtain such information directly from the firm's auditor as he reasonably considers necessary or desirable for the proper performance of his duties.

Responsibility for delivery

SUP 5.5.12

handbook-guidance
When a firm appoints a skilled person to provide a report under section 166 (Reports by skilled persons) or collect or update information under section 166A (Appointment of skilled person to collect and update information) of the Act, a firm is expected, including where applicable in complying with Principle 11, to take reasonable steps to ensure that a skilled person delivers a report or collects or updates information in accordance with the terms of his appointment.

Assistance to skilled persons from others

SUP 5.5.13

handbook-guidance
In respect of the appointment of a skilled person under section 166 of the Act (Reports by skilled persons), section 166(7) of the Act imposes a duty on certain persons to give assistance to a skilled person. The persons on whom this duty is imposed are those who are providing, or have at any time provided, services to any person falling within SUP 5.2.1 G. They include suppliers under material outsourcing arrangements.

SUP 5.5.14

handbook-guidance
In respect of the appointment of a skilled person under section 166A (Appointment of skilled person to collect and update information) of the Act, under section 166A(5) a skilled person may require any person to provide all such assistance as the skilled person may reasonably require to collect or update the information in question.
  • 01/04/2013

SUP 5.6

Confidential information and privilege

  • 01/12/2004

Confidential information

SUP 5.6.1

handbook-guidance
Within the legal constraints that apply, the appropriate regulator may pass on to a skilled person any information which it considers relevant to the skilled person's function. A skilled person, being a primary recipient under section 348 of the Act (Restrictions on disclosure of confidential information by Authority etc.), is bound by the confidentiality provisions in Part XXIII of the Act (Public record, disclosure of information and cooperation) as regards confidential information he receives from the appropriate regulator or directly from a firm or other person. A skilled person may not pass on confidential information without lawful authority, for example, where an exception applies under the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 (SI 2001/2188) or with the consent of the person from whom that information was received and (if different) to whom the information relates. The appropriate regulator will indicate to a skilled person if there is any matter which cannot be discussed with the person in SUP 5.2.1 G.

Banking confidentiality and legal privilege

SUP 5.6.2

handbook-guidance
The limitations in the following sections of the Act are relevant to this chapter:
(1) section 175(5) (Information and documents: supplemental provisions) under which a person may be required under Part XI of the Act (Information Gathering and Investigations) to disclose information or produce a document subject to banking confidentiality (with exceptions); and
(2) section 413 (Protected items), under which no person may be required to produce, disclose or allow the inspection of protected items.

SUP 5.6.3

handbook-guidance
In respect of the appointment of a skilled person under section 166A (Appointment of skilled person to collect and update information) of the Act, a contractual or other requirement imposed on a person to keep any information confidential will not apply if:
(1) the information is or may be relevant to anything required to be done as part of the skilled person's appointment under section 166A (Appointment of skilled person to collect and update information) of the Act;
(2) a firm or a skilled person requests or requires the person to provide the information for the purpose of securing that those things are done; and
(3) the appropriate regulator has approved the making of the request or the imposition of the requirement before it is made or imposed.
  • 01/04/2013

SUP 5.6.4

handbook-guidance
A firm may provide information that would otherwise be subject to a contractual or other requirement to keep it in confidence if it is provided for the purposes of anything required to be done in respect of the skilled person's collection or updating of information under section 166A (Appointment of skilled person to collect and update information) of the Act.
  • 01/04/2013

Export chapter as

SUP 6

Applications to vary and cancel Part 4A permission and to impose, vary or cancel requirements

SUP 6.1

Application, interpretation and purpose

Application

SUP 6.1.1

handbook-guidance
This chapter applies to every firm with a Part 4A permission which wishes to:
(1) vary its Part 4A permission; or
(2) cancel its Part 4A permission and end its authorisation;
(3) have a new requirement imposed on it;
(4) vary a requirement imposed on it; or
(5) cancel a requirement imposed on it.

SUP 6.1.2

handbook-guidance
If appropriate, a firm which is an authorised fund manager should also refer to COLL 7 for guidance on the termination of ICVCs and AUTs and on winding up authorised funds that are not commercially viable.

SUP 6.1.3

handbook-guidance
This chapter applies to an incoming firm or a UCITS qualifier only in respect of a top-up permission. An incoming firm or a UCITS qualifier should refer to SUP 14 (Variation of passport rights by incoming EEA firms and ending authorisation) for the procedures for changes to permission granted under Schedules 3, 4 or 5 of the Act.

SUP 6.1.3A

handbook-guidance
(1) In SUP 6 the "relevant regulator" is the regulator to which a firm with a Part 4A permission has made or can make (in accordance with SUP 6) an application to vary or cancel its Part 4A permission or to have imposed on it a new requirement or to vary or cancel any existing requirement (see SUP 6.2.3A G to SUP 6.2.3E G).
(2) Where the PRA can only determine an application with the consent of the FCA, the FCA may request further information as if it were the relevant regulator.
(3) In some instances, the Act requires the FCA and the PRA to consult with each other prior to exercising their powers under the Act. Details of where consultation is required have not been set out in SUP 6. Where a provision in SUP 6 makes reference to a power, the exercise of which by the FCA or the PRA (as the case may be) requires consultation under the Act, firms should be aware that the regulator concerned will need to consult the other regulator before exercising that power.
  • 01/04/2013

Purpose

SUP 6.1.4

handbook-guidance
This chapter explains:
(1) how a firm with a Part 4A permission can apply to the relevant regulator to vary that permission;
(2) how a firm which has ceased to carry on any of the regulated activities for which it has a Part 4A permission, or which expects to do so in the short term (normally less than six months), should apply to the relevant regulator to cancel that permission completely;
(2A) how a firm with a Part 4A permission can apply to the relevant regulator to:
(a) have a new requirement imposed on it; or
(b) vary a requirement imposed on it; or
(c) cancel a requirement imposed on it.
(3) the additional procedures that apply to a firm carrying on regulated activities which create long term obligations to customers (for example, effecting contracts of insurance, carrying out contracts of insurance or accepting deposits) that needs to wind down (run off) its business over a long term period (normally more than six months) and the applications it should make with a view to ultimately cancelling its permission; and
(4) how the relevant regulator assesses those applications.

SUP 6.1.5

handbook-guidance
This chapter also outlines the relevant regulator's powers to withdraw authorisation from a firm whose Part 4A permission has been cancelled at the firm's request.

SUP 6.2

Introduction

  • 01/12/2004

SUP 6.2.1

handbook-guidance
A firm authorised under Part 4A of the Act (Permission to carry on regulated activity) has a single Part 4A permission granted by the FCA or the PRA. A firm'sPart 4A permission specifies all or some of the following elements (see PERG 2 Annex 2 (Regulated activities and the permission regime) and the information online at the FCA and PRA websites):
(1) a description of the activities the firm may carry on, including any limitations;
(2) the specified investments involved; and
(3) if appropriate, requirements.

SUP 6.2.2

handbook-guidance
Under section 20(1) and 20(1A) of the Act (Authorised persons acting without permission), a firm is prohibited from carrying on a regulated activity in the United Kingdom (or purporting to do so) otherwise than in accordance with its permission.

SUP 6.2.3B

handbook-guidance
If an FCA-authorised person wishes to change its Part 4A permission, by adding to the regulated activities to which the permission relates one or more regulated activities, which include a PRA-regulated activity, it can apply to the PRA under section 55I of the Act (Variation by PRA at request of authorised person). The PRA can determine such an application only with the consent of the FCA.
  • 01/04/2013

SUP 6.2.3D

handbook-guidance
If a PRA-authorised person wishes to change its Part 4A permission to:
(1) add a regulated activity to those to which the permission relates; or
(2) remove a regulated activity from those to which the permission relates; or
(3) vary the description of a regulated activity to which the permission relates; or
(4) cancel the permission;
it can apply to the PRA under section 55I of the Act (Variation by PRA at request of authorised person). The PRA can determine such an application, other than an application to cancel the permission, only with the consent of the FCA.
  • 01/04/2013

SUP 6.2.3E

handbook-guidance
If a PRA-authorised person wishes the PRA to:
(1) impose a new requirement; or
(2) vary a requirement imposed by the PRA; or
(3) cancel such a requirement;
it can apply to the PRA under section 55M(5) of the Act (Imposition of Requirements by PRA).
  • 01/04/2013

SUP 6.2.4

handbook-guidance
A firm intending to expand its business should assess, taking appropriate professional advice where necessary, whether it will need to make an application in accordance with SUP 6 before making any changes to its business.

SUP 6.2.4A

handbook-guidance
If a firm intends to transfer its business to a different legal entity it will need to apply to the relevant regulator for cancellation of its Part 4A permission and the entity to which the business is to be transferred will need to apply for a Part 4A permission.

SUP 6.2.4B

handbook-guidance
SUP 6.2.5 G sets out the differences between these types of applications and the circumstances in which they should be made.
  • 01/04/2013

SUP 6.2.5

handbook-guidance

Variation and cancellation of Part 4A permission and imposition, variation and cancellation of requirements. See SUP 6.2.3A G to SUP 6.2.3E G

SUP 6.2.6

handbook-guidance
A firm which is seeking:
(1) to vary its Part 4A permission substantially; or
(2) tocancel its Part 4A permission; or
(3) the imposition of a new requirement and/or the variation or cancellation of any existing requirement;
should discuss its plans with its supervisory contact at the relevant regulator as early as possible before making an application, in order to comply with Principle 11 (see SUP 15.3.7 G). These discussions will help the relevant regulator and the firm to agree the correct approach for the firm.

SUP 6.2.7

handbook-guidance
If a firm intends to cease carrying on one or more regulated activities permanently, it should give prompt notice to the appropriate regulator to comply with Principle 11 (see SUP 15.3.8 G (1)(d)). A firm should consider whether it needs to notify the appropriate regulator before applying to vary or cancel its Part 4A permission.

Firms with long term liabilities to customers

SUP 6.2.8

handbook-guidance
Discussions with the appropriate regulator are particularly relevant where the firm has to discharge obligations to its customers or policyholders before it can cease carrying on a regulated activity. This may be the case, for example, where the firm is an insurer, a bank a dormant account fund operator, or, as is often the case, holding client money or customer assets.

SUP 6.2.9

handbook-guidance
If an insurer , a bank, or a dormant account fund operator wishes to cease carrying on all regulated activities for which it has Part 4A permission, it will usually be necessary to wind down the business over a long term period which is normally more than six months. This may also be the case for a firm holding client money or customer assets. In these circumstances, it will usually be appropriate for the firm to apply for variation of its Part 4A permission and/or imposition of a new requirement, variation of any existing requirement or cancellation of such a requirement before commencing the wind-down. A firm should only make an application for cancellation of permission when it expects to complete its wind-down (run-off) within six months.

SUP 6.2.10

handbook-guidance
A firm which is winding down (running off) its activities should contact its supervisory contact at the appropriate regulator to discuss its circumstances. Discussions will focus on the firm's winding down plans and the need for the firm to vary or cancel its Part 4A permission and/or the need to impose a new requirement, vary any existing requirement or cancel such a requirement. Following these discussions the firm should usually make the relevant application, as appropriate.

SUP 6.2.10A

handbook-guidance
In certain circumstances the FCA and/or the PRA may use their own-initiative powers (see SUP 7 and EG 8) (Variation and cancellation of permission on the FCA's own initiative and intervention against incoming firms)).
  • 01/04/2013

SUP 6.2.11

handbook-guidance
(1) Specific guidance on the additional procedures for a firm winding down (running off) its business in the circumstances discussed in SUP 6.2.8 G is in SUP 6 Annex 4.
(2) The guidance in SUP 6 Annex 4 applies to any firm that is applying for variation of Part 4A permission or for the imposition, variation or cancellation of a requirement before it applies for cancellation of Part 4A permission to enable it to wind down (run off) its business over a long term period of six months of more. It will apply to most insurers and banks and, in some circumstances, to firms holding client money or customer assets.
(3) If a firm wishes to cease carrying on some of its regulated activities, or the specified investments in respect of which the activities are carried on, the appropriate regulator may consider it appropriate for the firm to comply with the additional procedures in SUP 6 Annex 4. This would depend on the scale and nature of the regulated activities concerned. This might be the case, for example, if the firm is ceasing a significant part of its business in respect of which it has outstanding obligations to customers and it is believed that the additional procedures would protect consumers.

UK firms exercising EEA or Treaty rights

SUP 6.2.12

handbook-guidance
A UK firm should assess the effect of any change to its Part 4A permission, or any requirements, on its ability to continue to exercise any EEA right or Treaty right and discuss any concerns with its appropriate supervisory contact(s). This may also change the applicable provisions with which it is required to comply by a Host State.

SUP 6.2.13

handbook-guidance
A UK firm which, as well as applying to vary or cancel its Part 4A permission, wishes to vary or terminate any business which it is carrying on in another EEA State under one of the Single Market Directives, should follow the procedures in SUP 13 (Exercise of passport rights by UK firms) on varying or terminating its branch or cross border services business.

The Lloyd's market

SUP 6.2.14

handbook-guidance
A firm making an application in accordance with SUP 6 which requires any approval from the Society of Lloyd's should apply to the Society for this at the same time as applying to therelevant regulator. See SUP 6 Annex 4 for additional procedures.

SUP 6.3

Applications for variation of permission and/or imposition, variation or cancellation of requirements

What is a variation of permission?

SUP 6.3.1B

handbook-guidance
Under section 55I of the Act, an FCA-authorised person may apply to the PRA to vary its Part 4A permission to add regulated activities which include a PRA-regulated activity.
  • 01/04/2013

SUP 6.3.1C

handbook-guidance
Under section 55I of the Act, a PRA-authorised person may apply to the PRA to vary its Part 4A permission to:
(1) allow it to carry on further regulated activities; or
(2) reduce the number of regulated activities it is permitted to carry on; or
(3) vary the description of its regulated activities (including by the removal or variation of any limitations).
  • 01/04/2013

Applications to impose, vary or cancel requirements

SUP 6.3.2B

handbook-guidance
Under section 55M(5) of the Act, a PRA-authorised person may apply to the PRA for the imposition of a new requirement and/or the variation or cancellation of any requirement previously imposed by the PRA.
  • 01/04/2013

The scope of applications

SUP 6.3.2D

handbook-guidance
An application may relate to one or more of SUP 6.3.1C G and SUP 6.3.2B G. For example, a firm may apply to vary its Part 4A permission to add a new regulated activity and at the same time remove a regulated activity for which it currently has permission.
  • 01/04/2013

SUP 6.3.3

handbook-guidance
In applying for a variation of Part 4A permission, a branch of a firm from outside the EEA should be mindful of any continuing requirements referred to in the rest of the Handbook.

Applications to add additional regulated activities

SUP 6.3.4

handbook-guidance
In determining the activities and specified investments for which a Part 4A permission is required, and whether to apply for a variation of that permission, a firm may need to take professional advice and may also wish to discuss this with its appropriate supervisory contact.

SUP 6.3.5

handbook-guidance
Before applying to vary its permission, a firm should determine whether there are any statutory restrictions that do not allow combinations of certain types of regulated activity, particularly for insurance business or UCITS managers. For example, the PRA will not grant a variation of Part 4A permission to allow a friendly society to carry on reinsurance business as this is not permitted under the Friendly Societies Acts 1974 and 1992. A firm should discuss its plans with its appropriate supervisory contact.

SUP 6.3.6

handbook-guidance
If a firm is seeking a variation of Part 4A permission to add categories of regulated activities, it should be mindful of the directive requirements referred to at SUP 6.3.42 G relating to the need to commence new activities within 12 months.

Applications to remove certain regulated activities

SUP 6.3.7

handbook-guidance
If a firm wishes to cease carrying on an activity for which it has Part 4A permission, it will usually apply to vary its Part 4A permission to remove that activity. If a firm wishes to cease carrying on an activity in relation to any specified investment, it will usually apply to vary its Part 4A permission to remove that specified investment from the relevant activity.

How a variation of permission may affect the firm's approved persons

SUP 6.3.8

handbook-guidance
(1) Where a firm is submitting an application for variation of Part 4A permission which would lead to a change in the controlled functions of its approved persons, it should, at the same time and as appropriate:
(a) make an application for an internal transfer of an approved person, Form E (Internal transfer), or make an application for an individual to perform additional controlled functions, the relevant Form A (Application); see SUP 10.13.3 D to SUP 10.13.5 G;
(b) notify the appropriate regulator of any approved person who has ceased to perform a controlled function specified by that regulator, Form C (Ceasing to perform controlled functions); see SUP 10.13.6 R to SUP 10.13.13 G.
(2) If the firm intends to recruit new individuals to perform controlled functions, it should apply for approval of the individuals as approved persons as soon as possible using Form A (Application); see SUP 10.12.

Variation of permission involving insurance business

SUP 6.3.11

handbook-guidance
A firm with Part 4A permission to carry on insurance business, which is applying for a variation of its Part 4A permission to add further insurance activities or specified investments, will be required to submit particular information on its existing activities as part of its application. This includes the scheme of operations which is required to be submitted as part of the application pack (for further details on the scheme of operations, see SUP App 2 (Insurers: scheme of operations)).

SUP 6.3.12

handbook-guidance
In applying to vary its Part 4A permission to add categories of specified investments, in relation to insurance business, a firm carrying on insurance business will need to determine the classes of specified investments relating to effecting and carrying out contracts of insurance for which variation of Part 4A 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 (see SUP 3.12.6G to SUP 3.12.12G).

SUP 6.3.13

handbook-guidance
The application for variation of Part 4A permission will need to provide information about the classes of contract of insurance for which variation of Part 4A permission is requested and also those classes qualifying to be carried on, on an ancillary or supplementary basis. For example, an insurer applying to vary its permission to include class 10 (motor vehicle liability, other than carrier's liability) must satisfy the FCA that it will meet, and continue to meet, threshold condition3F(Appointment of claims representatives). Firms should note that, although the relevant regulator is able in principle to use its power to give Part 4A permission for an applicant to carry on a regulated activity for which it did not originally apply, this is not possible under the Insurance Directives, which set out minimum information requirements for an application for authorisation including information on the specified investments the applicant proposes to deal in.

SUP 6.3.14

handbook-guidance
(1) A firm carrying on insurance business which is seeking to cease such business in respect of one or more classes of specified investment, but which is not intending to cease all insurance business, should apply to vary its Part 4A permission to remove the activity of effecting contracts of insurance in respect of those specified investments in relation to which it no longer wishes to carry on business. A firm intending to cease all insurance business should refer to SUP 6 Annex 4.
(2) If the application for variation of Part 4A permission is granted by the PRA, the firm will have Part 4A permission only to carry out contracts of insurance in respect of the specified investments in relation to which it no longer wishes to carry on business (see SUP 6 Annex 4). This will allow the firm to run off this aspect of its business. When the business in question has been run-off completely, the firm should then apply to vary its Part 4A permission to remove the relevant classes of specified investment.

The application for variation of permission and/or imposition, variation or cancellation of requirements

SUP 6.3.15

handbook-directions
  1. (1) A firm other than a credit union wishing to make an application under SUP 6must apply online using the form specified on theONA system.
  2. (2) [deleted]
  3. (3) Until the application has been determined, a firm which submits an application must inform the relevant regulator of any significant change to the information given in the application immediately it becomes aware of the change.
  4. (3A) Where an application requires the consent of the FCA, a firm which submits an application must inform the FCA of any significant change to the information given in the application immediately it becomes aware of the change.
  5. (4) Where a firm is obliged to submit any form, notice or application online under (1), if the ONA information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored a firm must submit any form, notice or application by using the form in SUP 6 Ann 5D and submitting it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

SUP 6.3.15A

handbook-guidance
(1) If the ONA systems fail and online submission is unavailable for 24 hours or more, the relevant regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 6.3.15 D (4) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.
(2) Where SUP 6.3.15 D (4) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 6.3.15B

handbook-guidance
A credit union wishing to make an application under SUP 6 must apply using the form in SUP 6 Annex 5 and submit its application in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
  • 01/04/2013

SUP 6.3.16

handbook-guidance
(1) Section 55(U)(2) of the Act (Applications under this Part) requires that the application for variation of Part 4A permission must contain a statement:
(a) of the desired variation; and
(b) of the regulated activity or regulated activities which the firm proposes to carry on if its permission is varied.
(1A) Section 55(U)(3) of the Act requires that an application for variation of a requirement imposed under section 55L or 55M or the imposition of a new requirement must contain a statement of the desired variation or requirement.
(2) The full form and content of the application for variation of Part 4A permission or for the imposition or variation of a requirement is a matter for direction by the relevant regulator, who will determine the additional information and documentation required on a case by case basis.

SUP 6.3.17

handbook-guidance
(1) [deleted]
(2) A firm is advised to discuss its application with the relevant regulator before submission, particularly if it is seeking a variation of Part 4A permission or imposition, variation or cancellation of a requirement within a short timescale. A firm is also advised to include as much detail as possible (including any additional information identified by its supervisors at this stage) with its application.

SUP 6.3.18

handbook-guidance
The relevant regulator, as soon as possible after receipt of an application, will advise the firm of any additional information which is required as part of its application (see SUP 6.3.23 G to SUP 6.3.27 G). The amount of information required will vary depending on the scale of the variation in the context of the firm as a whole, and the nature, risk profile and complexity of the variation.

Applications from firms winding down (running off) business over the long term

SUP 6.3.19

handbook-guidance
A firm which is making an application for variation of Part 4A permission to wind down (run off) its business before applying for a cancellation of that permission (see SUP 6.2.9 G) should read SUP 6 Annex 4 for details of the additional procedures that apply.

Applications involving significant changes

SUP 6.3.20

handbook-guidance
In certain cases, the relevant regulator may consider that granting an application for imposition, variation or cancellation of any requirement or for variation of Part 4A permission which includes adding further regulated activities or changing a limitation would cause a significant change in the firm's business or risk profile. In these circumstances, therelevant regulator may require the firm to complete appropriate parts of the full application pack (see the relevant regulator's website ), as directed by the relevant regulator. Applications for variation involving significant changes may be processed by the firm's appropriate supervisory contact in conjunction with theAuthorisations Team. Examples of an application for imposition, variation or cancellation of a requirement and for variation of Part 4A permission which may represent a significant change include, but are not limited to, an application:
(1) to carry on new regulated activities such as accepting deposits;
(2) to extend the insurance business of a firm which already has Part IV permission which includes carrying out or effecting contracts of insurance (or both), to new classes of specified investment; or
(3) to remove a requirement preventing a firm from holding or controlling client money.
(4) [deleted]

SUP 6.3.21

handbook-guidance
A firm that wishes to make a significant change to its business, or is unsure whether the changes it is proposing would be considered to be significant, should contact the relevant regulator. The relevant regulator will discuss with the firm whether it will be required to submit parts of the application pack and whether any reports from third parties may be required.

SUP 6.3.22

handbook-guidance
The fees payable for a firm applying for the imposition, variation or cancellation of any requirements and/or a variation of its Part 4A permission are set out in FEES 3.

Information to be supplied to the relevant regulator as part of the application

SUP 6.3.23

handbook-guidance
(1) The relevant regulator may ask for any information it reasonably requires before determining the application. The information required will be determined on a case by case basis, taking into account the relevant regulator's existing knowledge of the firm and the change requested. The relevant regulator will advise the firm of the information required at an early stage in the application process.
(2) The nature of the information and documents requested will be related to the risks posed to the relevant regulator's statutory objectives by the regulated activities and any unregulated activities that the firm is carrying on or is seeking to carry on. This information will be proportional to the nature of the business which the firm intends to carry on or the risks posed by the firm.

SUP 6.3.24

handbook-guidance
(1) The information the relevant regulator may require includes, but is not limited to, the examples given in SUP 6.3.25 G:

SUP 6.3.25

handbook-guidance

Information which may be required. See SUP 6.3.24 G

SUP 6.3.26

handbook-guidance
Specific information may also be required by the relevant regulator on the activities the firm intends to cease, or cease carrying on in relation to any specified investments (see SUP 6 Annex 4).

SUP 6.3.27

handbook-guidance
When determining whether to grant an application, the relevant regulator may request further information, including reports from third parties such as the firm's auditors, and may require meetings with, and visits to, the firm. The relevant regulator may also require a statement from members of the firm's governing body confirming, to the best of their knowledge, the completeness and accuracy of the information supplied. The relevant regulator may also discuss the application with other regulators or exchanges.

When will an application for variation of permission and/or imposition or variation of requirements be granted?

SUP 6.3.28

handbook-guidance
(1) The relevant regulator is required by section 55B(3) of the Act to ensure that a firm applying to gain or vary a Part 4A permission or to impose or vary a requirement satisfies and will continue to satisfy the threshold conditions in relation to all the regulated activities for which the firm has or will have a Part 4A permission.
(2) [deleted]

SUP 6.3.28C

handbook-guidance
(1) The PRA's duty under section 55B(3) 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 firm, to meet any of its objectives. This may include, with the consent of the FCA, granting a firm's application for variation of Part 4A permission when it wishes to wind down (run off) its business activities and cease to carry on new business as a result of no longer being able to satisfy the threshold conditions.
(2) The PRA may refuse an application under section 55B(3) of the Act if it considers that it is desirable to do so in order to advance any of its objectives.
  • 01/04/2013

SUP 6.3.29

handbook-guidance
In determining whether the firm satisfies and continues to satisfy the threshold conditions, theregulator concerned will consider whether the firm is ready, willing and organised to comply with theregulatory requirements it will be subject to if the application is granted.

SUP 6.3.30

handbook-guidance
The specific requirements that apply to certain types of activitywill also need to be considered as these may not allow certain combinations of activity.

SUP 6.3.31

handbook-guidance
In considering whether to grant (or consent to, as the case may be) a firm's application to vary its Part 4A permission or impose or vary a requirement, the regulator concerned will also have regard, under section 55R(1) of the Act (Persons connected with an applicant), to any person appearing to be, or likely to be, in a relationship with the firm which is relevant. The Financial Groups Directive Regulations make special consultation provisions where the regulator is exercising its functions under Part 4A of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary supervision . Broadly, where a regulator, in the course of carrying on supplementary supervision, is considering varying the Part 4A permission of a person who is a member of a group which is a financial conglomerate, the consultation provisions in section 55R(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.

The regulator's powers in respect of application for variation of Part IV permission

SUP 6.3.32C

handbook-guidance
If a firm has applied (whether to the FCA or the PRA) for the variation of a Part 4A permission, the FCA has the power to impose on that person such requirements, taking effect on or after the variation of permission, as the FCA considers appropriate.
  • 01/04/2013

SUP 6.3.33A

handbook-guidance
The PRA's powers to vary a Part 4A permission after it receives an application from a firm extends, subject to the consent of the FCA, to including in the Part 4A permission as varied any provision that could be included as though a fresh permission was being given in response to an application under section 55A of the Act (Application for permission). Under section 55F of the Act (Giving permission: the PRA), the PRA may:
(1) incorporate in the description of a regulated activity such limitations (for example, as to the circumstance in which a regulated activity may or may not be carried on) as it considers appropriate; or
(2) specify a narrower or wider description of regulated activity than that to which the application relates; or
(3) give permission for the carrying on of a regulated activity which is not included among those to which the application relates.
  • 01/04/2013

SUP 6.3.33B

handbook-guidance
Thus, when determining an application for variation of Part 4A permission, the PRA can include new limitations and vary existing limitations, either on application from the firm (for example, the customer categories with which a firm may carry on a specified activity), or if considered appropriate by the PRA under section 55F(4) of the Act.
  • 01/04/2013

SUP 6.3.33C

handbook-guidance
If a firm has applied to the PRA for the variation of a Part 4A permission, the PRA has the power to impose on that person such requirements, taking effect on or after the giving or variation of the permission, as the PRA considers appropriate.
  • 01/04/2013

SUP 6.3.34

handbook-guidance
If limitationsare varied or imposed or requirements are imposed by the relevant regulator which were not included in the firm's application for variation of Part 4A permission, the relevant regulator will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

SUP 6.3.34A

handbook-guidance
Where a firm has made an application to the PRA for the variation of its Part 4A permission and requirements are imposed by the FCA which were not included in the firm's application, the FCA will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).
  • 01/04/2013

How long will an application take?

SUP 6.3.35

handbook-guidance
Under section 55V(1) of the Act (Determination of applications), the relevant regulator has six months to consider a completed application from the date of receipt.

SUP 6.3.36

handbook-guidance
If the relevant regulator receives an application which is incomplete (that is, if information or a document required as part of the application is not provided), section 55V(2) of the Act requires the relevant regulator to determine that incomplete application within 12 months of the initial receipt of the application.

SUP 6.3.36A

handbook-guidance
Where the application cannot be determined by the PRA without the consent of the FCA, section 55V(3) of the Act requires that the FCA's decision must also be made within the period required in SUP 6.3.35 G or SUP 6.3.36 G as appropriate.
  • 01/04/2013

SUP 6.3.37

handbook-guidance
Within these time limits, however, the length of the process will relate directly to the complexity of the application.

SUP 6.3.38

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

How will the relevant regulator make the decision?

SUP 6.3.39

handbook-guidance
A decision to grant an application will be taken by appropriately experienced staff at the relevant regulator. However, if the staff dealing with the application recommend that a firm's application for variation of Part 4A permission be either refused or granted subject to limitations or requirements or a narrower description of regulated activities than applied for, the decision will be subject to the regulator's formal decision making process.

Commencing new regulated activities

SUP 6.3.41

handbook-guidance
If the variation of Part 4A permission is given, the relevant regulator will expect a firm to commence a new regulated activity in accordance with its business plan (revised as necessary to take account of changes during the application process) or scheme of operations for an insurer. Firms should take this into consideration when determining when to make an application to the relevant regulator.

SUP 6.3.42

handbook-guidance
(1) Firms should be aware that the appropriate regulator may exercise its own-initiative variation power to vary or cancel their Part 4A permission if they do not (see section 55J of the Act (Variation or cancellation on initiative of regulator)):
(a) commence a regulated activity for which they have Part 4A permission within a period of at least 12 months from the date of being given; or
(b) carry on a regulated activity for which they have Part 4A permission for a period of at least 12 months (irrespective of the date of grant).
(1A) The appropriate regulator may exercise its own-initiative variation power to cancel an investment firm's Part 4A permission if the investment firm has provided or performed no investment services and activities at any time during the period of six months ending with the day on which the warning notice under section 55Z(1) of the Act is given (see EG 8).



[Note: article 8(a) of MiFID]
(2) If the appropriate regulator considers that such a variation or cancellation of the firm's Part 4A permission is appropriate, it will discuss the proposed action with the firm and its reasons for not commencing or carrying on the regulated activities concerned.

SUP 6.3.43

handbook-guidance
When a firm commences new regulated activities following a variation of a Part 4A permission, it should have particular regard to the requirements of Principle 11 (Relations with regulators) (see SUP 15.3.8 G (1)(c)).

SUP 6.4

Applications for cancellation of permission

  • 01/12/2004

SUP 6.4.1B

handbook-guidance
Under section 55I(2) of the Act (Variation by PRA at request of authorised person), if a PRA-authorised person applies to the PRA, the PRA may cancel its Part 4A permission. Cancellation applies to a firm's entire Part 4A permission, that is to every activity and every specified investment and not to the individual elements such as specified investments. Changes to the individual elements of a permission would require a variation.
  • 01/04/2013

SUP 6.4.2B

handbook-guidance
Under section 55I(4) of the Act, the PRA may refuse an application from a firm to cancel its Part 4A permission if it appears that it is desirable to do so in order to advance any of its objectives.
  • 01/04/2013

SUP 6.4.3

handbook-guidance
(1) A firm may apply to the relevant regulator to cancel its Part 4A permission before it has ceased carrying on all regulated activities. However, where a firm makes a formal application for cancellation of its permission when it has not yet ceased carrying on regulated activities, the relevant regulator will expect the firm:
(a) to cease those regulated activities within the short term (normally no more than six months from the date of application for cancellation); and
(b) to have formal plans to cease its regulated activities in an orderly manner.
(2) Firms should note, however, that the relevant regulator will not grant an application for cancellation of Part 4A permission until the firm can demonstrate that it has ceased carrying on all regulated activities (SUP 6.4.19 G).
(3) The relevant regulator may apply additional procedures or require additional information, as if the firm had entered into a long term wind down of business (see SUP 6 Annex 4), if it considers it appropriate to the circumstances of the firm.

SUP 6.4.4

handbook-guidance
Additional guidance for a firm carrying on insurance business, accepting deposits, operating a dormant account fund or which holds client money or customer's assets is given in SUP 6 Annex 4. As noted in SUP 6.2.9 G, it will usually be appropriate for a firm to apply for variation of its Part 4A permission and/or the imposition, variation or cancellation of a requirement while winding down (running off) its regulated activities and before applying to cancel its Part 4A permission.

The application for cancellation of permission

SUP 6.4.5

handbook-directions
  1. (1) A firm other than a credit union wishing to cancel its Part 4A permission, must apply online at the appropriate regulator website using the form specified on the ONA system.
  2. (2) [deleted]
  3. (3) [deleted]
  4. (4) Until the application has been determined, a firm which submits an application for cancellation of Part 4A permission must inform the relevant regulator of any significant change to the information given in the application immediately it becomes aware of the change.
  5. (5) Where a firm is obliged to submit any form, notice or application online under (1), if the ONA systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored a firm must submit any form, notice or application by using the form in SUP 6 Annex 6D and submitting it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

SUP 6.4.5A

handbook-guidance
(1) If the ONA systems fail and online submission is unavailable for 24 hours or more, the relevant regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 6.4.5 D (5) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.
(2) Where SUP 6.4.5 D (5) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 6.4.5B

handbook-guidance
A credit union wishing to cancel its Part 4A permission must apply using the form in SUP 6 Annex 6 and submit its application in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification). The application must be addressed for the attention of the [to be inserted] at the PRA.
  • 01/04/2013

SUP 6.4.6

handbook-guidance
(1) In addition to applying for cancellation of Part 4A permission in accordance with SUP 6.4.5 D, a firm may discuss prospective cancellations with its supervisory contact at the appropriate regulator. Alternatively a firm can contact the Firms Contact Centre on 0845 606 9966.
(2) To contact the
(a) write to: Cancellations Team, The Financial ConductAuthority, 25 The North Colonnade, Canary Wharf, London, E14 5HS; or; or
(b) emailcancellation.team@fca.org.uk
(3) If a firm which has applied for cancellation decides to remain authorised it should inform the relevant regulator immediately using one of the methods in SUP 6.4.6 G (2).

SUP 6.4.7

handbook-guidance
When an application is received, the relevant regulator will send the firm a written acknowledgement. The firm will be required to provide information which, in the opinion of the relevant regulator, is necessary for it to determine whether to grant or refuse the application for cancellation of Part 4A permission.

Information to be supplied to the relevant regulator as part of the application for cancellation of permission

SUP 6.4.8

handbook-guidance
The information which the relevant regulator may request on the circumstances of the application for cancellation and the confirmations which the relevant regulator may require a firm to provide will differ according to the nature of the firm and the activities it has Part 4A permission to carry on.

SUP 6.4.9

handbook-guidance
A firm will be expected to demonstrate to the relevant regulator that it has ceased carrying on regulated activities. The relevant regulator may require, as part of the application, a report from the firm that includes, but is not limited to, the confirmations referred to in SUP 6.4.12 G (as appropriate to the firm's business). The relevant regulator may also require additional information to be submitted with the report including, in some cases, confirmation or verification from a professional adviser on certain matters to supplement the report (see SUP 6.4.15 G).

Confirmations and resolutions

SUP 6.4.12

handbook-guidance
The relevant regulator will usually require the report in SUP 6.4.9 G to be signed by a director or other officer with authority to bind the firm. It may include confirmations from the firm that, in relation to business carried on under its Part 4A permission, it has:
(1) ceased carrying on all regulated activities;
(2) properly disbursed funds in its client bank accounts and closed those accounts;
(3) discharged all insurance or deposit liabilities; and
(4) properly transferred all investments, title documents and other property that it held on behalf of clients.

SUP 6.4.13

handbook-guidance
The relevant regulator may also require a resolution from the firm's governing body, for example to support the application for cancellation of permission, expressed to be irrevocable, and to give the signatory the authority to sign the formal report to the relevant regulator.

SUP 6.4.14

handbook-guidance
Under section 398 of the Act (Misleading the FCA or PRA: residual cases), it is an offence, in purported compliance with a requirement imposed by or under the Act (including the directions in SUP 6.4.5 D), for a person to knowingly or recklessly give the regulator information that is false or misleading. If necessary, a firm should take appropriate professional advice when supplying information required by the regulator(s). An insurer, for example, may ask an actuary to check assumptions in respect of future claims made under contracts of insurance.

Reports from professionals

SUP 6.4.15

handbook-guidance
The relevant regulator may require additional information, including professional advice, to supplement or support the report in SUP 6.4.9 G where it considers this appropriate. Examples of reports that may be requested by the relevant regulator include, but are not limited to those detailed in SUP 6.4.16 G.

SUP 6.4.16

handbook-guidance

Types of reports. See SUP 6.4.15 G

SUP 6.4.17

handbook-guidance
If a firm is transferring its business, the relevant regulator may require a professional opinion in respect of certain aspects of the transfer. For example, the relevant regulator may require a legal opinion on the validity of arrangements to transfer regulated activities, client money, client deposits, custody assets or any other property belonging to clients, to another authorised person. Alternatively, an auditor or reporting accountant may be requested to verify that a transfer has been properly accounted for in the firm's books and records. Transfers of insurance and banking business are subject to statutory requirements (see SUP 18).

Approved persons

SUP 6.4.18

handbook-guidance
A firm which is applying for cancellation of Part 4A permission and which is not otherwise authorised by, or under, the Act should, at the same time, comply with SUP 10.13.6 R and notify the appropriate regulator of persons ceasing to perform controlled functions specified by that regulator. These forms should give the effective date of withdrawal, if known (see SUP 10 (Approved persons)).

When will the relevant regulator grant an application for cancellation of permission?

SUP 6.4.19

handbook-guidance
Therelevant regulator will usually not cancel a firm's Part 4A permission until the firm can demonstrate that, in relation to business carried on under that permission, it has, as appropriate:
(1) ceased carrying on regulated activities or fully run off or transferred all insurance liabilities;
(2) repaid all client money and client deposits;
(3) discharged custody assets and any other property belonging to clients; and
(4) discharged, satisfied or resolved complaints against the firm.

SUP 6.4.20

handbook-guidance
If it is not possible for a firm to demonstrate a relevant matter referred to in SUP 6.4.19 G, for example, depositors are uncontactable, the firm will be expected to have satisfied therelevant regulator that it has made adequate provisions for discharging any liabilities to clients which do not involve the firm carrying on regulated activities.

SUP 6.4.21

handbook-guidance
Before the relevant regulator cancels a firm's Part 4A permission, the firm will be expected to be able to demonstrate that it has ceased or transferred all regulated activities under that permission. For example, the firm may be asked to provide evidence that a transfer of business (including, where relevant, any client money, customer assets or deposits or insurance liabilities) is complete. As noted in SUP 6.4.9 G, the relevant regulator may require the firm to confirm this by providing a report, in a form specified by the relevant regulator:
(1) as part of the application for cancellation of permission, if the firm has ceased carrying on all regulated activities under its Part 4A permission at the time of application (see SUP 6.4.9 G); or
(2) after the application but before its determination, if the firm has not ceased carrying on regulated activities under its Part 4A permission at the time of application.

SUP 6.4.22

handbook-guidance
In deciding whether to cancel a firm's Part 4A permission, the relevant regulator will take into account all relevant factors in relation to business carried on under that permission, including whether:
(1) there are unresolved, unsatisfied or undischarged complaints against the firm from any of its customers;
(2) the firm has complied with CASS 5.5.80 R and CASS 7.2.15 R (Client money: discharge of fiduciary duty) and CASS 7.2.19 R (Client money: allocated but unclaimed client money) if it has ceased to hold client money; these rules apply to both repayment and transfer to a third party;
(3) the firm has ceased to hold or control custody assets in accordance with instructions received from clients and COBS 6.1.7 R (Information concerning safeguarding of designated investments belonging to clients and client money);
(4) the firm has repaid all client deposits, if it is ceasing to carry on regulated activities including accepting deposits;
(5) the relevant regulator or another regulator has commenced an investigation against the firm or continuing enforcement action against the firm;
(6) there are any matters affecting the firm which should be investigated before a decision on whether the firm should have its Part 4A permission cancelled by the relevant regulator or be disciplined;
(7) the firm has unsettled or unexpired liabilities to consumers, for example, outstanding contracts (such as deposits or insurance liabilities);
(8) the firm has settled all its debts to the appropriate regulator; and
(9) the factors set out in SUP 6.4.19 G apply.

The FCA and the PRA enforcement and investigation powers against a former authorised person

SUP 6.4.23

handbook-guidance
If an application for cancellation of a firm's Part 4A permission has been granted and a firm's status as an authorised person has been withdrawn (see SUP 6.5) it will remain subject to certain investigative and enforcement powers as a former authorised person. These include:
(1) information gathering and investigation powers in Part XI of the Act (Investigation gathering and investigations) (see EG 3 (Use of information gathering and investigation powers));
(2) powers to apply to court for injunctions and restitution orders in Part XXV of the Act (Injunctions and restitution) (see EG 10 (Injunctions) and EG 11 (Restitution and redress));
(3) powers in Part XXIV of the Act (Insolvency) to petition for administration orders or winding up orders against companies or insolvent partnerships, or bankruptcy orders (or in Scotland sequestration awards) against individuals (see EG 13 (Insolvency));
(4) powers in Part XXVII of the Act (Offences) to prosecute offences under the Act and other specified provisions (see EG 12 (Prosecution of criminal offences)).

SUP 6.4.24

handbook-guidance
However, the following powers may not be used against former authorised persons:
(1) powers to take disciplinary action against firms by publishing statements of misconduct under section 205 of the Act (Public censure) or imposing financial penalties under section 206(1) of the Act (Financial penalties); and
(2) the power to require firms to make restitution under section 384 of the Act (Power of FCA or PRA to require restitution).

SUP 6.4.25

handbook-guidance
Consequently, the relevant regulator considers that it will have good reason not to grant a firm's application for cancellation of permission where:
(1) the FCA and/or the PRA proposes to exercise any of the powers described in SUP 6.4.24 G; or
(2) the FCA and/or the PRA has already begun disciplinary and/or restitution proceedings against the firm by exercising either or both of these powers against the firm.

How long will an application take?

SUP 6.4.27

handbook-guidance
(1) Under section 55V(1)of the Act (Determination of applications), therelevant regulator has six months to consider a completed application.
(2) If therelevant regulator receives an application which is incomplete, that is, where information or a document required as part of the application is not provided, section 55V(2) of the Act requires the relevant regulator to determine the incomplete application within 12 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 cancellation requested and whether the firm has fully wound down (run off) its activities at the time it applies.

How will the relevant regulator make the decision?

SUP 6.4.28

handbook-guidance
A decision to grant an application for cancellation of permission will be taken by appropriately experienced staff at the relevant regulator. Where, however, the staff dealing with the application recommend that a firm's application for cancellation of Part 4A permission be refused, the decision will be subject to the regulator's formal decision making process.

SUP 6.5

Ending authorisation

  • 01/12/2004

SUP 6.5.1

handbook-guidance
Under section 33(2) of the Act (Withdrawal of authorisation), if the appropriate regulator cancels a firm'sPart 4A permission, and as a result there is no regulated activity for which the firm has permission, theregulator authorising that firm is required to give a direction withdrawing the firm's status as an authorised person.

SUP 6.5.2B

handbook-guidance
If the PRA concludes that it should grant a PRA-authorised person's application for cancellation of permission and end its authorisation, the PRA will:
(1) cancel the firm's Part 4A permission under section 55I(2) of the Act;
(2) withdraw the firm's authorised status under section 33(2) of the Act by giving the firm a direction in writing; and
(3) contact the FCA and request that it update the firm's entry in the Financial Services Register to show it has ceased to be authorised.
  • 01/04/2013

SUP 6 Annex 4

Additional guidance for a firm winding down (running off) its business

  • 01/12/2004

SUP 6 Annex 4.1

handbook-guidance

SUP 6 Annex 4.2

handbook-guidance

SUP 6 Annex 4.3

handbook-guidance

SUP 6 Annex 4.4

handbook-guidance

SUP 6 Annex 4.5

handbook-guidance

SUP 6 Annex 5

Variation of permission application form

  • 01/12/2004

handbook-directions
This annex consists only of one or more forms. Forms are to be found through the following address:



Supervision forms - [web address to be inserted]

SUP 6 Annex 6

Cancellation of permission application form

  • 01/12/2004

handbook-directions
This annex consists only of one or more forms. Forms are to be found through the following address:



Cancellation of permission application form - Forms/sup/cancellation_form_20130401.doc

Export chapter as

SUP 8

Waiver and modification of rules

SUP 8.1

Application and purpose

  • 01/12/2004

SUP 8.1.1-B

handbook-rule
This chapter applies to every firm or person who is subject to PRArules that wishes to apply for, consent to, or has been given a modification of or waiver of the PRA'srules.
  • 01/04/2013

SUP 8.1.1A

handbook-guidance
This chapter is relevant to an applicant for a Part 4A permission , as if that applicant were a firm. Where the chapter refers to appropriatesupervisory contact, the applicant should read this as being the usual supervisorycontact at the appropriate regulator . Further, this chapter is relevant to a person who is subject to rules made by the appropriate regulator and where the chapter refers to a firm, this includes that person.

Purpose

SUP 8.1.4

handbook-guidance
This chapter explains how the regime for the waiver of rules works.

SUP 8.2

Introduction

  • 01/12/2004

Waivers under section 138A of the Act

SUP 8.2.1

handbook-guidance
Under section 138Aof the Act (Modification or waiver of rules), the appropriate regulator may, on the application or with the consent of a firm, direct that its rules :
(1) are not to apply to the firm; or
(2) are to apply to the firm with such modifications as may be specified.

SUP 8.2.1A

handbook-guidance
SUP 8.2.1 G does not apply to:
(1) rules made by either regulator under section 137O of the Act;
(2) rules made by the FCA under sections 247 or 248 of the Act.
  • 01/04/2013

SUP 8.2.2

handbook-guidance
The directions referred to in SUP 8.2.1 G (1) and SUP 8.2.1 G (2) are collectively referred to in the Handbook as waivers.

SUP 8.3

Applying for a waiver

  • 01/12/2004

Conditions for giving a waiver

SUP 8.3.1

handbook-guidance
Under section 138A(4) of the Act, the appropriate regulator may not give a waiver unless it is satisfied that:
(1) compliance by the firm with the rules, or with the rules as unmodified, would be unduly burdensome, or would not achieve the purpose for which the rules were made; and
(2) the waiver would not adversely affect the advancement of, in the case of the PRA, any of its objectives and, in the case of the FCA, any of its operational objectives.

SUP 8.3.1A

handbook-guidance
Even if the conditions in section 138A(4) of the Act are satisfied, the appropriate regulator will consider other relevant factors before giving a waiver, such as whether the waiver would be compatible with European law, including relevant EC Directives.

Publication of waivers

SUP 8.3.2

handbook-guidance
The appropriate regulator is required by section 138B of the Act to publish a waiver unless it is satisfied that it is inappropriate or unnecessary to do so (see SUP 8.6).

Form and method of application

SUP 8.3.3

handbook-directions
A firm wishing to apply for a waiver must complete the application form in SUP 8 Annex 2 D and submit it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
(1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [Deleted]
(5) [Deleted]
(6) [Deleted]
(7) [Deleted]
(a) [Deleted]
(b) [Deleted]

SUP 8.3.3A

handbook-guidance
(1) The appropriate regulator's preferred method of submission for waiver applications is by e-mail.
(2) The form is available on the appropriate regulator's website.

SUP 8.3.4

handbook-guidance
Before sending in a waiver application, a firm may find it helpful to discuss the application with its appropriate supervisory contact. However, the firm should still ensure that all relevant information is included in the application.

SUP 8.3.4B

handbook-guidance
PRA-authorised persons should send applications for waivers or applications for variations of waivers to:
(1) the FCA in respect of rules in the FCA Handbook applicable to that PRA-authorised person; and
(2) the PRA in respect of rules in the PRA Handbook.
  • 01/04/2013

Procedure on receipt of an application

SUP 8.3.5A

handbook-guidance
The appropriate regulator will treat a firm's application for a waiver as withdrawn if it does not hear from the firm within 20 business days of sending a communication which requests or requires a response from the firm. The appropriate regulator will not do this if the firm has made it clear to the appropriate regulator in some other way that it intends to pursue the application.

SUP 8.3.6

handbook-guidance
In some cases, the appropriate regulator may give a modification of a rule rather than direct that the rule is not to apply. The appropriate regulator may also impose conditions on a waiver, for example additional reporting requirements. A waiver may be given for a specified period of time only, after which time it will cease to apply. A firm wishing to extend the duration of a waiver should follow the procedure in SUP 8.3.3 D. A waiver will not apply retrospectively.

SUP 8.3.7

handbook-guidance
If the appropriate regulator decides not to give a waiver, it will give reasons for the decision.

SUP 8.3.8

handbook-guidance
A firm may withdraw its application at any time up to the giving of the waiver. In doing so, a firm should give the appropriate regulator its reasons for withdrawing the application.

SUP 8.3.9

handbook-guidance
If the appropriate regulator believes that a particular waiver given to a firm may have relevance to other firms, it may publish general details about the possible availability of the waiver. For example, IPRU(INV) 3-80(10)G explains that a firm that wishes to use its own internal model to calculate its position risk requirement (PRR) will need to apply for a waiver of the relevant rules.

Giving a waiver with consent rather than on an application

SUP 8.3.10

handbook-guidance
Under section 138A(1) of the Act the appropriate regulator may give a waiver with the consent of a firm. This power may be used by the appropriate regulator in exceptional circumstances where the appropriate regulator considers that a waiver should apply to a number of firms (for example, where a rule unmodified may not meet the particular circumstances of a particular category of firm). In such cases the appropriate regulator will inform the firms concerned that the waiver is available, either by contacting firms individually or by publishing details of the availability of the waiver on the appropriate regulator's website provided that the FCA must comply with SUP 8.3.2A G. The firms concerned will not have to make a formal application but will have to give their written consent for the waiver to apply.

Waiver of an evidential provision

SUP 8.3.11

handbook-guidance
An application for a waiver of an evidential provision will normally be granted only if a breach of the underlying binding rule is actionable under section 138D of the Act. Individual guidance would normally be a more appropriate response (see SUP 9 (Individual Guidance)) if there is no right of action.

SUP 8.3.12

handbook-guidance
An application for a waiver of the presumption of compliance created by an evidential provision would not normally be granted.

SUP 8.3.13

handbook-guidance
For an application for a waiver of the presumption of contravention of a binding rule, which is actionable under section 138D of the Act, the appropriate regulator would normally wish to be satisfied that the evidential rule is itself unduly burdensome or does not achieve the purpose of the rule.

SUP 8.3.13A

handbook-guidance
In accordance with section 138C(4) of the Act, in SUP 8.3.11 G to SUP 8.3.13 G, a reference to a rule does not include a rule made under:
(1) section 137O of the Act; or
(2) section 192J of the Act.
  • 01/04/2013

Waiver of a two-way evidential provision

SUP 8.3.14

handbook-guidance
In the case of an application for a waiver of a two-way evidential provision relating to an actionable binding rule, the policy in SUP 8.3.12 G would apply to the presumption of compliance and the policy in SUP 8.3.13 G would apply to the presumption of contravention. In other words, any modification is likely to be in relation to the second presumption only.

SUP 8.4

Reliance on waivers

  • 01/12/2004

Application of waived rules

SUP 8.4.1

handbook-guidance
If the appropriate regulator gives a firm a waiver, then the relevant rule no longer applies to the firm. But:
(1) if a waiver directs that a rule is to apply to a firm with modifications, then contravention of the modified rule could lead to appropriate regulator enforcement action and (if applicable) a right of action under section 138D of the Act (Actions for damages); and
(2) if a waiver is given subject to a condition, it will not apply to activities conducted in breach of the condition, and those activities, if in breach of the original rule, could lead to appropriate regulator enforcement action or such a right of action.

The effect of rule changes on waivers

SUP 8.4.2

handbook-guidance
Substantive changes to the rules (this would not include simple editorial changes) in the Handbook may affect existing waivers, changing their practical effect and creating a need for a change to the original waiver. The appropriate regulator will consult on proposed rule changes. A firm should note proposed rule changes and discuss the impact on a waiver with its appropriate supervisory contact.

SUP 8.5

Notification of altered circumstances relating to waivers

  • 01/12/2004

SUP 8.5.1

handbook-rule
A firm which has applied for or has been granted a waiver must notify the appropriate regulator immediately if it becomes aware of any matter which could affect the continuing relevance or appropriateness of the application or the waiver.

SUP 8.5.2

handbook-guidance
Firms are also referred to SUP 15.6 (Inaccurate, false or misleading information). This requires, in SUP 15.6.4 R, a firm to notify the appropriate regulator if false, misleading, incomplete or inaccurate information has been provided. This would apply in relation to information provided in an application for a waiver.

SUP 8.6

Publication of waivers

  • 01/12/2004

Requirement to publish

SUP 8.6.1

handbook-guidance
The appropriate regulator is required by sections 138B(1) and (2) of the Act to publish a waiver unless it is satisfied that it is inappropriate or unnecessary to do so. If the appropriate regulator publishes a waiver, it will not publish details of why a waiver was required or any of the supporting information given in a waiver application.

Matters for consideration

SUP 8.6.2

handbook-guidance
When considering whether it is satisfied under section 138B(2), the appropriate regulator is required by section 138B(3) of the Act:
(1) to take into account whether the waiver relates to a rule contravention of which is actionable under section 138D of the Act (Actions for damages); Schedule 5 identifies such rules;
(2) to consider whether its publication would prejudice, to an unreasonable degree, the commercial interests of the firm concerned, or any other member of its immediate group;
(3) to consider whether its publication would be contrary to an international obligation of the United Kingdom (for example, the confidentiality obligations in the Single Market Directives); and
(4) to consider whether the publication of the waiver would be detrimental to the stability of the UK financial system.

SUP 8.6.3

handbook-guidance
Waivers can affect the legal rights of third parties, including consumers. In the appropriate regulator's view it is important that the fact and effect of such waivers should be transparent. So the fact that a waiver relates to a rule that is actionable under section 138D of the Act (see SUP 8.6.2 G (1)) will tend to argue in favour of publication.

SUP 8.6.5

handbook-guidance
In considering whether commercial interests would be prejudiced to an unreasonable degree (see SUP 8.6.2 G (2)), the appropriate regulator will weigh the prejudice to firms' commercial interests against the interests of consumers, markets and other third parties in disclosure. In doing so the appropriate regulator will consider factors such as the extent to which publication of the waiver would involve the premature release of proprietary information to commercial rivals, for example relating to a product innovation, or reveal information which could reasonably be regarded as the firm's own intellectual property. In line with section 138B(5) of the Act, the appropriate regulator will also consider whether prejudice to a firm's commercial interests could be avoided or mitigated by publication of the waiver without disclosing the identity of the firm.

SUP 8.6.6

handbook-guidance
The appropriate regulator may consider publication unnecessary where, for example, the waiver relates to a minor matter that does not affect any third party and is unlikely to be of relevance or interest to other firms.

Firm's objection to publication

SUP 8.6.7

handbook-guidance
If, after taking into account the matters in SUP 8.3.3 D to SUP 8.6.6 G, a firm believes there are good grounds for the appropriate regulator either to withhold publication or to publish the waiver without disclosing the identity of the firm, it should make this clear in its application. If the appropriate regulator proposes to publish a waiver against the wishes of the firm, the appropriate regulator will give the firm the opportunity to withdraw its application before the waiver is given.

Withholding publication for a limited period

SUP 8.6.8

handbook-guidance
A decision to withhold a waiver or identity of a firm from publication may be for a limited period only, usually as long as the duration of the relevant grounds for non-publication. If the appropriate regulator proposes to publish information about a waiver that had previously been withheld, it will first give the firm an opportunity to make representations.

Means of publication

SUP 8.6.9

handbook-guidance
The principal means of publication of waiver information will be the appropriate regulator's website.

SUP 8.7

Varying waivers

  • 01/12/2004

SUP 8.7.1

handbook-guidance
Once the appropriate regulator has given a waiver, it may vary it with the firm's consent, or on the firm's application. If a firm wishes the appropriate regulator to vary a waiver, it should follow the procedures in SUP 8.3.3 D, giving reasons for the application. In a case where a waiver has been given to a number of firms (see SUP 8.3.10 G), if the appropriate regulator wishes to vary such waivers with the consent of those firms, it will follow the procedures in SUP 8.3.10 G.

SUP 8.7.2

handbook-guidance
If the waiver that has been varied has previously been published, the appropriate regulator will publish the variation unless it is satisfied that it is inappropriate or unnecessary to do so, having regard to any representation made by the firm.

SUP 8.8

Revoking waivers

  • 01/12/2004

SUP 8.8.1

handbook-guidance
The appropriate regulator may revoke a waiver at any time. In deciding whether to revoke a waiver, the appropriate regulator will consider whether the conditions in section 138A(4) of the Act are no longer satisfied (see SUP 8.3.1 G), and whether the waiver is otherwise no longer appropriate.

SUP 8.8.2

handbook-guidance
If the appropriate regulator proposes to revoke a waiver, or revokes a waiver with immediate effect, it will:
(1) give the firm written notice either of its proposal, or of its action, giving reasons;
(2) state in the notice a reasonable period (usually 28 days) within which the firm can make representations about the proposal or action; if a firm wants to make oral representations, it should inform the appropriate regulator as quickly as possible , specify who will make the representations and which matters will be covered; the appropriate regulator will inform the firm of the time and place for hearing the representations and may request a written summary;
(3) after considering any representations, in the case of a proposed revocation, give the firm written confirmation of its decision to revoke the waiver or not; or, in the case of a revocation that has already taken effect, either confirm the revocation or seek the firm's consent to a new waiver.

SUP 8.8.3

handbook-guidance
If the waiver that has been revoked has previously been published, the appropriate regulator will publish the revocation unless it is satisfied that it is inappropriate or unnecessary to do so, having regard to any representations made by the firm.

SUP 8.9

Decision making

  • 01/12/2004

SUP 8.9.1

handbook-guidance
The waivers regime is overseen by a staff committee. Its responsibility is to ensure that the giving of waivers is in accordance with the requirements of the Act, of the guidance in SUP 8 and of other relevant guidance. Decisions on individual applications are made under arrangements designed to result in rapid, responsive and well-informed decision making. The arrangements include arrangements for collective decision making to set general policies, and, as necessary, determine cases for applications with substantially common characteristics (for example, waivers in relation to the same rule or related rules or by firms in a similar position). It also includes arrangements for decision making by individuals within established precedents and policies.

SUP 8.9.2

handbook-guidance
If the appropriate regulator , in the course of carrying on supplementary supervision of a financial conglomerate, is considering exercising its powers under section 138A of the Act (Modification or waiver of rules), regulation 4 of the Financial Groups Directive Regulations contains special provisions. The appropriate regulator must, in broad terms, do two things. Where required by those regulations, it must obtain the consent of the relevant competent authorities of the group. And, where required by those Regulations, it must consult those competent authorities.

SUP 8 Annex 2

Application form for a waiver or modification of rules

  • 01/12/2004

handbook-directions
This annex consists only of one or more forms. Forms are to be found through the following address:



Waiver Application form - Forms/sup/w_form_20130401.doc

Export chapter as

SUP 10B

PRA Approved Persons

SUP 10B.1

Application

  • 01/04/2013

General

SUP 10B.1.1

handbook-rule
This chapter applies to every PRA-authorised person.
  • 01/04/2013

SUP 10B.1.2

handbook-guidance
This chapter is also relevant to every PRA-approved person.
  • 01/04/2013

SUP 10B.1.3

handbook-guidance
The rules in this chapter specify descriptions of PRA controlled functions under section 59 of the Act (Approval for particular arrangements).
  • 01/04/2013

SUP 10B.1.4

handbook-guidance
The directions in this chapter relate to the manner in which a firm must apply for the PRA's approval under section 59 of the Act and other procedures.
  • 01/04/2013

Overseas firms: UK services

SUP 10B.1.5

handbook-rule
This chapter does not apply to an overseas firm in relation to regulated activities which are carried on in the United Kingdom other than from an establishment maintained by it or its appointed representative in the United Kingdom.
  • 01/04/2013

Overseas firms: UK establishments

SUP 10B.1.6

handbook-rule
Only the following PRA controlled functions apply to an overseas firm which maintains an establishment in the United Kingdom from which regulated activities are carried on:
(1) the director function where the person performing that function:
(a) has responsibility for the regulated activities of a UKbranch which are likely to enable him to exercise significant influence over that branch; or
(b) is someone whose decisions or actions are regularly taken into account by the governing body of that branch;
(2) the non-executive director function where the person performing that function:
(a) has responsibility for the regulated activities of a UKbranch which is likely to enable him to exercise significant influence over that branch; or
(b) is someone whose decisions or actions are regularly taken into account by the governing body of that branch;
(3) the chief executive function;
(4) the PRA required functions;
(5) the systems and controls function.
  • 01/04/2013

Incoming EEA firms and incoming Treaty firms

SUP 10B.1.7

handbook-rule
This chapter does not apply to:
(1) an incoming EEA firm; or
(2) an incoming Treaty firm;
if and in so far as the question of whether a person is fit and proper to perform a particular function in relation to that firm is reserved, under any of the Single Market Directives, the Treaty or the auction regulation, to an authority in a country or territory outside the United Kingdom.
  • 01/04/2013

SUP 10B.1.8

handbook-guidance
SUP 10B.1.7 R reflects the provisions of section 59(8) of the Act and, in relation to an incoming Treaty firm the Treaty. It preserves the principle of Home State prudential regulation. In relation to an incoming EEA firm exercising an EEA right, or an incoming Treaty firm exercising a Treaty right, the effect is to reserve to the Home State regulator the assessment of the fitness and propriety of a person performing a function in the exercise of that right. A member of the governing body, or the notified UKbranch manager, of an incoming EEA firm, acting in that capacity, will not therefore have to be approved by the PRA under the Act.
  • 01/04/2013

SUP 10B.1.9

handbook-guidance
Notwithstanding SUP 10B.1.8 G, an incoming EEA firm (other than an EEA pure reinsurer) or incoming Treaty firm will have had to consider the impact of the Host State rules with which it is required to comply when carrying on a passported activity or Treaty activity through a branch in the United Kingdom. An incoming EEA firm (other than an EEA pure reinsurer) will have been notified of those provisions under Part II of Schedule 3 to the Act in the course of satisfying the conditions for authorisation in the United Kingdom.
  • 01/04/2013

SUP 10B.1.10

handbook-guidance
An incoming EEA firm will have to consider, for example, the position of a branch manager based in the United Kingdom who may also be performing a function in relation to the carrying on of a regulated activity not covered by the EEA right of the firm. In so far as the function is within the description of a PRA controlled function, the firm will need to seek approval for that person to perform that PRA controlled function.
  • 01/04/2013

Incoming EEA firms: passported activities from a branch

SUP 10B.1.11

handbook-rule
None of the PRA controlled functions apply to an incoming EEA firm with respect to its passported activities carried on from a branch in the United Kingdom.
  • 01/04/2013

Incoming EEA firms etc with top-up permission activities from a UK branch

SUP 10B.1.12

handbook-rule
In relation to the activities of a firm for which it has a top-up permission, only the PRA required functions apply.
  • 01/04/2013

Committees of the Society of Lloyd's

SUP 10B.1.13

handbook-rule
For the purpose of SUP 10B.6.1 R (the director function), "director" includes an executive member of a committee to which the Council of the Society of Lloyd's directly delegates authority to carry out the Society's regulatory functions.
  • 01/04/2013

SUP 10B.1.14

handbook-rule
For the purpose of SUP 10B.6.3 R (the non-executive director function), "non-executive director" includes a non-executive member of a committee to which the Council of the Society of Lloyd's directly delegates authority to carry out the Society's regulatory functions.
  • 01/04/2013

Insolvency practitioners

SUP 10B.1.15

handbook-rule
This chapter does not apply to a function performed by:
(1) a person acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986; or
(2) a person acting as a nominee in relation to a voluntary arrangement under Parts I (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency Act 1986; or
(3) a person acting as an insolvency practitioner within the meaning of Article 3 of the Insolvency (Northern Ireland) Order 1989; or
(4) a person acting as a nominee in relation to a voluntary arrangement under Parts II (Company Voluntary Arrangements) and VIII (Individual Voluntary arrangements) of the Insolvency (Northern Ireland) Order 1989.
  • 01/04/2013

Appointed representatives

SUP 10B.1.16

handbook-guidance
The PRA has no special rule relating to appointed representatives. Therefore, SUP 10B applies to an appointed representative of a firm in the same way as it does to any other contractor of the firm (see SUP 10B.3.1 R). In practice in SUP 10B the main application to appointed representatives of a firm will be to people seconded by the appointed representative to the firm.
  • 01/04/2013

SUP 10B.2

Purpose

  • 01/04/2013

SUP 10B.2.1

handbook-guidance
The immediate purpose of SUP 10B.3 to SUP 10B.9 is to specify, under section 59 of the Act, descriptions of the PRA controlled functions which are listed in SUP 10B.4.3 R. The underlying purpose is to establish, and mark the boundaries of, the PRA's "approved persons regime".
  • 01/04/2013

SUP 10B.3

Basic rules for all PRA controlled functions

  • 01/04/2013

The need for an arrangement

SUP 10B.3.1

handbook-rule
A function is a PRA controlled function only to the extent that it is performed under an arrangement entered into by:
(1) a firm; or
(2) a contractor of the firm;
in relation to the carrying on by the firm of a regulated activity.
  • 01/04/2013

SUP 10B.3.2

handbook-guidance
Sections 59(1) and (2) of the Act provide that approval is necessary in respect of a PRA controlled function which is performed under an arrangement entered into by a firm, or its contractor (typically an appointed representative), in relation to a regulated activity.
  • 01/04/2013

SUP 10B.3.3

handbook-guidance
Arrangement is defined in section 59(10) of the Act as any kind of arrangement for the performance of a function which is entered into by a firm or any of its contractors with another person and includes the appointment of a person to an office, his becoming a partner, or his employment (whether under a contract of service or otherwise). For the provisions in this chapter relating to outsourcing, see SUP 10B.11.6 G and SUP 10B.11.7 G.
  • 01/04/2013

SUP 10B.3.4

handbook-guidance
If, however, a firm is a member of a group, and the arrangements for the performance of a PRA controlled function of the firm are made by, say, the holding company, the person performing the function will only require approval if there is an arrangement (under section 59(1)) or a contract (under section 59(2)) between the firm and holding company permitting this. This need not be a written contract but could arise, for example, by conduct, custom and practice.
  • 01/04/2013

SUP 10B.3.5

handbook-guidance
The arrangement must be "in relation to" the carrying on of a regulated activity. Regulated activities are defined in the Glossary by reference to the Regulated Activities Order. This order prescribes the activities which are regulated activities for the purposes of the Act.
  • 01/04/2013

Significant-influence functions

SUP 10B.3.6

handbook-rule
Each PRA controlled function is one which comes within the definition of a significant-influence function.
  • 01/04/2013

SUP 10B.3.7

handbook-guidance
Section 59(6) of the Act says that the PRA may specify a description of function as a PRA controlled function only if, in relation to the carrying on of a regulated activity by a firm, it is satisfied that the function is a significant-influence function.
  • 01/04/2013

SUP 10B.3.8

handbook-guidance
Section 59(7B) of the Act says that a significant-influence function, in relation to the carrying on of a regulated activity by a firm, means a function that is likely to enable the person responsible for its performance to exercise a significant influence on the conduct of the firm's affairs, so far as relating to the activity.
  • 01/04/2013

SUP 10B.3.9

handbook-guidance
SUP 10B.3.6 R gives effect to sections 59(6) and 59(7B) of the Act.
  • 01/04/2013

SUP 10B.3.10

handbook-guidance
Whether a function is likely to result in the person responsible for its performance exercising significant influence on the conduct of the firm's affairs is a question of fact in each case. The PRA has identified the PRA controlled functions as satisfying this condition.
  • 01/04/2013

Actions for damages

SUP 10B.3.11

handbook-rule
A contravention of the rules in SUP 10B (other than SUP 10B.1 to SUP 10B.9) gives rise to a right of action by a private person under section 138D of the Act (and each of those rules is specified under section 138D(1) of the Act as a provision giving rise to such a right of action).
  • 01/04/2013

SUP 10B.4

Specification of functions

  • 01/04/2013

SUP 10B.4.1

handbook-rule
Each of the functions described in SUP 10B.4.3 R (the table of PRA controlled functions) is a PRA controlled function.
  • 01/04/2013

SUP 10B.4.2

handbook-guidance
The fact that a person may be approved for one purpose does not have the effect of bringing all his activities within that PRA controlled function.
  • 01/04/2013

SUP 10B.4.3

handbook-rule
  • 01/04/2013

SUP 10B.5

Temporary vacancies

  • 01/04/2013

SUP 10B.5.1

handbook-rule
If:
(1) a firm appoints an individual to perform a function which, but for this rule, would be a PRA controlled function;
(2) the appointment is to provide cover for an approved person whose absence is:
(a) temporary; or
(b) reasonably unforeseen; and
(3) the appointment is for less than 12 weeks in a consecutive 12-month period;
the description of the relevant PRA controlled function does not relate to those activities of that individual.
  • 01/04/2013

SUP 10B.5.2

handbook-guidance
SUP 10B.5.1 R enables cover to be given for holidays and emergencies and avoids the need for the precautionary approval of, for example, a deputy. However, as soon as it becomes apparent that a person will be performing a PRA controlled function for more than 12 weeks, the firm should apply for approval.
  • 01/04/2013

SUP 10B.6

PRA governing functions

  • 01/04/2013

Director function (CF1)

SUP 10B.6.1

handbook-rule
If a firm is a body corporate (other than a limited liability partnership), the director function is the function of acting in the capacity of a director (other than non-executive director) of that firm.
  • 01/04/2013

SUP 10B.6.2

handbook-rule
(1) If a firm is a body corporate (other than a limited liability partnership), the director function is also the function of acting in the capacity of a person:
(a) who is a director, partner, officer, member (if the parent undertaking or holding company is a limited liability partnership), senior manager, or employee of a parent undertaking or holding company of the firm; and
(b) whose decisions or actions are regularly taken into account by the governing body of the firm.
(2) (1) does not apply if that parent undertaking or holding company has a Part 4A permission or is regulated by an EEA regulator.
(3) (1) does not apply to the function falling into SUP 10B.6.4 R (non-executive director of the parent undertaking or holding company).
  • 01/04/2013

Non-executive director function

SUP 10B.6.3

handbook-rule
If a firm is a body corporate, the non-executive director function is the function of acting in the capacity of a non-executive director of that firm.
  • 01/04/2013

SUP 10B.6.4

handbook-rule
(1) If a firm is a body corporate, the non-executive director function is also the function of acting in the capacity of a person:
(a) who is a non-executive director of a parent undertaking or holding company; and
(b) whose decisions or actions are regularly taken into account by the governing body of the firm.
(2) However, (1) does not apply if that parent undertaking or holding company has a Part 4A permission or is regulated by an EEA regulator.
  • 01/04/2013

SUP 10B.6.5

handbook-rule
If a firm is a long-term insurer, the non-executive director function is also the function of acting in the capacity of an individual who, as a member of a committee having the purpose of a with-profits committee, has responsibility in relation to governance arrangements for with-profits business under COBS 20.3 (Principles and Practices of Financial Management). This does not apply to an individual performing the director function.
  • 01/04/2013

SUP 10B.6.6

handbook-guidance
A firm should notify the PRA if a person moves between certain roles making up the non-executive director function (SUP 10B.12.6 R).
  • 01/04/2013

Chief executive function (CF3)

SUP 10B.6.7

handbook-rule
The chief executive function is the function of acting in the capacity of a chief executive of a firm.
  • 01/04/2013

SUP 10B.6.8

handbook-guidance
This function is having the responsibility, alone or jointly with one or more others, under the immediate authority of the governing body:
(1) for the conduct of the whole of the business (or relevant activities); or
(2) in the case of a branch in the United Kingdom of an overseas firm, for the conduct of all of the activities subject to the UKregulatory system.
  • 01/04/2013

SUP 10B.6.9

handbook-guidance
For a branch in the United Kingdom of an overseas firm, the PRA would not normally expect the overseas chief executive of the firm as a whole to be approved for this function where there is a senior manager under him with specific responsibility for those activities of the branch which are subject to the UK regulatory system. In some circumstances, the person within the firm responsible for UK operations may, if the function is likely to enable him to exercise significant influence over the branch, also perform the chief executive function.
  • 01/04/2013

SUP 10B.6.10

handbook-guidance
A person performing the chief executive function may be a member of the governing body but need not be. If the chairman of the governing body is also the chief executive, he will be discharging this function. If the responsibility is divided between more than one person but not shared, there is no person exercising the chief executive function. But if that responsibility is discharged jointly by more than one person, each of those persons will be performing the chief executive function.
  • 01/04/2013

SUP 10B.6.11

handbook-guidance
Note that a body corporate may be a chief executive. If so, it will need to be approved to perform the chief executive function.
  • 01/04/2013

Partner function (CF4)

SUP 10B.6.12

handbook-rule
If a firm is a partnership, the partner function is the function of acting in the capacity of a partner in that firm.
  • 01/04/2013

SUP 10B.6.13

handbook-rule
If a firm is a limited liability partnership, the partner function extends to the firm as if the firm were a partnership and a member of the firm were a partner.
  • 01/04/2013

SUP 10B.6.14

handbook-rule
If a partnership is registered under the Limited Partnership Act 1907, the partner function does not extend to any function performed by a limited partner.
  • 01/04/2013

Director of unincorporated association function (CF5)

SUP 10B.6.15

handbook-rule
If a firm is an unincorporated association, the Director of unincorporated association function is the function of acting in the capacity of a director of the unincorporated association.
  • 01/04/2013

Small friendly society function (CF6)

SUP 10B.6.16

handbook-rule
(1) If a firm is a non-directive friendly society, the small friendly society function is the function of directing its affairs, either alone or jointly with others.
(2) If the principal purpose of the firm is to carry on regulated activities, each person with responsibility for directing its affairs performs the PRA controlled function.
(3) If the principal purpose of the firm is other than to carry on regulated activities, a person performs the small friendly society function only to the extent that he has responsibility for a regulated activity.
  • 01/04/2013

SUP 10B.6.17

handbook-rule
(1) Each person on the non-directive friendly society'sgoverning body will be taken to have responsibility for its regulated activities, unless the firm has apportioned this responsibility to one particular individual to whom it is reasonable to give this responsibility.
(2) The individual need not be a member of the governing body.
  • 01/04/2013

SUP 10B.6.18

handbook-guidance
(1) Typically a non-directive friendly society will appoint a "committee of management" to direct its affairs. However, the governing arrangements may be informal and flexible. If this is the case, the PRA would expect the society to resolve to give responsibility for the carrying on of regulated activities to one individual who is appropriate in all the circumstances. That individual may, for example, have the title of chief executive or similar. The individual would have to be a PRA-approved person under SUP 10B.6.16 R.
(2) The PRA expects that any apportionment of responsibilities will have taken place under SYSC 2.1.1 R. The PRA may ask to see details of the apportionment but will not require, as a matter of course, a copy of the material which records this (see SYSC 2.2).
  • 01/04/2013

Insurance mediation

SUP 10B.6.19

handbook-guidance
A firm carrying on insurance mediation activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm'sinsurance mediation activity (MIPRU 2.2.1 R). MIPRU 2.2.2R (1) provides that the firm may allocate this responsibility to one or more of the persons performing a governing function (other than the non-executive director function).

SUP 10B.6.20

handbook-guidance
Where a person performing a governing function is also responsible for the firm'sinsurance mediation activity, the words "(insurance mediation)" will be inserted after the relevant PRA controlled function (see MIPRU 2.2.5 G).

SUP 10B.7

Other functions included in the governing functions

  • 01/04/2013

Systems and controls function

SUP 10B.7.1

handbook-rule
Each of the PRA governing functions includes, where apportioned under SYSC 2.1.1 R, SYSC 4.3.1 R or SYSC 4.4.3 R, the systems and controls function. This does not apply to the non-executive director function or the function described in SUP 10B.6.2 R.
  • 01/04/2013

SUP 10B.7.2

handbook-guidance
The effect of SUP 10B.7.1 R is that a person who is approved to perform a PRA governing function (other than the non-executive director function or the function described in SUP 10B.6.2 R) will not have to be specifically approved to perform the systems and controls function. A person who is approved to perform a PRA governing function will have to be additionally approved before he can perform any of the PRA required functions.
  • 01/04/2013

The FCA's apportionment and oversight function (CF8)

SUP 10B.7.3

handbook-rule
If:
(1) a person has been approved to perform a PRA governing function in relation to a firm and that approval is still in force;
(2) that person is also performing a function that falls within the apportionment and oversight function in relation to that firm (or would do so except for SUP 10A.11.11 R (FCA rule disapplying the apportionment and oversight function in relation to a person approved by the PRA to perform a governing function)); and
(3) that person is not the subject of a current FCA approved person approval for the apportionment and oversight function in relation to that firm;
that PRA governing function includes the apportionment and oversight function (or, if there is more than one such PRA governing function, each them does).
  • 01/04/2013

SUP 10B.7.4

handbook-rule
If in relation to a firm:
(1) SUP 10B.7.3 R has applied to a PRA-approved person;
(2) that person has ceased to perform any PRA governing function (ignoring the expansion of that function by SUP 10B.7.3 R); and
(3) that person is still performing what would otherwise be the apportionment and oversight function;
SUP 10B.7.3 R continues to apply for three months after that PRA-approved person would otherwise have ceased to perform the PRA controlled function or, if sooner, until the FCA has approved the performance by that person of the apportionment and oversight function in relation to the firm.
  • 01/04/2013

SUP 10B.7.5

handbook-guidance
An example of the way SUP 10B.7.4 R works is this. Say that a person (A) is appointed as director and the person who performs the apportionment and oversight function. A will be performing the director function but will not be performing the apportionment and oversight function. Say that later A gives up his role as director but remains as the person who performs apportionment and oversight function. If SUP 10B.7.4 R (and the corresponding parts of the FCA's Handbook) did not apply the result would be that A would cease to perform a PRA controlled function but would start performing the apportionment and oversight function before A had a chance to apply to the FCA for approval. The combined effect of SUP 10B.7.4 R and SUP 10A.11 of the FCA's Handbook is that the firm has three months to secure approval by the FCA for A's performance of the apportionment and oversight function and during that interim period A keeps his status as a PRA-approved person.
  • 01/04/2013

SUP 10B.7.6

handbook-guidance
Further details of how SUP 10B.7.3 R and SUP 10B.7.4 R work can be found in SUP 10A.11 of the FCA's Handbook.
  • 01/04/2013

SUP 10B.8

PRA required functions

  • 01/04/2013

Actuarial function (CF12)

SUP 10B.8.1

handbook-rule
The actuarial function is the function of acting in the capacity of an actuary appointed by a firm under SUP 4.3.1 R to perform the duties set out in SUP 4.3.13 R.
  • 01/04/2013

With-profits actuary function (CF12A)

SUP 10B.8.2

handbook-rule
The with-profits actuary function is the function of acting in the capacity of an actuary appointed by a firm under SUP 4.3.1 R to perform the duties set out in SUP 4.3.16A R.
  • 01/04/2013

Lloyd's actuary function (CF12B)

SUP 10B.8.3

handbook-rule
The Lloyd's actuary function is the function of acting in the capacity of the actuary appointed under SUP 4.6.1 R to perform the duties set out in SUP 4.6.7 R.
  • 01/04/2013

SUP 10B.9

Systems and controls function

  • 01/04/2013

Systems and controls function (CF28)

SUP 10B.9.1

handbook-rule
The systems and controls function is the function of acting in the capacity of an employee of the firm with responsibility for reporting to the governing body of a firm, or the audit committee (or its equivalent) in relation to:
(1) its financial affairs;
(2) setting and controlling its risk exposure (see SYSC 3.2.10 G and SYSC 7.1.6 R ); and
(3) adherence to internal systems and controls, procedures and policies (see SYSC 3.2.16 G and SYSC 6.2 ).

SUP 10B.9.2

handbook-rule
The systems and controls function does not apply in relation to bidding in emissions auctions carried on by a firm that is exempt from MiFID under article 2(1)(i).
  • 01/04/2013

SUP 10B.9.3

handbook-guidance
Where an employee performs the systems and controls function the PRA would expect the firm to ensure that the employee had sufficient expertise and authority to perform that function effectively. A director or senior manager would meet this expectation.
  • 01/04/2013

SUP 10B.10

Procedures relating to PRA-approved persons

  • 01/04/2013

Forms

SUP 10B.10.1

handbook-guidance
The forms listed in SUP 10B.10.2 G are referred to in SUP 10B.11 (Application for approval and withdrawing an application for approval) to SUP 10B.14 (How to apply for approval and give notifications).
  • 01/04/2013

SUP 10B.10.2

handbook-guidance
Table PRA-approved persons forms
  • 01/04/2013

SUP 10B.10.3

handbook-guidance
A summary of the forms and their purposes is in SUP 10B Annex 2G.
  • 01/04/2013

SUP 10B.10.4

handbook-guidance
Unless the context otherwise requires, in SUP 10B.10 (Procedures relating to PRA-approved person) to SUP 10B.14 (How to apply for approval and give notifications) where reference is made to a firm, this also includes an applicant for Part 4A permission, and other persons seeking to carry on regulated activities as an authorised person.
  • 01/04/2013

SUP 10B.10.5

handbook-guidance
Forms B, C, D and E can only be submitted in respect of a PRA-approved person by the firm that submitted a PRA-approved person's original application (the relevant Form A).
  • 01/04/2013

SUP 10B.10.6

handbook-guidance
Copies of Forms A, B, C, D and E may be obtained from the PRA's website. Credit unions can obtain copies by email at PRA-ApprovedPersons@bankofengland.co.uk. To contact the PRA for general approved persons enquiries please contact PRA Firm Enquiries:
(1) telephone: +44 (0) 20 3461 7000; or
(2) write to:

PRA Firm Enquiries

Prudential Regulation Authority

20 Moorgate

London EC2R 6DA; or
(3) e-mail: PRA-ApprovedPersons@bankofengland.co.uk.
  • 01/04/2013

SUP 10B.11

Application for approval and withdrawing an application for approval

  • 01/04/2013

When to apply for approval

SUP 10B.11.1

handbook-guidance
In accordance with section 59 of the Act (Approval for particular arrangements), where a candidate will be performing one or more PRA controlled functions, a firm must take reasonable care to ensure that the candidate does not perform these functions unless he has prior approval from the PRA with the consent of the FCA.
  • 01/04/2013

SUP 10B.11.2

handbook-guidance
Under section 59B of the Act (Role of FCA in relation to PRA decisions) the FCA may arrange with the PRA that in agreed kinds of cases there is no need for the consent of the FCA. There are currently no such arrangements in place.
  • 01/04/2013

Failure to apply for approval

SUP 10B.11.3

handbook-guidance
If a person performs a PRA controlled function without approval it is not only the firm that is accountable. Under section 63A of the Act (Power to impose penalties) if the PRA is satisfied that:
(1) a person ("P") has at any time performed a PRA controlled function without approval; and
(2) at that time P knew, or could reasonably be expected to have known, that P was performing a PRA controlled function without approval;
it may impose a penalty on P of such amount as it considers appropriate.
  • 01/04/2013

How to apply for approval

SUP 10B.11.4

handbook-directions
An application by a firm for the PRA's approval under section 59 of the Act (Approval for particular arrangements) must be made by completing Form A (except where SUP 10B.12.4 D requires a Form E).
  • 01/04/2013

SUP 10B.11.5

handbook-guidance
SUP 10B.14.1 D explains how applications should be submitted.
  • 01/04/2013

Who should make the application?

SUP 10B.11.6

handbook-guidance
(1) In accordance with section 60 of the Act (Applications for approval), applications must be submitted by, or on behalf of, the firm itself, not by:
(a) the PRA candidate; or
(b) (where the PRA candidate works for the firm's parent undertaking or holding company) by the firm's parent undertaking or holding company.
(2) Usually this will be the firm that is employing the PRA candidate to perform the PRA controlled function. Where a firm has outsourced the performance of a PRA controlled function, the details of the outsourcing determine where responsibility lies and whom the PRA anticipates will submit PRA-approved persons application forms. SUP 10B.11.7 G describes some common situations. The firm which is outsourcing is referred to as "A" and the person to whom the performance of the PRA controlled function has been outsourced, or which makes the arrangement for the PRA controlled function to be performed, is referred to as "B". In each situation, A must take reasonable care to ensure that, in accordance with section 59(2) of the Act, no person performs a PRA controlled function under an arrangement entered into by its contract or in relation to the carrying on by A of a regulated activity, without approval from the PRA. See also SYSC 3.2.4 G and SYSC 8.1.1 R, and SYSC 13.9 for insurers.

SUP 10B.11.7

handbook-guidance
Outsourcing arrangements

Processing an application

SUP 10B.11.8

handbook-guidance
The Act sets out the time that the PRA has to consider an application and come to a decision.
  • 01/04/2013

SUP 10B.11.9

handbook-guidance
In any case where the application for approval is made by a person applying for permission under Part 4A of the Act the PRA has until the end of whichever of the following periods ends last:
(1) the period within which an application for that permission must be determined; and
(2) the period of three months from the time it receives a properly completed application.
  • 01/04/2013

SUP 10B.11.10

handbook-guidance
In any other case it is the period of three months from the time it receives a properly completed application.
  • 01/04/2013

SUP 10B.11.11

handbook-guidance
Application forms must always be completed fully and honestly. Further notes on how to complete the form are contained in each form. If forms are not completed fully and honestly, applications will be subject to investigation and the PRA candidate's suitability to be approved to undertake a PRA controlled function will be called into question. A person who provides information to the PRA that is false or misleading may commit a criminal offence, and could face prosecution under section 398 of the Act regardless of the status of their application.
  • 01/04/2013

SUP 10B.11.12

handbook-guidance
The PRA will as soon as practicable notify the FCA of the receipt of an application to the PRA. There is no need for the firm to copy the application to the FCA.
  • 01/04/2013

SUP 10B.11.13

handbook-guidance
Before making a decision to grant the application or give a warning notice, the PRA may ask the firm for more information about the PRA candidate. If it does this, the period in which the PRA must determine a completed application:
(1) will stop on the day the PRA requests the information; and
(2) will start running again on the day on which the PRA finally receives all the requested information.
  • 01/04/2013

SUP 10B.11.14

handbook-guidance
The FCA may also ask the firm for more information about the PRA candidate. If it does this, the period in which the PRA must determine a completed application is extended in the same way as it is if the PRA asks for the information.
  • 01/04/2013

SUP 10B.11.15

handbook-guidance
The PRA may only grant an application (and the FCA may only give its consent) if it is satisfied that the PRA candidate is a fit and proper person to perform the PRA controlled function stated in the application form. Responsibility lies with the firm making the application to satisfy the PRA and the FCA that the PRA candidate is fit and proper to perform the PRA controlled function applied for.
  • 01/04/2013

SUP 10B.11.16

handbook-guidance
For further guidance on criteria for assessing whether a PRA candidate is fit and proper, see FIT.
  • 01/04/2013

Decisions on applications

SUP 10B.11.17

handbook-guidance
The PRA must either grant the application or, if it proposes not to grant an application, issue a warning notice.
  • 01/04/2013

SUP 10B.11.18

handbook-guidance
Whenever it grants an application, the PRA will confirm this in writing to all interested parties.
  • 01/04/2013

SUP 10B.11.19

handbook-guidance
If the PRA proposes to refuse an application in relation to one or more PRA controlled functions, it must follow the procedures for issuing warning and decision notices.
  • 01/04/2013

Withdrawing an application for approval

SUP 10B.11.20

handbook-rule
A firm applying to withdraw an application for approval must notify the PRA, using Form B, in the form set out in SUP 10B Annex 5R.
  • 01/04/2013

SUP 10B.11.21

handbook-guidance
Under section 61(5) of the Act (Determination of applications), the firm may withdraw an application only if it also has the consent of the PRA candidate and the person by whom the PRA candidate is or would have been employed, if this is not the firm making the application.
  • 01/04/2013

SUP 10B.11.22

handbook-guidance
The PRA will as soon as practicable notify the FCA of the receipt of a notice of withdrawal. There is no need for the firm to copy the notice to the FCA.
  • 01/04/2013

SUP 10B.12

Changes to a PRA-approved person's details

  • 01/04/2013

Moving within a firm

SUP 10B.12.1

handbook-guidance
A PRA-approved person's job may change from time to time as a result, for instance, of a change in personal job responsibilities or a firm's regulated activities. Where the changes will involve the person performing one or more PRA controlled functions different from those for which approval has already been granted, then an application must be made to the PRA for approval for the person to perform those PRA controlled functions. The firm must take reasonable care to ensure that an individual does not begin performing a PRA controlled function until the PRA has granted approved person status to that individual in respect of that PRA controlled function. Similarly, a firm must get the PRA's approval if a person is to start performing a PRA controlled function in relation to that firm when he already has the FCA's approval to perform an FCA controlled function in relation to that firm.
  • 01/04/2013

SUP 10B.12.2

handbook-guidance
If an FCA-approved person or a PRA-approved person is ceasing to perform FCA controlled functions or PRA controlled functions, as well as applying for approval in respect of PRA controlled functions, SUP 10B.12.4 D generally applies. Further details can be found in SUP 10B Annex 2G.
  • 01/04/2013

SUP 10B.12.3

handbook-guidance
If a person is to perform a PRA controlled function for a firm for which he already performs a PRA controlled function or FCA controlled function as an approved person but he is not at the same time ceasing to perform an FCA controlled function or PRA controlled function, a firm should use Form A rather than Form E. It is not mandatory to complete all parts of the form. See the notes relevant to each form for full details.
  • 01/04/2013

SUP 10B.12.4

handbook-directions
(1) A firm must use Form E where an approved person is both ceasing to perform one or more controlled functions and needs to be approved in relation to one or more PRA controlled functions within the same firm or group.
(2) A firm must not use Form E if the approved person has never before been approved to perform a significant influence function for any firm or has not been the subject of a current approved person approval from the FCA or PRA to perform a significant influence function in relation to any firm for more than six months.
(3) A firm must not use Form E if a notification has been made or should be made under SUP 10B.12.18 R (Changes in fitness to be notified under Form D) or SUP 10A.14.17 R (the equivalent FCA rule) in relation to any controlled functions that, that person is ceasing to perform (as referred to in (1)) or any controlled function that he is continuing to perform in relation to that firm or a firm in the same group.
  • 01/04/2013

SUP 10B.12.5

handbook-guidance
SUP 10B.14.1 D explains how applications should be submitted.
  • 01/04/2013

SUP 10B.12.6

handbook-rule
If a person is performing the non-executive director function in relation to a firm, the firm must notify the PRA as soon as possible if that person begins to perform or ceases to perform any of the following functions:
(1) the function of acting in the capacity of the chairman of the governing body of the firm; or
(2) the function of acting as a non-executive director who has been appointed by the non-executive directors to act as the senior independent director of that firm; or
(3) the function of acting in the capacity of the chairman of the governing body risk committee of the firm (if there is such a committee). For these purposes, the governing body risk committee means the committee described in SYSC 21.1.5 G; or
(4) the function of acting in the capacity of the chairman of the audit committee of the governing body of the firm (if there is such a committee); or
(5) the function of acting in the capacity of the chairman of the remuneration committee of the governing body of the firm (if there is such a committee).
Any such notification must be e-mailed to the PRA's approved persons mailbox at PRA-ApprovedPersons@bankofengland.co.uk
  • 01/04/2013

SUP 10B.12.7

handbook-guidance
So for example if a non-executive director moves from being chair of the audit committee to chair of the risk committee or adds the role of chair of the audit committee to his existing role as chair of the risk committee he does not require approval from the PRA. However, the firm should notify the PRA of that change as soon as possible. If a person stops performing the non-executive director function altogether, SUP 10B.12.4 D or SUP 10B.12.10 R apply instead.
  • 01/04/2013

Moving between firms

SUP 10B.12.8

handbook-guidance
If it is proposed that a PRA-approved person will no longer be performing a PRA controlled function under an arrangement entered into by one firm or one of its contractors, but will be performing the same or a different PRA controlled function under an arrangement entered into by a new firm or one of its contractors (whether or not the new firm is in the same group as the old firm), the new firm will be required to make a fresh application for the performance of the PRA controlled function by that person.
  • 01/04/2013

SUP 10B.12.9

handbook-guidance
In certain circumstances, when the PRA already has the information it would usually require, a shortened version of the relevant Form A may be completed. See the notes relevant to each form for full details.
  • 01/04/2013

Ceasing to perform a PRA controlled function

SUP 10B.12.10

handbook-rule
A firm must submit to the PRA a completed Form C, in the form set out in SUP 10B Annex 6R no later than seven business days after a PRA-approved person ceases to perform a PRA controlled function. This does not apply if the firm has already notified the PRA of the proposal to do that using Form E in accordance with this chapter or has notified the FCA of the proposal to do using the FCA's Form E in accordance with SUP 10A of the FCA's Handbook.
  • 01/04/2013

SUP 10B.12.11

handbook-guidance
SUP 10B.14.1 D explains how notifications should be submitted.
  • 01/04/2013

SUP 10B.12.12

handbook-rule
(1) A firm must notify the PRA as soon as practicable after it becomes aware, or has information which reasonably suggests, that it will submit a qualified Form C in respect of a PRA-approved person.
(2) Form C is qualified if the information it contains:
(a) relates to the fact that the firm has dismissed, or suspended, the PRA-approved person from its employment; or
(b) relates to the resignation by the PRA-approved person while under investigation by the firm, the PRA or any other regulatory body; or
(c) otherwise reasonably suggests that it may affect the PRA's assessment of the PRA-approved person's fitness and propriety.
  • 01/04/2013

SUP 10B.12.13

handbook-guidance
Notification under SUP 10B.12.12 R may be made by telephone, fax or email and should be made, where possible, within one business day of the firm becoming aware of the information. If the firm does not submit Form C, it should inform the PRA in due course of the reason. This could be done using Form D, if appropriate.
  • 01/04/2013

SUP 10B.12.14

handbook-guidance
A firm is responsible for notifying the PRA if any PRA-approved person has ceased to perform a PRA controlled function under an arrangement entered into by its appointed representative or former appointed representative.
  • 01/04/2013

SUP 10B.12.15

handbook-guidance
A firm can submit Form C or Form E to the PRA in advance of the cessation date. When a person ceases the arrangement under which he performs a PRA controlled function, he will automatically cease to be a PRA-approved person in relation to that PRA controlled function. A person can only be a PRA-approved person in relation to a specific PRA controlled function. Therefore, a person is not a PRA-approved person during any period between ceasing to perform one PRA controlled function (when he is performing no other PRA controlled function) and being approved in respect of another PRA controlled function.
  • 01/04/2013

Changes to a PRA-approved person's personal details

SUP 10B.12.16

handbook-rule
If a PRA-approved person's title, name or national insurance number changes, the firm for which the person performs a PRA controlled function must notify the PRA on Form D, in the form set out in SUP 10B Annex 7R, of that change within seven business days of the firm becoming aware of the matter.
  • 01/04/2013

SUP 10B.12.17

handbook-guidance
The duty to notify in SUP 10B.12.16 R does not apply to changes to a PRA-approved person's private address.
  • 01/04/2013

SUP 10B.12.18

handbook-rule
If a firm becomes aware of information which would reasonably be material to the assessment of a PRA-approved person's, or a PRA candidate's, fitness and propriety (see FIT), it must inform the PRA on Form D, or (if it is more practical to do so and with the prior agreement of the PRA) by fax or e-mail, as soon as practicable.
  • 01/04/2013

SUP 10B.12.19

handbook-guidance
SUP 10B.14.2 R applies to the submission of Form D.
  • 01/04/2013

SUP 10B.12.20

handbook-guidance
Failing to disclose relevant information to the PRA may be a criminal offence under section 398 of the Act.
  • 01/04/2013

SUP 10B.12.21

handbook-guidance
The duty to notify in SUP 10B.12.18 R extends to any circumstances that would normally be declared when giving the information required for section 5 of Form A or matters considered in FIT 2.
  • 01/04/2013

SUP 10B.12.22

handbook-rule
(1) If, in relation to a firm which has completed the relevant Form A (SUP 10B Annex 4D), any of the details relating to arrangements and PRA controlled functions are to change, the firm must notify the PRA on Form D (SUP 10B Annex 7R).
(2) The notification under (1) must be made as soon as reasonably practicable after the firm becomes aware of the proposed change.
(3) This also applies in relation to a PRA controlled function for which an application was made using Form E.
(4) This rule also applies to a firm in respect of an approved person, to whom the grandfathering arrangements relating to the coming into force of the Act applied as if the firm had completed the relevant Form A for that person.
  • 01/04/2013

SUP 10B.13

References and accurate information

  • 01/04/2013

References

SUP 10B.13.1

handbook-rule
(1) If a firm (A):
(a) is considering appointing a person to perform any PRA controlled function;
(b) requests another firm (B), as a current or former employer of that person, for a reference or other information in connection with that appointment; and
(c) indicates to B the purpose of the request;
B must, as soon as reasonably practicable, give to A all relevant information of which it is aware.
(2) When giving the information to A under (1), B must have regard to the purpose of the request and in particular to:
(a) any outstanding liabilities of that person from commission payments;
(b) any relevant outstanding or upheld complaint from an eligible complainant against that person;
(c) section 5 of the relevant Form A in SUP 10B Annex 4 (Application to perform controlled functions under approved persons regime);
(d) FIT 2 (Main assessment criteria); and
(e) if SUP 16.8.1 G (1) (Persistency reports from insurers and data reports on stakeholder pensions) applies to B, the persistency of any life policies sold by that person.
  • 01/04/2013

SUP 10B.13.2

handbook-guidance
The requirement in SUP 10B.13.1R (1) for firm (B) to give to firm (A) all relevant information of which it is aware concerning a person firm A is considering appointing to perform any of the PRA controlled functions, also applies where firm A has outsourced the collection of that information to another (unregulated) third party, where firm B has been made aware that the unregulated third party is acting on behalf of firm A.
  • 01/04/2013

SUP 10B.13.3

handbook-guidance
A firm supplying a reference in accordance with SUP 10B.13.1 R owes a duty to its former employee and the recipient firm to exercise due skill and care in the preparation of the reference. The reference should be accurate and based on documented fact. The firm may give frank and honest views, but only after taking reasonable care both as to factual content, and as to the opinions expressed, and verifying the information upon which they are based.
  • 01/04/2013

The need for complete and accurate information

SUP 10B.13.4

handbook-guidance
The obligations to supply information to:
(1) the PRA under either SUP 10B.12.10 R or SUP 10B.12.12 R; or
(2) another firm under SUP 10B.13.1 R;
apply notwithstanding any agreement (for example a 'COT 3' Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS)) or any other arrangements entered into by a firm and an employee upon termination of the employee's employment. A firm should not enter into any such arrangements or agreements that could conflict with its obligations under this section.
  • 01/04/2013

SUP 10B.13.5

handbook-guidance
Failing to disclose relevant information to the PRA may be a criminal offence under section 398 of the Act.
  • 01/04/2013

SUP 10B.14

How to apply for approval and give notifications

  • 01/04/2013

SUP 10B.14.1

handbook-directions
(1) This direction applies to an application under Form A or Form E.
(2) An application by a firm other than a credit union must be made by submitting the Form online at www.pra.org.uk using the form specified on the FCA's and PRA's ONA system.
(3) An application by a credit union must be made using the form in SUP 10B Annex 4D or SUP 10B Annex 8D and must be submitted in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
(4) Where a firm is obliged to submit an application online under (2), if the information technology systems used by the PRA fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored a firm must use the form in SUP 10B Annex 4D or SUP 10B Annex 8D and submit it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

SUP 10B.14.2

handbook-rule
(1) This rule applies to a notification under Form C or Form D.
(2) A notification must be made in accordance with SUP 10B.14.1 D except that the annexes to SUP 10B in which the forms are to be found are SUP 10B Annex 6R or SUP 10B Annex 7R rather than the Annexes mentioned in SUP 10B.14.1 D.
  • 01/04/2013

SUP 10B.14.3

handbook-guidance
If the information technology systems used by the PRA fail and online submission is unavailable for 24 hours or more, the FCA and PRA will endeavour to publish a notice on their websites confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 10B.14.1D (4) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.

SUP 10B.14.4

handbook-guidance
Where SUP 10B.14.1D (4) or the equivalent situation under SUP 10B.14.2 R applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 10B Annex 1

[Not used]

  • 01/04/2013

handbook-rule
  • 01/04/2013

SUP 10B Annex 2

Approved person regime: summary of forms and their use for applications for approval to perform a PRA-controlled function

  • 01/04/2013

handbook-guidance
  • 01/04/2013

SUP 10B Annex 3

[Not used]

  • 01/04/2013

[Not used]
  • 01/04/2013

SUP 10B Annex 4

Form A: Application to perform controlled functions under the approved person regime

  • 01/04/2013

handbook-directions
This annex consists only of one or more forms. Forms are to be found through the following address: Supervision forms - Notes from direction in SUP 10B.12
  • 01/04/2013

SUP 10B Annex 5

Form B: Notice to withdraw an application to perform controlled functions under the approved persons regime

  • 01/04/2013

handbook-directions
This annex consists only of one or more forms. Forms are to be found through the following address: Supervision forms - SUP 10B Annex 5
  • 01/04/2013

SUP 10B Annex 6

Form C: Notice of ceasing to perform controlled functions

  • 01/04/2013

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fca.org.uk/firms/about-authorisation



The forms are also to be found through the following address: Supervision forms - SUP 10B Annex 6
  • 01/04/2013

SUP 10B Annex 7

Form D: Notification of changes in personal information or application details

  • 01/04/2013

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fca.org.uk/firms/about-authorisation



The forms are also to be found through the following address: Supervision forms - SUP 10B Annex 7
  • 01/04/2013

SUP 10B Annex 8

Form E: Internal transfer of an approved person

  • 01/04/2013

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address: Supervision forms - SUP 10B Annex 8
  • 01/04/2013

Export chapter as

SUP 11

Controllers and close links

SUP 11.1

Application

  • 01/12/2004

Application to firms

SUP 11.1.1

handbook-rule
This chapter applies to every firm except:
(1) an ICVC;
(2) an incoming EEA firm;
(3) an incoming Treaty firm;
(4) [deleted]
(5) a sole trader;
(6) a UCITS qualifier;
as set out in the table in SUP 11.1.2 R.

SUP 11.1.2

handbook-rule

Applicable sections (see SUP 11.1.1 R)

SUP 11.1.3

handbook-guidance
This chapter may apply to directive friendly societies in the circumstances described in SUP 16.4.2 G (1) to (3).

Application to controllers

SUP 11.1.4

handbook-directions

SUP 11.1.5

handbook-guidance
This chapter may apply to controllers and proposed controllers of directive friendly societies in the circumstances described in SUP 16.4.2G (1) to (3).

SUP 11.2

Purpose

  • 01/12/2004

SUP 11.2.1

handbook-guidance
Part XII of the Act (Control Over Authorised Persons) places an obligation on the controllers and proposed controllers of those UK domestic firms not listed in SUP 11.1.1 R (1) to SUP 11.1.1 R (6) to notify the appropriate regulator of changes in control, including acquiring, increasing or reducing control or ceasing to have control over a firm. Furthermore, those persons are required to obtain the appropriate regulator's approval before becoming a controller or increasing their control over a firm. SUP 11.3 is intended to assist those persons in complying with their obligations under Part XII of the Act.

SUP 11.2.2

handbook-guidance
The rules in SUP 11.4 to SUP 11.6 are aimed at ensuring that the appropriate regulator receives the information that it needs to fulfil its responsibility to monitor and, in some cases, give prior approval to firms' controllers.

SUP 11.2.3

handbook-guidance
As the approval of the appropriate regulator is not required under the Act for a new controller of an overseas firm, the notification rules on such firms are less prescriptive than they are for UK domestic firms. Nevertheless, the appropriate regulator still needs to monitor such an overseas firm's continuing satisfaction of the threshold conditions, which normally includes consideration of a firm's connection with any person, including its controllers and parent undertakings (see the threshold conditions set out in paragraphs 3B, 4F and 5F of Schedule 6 to the Act). The appropriate regulator therefore needs to be notified of controllers and parent undertakings of overseas firms.

SUP 11.2.4

handbook-guidance
As part of the appropriate regulator's function of monitoring a firm's continuing satisfaction of the threshold conditions, the appropriate regulator needs to consider the impact of any significant change in the circumstances of one or more of its controllers, for example, in their financial standing and, in respect of corporate controllers, in their governing bodies. Consequently, the appropriate regulator needs to know if there are any such changes. SUP 11.8 therefore requires a firm to tell the appropriate regulator if it becomes aware of particular matters relating to a controller.

SUP 11.2.5

handbook-guidance
Similarly, the appropriate regulator needs to monitor a firm's continuing satisfaction of the threshold conditions set out in paragraphs 3B, 4F and 5F of Schedule 6 to the Act (as applicable) (in relation to threshold conditions for which the FCA is responsible,see COND 2.3), which requires that a firm's close links are not likely to prevent the appropriate regulator's effective supervision of that firm. Accordingly the appropriate regulator needs to be notified of any changes in a firm's close links. This requirement is contained in SUP 11.9.

SUP 11.2.6

handbook-guidance
Every firm, other than a firm listed in SUP 11.1.1 R (1) to SUP 11.1.1 R (6)or a firm excluded from the operation of SUP 16.4 or SUP 16.5 by SUP 16.1.3 R, is required to submit an annual report on its controllers and close links as set out in SUP 16.4 and SUP 16.5.

SUP 11.2.7

handbook-guidance
The requirements in SUP 11 implement certain provisions relating to changes in control and close links required under the Single Market Directives.

SUP 11.2.8

handbook-guidance
An event described in SUP 11.4.2R, SUP 11.4.2A R and SUP 11.4.4Ris referred to in this chapter as a "change in control".

SUP 11.3

Requirements on controllers or proposed controllers under the Act

  • 01/12/2004

SUP 11.3.1

handbook-guidance
The notification requirements are set out in sections 178, 179, 191D and 191E of the Act and holdings which may be disregarded are set out in section 184 of the Act.A summary of the notification requirements described in this section is given in SUP 11 Annex 1.

SUP 11.3.1A

handbook-guidance
For the purposes of Part XII (Control over authorised persons) of the Act, and in particular, calculations relating to the holding of shares and/or voting power, the definitions of "shares" and "voting power" are set out in section 191G of the Act.

SUP 11.3.1B

handbook-guidance
SUP 11 Annex 6G provides guidance on when one person's holding of shares or voting power must be aggregated with that of another person for the purpose of determining whether an acquisition or increase of control will take place as contemplated by section 181 or 182 of the Act such that notice must be given to the appropriate regulator in accordance with section 178 of the Act before making the acquisition or increase. This will be:
(1) where those persons are acting in concert, as contemplated by section 178(2) (Obligation to notify appropriate regulator: acquisitions of control) of the Act; or
(2) in the case of voting power only, if any of the circumstances described in section 422(5) (Controller) of the Act apply.

Requirement to notify a proposed change in control

SUP 11.3.2

handbook-guidance
Sections 178(1) and 191D(1)of the Act require a person (whether or not he is an authorised person) to notify the appropriate regulator in writing if he decides toacquire, increase or reduce control or to cease to have controlover a UK domestic firm. Failure to notify is an offence under section 191F of the Act (Offences under this Part).

SUP 11.3.2A

handbook-guidance

The Treasury have made the following exemptions from the obligations under section 178 of the Act:

  1. (1) controllers and potential controllers of non-directive friendly societiesare exempt from the obligation to notify a change in control (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774));
  2. (2) controllers and potential controllers of building societies are exempt from the obligation to notify a change in control unless the change involves the acquisition of a holding of a specified percentage of a building society's capital or the increase or reduction by a specified percentage of a holding of a building society's capital (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774.)). The "capital" of a building society for these purposes consists of:
    1. (a) any shares of a class defined as deferred shares for the purposes of section 119 of the Building Societies Act 1986 which have been issued by the society (in practice, likely to be permanent interest bearing shares (PIBS)); and
    2. (b) the general reserves of that building society:
  3. (3) potential controllers of non-directive firms("A") are exempt from the obligation to notify a change in control unless the change results in the potential controller holding:
    1. (a) 20% or more of the shares in A or in a parent undertaking of A ("P");
    2. (b) 20% or more of the voting power in A or P; or
    3. (c) shares or voting power in A or P as a result of which the controller is able to exercise significant influence over the management of A;
  4. or where the change in control over A would lead to the controller ceasing to fall into any of the cases (a), (b) or (c) above (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774)).

Approval required before acquiring or increasing control

SUP 11.3.4

handbook-guidance
If a persondecidesto acquire control or increase control over a UK domestic firm in a way described in SUP 11.4.2 Ror acquire control in a way described in SUP 11.4.2AR (1), he must obtain the appropriate regulator's approval before doing so. Making an acquisition before the appropriate regulator has approved of itis an offence under section 191F of the Act (Offences under this Part).

SUP 11.3.5

handbook-guidance
The appropriate regulator's approval is not required before a controller reduces control or ceases to have controlover a UK domestic firm.

Pre-notification and approval for fund managers

SUP 11.3.5A

handbook-guidance
The appropriate regulator recognises that firms acting as investment managers may have difficulties in complying with the prior notification requirements in sections 178 and 191D of the Act as a result of acquiring or disposing of listed shares in the course of that fund management activity. To ameliorate these difficulties, the appropriate regulator may accept pre-notification of proposed changes in control, made in accordance with SUP D, and may grant approval of such changes for a period lasting up to a year.

SUP 11.3.5B

handbook-directions
The appropriate regulator may treat as notice given in accordance with sections 178 and 191Dof the Act a written notification from a firm which contains the following statements:
(1) that the firm proposes to acquire and/or dispose of control, on one or more occasions, of any UK domestic firm whose shares or those of its ultimate parent undertaking are, at the time of the acquisition or disposal of control, listed or which are admitted to listing on a designated investment exchange;;
(2) that any such acquisitions and/or disposals of control will occur only in the course of the firm's business as an investment manager;
(3) that the level of control the firm so acquires in the pre-approval period will at all times remain less than 20%; and
(4) that the firm will not exercise any influence over the UK domestic firm in which the shares are held, other than by exercising its voting rights as a shareholder or by exercising influence intended to promote generally accepted principles of good corporate governance.

SUP 11.3.5C

handbook-guidance
Where the appropriate regulator approves changes in control proposed in a notice given under SUP 11.3.5B D:
(1) the controller remains subject to the requirement to notify the appropriate regulator when a change in control actually occurs; and
(2) the notification of change in control should be made no later than five business days after the end of each month and set out all changes in the controller's control position for each UK domestic firm for the month in question.

At that stage, the appropriate regulator may seek from the controller further information.

Forms of notifications when acquiring or increasing control

SUP 11.3.7

handbook-directions
A section 178 notice given to the appropriate regulator by a person who is acquiring control or increasing his control over a UK domestic firm, in a way described in SUP 11.4.2 R (1) to (4), or acquiring control in a way described in SUP 11.4.2A R, mustcontain the information and be accompanied by such documents as are required by the controllers form approved by the appropriate regulator for the relevant application.

SUP 11.3.7A

handbook-guidance
The controllers forms approved by the appropriate regulator may be found at the appropriate regulator's website [web address tbc].

SUP 11.3.10

handbook-directions
(1) A person who has submitted a section 178 notice under SUP 11.3.7 D must notify the appropriate regulator immediately if he becomes aware, or has information that reasonably suggests, that he has or may have provided the appropriate regulator with information which was or may have been false, misleading, incomplete or inaccurate, or has or may have changed, in a material particular. The notification must include:
(a) details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;
(b) an explanation why such information was or may have been provided; and
(c) the correct information.
(2) If the information in (1) (c) cannot be submitted with the section 178 notice (because it is not immediately available), it must instead be submitted as soon as possible afterwards.
(3) The requirement in (1) ceases if the change in control occurs or will not take place.

SUP 11.3.11

handbook-guidance
The appropriate regulator will inform a section 178 notice giver as soon as reasonably practicable if it considers the section 178 notice to be incomplete.

SUP 11.3.12

handbook-guidance
The appropriate regulator has power, under section 179(3) of the Act (Requirements for section 178 notices ), to vary or waive these requirements in relation to a section 178 notice in particular cases if it considers it appropriate to do so.

SUP 11.3.13

handbook-guidance
Where a controller or proposed controller which is an authorised person is required to submit less information under SUP 11.3.7 D than other persons, the appropriate regulator may ask for confirmation of details already held by it or any additional information required under SUP 11.5.1R.

SUP 11.3.14

handbook-guidance
Pursuant to section 188 of the Act (Assessment: consultation with EC competent authorities), the appropriate regulator is obliged to consult any appropriate Home State regulatorbefore making a determination under section 185 of the Act (Assessment: general).

Notification when reducing control

SUP 11.3.15A

handbook-directions
A notice given to the appropriate regulator by a person who is reducing or ceasing to have control over a UK domestic firm, as set out in SUP 11.4.2Ror SUP 11.4.2A R must:
(1) be in writing; and
(2) provide details of the extent of control (if any) which the controller will have following the change in control.

Joint notifications

SUP 11.3.17

handbook-guidance
Notifications to the appropriate regulator by proposed controllers and controllers under Part XII of the Act may be made on a joint basis outlined in SUP 11.5.8 G to SUP 11.5.10 G.

SUP 11.4

Requirements on firms

  • 01/12/2004

SUP 11.4.1

handbook-guidance
A summary of the notification requirements in this section is given in SUP 11 Annex 1.

Requirement to notify a change in control

SUP 11.4.2

handbook-rule
A UK domestic firm, other than a non-directive firm, must notify the appropriate regulator of any of the following events concerning the firm:
(1) a person acquiring control;
(2) an existing controllerincreasing control;
(3) an existing controllerreducing control;
(4) an existing controllerceasing to have control.

SUP 11.4.2A

handbook-rule

A non-directive firm must notify the appropriate regulator of any of the following events concerning the firm:

  1. (1) a personbecoming controller of the firm; or
  2. (2) an existing controller ceasing to be controller of the firm.

SUP 11.4.4

handbook-rule
An overseas firm must notify the appropriate regulator if a person becomes a controller of the firm, increases or reduces control over the firm or ceases to have control over the firm

SUP 11.4.6

handbook-guidance
If a firm is required to obtain approval from the Society of Lloyd's for any changes in its controllers, it should apply for this approval as well as notifying the PRA.

Content and timing of the notification

SUP 11.4.7

handbook-rule
The notification by a firm under SUP 11.4.2 R or SUP 11.4.4 R must:
(1) be in writing;
(2) contain the information set out in:
(a) in the case of acquiring or increasing control, SUP 11.5.1 R (subject to SUP 11.5); or
(b) in the case of reducing control, SUP 11.5.7 R; and
(3) be made:
(a) as soon as the firm becomes aware that a person, whether alone or acting in concert, has decided to acquire control or to increase or reduce control; or
(b) if the change in controltakes place without the knowledge of the firm, within 14 days of the firm becoming aware of the change in control concerned.

SUP 11.4.8

handbook-guidance
Principle 11 requires firms to be open and cooperative with the appropriate regulator . A firm should discuss with the appropriate regulator , at the earliest opportunity, any prospective changes of which it is aware, in a controller'sor proposed controller's shareholdings or voting power (if the change is material). These discussions may take place before the formal notification requirement in SUP 11.4.2 R or SUP 11.4.4 R arises. (See also SUP 11.3.2 G). As a minimum, the appropriate regulator considers that such discussions should take place before a person:
(1) enters into any formal agreement in respect of the purchase of shares or a proposed acquisition or merger which would result in a change in control (whether or not the agreement is conditional upon any matter, including the appropriate regulator's approval); or
(2) purchases any shareoptions, warrants or other financial instruments, the exercise of which would result in the person acquiring control or any other change in control.

SUP 11.4.9

handbook-guidance
The obligationsin SUP 11.4.2 R and SUP 11.4.2A R apply whether or not the controller himself has given or intends to give a notification, in accordance with his obligations under the Act.

Identity of controllers

SUP 11.4.10

handbook-rule
A firm must take reasonable steps to keep itself informed about the identity of its controllers.

SUP 11.4.11

handbook-guidance
The steps that the appropriate regulator expects a firm to take to comply with SUP 11.4.10 R include, if applicable:
(1) monitoring its register of shareholders (or equivalent);
(2) monitoring notifications to the firm in accordance with Part 22 of the Companies Act 2006;
(3) monitoring public announcements made under the relevant disclosure provisions of the Takeover Code or other rules made by the Takeover Panel;
(4) monitoring the entitlement of delegates, or persons with voting rights in respect of group insurance contracts, to exercise or control voting power at general meetings.

SUP 11.5

Notifications by firms

SUP 11.5.1

handbook-rule

Information to be submitted by the firm (see SUP 11.4.7 R (2)(a))

SUP 11.5.2

handbook-rule
The notification from a firm under SUP 11.4.7 R (2)(a) need only contain as much of the information set out in SUP 11.5.1 R as the firm is able to provide, having made reasonable enquiries from persons and other sources as appropriate.

SUP 11.5.4

handbook-guidance
Firms are reminded that a change in control may give rise to a change in the groupcompanies to which the appropriate regulator's consolidated financial supervision requirements apply. Also, the firm may for the first time become subject to the appropriate regulator's requirements on consolidated financial supervision (or equivalent requirements imposed by another EEA State). This may apply, for example, if the controller is itself an authorised undertaking. The appropriate regulator may therefore request such a firm, controller or proposed controller to provide evidence that, following the change in control, the firm will meet the requirements of these rules, if appropriate.

SUP 11.5.4A

handbook-guidance
Firms are also reminded that a change in control may give rise to a notification as a financial conglomerate or a change in the supplementary supervision of a financial conglomerate (see GENPRU 3.1 (Cross sector groups) and GENPRU 3.2 (Third country groups)).

Form of notification when a person reduces control

SUP 11.5.7

handbook-rule
A notification of a proposed reduction in control must:
(1) give the name of the controller; and
(2) provide details of the extent of control (if any) which the controller will have following the change in control.

Joint notifications

SUP 11.5.8

handbook-guidance
A firm and its controller or proposed controller may discharge an obligation to notify the appropriate regulator by submitting a single joint section 178 notice containing the information required from the firm and the controller or proposed controller. In this case, the section 178 notice may be used on behalf of both the firm and the controller or proposed controller.

SUP 11.5.9

handbook-guidance
If a person is proposing a change in control over more than one firm within a group, then the controller or proposed controller may submit a single section 178 notice to the PRA in respect of all those firms which are PRA-authorised persons and a single section 178 notice to the FCA in respect of all those firms which are not PRA-authorised persons. The section 178 notice should contain all the required information as if separate notifications had been made, but information and documentation need not be duplicated within the set of information sent to each regulator.

SUP 11.5.10

handbook-guidance
When an event occurs (for example, a group restructuring or a merger) as a result of which:
(1) more than one firm in a group would undergo a change in control; or
(2) a single firm would experience more than one change in control;
then, to avoid duplication of documentation, all the firms and their controllers or proposed controllers may discharge their respective obligations to notify the appropriate regulator by submitting a single section 178 notice to the PRA containing one set of information in relation to all the firms which are PRA-authorised persons and a single section 178 notice to the FCA containing one set of information in relation to all the firms which are not PRA-authorised persons.

SUP 11.6

Subsequent notification requirements by firms

  • 01/12/2004

Changes in the information provided to the appropriate regulator

SUP 11.6.1

handbook-guidance
Firms are reminded that SUP 15.6.4 R requires them to notify the appropriate regulator if information notified under SUP 11.4.2 R or SUP 11.4.4 R was false, misleading, inaccurate, incomplete, or changes, in a material particular. This would include a firm becoming aware of information that it would have been required to provide under SUP 11.5.1 R if it had been aware of it.

SUP 11.6.2

handbook-rule
After submitting a section 178 notice under SUP 11.4.2 R or SUP 11.4.2A R and until the change in control occurs (or is no longer to take place), SUP 15.6.4 R and SUP 15.6.5 R apply to a UK domestic firm in relation to any information its controller or proposed controller provided to the appropriate regulator under SUP 11.5.1 R or SUP 11.3.7 D.

SUP 11.6.3

handbook-rule
During the period in SUP 11.6.2 R, a UK domestic firm must take reasonable steps to keep itself informed about the circumstances of the controller or the proposed controller to which the notification related.

Notification that the change in control has taken place

SUP 11.6.4

handbook-rule
A firm must notify the appropriate regulator :
(1) when a change in control which was previously notified under SUP 11.4.2 R, SUP 11.4.2A Ror SUP 11.4.4 R has taken place; or
(2) if the firm has grounds for reasonably believing that the event will not now take place.

SUP 11.6.5

handbook-rule
The notification under SUP 11.6.4 R must be given within 14 days of the change in control or of having the grounds (as applicable).

SUP 11.7

Acquisition or increase of control: assessment process and criteria

SUP 11.7.1

handbook-guidance
The assessment process and the assessment criteria are set out in sections 185 to 191 of the Act.

SUP 11.7.2

handbook-guidance
Section 191A deals with the procedure the appropriate regulator must follow where the appropriate regulator reasonably believes that:
(1) there has been a failure to give notice under section 178(1) of the Act in circumstances where notice was required;
(2) there has been a breach of a condition imposed under section 187 of the Act; or
(3) there are grounds for objecting to control on the basis of the matters in section 186 of the Act.

SUP 11.7.3

handbook-guidance
The appropriate regulator may serve restriction notices in certain circumstances in accordance with section 191B of the Act.

SUP 11.7.4

handbook-guidance
The appropriate regulator may apply to the court for an order for the sale of shares in accordance with section 191C of the Act.

SUP 11.7.13

handbook-guidance
Before making a determination under section 185 orgiving a warning notice under section 191A, the appropriate regulator must comply with the requirements as to consultation with EC competent authorities set out in section 188 of the Act and with the other regulator set out in sections 187A, 187B and 191A of the Act, as applicable.

SUP 11.8

Changes in the circumstances of existing controllers

  • 01/12/2004

SUP 11.8.1

handbook-rule
A firm must notify the appropriate regulator immediately it becomes aware of any of the following matters in respect of one or more of its controllers:
(1) if a controller, or any entity subject to his control, is or has been the subject of any legal action or investigation which might put into question the integrity of the controller;
(2) if there is a significant deterioration in the financial position of a controller;
(3) if a corporate controller undergoes a substantial change or series of changes in its governing body;
(4) if a controller, who is authorised in another EEA State as a MiFID investment firm , BCD credit institution or UCITS management company or under the Insurance Directives or the Insurance Mediation Directive, ceases to be so authorised (registered in the case of an IMD insurance intermediary).

SUP 11.8.3

handbook-guidance
In respect of SUP 11.8.1 R (3), the appropriate regulator considers that, in particular, the removal or replacement of a majority of the members of a governing body (in a single event or a series of connected events) is a substantial change and should be notified.

SUP 11.8.4

handbook-guidance
If a matter has already been notified to the appropriate regulator (for example, as part of the firm's application for a Part 4A permission ), the firm need only inform the appropriate regulator of any significant developments.

SUP 11.8.5

handbook-guidance
The level of a firm's awareness of its controller's circumstances will depend on its relationship with that controller. The appropriate regulator does not expect firms to implement systems or procedures so as to be certain of any changes in its controllers' circumstances. However, the appropriate regulator does expect firms to notify it of such matters if the firm becomes aware of them, and it expects firms to make enquiries of its controllers if it becomes aware that one of the events in SUP 11.8.1 R may occur or has occurred.

SUP 11.8.6

handbook-guidance
The appropriate regulator may ask the firm for additional information following a notification under SUP 11.8.1 R in order to satisfy itself that the controller continues to be suitable (see SUP 2: Information gathering by the appropriate regulator on its own initiative).

SUP 11.9

Changes in close links

  • 01/12/2004

Requirement to notify changes in close links

SUP 11.9.1B

handbook-rule
(1) A firm must notify the PRA that it has become or ceased to be closely linked with any person. The notification must be made by completing the Close Links Notification Form (see SUP 11.9.3C G) and must include the information set out in SUP 16.5.4 R (4).
(2) If a group includes more than one firm, a single close links notification may be made by completing the Close Links Notification Form and so satisfy the notification requirement for all firms in the group. Nevertheless, the requirement to notify, and the responsibility for notifying, remains with each firm in the group.

SUP 11.9.2A

handbook-guidance
A firm may elect not to include the following close links in the notification submitted under SUP 11.9.1 R, SUP 11.9.5 R or SUP 16.5:
(1) shares held in its capacity as custodian provided it can only exercise any voting rights attached to such shares under instructions given in writing or by electronic means;
(2) shares held in its capacity as collateral taker under a collateral transaction which involves the outright transfer of securities provided it does not declare any intention of exercising (and does not exercise) the voting rights attaching to such shares.

SUP 11.9.3-B

handbook-guidance
The PRA may ask the firm for additional information following a notification under SUP 11.9.1B R in order to satisfy itself that the firm continues to satisfy the threshold conditions (see SUP 2: Information gathering by the FCA and PRA on their own initiative).

Form of notification

SUP 11.9.3C

handbook-guidance
The Close Links Notification Form approved by the PRA for notifications under SUP 11.9.1B R , SUP 11.9.5B R and SUP 16.5.4 R (1), may be found at the PRA website.

Timing of notification requirement

SUP 11.9.4B

handbook-rule
The firm must make a notification to the PRA under SUP 11.9.1B R:
(1) as soon as reasonably practicable and no later than one month after it becomes aware that it has become or ceased to be closely linked with any person; or
(2) where a firm has elected to report on a monthly basis, within fifteen business days of the end of each month by completing the Close Links Notification Form, including the information set out in SUP 16.5.4 R (4) for that month and must submit the group organisation chart on a quarterly basis unless there have been no changes since the submission of the previous organisation chart to the PRA, in which case the group organisation chart is not required.

Electing to notify changes in close links monthly

SUP 11.9.5B

handbook-rule
(1) A firm elects to report changes in close links on a monthly basis by sending a written notice of election to the firm's usual supervisory contacts at both the PRA and FCA.
(2) An election to report changes in close links on a monthly basis will stand until such time as the firm gives its usual supervisory contacts at both the PRA and FCA at least one month's written notice of its intention to cease reporting changes in close links on a monthly basis.
  • 01/04/2013

SUP 11.9.6B

handbook-guidance
The PRA considers that monthly reporting of changes in close links will ordinarily only be appropriate for firms forming part of large groups.
  • 01/04/2013

SUP 11 Annex 1

Summary of notification requirements

  • 01/12/2004

handbook-guidance

SUP 11 Annex 6G

Aggregation of holdings for the purpose of prudential assessment of controllers

  • 06/02/2011

Q1: What is this guidance about?

A: This guidance considers when one person's holding of shares or voting power must be aggregated with that of another person for the purpose of determining whether those persons have decided to acquire or increase control over a UK authorised person, as contemplated by section 181 or 182 of the Act, such that notice must be given to the appropriate regulator in accordance with section 178 (Obligation to notify the Authority: acquisitions of control) of the Act before making the acquisition or deciding to increase their control.

Q2: When are shares or voting power to be aggregated?

A: There are two situations which would require the holdings of two or more persons to be aggregated for the purpose of determining whether they are acquiring or increasing control within the meaning of section 181 or 182 of the Act. The first is where shares or voting power are held or to be held by persons 'acting in concert' - this is referred to in sections 178(2) and 422(3) of the Act. The second is where a person (H) is attributed with voting power in a firm through the application of any of the circumstances described in section 422(5)(a) of the Act ('deemed voting power') in addition to any other voting power that he holds (or is deemed to hold) in that firm. These two situations may apply concurrently. For example, H could be acting in concert pursuant to section 178(2) of the Act and have deemed voting power under section 422(5)(a)(i) of the Act where H has concluded an agreement that obliges him and a third party shareholder in the firm to adopt, by concerted exercise of the voting power they hold, a lasting common policy towards the management of that firm.

Acting in Concert

Q3: What does 'acting in concert' mean for these purposes?

A: There is no definition of this phrase in the Act. The Glossary to the Guidelines for the prudential assessment of acquisitions and increases in holdings in the financial sector required by Directive 2007/44/EC (the 'Acquisitions Directive') published jointly by CEBS, CEIOPS and CESR (the 'Level 3 Guidelines') states that, for the purposes of the Acquisitions Directive, 'persons are "acting in concert" when each of them decides to exercise his rights linked to the shares he acquires in accordance with an explicit or implicit agreement made between them.' The relevant persons must therefore (1) hold shares and/or voting power in the firm or its parent undertaking, and (2) reach a decision to exercise the rights linked to those shares in accordance with an agreement (in writing or otherwise) between them.

While the rights 'linked to' shares for these purposes are most likely to be voting rights, persons may be 'acting in concert' where they decide to exercise other share-related rights, either in addition to or instead of voting rights, in accordance with an agreement made between them. As indicated in the Level 3 Guidelines, persons will begin acting in concert when they take the decision to exercise their rights in accordance with an agreement between them. This decision may be taken before or after the time the relevant persons decide to purchase shares in the firm. The agreement need not require them always to exercise the rights attached to their respective shares in the same way - see, for example, the response to Question 11 in respect of passive shareholdings.

Q4: Does section 178(2) of the Act have the effect that two or more persons who already hold shares or voting power in a firm or its parent undertaking and who subsequently decide to exercise their voting or other rights in accordance with an agreement between them are required to give prior notice under section 178(1) of the Act, if their aggregated holdings fall within any of the cases set out in section 181(2) of the Act or increase by any of the steps set out in section 182(2) of the Act?

A: Yes. Section 178(1) of the Act applies when a person 'decides to acquire or increase control over a UK authorised person...'. For the purposes of Part XII of the Act, a person's acquisition of control of a firm is determined by virtue of his holdings of shares or voting power in that firm or in a parent undertaking of that firm. In determining whether control has been acquired, section 178(2) of the Act requires the holdings of shares or voting power of persons who are acting in concert to be aggregated. As noted in the response to Question 3, persons begin acting in concert when they decide to exercise their voting or other rights in accordance with an agreement between them. Once this decision has been taken, shares or voting rights must be aggregated to determine whether control has been or will be acquired. The same analysis applies to increases in control and reductions in control, as set out in sections 182 and 183 of the Act, respectively. Accordingly, the requirement to aggregate holdings of shares and/or voting power under section 178(2) of the Act may apply to existing holdings, as well as to new purchases, of shares and/or voting power.

Q5: What types of arrangement amount to acting in concert in acquiring or holding shares or voting power for the purposes of these Sections of the Act?

A: Although the term 'acting in concert' has a potentially wide meaning, not all common actions taken by shareholders in relation to shares or voting power will require the aggregation of holdings of shares or voting power for the purposes of section 178 of the Act. In particular, there are many circumstances in which persons, who between them hold 10% or more of the shares or voting power in a firm or its parent undertaking, may engage in a concerted exercise of voting power, without this amounting to 'acting in concert' in a manner requiring aggregation of their holdings under section 178(2) of the Act. An agreement by one shareholder to vote with other shareholders on a specific issue, for example, rather than on an ongoing or sustained basis, would not generally be regarded by the appropriate regulator as acting in concert so as to require a section 178 notice to be given by that group of shareholders, even where the group collectively holds 10% or more of the voting power in the firm. However, see further on this point in the response to Question 9.

Deemed voting power

Q6 : What is meant by 'deemed voting power'?

A: 'Deemed voting power' is the term used in this guidance to describe those cases set out in section 422(5)(a) of the Act in which one person's holding of voting power is attributed to another. There may be circumstances in which deemed voting power must be aggregated with other (actual or deemed) voting power for the purposes of determining whether section 181(2)(b) of the Act applies, but the cases set out in section 422(5)(a) may result in the attribution of voting power to a person (H) without aggregation where H holds no other actual or deemed voting power in the relevant firm and is not acting in concert with any other person (for example, where H exercises the voting power attaching to shares deposited with him pursuant to a discretion granted to him in the absence of (1) specific instructions from the actual shareholders, and (2) any agreement with the shareholders as to how he should exercise that voting power or any other rights attached to those shares - see section 422(5)(a)(vi) of the Act).

The provisions of section 422(5)(a) of the Act were transposed into the Act in order to implement Directive 2004/109/EC (the 'Transparency Directive'). These provisions have direct application to Part XII of the Act, and in particular to the meaning of 'voting power' for the purposes of that Part, by virtue of section 191G (Interpretation) of the Act.

In introducing the cases in which the voting power of a third party may be attributed to H, the Transparency Directive refers to the ability 'to acquire, to dispose of, or to exercise voting rights in any of the [relevant] cases or a combination of them.' No new purchase of shares is therefore required in order for these attribution provisions to apply.

Q7: Where X holds 10% of the voting power in a firm and X is the subsidiary of H, which itself has no holding at all directly in the firm, is H a controller?

A: Yes. This follows from section 422(5)(a)(v) of the Act, which provides that voting power includes, in relation to a person (H), voting power held by a subsidiary of H. The voting power held by X is attributed to H, making H a controller.

For the purposes of section 178 of the Act, both H and its subsidiary, would be required to notify and obtain the appropriate regulator's approval prior to acquiring or increasing control.

Practical application of aggregation of holdings

Q8: Does there need to be a new purchase of shares or voting rights in order for the notification requirement to arise?

A: No. As stated in the response to Question 4, the aggregation of shares and/or voting power is relevant to existing holdings of shares and/or voting power where no new purchase is to take place, as well as to new purchases.

Q9: Do the aggregation provisions apply to shareholders agreeing how they will vote on a particular issue, for example, for reasons of good corporate governance?

A: We would not generally regard shareholders as acting in concert for the purposes of section 178(2) of the Act or as having deemed voting power requiring aggregation pursuant to section 422(5)(a)(i) of the Act simply because they have agreed to vote together on a particular issue, for example:

•rejection of a proposal for the remuneration of directors;
•appointment/removal of a particular director; or
•approval/rejection of an acquisition or disposal proposed by the firm's board of directors.


However, there may be circumstances in which voting together on a specific issue would amount to acting in concert for these purposes. Where, for example, shareholders who have no previous agreement in relation to the exercise of their voting rights agree to act together for the purpose of voting through the resolution(s) required to enable them to obtain control of the board of a firm, that is likely to constitute acting in concert for these purposes, although it may not fall within section 422(5)(a)(i) of the Act, if those shareholders have no 'lasting common policy' towards the firm's management.

Those circumstances are likely to be exceptional and, while it is not possible in this guidance to give a definitive list of how they might arise, the appropriate regulator remains willing to provide firms with individual guidance on the point in cases of uncertainty.

Q10: What about agreements that specific issues will be put to a vote of shareholders?

A: An agreement that does no more than require particular management actions to be put to a vote of shareholders, such as major acquisitions, disposals or new issues of shares, would not of itself trigger the requirement to notify. This is because there is no agreement as to how the shareholders will exercise their rights on, or whether the shareholders will adopt a common policy towards, those proposals. An agreement which gives certain shareholders veto rights over key decisions by the firm may, however, bring those shareholders within the ambit of section 178(1) of the Act regardless of whether they are acting in concert, by virtue of their being able to exercise significant influence over the management of the firm - see section 181(2)(c) of the Act.

Q11: What about agreements as to how to exercise voting power on future issues generally?

A: This would involve acting in concert, and thus require the aggregation of holdings by the parties to the agreement, for the purposes of section 178 of the Act. It may also fall within the ambit of section 422(5)(a)(i) of the Act, but this will depend on whether the parties to the agreement have adopted a lasting common policy that relates to the management of the relevant undertaking.

Acting in concert not only covers agreements to exercise voting power, but may also arise as a result of 'passive shareholder agreements'. In these, a shareholder (the 'passive shareholder') agrees explicitly or implicitly with another shareholder or group of shareholders (the 'active shareholder') that it will not exercise its voting power. For example, where the passive shareholder holds 2% of the voting power and the active shareholder holds 9% of the voting power, each would be regarded as having control (11% of the voting power) because their holdings are required to be aggregated under the acting in concert provisions. However, persons that acquire shares as part of an investment or hedging programme and adhere consistently to a stated policy of not voting those shares would not, by reason of that policy alone, be regarded as having entered into an agreement with other shareholders and so would not be regarded as acting in concert with them.

Q12: Are multiple purchasers of shares, who are each party to a share purchase agreement and whose combined shareholding will fall within section 181(2) of the Act, required to give notice pursuant to section 178(1) of the Act, on the basis that the existence of the agreement means they are acting in concert?

A: If it is clear that the only 'agreement' between one or more persons consists in their being parties to the same share purchase agreement, the terms of which pertain strictly to the purchase of shares and do not govern or otherwise seek to regulate the purchasers' relationship with each other following completion of the share purchase, those purchasers would not be regarded by the appropriate regulator as acting in concert for the purpose of requiring notification under section 178 of the Act. If, however, the share purchase agreement contains provisions governing or otherwise regulating the exercise of the rights linked to the shares to be acquired by the purchasers (or the purchasers have entered into or propose to enter into a shareholders' or other agreement with similar effect), the proposed acquirers may be regarded by the appropriate regulator to be acting in concert for the purpose of requiring notification under section 178 of the Act, depending on the terms of the relevant agreement(s). Further guidance on the effect of some of the typical provisions included in shareholders' agreements is contained in the response to Question 14. Prospective shareholders who are uncertain as to the effect of any of the provisions of their agreement(s) in these circumstances may wish to seek (either formally or informally) individual guidance at an early stage from the appropriate regulator .

Where there is evidence to suggest that the parties do in fact intend to co-operate in relation to the exercise of voting or other rights relating to the shares they are acquiring, notwithstanding that no provisions to that effect appear in the share purchase or other written agreement, this may warrant the conclusion that there is an implicit agreement between them by virtue of which they are acting in concert.

Q13: What about agreements that are conditional on any necessary approval by the appropriate regulator?

A: Notice must be given under section 178(1) of the Act before control is acquired. The point in time at which this occurs may depend on a number of circumstances. In the context of a share purchase agreement that provides for appropriate regulator approval of the purchaser to be obtained before the acquisition is completed, the purchaser will not usually be required to give a section 178 notice prior to entering into the agreement. However, there may be circumstances in which control is actually acquired at the time the agreement is entered into, for example, where the parties have agreed that the purchaser will be entitled (whether by virtue of a power of attorney contained in the agreement or otherwise) to exercise the voting rights attached to the shares being acquired in the period between signing and completion. In that case, the purchaser will need to consider whether to give notice under section 178(1) prior to entering into the agreement.

Q14: What about pre-emption rights, 'drag along' rights and 'tag along' rights?

A: Typical examples of these arrangements are unlikely to trigger the requirement to notify under section 178(1) of the Act in themselves.

Bare pre-emption rights will simply indicate each shareholder's (the 'offeror') agreement to give fellow shareholders an option to purchase his shares, if he wishes to sell. The acquisition of shares under these arrangements cannot take place until the offeror decides to sell his shares and other shareholders decide to buy them.

Shareholders will not usually be regarded as acting in concert in holding or acquiring shares simply by agreeing to give each other future pre-emption rights. In the event that some shareholders enter into an agreement to buy the offeror's shares, those shareholders are only likely to be regarded as acting in concert by virtue of that agreement in the circumstances described in the response to Question 12 above.

The existence of 'drag along' and 'tag along' rights in a shareholders' agreement designed to ensure equivalent treatment of shareholders of the same class in the event an offer is made, or to be made, by a non-shareholder to purchase the shares of any single shareholder in a private company would not, in and of themselves, result in the shareholders who have the benefit of those rights being considered to be acting in concert in their holding or acquiring of shares.

Q15: How does this guidance relate to the definition of 'acting in concert' in the Takeover Code (the 'Code')?

A: Although similar terminology may be used, the definition of 'acting in concert' in the Code derives from the Takeovers Directive and has particular relevance in determining whether the relationship between persons with interests in shares carrying voting rights is such as to require those rights to be aggregated for the purpose of assessing whether, under Rule 9.1, the threshold for the making of a mandatory offer to all other shareholders in a company to which the Code applies has been reached. The notes on the definition in the Code and on Rule 9.1 make clear that the Takeover Panel's views in relation to acting in concert '...relate only to the Code and should not be taken as guidance on any other statutory or regulatory provisions'.

This guidance is given for a quite different purpose. It is relevant to considering whether the holdings of persons who have reached an agreement in relation to the shares or voting rights they do or will hold must be aggregated for the purpose of determining whether they are subject to the requirements for prudential assessment specified in sections 185 et seq of the Act. This guidance has no relevance to how 'acting in concert' is to be interpreted in the context of the Code.

Export chapter as

SUP 13

Exercise of passport rights by UK firms

SUP 13.1

Application and purpose

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Application

SUP 13.1.1

handbook-guidance
This chapter applies to a UK firm, that is, a person whose head office is in the United Kingdom and which is entitled to carry on an activity in another EEA State subject to the conditions of a Single Market Directive. Such an entitlement is referred to in the Act as an EEA right and its exercise is referred to in the Handbook as passporting.

SUP 13.1.2

handbook-guidance
This chapter also applies to a UK firm which wishes to establish a branch in, or provide cross border services into, Gibraltar. The Financial Services and Markets Act 2000 (Gibraltar) Order 2001 provides that a UK firm is to be treated as having an entitlement corresponding to its EEA right, to establish a branch in, or provide cross border services into, Gibraltar under any of the Single Market Directives. So, references in this chapter to an EEA State or an EEA right include references to Gibraltar and the entitlement under the Gibraltar Order respectively.

SUP 13.1.3

handbook-guidance
This chapter does not apply to:
(1) a firm established in an EEA State other than the United Kingdom; passporting by such a firm in or into the United Kingdom is a matter for its Home State regulator although guidance is given in SUP 13A (Qualifying for authorisation under the Act);
(2) other overseas firms (that is, overseas firms established outside the EEA); such firms are not entitled to passport into another EEA State and, where relevant, may need to obtain authorisation in each EEA State in which they carry on business;
(3) any insurance activity by way of provision of services which is provided by an EEA firm participating in a community co-insurance operation otherwise than as leading insurer; article 26.2 of the Second Non-Life Directive provides that only the leading insurer in such an operation is required to complete any passporting formalities (see also article 11 of the Regulated Activities Order); or
(4) the marketing of the units of a UCITS scheme by its management company in another EEA State under the UCITS Directive (see paragraph 20B of Part III of Schedule 3 to the Act and COLL 12.4 (UCITS product passport)).

SUP 13.1.4

handbook-guidance

Purpose

SUP 13.1.5

handbook-guidance
This chapter gives guidance on Schedule 3 to the Act for a UK firm which wishes to exercise its EEA right and establish a branch in, or provide cross border services into, another EEA State. That is, when a UK firm wishes to establish its first branch in, or provide cross border services for the first time into, a particular EEA State.

SUP 13.1.6

handbook-guidance
The chapter also explains how a UK firm which has already established a branch in, or is providing cross border services into, another EEA State, may change the details of its branch or of the cross border services it is providing: for example, where a UK firm wishes to establish additional branches in an EEA State in which it has already established a branch where this would result in a change to the details provided previously. Such changes are governed by the EEA Passport Rights Regulations.

SUP 13.2

Introduction

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SUP 13.2.1

handbook-guidance
This chapter gives guidance to UK firms. In most cases UK firms will be authorised persons under the Act. However, under the Banking Consolidation Directive , a subsidiary of a firm which is a credit institution which meets the criteria set out in that Directive also has an EEA right. Such an unauthorised subsidiary is known as a financial institution. References in this chapter to a UK firm include a financial institution.

SUP 13.2.2

handbook-guidance
A UK firm should be aware that the guidance is the FSA's interpretation of the Single Market Directives, the Act and the legislation made under the Act. The guidance is not exhaustive and is not a substitute for firms consulting the legislation or taking their own legal advice in the United Kingdom and in the relevant EEA States.

SUP 13.2.3

handbook-guidance
In some circumstances, a UK firm that is carrying on business which is outside the scope of the Single Market Directives has a right under the Treaty to carry on that business. For example, for an insurer carrying on both direct insurance and reinsurance business, the authorisation of reinsurance business is not covered by the Insurance Directives. The firm may, however, have rights under the Treaty in respect of its reinsurance business. Such UK firms may wish to consult with the appropriate UK regulator on their particular circumstances (see SUP 13.12.2 G).

SUP 13.2.4

handbook-guidance
In SUP 13 the "appropriate UK regulator" amounts to whichever of the FCA and the PRA is the competent authority for authorising the relevant UK firm.
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SUP 13.3

Establishing a branch in another EEA State

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What constitutes a branch

SUP 13.3.1

handbook-guidance
Guidance on what constitutes a branch is given in SUP App 3 . Note that if a UK MiFID investment firm is seeking to use a tied agent established in another EEA State, the rules in SUP 13 will apply as if that firm were seeking to establish a branch in that EEA State unless the firm has already established a branch in that EEA State (paragraph 20A of Schedule 3 to the Act).

The conditions for establishing a branch

SUP 13.3.2

handbook-guidance

A UK firm other than a UK pure reinsurer cannot establish a branch in another EEA State for the first time under an EEA right unless the conditions in paragraphs 19(2), (4) and (5) of Part III of Schedule 3 to the Act are satisfied. It is an offence for a UK firm which is not an authorised person to contravene this prohibition (paragraph 21 of Part III of Schedule 3 to the Act). These conditions are that:

  1. (1) the UK firm has given the appropriate UK regulator, in accordance with the appropriate UK regulator's rules (see SUP 13.5.1 R), notice of its intention to establish a branch (known as a notice of intention) which:
    1. (a) identifies the activities which it seeks to carry on through the branch; and
    2. (b) includes such other information as may be specified by the appropriate UK regulator (see SUP 13.5.1 R);
  2. (2) the appropriate UK regulator has given notice (known as a consent notice) to the Host State regulator;
  3. (2A) if the UK firm's EEA right relates to providing collective portfolio management services, the FCA has provided to the Host State regulator:
    1. (a) confirmation that the firm has been authorised as a management company under the provisions of the UCITS Directive;
    2. (b) a description of the scope of the firm's authorisation; and
    3. (c) details of any restriction on the types of EEA UCITS scheme that the firm is authorised to manage; and
  4. (3)
    1. (a) if the UK firm's EEA right derives from the Insurance Mediation Directive one month has elapsed beginning on the date on which the UK firm received notice that the appropriate UK regulator had given a consent notice as described in SUP 13.3.6 G (1) (see SUP 13.3.2A G);
    2. (b) in any other case:
      1. (i) the Host State regulator has notified the UK firm (or, where the UK firm is passporting under the Insurance Directives, the PRA) of the applicable provisions or, in the case of a UK firm passporting under MiFID or the UCITS Directive, that the branch may be established; or
      2. (ii) two months have elapsed beginning with the date on which the appropriate UK regulator gave the consent notice.

SUP 13.3.2A

handbook-guidance
If the UK firm is passporting under the Insurance Mediation Directive and the EEA State in which the UK firm is seeking to establish a branch has not notified the European Commission of its wish to be informed of the intention of persons to establish a branch in its territory in accordance with article 6(2) of that directive, SUP 13.3.2 G (2) and SUP 13.3.2 G (3) do not apply. Accordingly, the UK firm may establish the branch to which its notice of intention relates as soon as the conditions referred to in SUP 13.3.2 G (1) are satisfied.The list of EEA States that have notified the European Commission of their wish to be informed in accordance with article 6(2) of the Insurance Mediation Directive is published on the FCA's website at www.fca.org.uk .

SUP 13.3.2B

handbook-guidance
An appointed representative appointed by a firm to carry on insurance mediation activity on its behalf may establish a branch in another EEA State under the Insurance Mediation Directive. In this case, the notice of intention in SUP 13.3.2 G (1) should be given to the appropriate UK regulator by the firm on behalf of the appointed representative.

SUP 13.3.2D

handbook-guidance
A tied agent appointed by a MiFID investment firm to carry on investment services and activities (and ancillary services where relevant) does not have its own passporting right to establish a branch in another EEA State. However, a MiFID investment firm remains free to appoint a tied agent to do business in another EEA State and where it does so, the tied agent will benefit from its passport.

SUP 13.3.2E

handbook-guidance
Once authorised in the United Kingdom, a UK pure reinsurer has an automatic EEA right to carry on reinsurance business in another EEA State by establishing a branch in that state or providing cross border services into that state. There are no additional requirements to be satisfied before the firm can commence business in that state.

SUP 13.3.3

handbook-guidance
Where the UK firm is passporting under the Insurance Directives and the Host State regulator has notified the PRA of the applicable provisions, then under paragraph 19(9) of Part III of Schedule 3 to the Act, the PRA is required to inform the firm of these provisions.

SUP 13.3.3A

handbook-guidance
(1) SUP 13.3.3 G does not apply to UK pure reinsurers as they have automatic passport rights on the basis of their Home State authorisation under the Reinsurance Directive.
(2) Under section 3 of Part III of the General Protocol, Home State regulators have agreed to inform Host State regulators if a pure reinsurer for which the Home State is responsible carries on business through a branch in the Host State. Therefore SUP 13.5.1A R requires a UK firm passporting under the Reinsurance Directive to notify the PRA of certain information relating to the branch.

Issue of a consent notice to the Host State regulator

SUP 13.3.5

handbook-guidance
  1. (1) If the UK firm's EEA right derives from the Banking Consolidation Directive or MiFID, the appropriate UK regulator will give the Host State regulator a consent notice within three months unless it has reason to doubt the adequacy of a UK firm's resources or its administrative structure. The Host State regulator then has a further two months to notify the applicable provisions (if any) and prepare for the supervision, as appropriate, of the UK firm, or in the case of a MiFID investment firm, to inform the UK firm that a branch can be established.
  2. (1A) If the UK firm's EEA right derives from the UCITS Directive, the FCA will give the Host State regulator a consent notice within two months unless it has reason to doubt the adequacy of the UK firm's resources or its administrative structure. The Host State regulator then has a further two months to prepare for the supervision of the UK firm.
  3. (2)
    1. (a) If the UK firm's EEA right derives from the Insurance Directives, the PRA will give the Host State regulator a consent notice within three months unless it has reason to:
      1. (i) doubt the adequacy of the UK firm's resources or its administrative structure; or
      2. (ii) question the reputation, qualifications or experience of the directors or managers of the UK firm or its proposed authorised agent;
    2. in relation to the business the UK firm intends to conduct through the proposed branch. The Host State regulator then has a further two months to notify the applicable provisions (if any) and prepare for the supervision, as appropriate, of the UK firm.
    3. (b) In assessing the matters in (2)(a), the PRA may, in particular, seek further information from the firm or require a report from a skilled person (see SUP 5 (skilled persons)).
    4. (c) If the PRA has required a financial recovery plan of a UK firm of the kind mentioned in paragraph 1 of article 38 of the Consolidated Life Directive or paragraph 1 of article 20a of the First Non-Life Directive, the PRA will not give a consent notice for so long as it considers that policyholders are threatened within the meaning of those provisions.
    5. (d) If the UK firm's EEA right derives from the Insurance Mediation Directive and SUP 13.3.2 G (2) applies, the appropriate UK regulator will give the Host State regulator a consent notice within one month of the date on which it received the UK firm's notice of intention. In cases where SUP 13.3.2 G (2) does not apply (see SUP 13.3.2A G), the UK firm may establish a branch as soon as it satisfies the conditions referred to in SUP 13.3.2 G.

SUP 13.3.5A

handbook-guidance
Where the PRA is the appropriate UK regulator, it will consult the FCA before deciding whether to give a consent notice, except where paragraph 19(7A) of Part III of Schedule 3 to the Act applies. Where the FCA is the appropriate UK regulator, it will consult the PRA before deciding whether to give a consent notice in relation to a UK firm whose immediate group includes a PRA-authorised person.
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SUP 13.3.6

handbook-guidance
  1. (1) If the appropriate UK regulator gives a consent notice, it will inform the UK firm in writing that it has done so.
  2. (2) The consent notice will contain, among other matters, the requisite details or, if the firm is passporting under the Insurance Directives, the relevant EEA details (see SUP 13 Annex 1) provided by the UK firm in its notice of intention (see SUP 13.5 (Notices of intention)).
  3. (3) Where a consent notice is given under the UCITS Directive, the FCA will at the same time:
    1. (a) communicate to the Host State regulator details of the compensation scheme intended to protect investors; and
    2. (b) enclose the information described at SUP 13.3.2 G (2A).

SUP 13.3.7

handbook-guidance
(1) If the appropriate UK regulator proposes to refuse to give a consent notice, then paragraph 19(8) of Part III of Schedule 3 to the Act requires the appropriate UK regulator to give the UK firm a warning notice.
(2) If the appropriate UK regulator decides to refuse to give a consent notice, then paragraph 19(12) of Part III of Schedule 3 to the Act requires the appropriate UK regulator to give the UK firm a decision notice within three months of the date on which it received the UK firm's notice of intention (two months in the case of a UK firm which is a UCITS management company). The UK firm may refer the matter to the Tribunal.
(3) [deleted]

SUP 13.4

Providing cross border services into another EEA State

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The conditions for providing cross border services into another EEA State

SUP 13.4.2

handbook-guidance

A UK firm, other than a UK pure reinsurer, cannot start providing cross border services into another EEA State under an EEA right unless it satisfies the conditions in paragraphs 20(1) of Part III of Schedule 3 to the Act and, if it derives its EEA right from the Insurance Directives, paragraph 20(4B) of Part III of Schedule 3 to the Act. It is an offence for a UK firm which is not an authorised person to breach this prohibition (paragraph 21 of Part III of Schedule 3 to the Act).The conditions are that:

  1. (1) the UK firm has given the appropriate UK regulator, in the way specified by appropriate UK regulator's rules (see SUP 13.5.2 R), notice of its intention to provide cross border services (known as a notice of intention) which:
    1. (a) identifies the activities which it seeks to carry on by way of provision of cross border services; and
    2. (b) includes such other information as may be specified by the appropriate UK regulator (see SUP 13.5.2 R); and
  2. (2) if the UK firm is passporting under the Insurance Directives, the firm has received written notice from the PRA as described in SUP 13.4.6 G; or
  3. (3) if the UK firm is passporting under the Insurance Mediation Directive and the EEA State in which the UK firm is seeking to provide services has notified the European Commission of its wish to be informed of the intention of persons to provide cross border services in its territory in accordance with article 6(2) of that directive, one month has elapsed beginning with the date on which the UK firm received written notice from the appropriate UK regulator as described in SUP 13.4.5 G (paragraph 20 (3B)(c) of Schedule 3 to the Act).

SUP 13.4.2A

handbook-guidance
An appointed representative appointed by a firm to carry on insurance mediation activity on its behalf may provide cross border services in another EEA State under the Insurance Mediation Directive. In this case, the notice of intention in SUP 13.4.2 G (1) should be given to the appropriate UK regulator by the firm on behalf of the appointed representative.

SUP 13.4.2C

handbook-guidance
A tied agent appointed by a MiFID investment firm to carry on investment services and activities (and ancillary services where relevant) does not have its own passporting right to provide cross border services in another EEA State. However, a MiFID investment firm remains free to appoint a tied agent to do business in another EEA State and where it does so, the tied agent will benefit from its passport.

SUP 13.4.2D

handbook-guidance
A MiFID investment firm that wishes to obtain a passport for the activity of operating an MTF should follow the procedures described in this chapter. A UK market operator that operates a recognised investment exchange, a recognised auction platform (pursuant to the RAP regulations, the definition of regulated market in the Act is read for these purposes as including a recognised auction platform) or an MTF and wishes to provide cross border services into another EEA State should follow the procedure described in REC 4.2B.

SUP 13.4.2E

handbook-guidance
SUP 13.4.2 G does not apply to UK pure reinsurers as they have automatic passport rights on the basis of their Home State authorisation under the Reinsurance Directive. No notification is required from UK pure reinsurers in respect of the provision of cross border services.

Issuing a consent notice or notifying the Host State regulator

SUP 13.4.4

handbook-guidance
  1. (1) If the UK firm's EEA right derives from MiFID, the Banking Consolidation Directive or the UCITS Directive, paragraph 20(3) of Part III of Schedule 3 to the Act requires the appropriate UK regulator to send a copy of the notice of intention to the Host State Regulator within one month of receipt. A UK firm passporting under the Banking Consolidation Directive may start providing cross border services as soon as it satisfies the relevant conditions (see SUP 13.4.2 G).
  2. (2)
    1. (a) If the UK firm's EEA right derives from the Insurance Directives, paragraph 20(3A) of Part III of Schedule 3 to the Act requires the PRA, within one month of receiving the notice of intention, to:
      1. (i) give notice in a specified form (known as a consent notice) to the Host State regulator; or
      2. (ii) give written notice to the UK firm of its refusal to give a consent notice and the reasons for that refusal.
    2. (b) The issue or refusal of a consent notice under paragraph 20(3A) of Part III of Schedule 3 to the Act is the consequence of a regulatory decision, and this consent notice (unlike the consent notice for establishment of a branch) is not a statutory notice as set out in section 395 of the Act. A UK firm that receives notice that the PRA refuses to give a consent notice may refer the matter to the Tribunal under paragraph 20(4A) of Part III of Schedule 3 to the Act.
    3. (c) If the PRA has required of a UK firm a financial recovery plan of the kind mentioned in paragraph 1 of article 38 of the Consolidated Life Directive or paragraph 1 of article 20a of the First Non-Life Directive, the PRA will not give a consent notice for so long as it considers that policyholders' rights are threatened within the meaning of those provisions.
  3. (2A)
    1. (a) If the UK firm's EEA right derives from the Insurance Mediation Directive, and the EEA State in which the UK firm is seeking to provide services has notified the European Commission of its wish to be informed of the intention of persons to provide cross border services in its territory in accordance with article 6(2) of that directive, paragraph 20(3B)(a) of Part III of Schedule 3 to the Act requires the appropriate UK regulator to send a copy of the notice of intention to the Host State regulator within one month of receipt. Otherwise, the UK firm may start providing cross border services as soon as it satisfies the relevant conditions (see SUP 13.4.2 G).
    2. (b) The list of the EEA States that have notified the European Commission of their wish to be informed in accordance with article 6(2) of the Insurance Mediation Directive is published on the FCA's website at www.fca.org.uk.
  4. (2B) Where a consent notice is given under the UCITS Directive, the FCA will at the same time:
    1. (a) communicate to the Host State regulator details of the compensation scheme intended to protect investors; and
    2. (b) provide to the Host State regulator:
      1. (i) confirmation that the firm has been authorised as a management company under the provisions of the UCITS Directive;
      2. (ii) a description of the scope of the firm's authorisation; and
      3. (iii) details of any restriction on the types of EEA UCITS scheme that the firm is authorised to manage.

SUP 13.4.4A

handbook-guidance
Where the PRA is the appropriate UK regulator, it will consult the FCA before deciding whether to give a consent notice and where the FCA is the appropriate UK regulator, it will consult the PRA before deciding whether to give a consent notice in relation to a UK firm whose immediate group includes a PRA-authorised person.
  • 01/04/2013

SUP 13.4.5

handbook-guidance
When the appropriate UK regulator sends a copy of a notice of intention , or if it gives a consent notice to the Host State regulator, it must inform the UK firm in writing that it has done so (paragraphs 20 (3B)(b) and (4) of Schedule 3 to the Act).

Applicable provisions for cross border services

SUP 13.4.6

handbook-guidance
(1) [deleted]
(2) If the UK firm is passporting under the Insurance Directives, then the Host State regulator may notify the PRA if there are any applicable provisions. If so, the PRA will inform the UK firm of the applicable provisions.
(3) If a UK firm is not notified of the applicable provisions, it should, for its own protection, take all reasonable steps to determine the applicable provisions for itself.

SUP 13.5

Notices of intention

  • 01/12/2004

Specified contents: notice of intention to establish a branch

SUP 13.5.1

handbook-rule
A UK firm, other than a UK pure reinsurer, wishing to establish a branch in a particular EEA State for the first time under an EEA right other than under the auction regulation must submit a notice of intention in the form set out in SUP 13 Annex 1 R.
(1) [deleted]
(2) [deleted]

SUP 13.5.1A

handbook-rule
A UK pure reinsurer establishing a branch in a particular EEA state for the first time under the Reinsurance Directive mustsubmit a notice in the form set out in SUP 13 Annex 1 R. Whenever possible, this notification must be made as soon as the information specified in that form is known by the firm.

SUP 13.5.1B

handbook-guidance
SUP 13.5.1 R does not apply to UK pure reinsurers or a UK firm exercising an EEA right under the auction regulation as they have automatic passport rights on the basis of their Home State authorisation under the Reinsurance Directive or the auction regulation. However, the information required by SUP 13.5.1A R and SUP 13.5.1AA R assists the FSA's supervision of a branch in another EEA state.

Specified contents: notice of intention to provide cross border services

SUP 13.5.2

handbook-rule

A UK firm wishing to provide cross border services into a particular EEA State for the first time under an EEA right other than under the auction regulation must submit a notice in the form set out in:

  1. (1) SUP 13 Annex 2 R if the UK firm is passporting under MiFID; or
  2. (1A) SUP 13 Annex 3 R if the UK firm is passporting under the Insurance Directives; or
  3. (2) SUP 13 Annex 4 R if the UK firm is passporting under the Banking Consolidation Directive; or
  4. (3) SUP 13 Annex 5 R if the UK firm is passporting under the Insurance Mediation Directive
  5. (4) SUP 13 Annex 6 R, if the UK firm is a management company passporting under the UCITS Directive.

Method of submission of notices

SUP 13.5.3

handbook-rule
(1) A UK firm, other than a credit union, must submit any notice under SUP 13.5.1 R (1), SUP 13.5.1A R or SUP 13.5.2 R online at www.fca.org.uk using theONAsystem.
(a) [deleted]
(b) [deleted]
(2) [deleted]
(a) [deleted]
(b) [deleted]
(c) [deleted]
(d) [deleted]
(e) [deleted]
(f) [deleted]
(3) Where a firm is obliged to submit a notice in accordance with (1), if the information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm must submit that notice in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
(4) [deleted]

SUP 13.5.3A

handbook-guidance
A credit union must submit any notice under SUP 13.5.1 R (1), SUP 13.5.1A R or SUP 13.5.2 R in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
  • 01/04/2013

SUP 13.5.4

handbook-guidance
(1) If the information technology systems fail and online submission is unavailable for 24 hours or more, the appropriate UK regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 13.5.3 R (3) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.
(2) Where SUP 13.5.3 R (3) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

Unregulated activities

SUP 13.5.5

handbook-guidance
A notice of intention (other than one to establish a branch or provide services in another EEA state under the auction regulation) may include activities within the scope of the relevant Single Market Directive which are not regulated activities (paragraphs 19(3) and 20(2) of Part III of Schedule 3 to the Act), although in the case of a MiFID investment firm a notice of intention may only include ancillary services which are to be carried on with one or more investment services and activities (paragraphs 19(5B) and 20(2A) of Part III of Schedule 3 to the Act). Regulation 19 of the EEA Passport Rights Regulations states that where a UK firm is able to carry on such an unregulated activity in the EEA State in question without contravening any law of the United Kingdom (or any part of the United Kingdom) the UK firm is treated, for the purposes of the exercise of its EEA right, as being authorised to carry on that activity.

Translations

SUP 13.5.6

handbook-guidance
(1) A UK firm passporting under the Banking Consolidation Directive , the Insurance Directives or the Reinsurance Directivemay have to submit the requisite details or relevant details in the language of the Host State as well as in English . For a UK firm passporting under the Insurance Directives this translated document will not include the relevant UK details. Further information is available from the PRA authorisations team.
(2) A UK firm may wish to discuss with the PRA authorisations teamthe appropriate time for providing the translations in (1), given that further information or clarification of the details provided may be required by the PRA .
(3) A UK firm passporting under the Insurance Directives should keep the EEA and UK relevant details separate as, if the application is approved, only the former will be sent to the Host State regulator.

Notifications to more than one EEA State

SUP 13.5.7

handbook-guidance
If a UK firm wishes to establish branches in, or provide cross border services into, more than one EEA State, a single notification may be provided but the relevant information for each EEA State should be clearly identifiable.

SUP 13.6

Changes to branches

  • 01/12/2004

SUP 13.6.1

handbook-guidance
Where a UK firm is exercising an EEA right, other than under the Insurance Mediation Directive (see SUP 13.6.9A G) or the Reinsurance Directive (see SUP 13.6.9B R), and has established a branch in another EEA State, any changes to the details of the branch are governed by the EEA Passport Rights Regulations. References to regulations in this section are to the EEA Passport Rights Regulations. A UK firm which is not an authorised person should note that, under regulation 18, contravention of the prohibition imposed by regulation 11(1), 13(1) or 15(1) is an offence. It is a defence, however, for the UK firm to show that it took all reasonable precautions and exercised due diligence to avoid committing the offence.

SUP 13.6.2

handbook-guidance
UK firms should note that if a branch in another EEA State ceases to provide services, this may represent a change in requisite details or, if the firm is passporting under the Insurance Directives, the relevant EEA details or relevant UK details.

SUP 13.6.3

handbook-guidance
UK firms should also note that changes to the details of branches may lead to changes to the applicable provisions to which the UK firm is subject. These changes should be communicated to the UK firm either by the Host State regulator, or, if the firm is passporting under Insurance Directives, via the PRA .

Firms passporting under the Banking Consolidation Directive and the UCITS Directive.

SUP 13.6.4

handbook-guidance
If a UK firm has exercised an EEA right, under the Banking Consolidation Directive or the UCITS Directive, and established a branch in another EEA State, regulation 11(1) states that the UK firm must not make a change in the requisite details of the branch (see SUP 13 Annex 1), unless it has satisfied the requirements of regulation 11(2), or, where the change arises from circumstances beyond the UK firm's control, regulation 11(3) (see SUP 13.6.10 G).

SUP 13.6.5

handbook-guidance
Where the change arises from circumstances within the control of the UK firm, the requirements in regulation 11(2) are that:
(1) the UK firm has given notice to the appropriate UK regulator and to the Host State regulator stating the details of the proposed change;
(2) the appropriate UK regulator has given the Host State regulator a notice informing it of the details of the change; and
(3) either the Host State regulator has informed the UK firm that it may make the change, or the period of one month beginning with the day on which the UK firm gave the Host State regulator the notice in (1) has elapsed.

Firms passporting under MiFID

SUP 13.6.5A

handbook-guidance
If a UK firm has exercised an EEA right to establish a branch under MiFID, it must not make a change in the requisite details of the branch (see SUP 13 Annex 1), use, for the first time, a tied agent established in the EEA State in which the branch is established, or cease to use a tied agent established in the EEA State in which the branch is established, unless it has satisfied the requirements of regulation 11A(2) (see SUP 13.6.5B G).

SUP 13.6.5B

handbook-guidance
The requirements of regulation 11A(2) are that:
(1) the UK firm has given a notice to the appropriate UK regulator stating the details of the proposed change; and
(2) the period of one month beginning with the day on which the UK firm gave the notice has elapsed.

Firms passporting under the Insurance Directives

SUP 13.6.6

handbook-guidance
If a UK firm has exercised an EEA right under the Insurance Directives and established a branch in another EEA State, regulation 13(1) states that the UK firm must not make a change in the relevant EEA details , unless it has satisfied the requirements of regulation 13(2), or, where the change arises from circumstances beyond the UK firm's control, regulation 13(3) (see SUP 13.6.10 G).

SUP 13.6.7

handbook-guidance
Where the change arises from circumstances within the control of the UK firm, the requirements in regulation 13(2) are that:
(1) the UK firm has given notice to the PRA and to the Host State regulator stating the details of the proposed change;
(2) the PRA has given the Host State regulator a notice informing it of the details of the proposed change;
(3) the period of at least one month beginning on the day on which the UK firm gave the PRA the notice in (1) has elapsed; and
(4) either:
(a) a further period of one month has elapsed; or
(b) the PRA has informed the UK firm of any consequential changes in the applicable provisions of which the PRA has been notified by the Host State regulator.

SUP 13.6.8

handbook-guidance
If a UK firm has exercised an EEA right under the Insurance Directives and established a branch in another EEA State, regulation 15(1) states that the UK firm cannot make a change in any of the relevant UK details unless the UK firm has given a notice to the PRA stating the details of the proposed change at least one month before the change is effected.

SUP 13.6.9

handbook-guidance
Where a UK firm with Part 4A permission to carry on both long-term and general insurance business, is passporting under the Insurance Directives and wishes to extend its general insurance business to include long term insurance business (or vice versa), it should complete a new notice of intention and not a change to details notice.

Firms passporting under the Insurance Mediation Directive

SUP 13.6.9A

handbook-guidance
A UK firm exercising its EEA right under the Insurance Mediation Directive to establish a branch in another EEA State is not required to supply a change to the details of branches notice .

Firms passporting under the Reinsurance Directive

SUP 13.6.9B

handbook-rule
A UK firm exercising its EEA right under the Reinsurance Directive to establish a branch in another EEA State must notify the PRA of any changes in the information specified in SUP 13 Annex 1 R. Whenever possible, this notification must be made as soon as the change in information is known by the firm.

Changes arising from circumstances beyond the control of a UK firm

SUP 13.6.10

handbook-guidance
  1. (1) If the change arises from circumstances beyond the UK firm's control, the UK firm:
    1. (a) is required by regulation 11(3) or regulation 13(3) to give a notice to the appropriate UK regulator and to the Host State regulator stating the details of the change as soon as reasonably practicable;
    2. (b) may, if it is passporting under the Insurance Directives, make a change to its relevant UK details under regulation 15(1) if it has, as soon as practicable (whether before or after the change), given notice to the PRA stating the details of the change.
  2. (2) The appropriate UK regulator believes that for a change to arise from circumstances beyond the control of a UK firm, the circumstances should be outside the control of the firm as a whole and not just the branch in the EEA State.
  3. (3) Neither this guidance nor that set out at SUP 13.6.4 G or SUP 13.6.5 G is applicable to MiFID investment firms.

The process

SUP 13.6.11

handbook-guidance
When the appropriate UK regulator receives a notice from a UK firmother than a MiFID investment firm(see SUP 13.6.5 G (1) and SUP 13.6.7 G (1)) ora pure reinsurer (see SUP 13.6.9B R) it is required by regulations 11(4) and 13(4) to either refuse, or consent to the change within a period of one month from the day on which it received the notice.

SUP 13.6.12

handbook-guidance
If the appropriate UK regulator consents to the change, then under regulations 11(5) and 13(5) it will:
(1) give a notice to the Host State regulator informing it of the details of the change; and
(2) inform the UK firm that it has given the notice, stating the date on which it did so.

SUP 13.6.12A

handbook-guidance
Where the PRA is the appropriate UK regulator, it will consult the FCA before deciding whether to give consent to a change (or proposed change) and where the FCA is the appropriate UK regulator, it will consult the PRA before deciding whether to give consent in relation to a UK firm whose immediate group includes a PRA-authorised person.
  • 01/04/2013

SUP 13.6.13

handbook-guidance
If a UK firm is passporting under the Banking Consolidation Directive, then regulation 11(7) provides that the PRA may not refuse to consent to a change unless, having regard to the change and to the EEA activities the UK firm is seeking to carry on, it doubts the adequacy of the administrative structure or the financial situation of the UK firm. In reaching its determination, the PRA may have regard to the adequacy of management, systems and the presence of relevant skills needed for the EEA activities to be carried on.

SUP 13.6.14

handbook-guidance
If a UK firm is passporting under the Insurance Directives, then regulation 13(7) provides that the PRA may not refuse to consent to a change unless, having regard to the change, the PRA has reason:
(1) to doubt the adequacy of the UK firm's administrative structure or financial situation; or
(2) to question the reputation, qualifications or experience of the directors or managers of the firm or the authorised agent;
in relation to the business conducted, or to be conducted, through the branch.

SUP 13.6.15

handbook-guidance
If the appropriate UK regulator refuses to consent to a change, then under regulations 11(6) and 13(6):
(1) the appropriate UK regulator will give notice of the refusal to the UK firm, stating its reasons and giving an indication of the UK firm's right to refer the matter to the Tribunal and the procedures on such a reference; and
(2) the UK firm may refer the matter to the Tribunal.

SUP 13.6.16

handbook-guidance
Standard forms are available from the FCA and PRA authorisations teams (see SUP 13.12 (Sources of further information)) to give the notices to the appropriate UK regulator described in SUP 13.6.5 G (1), SUP 13.6.5B G, SUP 13.6.7 G (1), SUP 13.6.8 G and SUP 13.6.10 G (1).

The process: MiFID investment firms

SUP 13.6.17

handbook-guidance
When the appropriate UK regulator receives a notice from a UK MiFID investment firm (see SUP 13.6.5BG (1)), it is required by regulation 11A(3) to inform the relevant Host State regulator of the proposed change as soon as reasonably practicable. The firm in question may make the change once the period of one month beginning with the day on which it gave notice has elapsed.

SUP 13.7

Changes to cross border services

  • 01/12/2004

SUP 13.7.1

handbook-guidance
Where a UK firm is exercising an EEA right under the UCITS Directive, MiFID or the Insurance Directives and is providing cross border services into another EEA State, any changes to the details of the services are governed by the EEA Passport Rights Regulations. References to regulations in this section are to the EEA Passport Rights Regulations. A UK firm which is not an authorised person should note that contravention of the prohibition imposed by regulation 12(1), 12A(1) or 16(1) is an offence. It is a defence, however, for the UK firm to show that it took all reasonable precautions and exercised due diligence to avoid committing the offence.

SUP 13.7.2

handbook-guidance
UK firms should also note that changes to the details of cross border services may lead to changes to the applicable provisions to which the UK firm is subject.

Firms passporting under MiFID

SUP 13.7.3A

handbook-guidance
If a UK firm is providing cross border services in a particular EEA State in exercise of an EEA right deriving from MiFID, the UK firm must comply with the requirements of regulation 12A(2) before it makes a change to its programme of operations, including:
(1) changing the activities to be carried on in exercise that EEA right;
(2) using, for the first time, any tied agent to provide services in the territory of that EEA State; or
(3) ceasing to use any tied agent to provide services in the territory of that EEA State.

SUP 13.7.3B

handbook-guidance
The requirements of regulation 12A(2) are that:
(1) the UK firm has given notice to the appropriate UK regulator stating the details of the proposed change; and
(2) the period of one month beginning with the day on which the UK firm gave the notice mentioned in (1) has elapsed.

Firms passporting under the Insurance Directives

SUP 13.7.4

handbook-guidance
If a UK firm has exercised an EEA right under the Insurance Directives and is providing cross border services into another EEA State, regulation 16(1) states that the UK firm must not make a change in the relevant details (as defined in regulation 17 - see also SUP 13 Annex 3) unless the relevant requirements in regulation 16(3) or, where the change arises from circumstances beyond the UK firm's control, regulation 16(4), have been complied with.

SUP 13.7.5

handbook-guidance
Regulation 16(3) provides that:
(1) the UK firm has given a notice to the PRA stating the details of the proposed change; and
(2) the PRA has given the Host State regulator a notice informing it of the details of the proposed change.

SUP 13.7.6

handbook-guidance
If the change arises from circumstances beyond the UK firm's control, the UK firm is required by regulation 16(4) to give a notice to the PRA stating the details of the change as soon as reasonably practicable (whether before or after the change). See also SUP 13.6.10 G(2), as relevant to cross border services.

SUP 13.7.6A

handbook-guidance
For further details on giving the notices to the appropriate UK regulator, as described in SUP 13.7.3 G (1), SUP 13.7.3A G, SUP 13.7.3B G, SUP 13.7.5 G (1)and SUP 13.7.6 G, UK firms may wish to use the standard electronic form available from the FCA and PRA authorisation teams (see SUP 13.12 (Sources of further information)).

SUP 13.7.7

handbook-guidance
When the appropriate UK regulator receives a notice from a UK firm (see SUP 13.7.5 G (1) and SUP 13.7.6 G), it is required by regulations 16(5) to (6)either to refuse or consent to the change within one month of receipt.

SUP 13.7.7A

handbook-guidance
Where the PRA is the appropriate UK regulator, it will consult the FCA before deciding whether to give consent to a change (or proposed change) and where the FCA is the appropriate UK regulator, it will consult the PRA before deciding whether to give consent in relation to a UK firm whose immediate group includes a PRA-authorised person.
  • 01/04/2013

SUP 13.7.8

handbook-guidance
If the appropriate UK regulator consents to the change it will:
(1) give a notice to the Host State regulator informing it of the details of the proposed change; and
(2) inform the UK firm that it has given the notice, stating the date on which it did so.

SUP 13.7.9

handbook-guidance
If the appropriate UK regulator refuses to consent to a change it is required by regulation 16(7) to give notice of the refusal to the UK firm, stating its reasons and giving an indication of the UK firm's right to refer the matter to the Tribunal and the procedures that apply to such a reference.

SUP 13.7.10

handbook-guidance
Where a UK firm with Part 4A permission to carry on both long-term and general insurance business is passporting under the Insurance Directives and wishes to extend its general insurance business to include long term insurance business (or vice versa), it should complete a new notice of intention and not a change to details notice.

Firms passporting under the Banking Consolidation Directive and Insurance Mediation Directive

SUP 13.7.11

handbook-guidance
A UK firm providing cross border services under the Banking Consolidation Directive or Insurance Mediation Directive is not required to supply a change to the details of cross border services notice.

Firms passporting under the Reinsurance Directive

SUP 13.7.12

handbook-guidance
A UK firm providing cross border services under the Reinsurance Directive is not required to supply notification of, or a change to the details of, its cross border services.

Liaison between regulators

SUP 13.7.13A

handbook-guidance
Where the PRA is the appropriate UK regulator, it will consult the FCA before deciding whether to give consent to a change (or proposed change) and where the FCA is the appropriate UK regulator, it will consult the PRA before deciding whether to give consent in relation to a UK firm whose immediate group includes a PRA-authorised person.
  • 01/04/2013

SUP 13.8

Changes of details: provision of notices to the appropriate UK regulator

SUP 13.8.1

handbook-rule
(1) Where a firm is required to submit a notice of a change to a branchreferred to in SUP 13.6.5 G (1), SUP 13.6.5BG (1), SUP 13.6.7 G (1) , SUP 13.6.8 G, SUP 13.6.9B R and SUP 13.6.10 G (1) or a notice of a change to cross border servicesreferred to in SUP 13.7.3 G (1) , SUP 13.7.3AG (1), SUP 13.7.5 G (1) and SUP 13.7.6 G it must complete and submit that notice in accordance with the procedures set out in SUP 13.5 for notifying the establishing of a branch or the provision of cross border services.
(a) [deleted]
(b) [deleted]
(2) [deleted]
(a) [deleted]
(b) [deleted]
(c) [deleted]
(d) [deleted]
(e) [deleted]
(f) [deleted]
(3) [deleted]
(4) [deleted]

SUP 13.8.1A

handbook-guidance
The effect of SUP 13.8.1 R (1) is that a firm should submit any form, notice or application under SUP 13.8.1 R (1) in the following ways:
(1) A UK firm, other than a credit union, should submit it online at www.fca.org.uk using theONAsystem.
(2) If the information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm should submit it in the way set out in SUP 13.5.3 R (3) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification). GEN 1.3.2 R (Emergency) does not apply in these circumstances.
(3) If the information technology systems fail and online submission is unavailable for 24 hours or more, the appropriate UK regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission should be used.
(4) [deleted]

SUP 13.8.1B

handbook-guidance
A credit union should submit any form, notice or application under SUP 13.8.1 R (1) in the way set out in SUP 13.5.3 R (3) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
  • 01/04/2013

SUP 13.8.2

handbook-guidance
UK firms passporting under the Banking Consolidation Directive or the Insurance Directives may be required to submit the change to details notice in the language of the Host State as well as in English.

SUP 13.10

Applicable provisions

  • 01/12/2004

SUP 13.10.1

handbook-guidance
UK firms are reminded that conduct of business rules, and other rules made for the general good, may apply to business carried on in the Host State by a UK firm. These are known in the Act as the applicable provisions (paragraph 19(13) of Part III of Schedule 3 to the Act).

SUP 13.10.2

handbook-guidance
UK firms passporting under the Banking Consolidation Directive should note that, under the Directive, the Host State is responsible, together with the PRA , for monitoring the liquidity of a branch established by a UK firm in another EEA State.

SUP 13.10.3

handbook-guidance
These Host State provisions often have requirements about the soliciting of business, for example, advertising and cold-calling rules. A UK firm should ensure it is familiar with, and acts in compliance with, the relevant requirements of its Host State regulator.

SUP 13.11

Record keeping

  • 01/12/2004

SUP 13.11.1

handbook-rule
(1) A UK firm which is exercising an EEA right must make and retain a record of:
(a) the services or activities it carries on from a branch in, or provides cross-border into, another EEA State under that EEA right; and
(b) the details relating to those services or activities (as set out in SUP 13.6 and SUP 13.7).
(2) The record in (1) must be kept for five years (for firms passporting under MiFID) or three years (for other firms)from the earlier of the date on which:
(a) it was superseded by a more up-to-date record; or
(b) the UK firm ceased to have a branch in, or carry on cross border services into, any EEA State under an EEA right.

SUP 13.11.2

handbook-guidance
The record in SUP 13.11.1 R need not relate to the level of business carried on. A UK firm may comply with SUP 13.11.1 R by, for example, keeping copies of all notices of intention and change to details notices.

SUP 13.11.3

handbook-guidance
A UK firm should monitor the business carried on under an EEA right to ensure that any changes to details are notified as required by SUP 13.6 (Changes to branches) and SUP 13.7 (Changes to cross border services).

SUP 13.12

Sources of further information

  • 01/12/2004

SUP 13.12.1

handbook-guidance
(1) Given the complexity of issues raised by passporting, UK firms are advised to consult legislation and also to obtain legal advice at earliest opportunity. Firms are encouraged to contact their usual supervisory contact at the appropriate UK regulator to discuss their proposals. However, a UK firm which is seeking guidance on procedural or notification issues relating to passporting should contact the FCA and PRA authorisations teams, as and where appropriate.
(2) An applicant for Part 4A permission which is submitting a notice of intention with its application for such permission should contact the FCA and PRA authorisations teams, as and where appropriate.

SUP 13.12.2

handbook-guidance
To contact the FCA and/or PRA authorisations teams, please see the details provided on that regulator's website.

SUP 13 Annex 1

Passporting: Notification of intention to establish a branch in another EEA state

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fsa.gov.uk/Pages/doing/index.shtmlThe forms are also to be found through the following address:

Passporting: Notification of intention to establish a branch in another EEA state - SUP 13 Annex 1

SUP 13 Annex 2

Passporting: Markets in Financial Instruments Directive

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fsa.gov.uk/Pages/doing/index.shtml.

The forms are also to be found through the following address:

Passporting: Markets in Financial Instruments Directive - SUP 13 Annex 2

SUP 13 Annex 3

Passporting: Consolidated Life Directive and Third Non-Life Directive

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fsa.gov.uk/Pages/doing/index.shtml

The forms are also to be found through the following address:

Passporting: Consolidated Life Directive and Third Non-Life Directive - SUP 13 Annex 3

SUP 13 Annex 4

Passporting: Banking Consolidation Directive

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fsa.gov.uk/Pages/doing/index.shtml



The forms are also to be found through the following address:



Passporting: Banking Consolidation Directive - SUP 13 Annex 4

SUP 13 Annex 5

Passporting: Insurance Mediation Directive

  • 04/10/2010

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by http://www.fsa.gov.uk/Pages/doing/index.shtml

The forms are also to be found through the following address:

Passporting: Insurance Mediation Directive - SUP 13 Annex 5

SUP 13 Annex 7

Passporting: Emissions Trading. Notice of intention from a UK firm to exercise the right of establishment in another EEA Member State

  • 27/07/2012

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting http://www.fca.org.uk/firms/systems-reporting/ona

The forms are also to be found through the following address:



Passporting: Emissions Trading. Notice of intention from a UK firm to exercise the right of establishment in another EEA Member State - SUP 13 Annex 7

Export chapter as

SUP 13A

Qualifying for authorisation under the Act

SUP 13A.1

Application and purpose

  • 01/02/2006

Application

SUP 13A.1.1

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 or the auction regulation. (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) This chapter also applies to:
(a) a Treaty firm that wishes to exercise rights under the Treaty in respect of regulated activities, those rights not being covered by passporting rights provided by the Single Market Directives, and qualifies 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 consists of activities that fall within one of the Single Market Directives, the passporting requirements on exercising an EEA right in this chapter will apply.

SUP 13A.1.2

handbook-guidance

This chapter does not apply to:

  1. (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 4A of the Act (see the appropriate UK regulator's website http://www.fca.org.uk/firms/about-authorisation/getting-authorised for the FCA and www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx for the PRA); or
  2. (2) an EEA firm that carries on any insurance activity:
    1. (a) by the provision of services; and
    2. (b) pursuant to a community co-insurance operation in which the firm is participating otherwise than as leading insurer (see Article 11 of the Regulated Activities Order); or
  3. (3) a Treaty firm that wishes to provide electronic commerce activities into the United Kingdom; or
  4. (4) a market operator that operates a regulated market or an MTF in an EEA State other than the UK and wishes to make appropriate arrangements so as to facilitate access to and use of its system by remote users or participants in the UK. See SUP App 3.6.25 G for guidance.

SUP 13A.1.3

handbook-guidance
  1. (1) Under the Gibraltar Order made under section 409 of the Act, a Gibraltar firm is treated as an EEA firm under Schedule 3 to the Act if it is:
    1. (a) authorised in Gibraltar under the Insurance Directives; or
    2. (aA) authorised in Gibraltar under the Reinsurance Directive; or
    3. (b) authorised in Gibraltar under the Banking Consolidation Directive; or
    4. (c) authorised in Gibraltar under the Insurance Mediation Directive; or
    5. (d) authorised in Gibraltar under the MiFID.
  2. (1A) Similarly, an EEA firm which:
    1. (a) has satisfied the Gibraltar establishment conditions and has established a branch in the UK; or
    2. (b) has satisfied the Gibraltar service conditions and is providing cross border services into the UK;
  3. is treated as having satisfied the establishment conditions or service conditions (as appropriate) under Schedule 3 to the Act. Regulations 4 to 7 of the EEA Passport Rights Regulations will apply to the establishment of the branch or the provision of cross border services.
  4. (2) Gibraltar insurance companies, credit institutions, insurance intermediaries and investment firms are allowed to passport their services into the United Kingdom if they comply with the relevant notification procedures. 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.
  5. (3) [deleted]

Purpose

SUP 13A.1.4

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.

SUP 13A.1.5

handbook-guidance
(1) EEA firms should note that this chapter only addresses the procedures which the appropriate UK regulator will follow under the Act.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 appropriate UK regulator's interpretation of the Single Market Directives, the auction regulation,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.

SUP 13A.2

EEA firms and Treaty firms

  • 01/02/2006

SUP 13A.2.1

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 or the auction regulation, whereas a Treaty firm carries on activities for which the right to carry on those activities does not fall within the scope of a Single Market Directive or the auction regulation. 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 thatincludes regulated activities, the right to carry on which does not fall within the scope of the Single Market Directiveor the auction regulationunder which it is entitled to exercise an EEA right, for example, reinsurance in the case of a direct insurer to which the Insurance Directives apply.
(1) [deleted]
(2) [deleted]

SUP 13A.2.2

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

SUP 13A.3

Qualifications for authorisation under the Act

  • 01/02/2006

EEA firms

SUP 13A.3.1

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 firmthat is an EEA pure reinsurer, or an EEA firm that has received authorisation under article 18 of the auction regulation, qualifies for authorisation without condition. Other than those two types of EEA firm, 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 SUP 13A.4.1 G and SUP 13A.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 SUP 13A.5.3 G).

SUP 13A.3.1A

handbook-guidance
If an EEA MiFID investment firm seeks to use a tied agent established in the UK, the EEA MiFID investment firm will be treated as if it were seeking to establish a branch and must satisfy the establishment conditions (see SUP 13A.4.1 G).

SUP 13A.3.1B

handbook-guidance
A pure reinsurer with its head office in an EEA State that has not fully implemented the Reinsurance Directive may nevertheless be accepted as satisfying the conditions to be an EEA pure reinsurer if the firm provides satisfactory evidence that the prudential requirements of the Reinsurance Directive have been implemented by that EEA State and that they apply to the firm. The firm may then be deemed to be authorised under the Reinsurance Directive in that EEA State.

SUP 13A.3.2

handbook-guidance
(1) On qualifying for authorisation, subject to SUP 13A.3.1C G (1), an EEA firm (except for an EEA firm that has received authorisation under article 18 of the auction regulation) will have permission to carry on each permitted activity (see (3) below) which is a regulated activity.
(2) [deleted]
(3) The permitted activities of an EEA firm (except for an EEA firm that has received authorisation under article 18 of the auction regulation) are those activities identified in the consent notice, regulator's notice or notice of intention. Those permitted activities may include activities that are within the scope of a Single Market Directive but which are unregulated activities in the United Kingdom.
(3A) An EEA firm that received authorisation under article 18 of the auction regulation has permission to carry on bidding in emissions auctions.
(4) The permission will be treated as being on terms equivalent to those appearing in the consent notice, regulator's notice, notice of intention or (in respect of an EEA firm that has received authorisation under article 18 of the auction regulation) to those appearing in the authorisation granted to the EEA firm under article 18 of the auction regulation. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

SUP 13A.3.3

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

Treaty firms

SUP 13A.3.4

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 firm is 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.

SUP 13A.3.5

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's Home State authorisation. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

SUP 13A.3.6

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 appropriate UK regulator written notice of its intention to do so. Failure to do so is a criminal offence under paragraph 6(1) of that Schedule.

SUP 13A.3.6A

handbook-guidance
Where the PRA receives a notification, it will give a copy to the FCA, and where the FCA receives a notification, it will give a copy to the PRA where relevant.
  • 01/04/2013

SUP 13A.3.7

handbook-directions
(1) A written notice from a Treaty firm under paragraph 5(2) of Schedule 4 to the Act must be:
(a) addressed for the attention ofthe authorisations team in the PRA or FCA, as appropriate; and
(b) delivered to the appropriate UK regulator by one of the methods in (2).
(2) The written notice may be delivered by:
(a) post to either of the following addresses, as appropriate:
(i) the address for notices to the FCA: The Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS; or
(ii) the address for notices to the PRA: The Prudential Regulation Authority, 20 Moorgate, London, EC2R 6DA; or
(b) leaving the application at the address in SUP 13A.3.9 G below and obtaining a time-stamped receipt; or
(c) hand delivery to a member of the authorisations team in the PRA or FCA, as appropriate.

SUP 13A.3.8

handbook-guidance
The written notice required by paragraph 5(2) of Schedule 4 to the Act should be accompanied by confirmation of the Treaty firm's authorisation from the Home State regulator, as referred to in paragraph 3(2) of Schedule 4 to the Act.

SUP 13A.3.9

handbook-guidance
(1) For further information, a Treaty firm should contact the FCA and/or PRA authorisations teams using the details provided on that regulator's website.

SUP 13A.3.10

handbook-guidance
(1) The guidance in PERG 2 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.

SUP 13A.3.11

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 in relation to the reinsurance business if the firm has received Home State authorisation for the regulated activity of effecting and/or carrying out the relevant class of insurance business that includes reinsurance business for that class and the relevant provisions of the law of the Home State satisfy the conditions laid down by the Insurance Directives relating to the carrying on of that activity (see SUP App 3.10.13 G).
(1A) 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 has received authorisation (or is deemed to be authorised) under the Reinsurance Directive from its Home State (an EEA pure reinsurer), has an automatic EEA right to passport into the United Kingdom by establishing a branch in the United Kingdom or by the provision of cross border services. Under the General Protocol, Home State regulators have agreed to inform Host State regulators if a pure reinsurer carries on business through a branch in the Host State.
(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 and is authorised by its Home State but not yet under the Reinsurance Directive, is advised to discuss its particular requirements with the authorisations team in the PRA. 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 SUP 13A.3.4 G). Otherwise, it will have to seek a Part 4A permission (see www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx ).

SUP 13A.4

EEA firms establishing a branch in the United Kingdom

  • 01/02/2006

The conditions for establishing a branch

SUP 13A.4.2

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) of Part II of Schedule 3 to the Act.

SUP 13A.4.3

handbook-guidance
For the purposes of paragraph 13(2)(b) of Part II of Schedule 3 to the Act, the applicable provisions may include the appropriate UK regulator's rules. 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.

SUP 13A.4.3A

handbook-guidance
Guidance on the matters that are reserved to a firm's Home State regulator is located in SUP 13A Annex 2.

The notification procedure

SUP 13A.4.4

handbook-guidance
(1) When the appropriate regulator receives a consent notice from the EEA firm's Home 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 the Insurance Directives, the Home State regulator;
within two months of the notice date.
(1A) The notice date is:
(a) for a MiFID investment firm, the date on which the Home State gave the consent notice; and
(b) in any other case, the date on which the appropriate UK regulator received the consent notice.
(2) Although the appropriate UK regulator is not required to notify the applicable provisions to an EEA firm passporting under the Insurance Mediation Directive or MiFID, these provisions are set out in SUP 13A Annex 1 (Application of the Handbook to Incoming EEA Firms).

SUP 13A.4.4A

handbook-guidance
(1) Where the PRA receives a consent notice, it will give a copy to the FCA without delay, and where the FCA receives a consent notice it will give a copy to the PRA, where relevant, without delay.
(2) In a case where the FCA is the appropriate UK regulator, the consent of the PRA is required for any notification by the FCA which relates to:
(a) a PRA-regulated activity;
(b) a PRA-authorised person; or
(c) a person whose immediate group includes a PRA-authorised person.
  • 01/04/2013

SUP 13A.5

EEA firms providing cross border services into the United Kingdom

  • 01/02/2006

Is the service provided within the United Kingdom?

SUP 13A.5.1

handbook-guidance
There is guidance for UK firms in SUP Appendix 3.6 on when a service is provided cross border. EEA firms may find this of interest although they should follow the guidance of their Home State regulators.

SUP 13A.5.2

handbook-guidance
An EEA firm (other than an EEA pure reinsurer or an EEA firm that received authorisation under article 18 of the auction regulation) 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
(2) those cross border services are regulated activities.

The conditions for providing cross border services into the United Kingdom

SUP 13A.5.3

handbook-guidance
(1) Before an EEA firm (other than an EEA pure reinsurer or an EEA firm that has received authorisation under article 18 of the auction regulation) 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.
(2) For the purposes of paragraph 14(1)(b) of Part II of Schedule 3 to the Act, the information to be contained in the regulator's notice has been prescribed under regulation 3 of the EEA Passport Rights Regulations.
(3) An EEA UCITS management company may not exercise an EEA right to provide collective portfolio management services for a UCITS scheme on a cross border services basis until approved by the FCA to do so (see SUP 13A.3.1C G).
(4) An EEA firm that has received authorisation under article 18 of the auction regulation is not subject to the service conditions in its exercise of an EEA right under the auction regulation to provide services in the United Kingdom. The notification procedure in SUP 13A.5.4 G does not apply to it and it does not need to notify the FCA prior to providing services into the United Kingdom because there are presently no applicable provisions that apply in these circumstances. Instead, its provision of these services is supervised by its Home State regulator.

The notification procedure

SUP 13A.5.4

handbook-guidance
(1) Unless the EEA firm (other than an EEA pure reinsurer or an EEA firm that received authorisation under article 18 of the auction regulation) is passporting under the Insurance Mediation Directive, if the appropriate UK regulator 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 appropriate UK regulator will, under paragraphs 14(2) 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 appropriate UK regulator received the regulator's notice or was informed of the EEA firm's intention.
(2) Although the appropriate UK regulator is not required to notify the applicable provisions to an EEA Firm passporting under the Insurance Mediation Directive or MiFID, these provisions are set out in SUP 13A Annex 1 (Application of the Handbook to Incoming EEA Firms).

SUP 13A.5.4A

handbook-guidance
Where the PRA receives a notice, it will give a copy to the FCA without delay and where the FCA receives a notice, it will give a copy to the PRA without delay, where relevant.
  • 01/04/2013

SUP 13A.5.5

handbook-guidance
An EEA firm (other than an EEA UCITS management company) that has satisfied the service conditions in paragraph 14 of Part II of Schedule 3 to the Act is entitled to start providing cross border services into the United Kingdom. In the case of an EEA UCITS management company, FCA approval must first be obtained, as explained in SUP 13A.5.3 G (see also SUP 13A.3.1C G). However, an 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 authorisations team in the FCA or PRA, as appropriate (see SUP 13A.8.1G (2)).

SUP 13A.6

Which rules will an incoming EEA firm be subject to?

  • 01/02/2006

SUP 13A.6.1

handbook-guidance
(1) SUP 13A Annex 1 summarises how the Handbook applies to incoming EEA firms.
(2) SUP 13A Annex 2 summarises the matters that are reserved to a firm's Home State regulator.

SUP 13A.6.2

handbook-guidance
An incoming EEA firm (other than an EEA pure reinsurer or an EEA firm that has received authorisation under article 18 of the auction regulation and only provides services in the United Kingdom) or incoming Treaty firm carrying on business in the United Kingdom must comply with the applicable provisions (see SUP 13A.4.4 G, SUP 13A.4.6 G, and SUP 13A.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.

SUP 13A.6.3

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

SUP 13A.6.4

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:
(1) an EEA MiFID investment firm whose Home State regulator has given a consent notice under paragraph 13 of Schedule 3 to the Act (see SUP 13A.4.1G (1) and SUP 13A.4.2 G) or a regulator's notice under paragraph 14 of that Schedule (see SUP 13A.5.3G (1)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule; and
(2) any other EEA firm with respect to which the appropriate UK regulator has received a consent notice or regulator's notice under paragraph 13 of Schedule 3 to the Act (see SUP 13A.4.1G (1) and SUP 13A.4.2 G) or a regulator's notice under paragraph 14 of that Schedule (see SUP 13A.5.3G (1)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule.

SUP 13A.6.5

handbook-guidance
SUP 13A Annex 1 does not apply to incoming ECA providers acting as such.

SUP 13A.7

Top-up permission

  • 01/02/2006

SUP 13A.7.1

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 SUP 13A.3.4 G to SUP 13A.3.11 G);
to carry on a particular regulated activity in the United Kingdom, it must seek Part 4A permission from the appropriate UK regulator to do so (see the appropriate UK regulator's website: http://www.fca.org.uk/firms/about-authorisation/getting-authorised for the FCA and www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx for the PRA). 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's Home State authorisation. If a person also qualifies for authorisation under Schedules 3, 4 or 5 to the Act as a result of its other activities, the Part 4A permission is referred to in the Handbook as a top-up permission.

SUP 13A.7.2

handbook-guidance
Where the appropriate UK regulator 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 appropriate UK regulator 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.

SUP 13A.7.4

handbook-guidance
For guidance on how to apply for Part 4A permission under the Act, see the appropriate UK regulator's website: http://www.fca.org.uk/firms/about-authorisation/getting-authorised for the FCA and www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx for the PRA. 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 4A permission)).

SUP 13A.8

Sources of further information

  • 01/02/2006

SUP 13A.8.1

handbook-guidance
For further information on UK regulation, an EEA firm, a Treaty firm or a UCITS qualifier should contact the authorisations team in the FCA or PRA, if and when appropriate. To contact the FCA and/or PRA authorisations teams, please see the details provided on that regulator's website.

SUP 13A Annex 1

Application of the Handbook to Incoming EEA Firms

  • 01/02/2006

handbook-guidance

SUP 13A Annex 2

Matters reserved to a Home State regulator

  • 01/11/2007

handbook-guidance

Export chapter as

SUP 14

Incoming EEA firms changing details, and cancelling qualification for authorisation

SUP 14.1

Application and purpose

  • 01/12/2004

Application

SUP 14.1.1

handbook-guidance
This chapter applies to an incoming EEA firmother than an EEA pure reinsurer which has established a branch in, or is providing cross border services into, the United Kingdom under one of the Single Market Directives or the auction regulation and, therefore, qualifies for authorisation under Schedule 3 to the Act.

SUP 14.1.2

handbook-guidance
SUP 14.6 (Cancelling qualification for authorisation), which sets out how to cancel qualification for authorisation under the Act, also applies to:
(1) an incoming Treaty firm that qualifies for authorisation under Schedule 4 to the Act; and
(2) a UCITS qualifier that is an authorised person under Schedule 5 to the Act; a UCITS qualifier should, however, refer to COLLG 3.1.11 G for full details of applicable rules and guidance.

SUP 14.1.3

handbook-guidance
  1. (1) Under the Gibraltar Order made under section 409 of the Act, a Gibraltar firm is treated as an EEA firm under Schedule 3 to the Act if it is:
    1. (a) authorised in Gibraltar under the Insurance Directives; or
    2. (b) authorised in Gibraltar under the Banking Consolidation Directive;
    3. (c) authorised in Gibraltar under the Insurance Mediation Directive; or
    4. (d) authorised in Gibraltar under the Investment Services Directive.
  2. (1A) Similarly, an EEA firm which:
    1. (a) has satisfied the Gibraltar establishment conditions and has established a branch in the UK; or
    2. (b) has satisfied the Gibraltar service conditions and is providing cross border services into the UK;
  3. is treated as having satisfied the establishment conditions or service conditions (as appropriate) under Schedule 3 to the Act.
  4. (2) Gibraltar insurance companies, credit institutions, insurance intermediaries and investment firms are allowed to passport their services into the United Kingdom if they comply with the relevant notification procedures. So, any references in SUP 14 to EEA State or EEA right include references to Gibraltar and the entitlement under the Gibraltar Order where appropriate.

Purpose

SUP 14.1.4

handbook-guidance
This chapter gives guidance on the Act and the EEA Passport Rights Regulations made under the Act, for an incoming EEA firm which has established a branch in, or is providing cross border services into, the United Kingdom and wishes to change the details of the branch or cross border services.

SUP 14.1.5

handbook-guidance
This chapter also explains how an incoming EEA firm, an incoming Treaty firm or a UCITS qualifier may cancel its qualification for authorisation under the Act.

SUP 14.1.6

handbook-guidance
This chapter does not, however, give guidance on the procedures for the establishment of a branch in, or the providing of cross border services into, the United Kingdom for the first time. So, an incoming EEA firm that wishes to change or supplement the nature of its operations in the United Kingdom from the providing of cross border services to the establishment of a branch (or vice versa) should refer to SUP 13A (Qualifying for authorisation under the Act).

SUP 14.1.7

handbook-guidance
In addition, the chapter does not give guidance on the procedures for making an application for top-up permission, to carry on regulated activities in the United Kingdom which are outside the scope of the Single Market Directives and for which the firm cannot exercise Treaty rights. Incoming EEA firms seeking a top-up permission should refer to SUP 13A.

SUP 14.1.8

handbook-guidance
The FCA and PRA will share with each other relevant information received, as necessary, in order to perform their respective functions.
  • 01/04/2013

SUP 14.2

Changes to branch details

  • 01/12/2004

SUP 14.2.1

handbook-guidance
Where an incoming EEA firm is exercising an EEA right, other than under the Insurance Mediation Directive, and has established a branch in the United Kingdom, the EEA Passport Rights Regulations govern any changes to the details of that branch. Where an incoming EEA firm has complied with the relevant requirements in the EEA Passport Rights Regulations, then the firm's permission given under Schedule 3 to the Act is to be treated as varied accordingly. All references to regulations in SUP 14 are to the EEA Passport Rights Regulations.

Firms passporting under the Banking Consolidation Directive and the UCITS Directive

SUP 14.2.2

handbook-guidance
(1) Where an incoming EEA firm passporting under the Banking Consolidation Directive or the UCITS Directive has established a branch in the United Kingdom, regulation 4 states that it must not make a change in the requisite details of the branch unless it has complied with the relevant requirements.
(2) The relevant requirements are set out in regulation 4(4) or, where the change arises from circumstances beyond the incoming EEA firm's control, in regulation 4(5) (see SUP 14.2.8 G).

SUP 14.2.3

handbook-guidance
Where the change arises from circumstances within the control of the incoming EEA firm, the requirements in regulation 4(4) are that:
(1) the incoming EEA firm has given notice to the appropriate UK regulator (see SUP 14.4.1 G) and to its Home State regulator stating the details of the proposed change;
(2) the appropriate UK regulator has received a notice stating those details; and
(3) either:
(a) the appropriate UK regulator has informed the firm that it may make the change; or
(b) the period of one month beginning with the date on which the incoming EEA firm gave the appropriate UK regulator the notice mentioned in (1) has elapsed.

SUP 14.2.4

handbook-guidance
Changes to the requisite details may lead to changes to the applicable provisions to which the incoming EEA firm is subject. The appropriate UK regulator will, as soon as practicable after receiving a notice in SUP 14.2.3 G or SUP 14.2.8 G, inform the incoming EEA firm of any consequential changes in the applicable provisions (regulation 4(6)).

Firms passporting under the Insurance Directives

SUP 14.2.5

handbook-guidance
(1) Where an incoming EEA firm, passporting under the Insurance Directives has established a branch in the United Kingdom, regulation 6 states that it must not make a change to the information referred to in regulation 2(5)(a) to (c) unless it has complied with the relevant requirements.
(2) The relevant requirements are set out in regulation 6(4) or, where the change arises from circumstances beyond the incoming EEA firm's control, regulation 6(5) (see SUP 14.2.8 G).

SUP 14.2.6

handbook-guidance
Where the change arises from circumstances within the control of the incoming EEA firm, the relevant requirements in regulation 6(4) are that:
(1) the incoming EEA firm has given a notice to the PRA (see SUP 14.4.1 G) and to its Home State regulator stating the details of the proposed change;
(2) the PRA has received from the Home State regulator a notice stating that it has approved the proposed change;
(3) the period of at least one month beginning with the day on which the incoming EEA firm gave the PRA the notice in (1) has elapsed; and
(4) either:
(a) a further period of one month has elapsed; or
(b) the PRA has informed the Home State regulator of any consequential changes in the applicable provisions.

SUP 14.2.7

handbook-guidance
Under regulation 6(6) the FSA is required, as soon as practicable, to:
(1) acknowledge receipt of the documents sent under regulation 6(4) or 6(5); and
(2) in the case of a notice under regulation 6(5), inform the incoming EEA firm's Home State regulator of any consequential changes in the applicable provisions.

Changes arising from circumstances beyond the control of an incoming EEA firm passporting under the Banking Consolidation Directive, UCITS Directive or Insurance Directive, UCITS Directive or Insurance Directive

SUP 14.2.8

handbook-guidance
If the change arises from circumstances beyond the incoming EEA firm's control, the firm is required by regulation 4(5) (see SUP 14.2.2 G) or regulation 6(5) (see SUP 14.2.5 G (2)) to give a notice to the appropriate UK regulator (see SUP 14.4.1 G) and to its Home State regulator stating the details of the change as soon as reasonably practicable.

SUP 14.2.9

handbook-guidance
The appropriate UK regulator believes that for a change to arise from circumstances beyond the control of an incoming EEA firm, the circumstances should be outside the control of the firm as a whole and not just its UK branch. For example, the appropriate UK regulator considers that this provision would be unlikely to apply to circumstances in which lack of planning at the incoming EEA firm's head office resulted in a problem arising in a UK branch which was outside its control. In practice, therefore, use of this provision is likely to be rare.

Firms passporting under MiFID

SUP 14.2.10

handbook-guidance
Where an EEA MiFID investment firm has established a branch in the UK, regulation 4A states that it must not:
(1) make a change in the requisite details of the branch; or
(2) use, for the first time, any tied agent established in the United Kingdom; or
(3) cease to use tied agents established in the United Kingdom;

unless it has complied with the relevant requirements in regulation 4A(3).

SUP 14.2.11

handbook-guidance
The relevant requirements in regulation 4A(3) are that:
(1) the EEA MiFID investment firm has given notice to its Home State regulator stating the details of the proposed change; and
(2) the period of one month beginning with the date on which the EEA MiFID investment firm gave the notice mentioned in (1) has elapsed.

SUP 14.2.12

handbook-guidance
Changes to the requisite details may lead to changes to the applicable provisions to which the EEA MiFID investment firm is subject. The appropriate UK regulator will, as soon as practicable after receiving a notice in SUP 14.2.11 G inform the EEA MiFID investment firm of any consequential changes in the applicable provisions.

SUP 14.2.13

handbook-guidance
SUP 14.2.10 G does not apply to a change occasioned by circumstances beyond the incoming EEA firm's control.

SUP 14.3

Changes to cross border services

  • 01/12/2004

SUP 14.3.1

handbook-guidance
Where an incoming EEA firm passporting under the MiFID , UCITS Directive or Insurance Directives is exercising an EEA right and is providing cross border services into the United Kingdom, the EEA Passport Rights Regulations govern any changes to the details of those services. Where an incoming EEA firm has complied with the relevant requirements in the EEA Passport Rights Regulations, then the firm's permission given under Schedule 3 to the Act is to be treated as varied accordingly.

SUP 14.3.4

handbook-guidance
Under regulation 5(4), the FCA is required, as soon as practicable after receiving the notice in SUP 14.3.3 G, to inform the incoming EEA firm of any consequential changes in the applicable provisions.

Firms passporting under MiFID

SUP 14.3.4A

handbook-guidance
Where an incoming EEA firm passporting under MiFID is providing cross border services into the United Kingdom, it must not:
(1) make a change in the details referred to in regulation 5A(1)(a); or
(2) use, for the first time, any tied agent to provide services in the United Kingdom; or
(3) cease to use tied agents to provide services in the United Kingdom;

unless it has complied with the relevant requirements in regulation 5A(3).

SUP 14.3.4B

handbook-guidance
The relevant requirements in regulation 5A(3) are that:
(1) the incoming EEA firm has given notice to its Home State regulator stating the details of the proposed change; and
(2) the period of one month beginning with the day on which the incoming EEA firm gave that notice has elapsed.

SUP 14.3.4D

handbook-guidance
SUP 14.3.4A G does not apply to a change occasioned by circumstances beyond the incoming EEA firm's control.

Firms passporting under the Insurance Directives

SUP 14.3.5

handbook-guidance
If an incoming EEA firm passporting under the Insurance Directives is providing cross border servicesinto the United Kingdom, it must not make a change to the details referred to in regulation 7(1) unless it has complied with the relevant provisions.

SUP 14.3.6

handbook-guidance
The relevant provisions are those set out in regulation 7(4), namely that:
(1) the incoming EEA firm has given a notice to its Home State regulator stating the details of the proposed change; and
(2) the Home State regulator has passed on to the PRA the information contained in that notice.

SUP 14.3.7

handbook-guidance
If the change arises from circumstances beyond the incoming EEA firm's control, the incoming EEA firm is required to comply with the relevant provisions referred to in SUP 14.3.6 G as soon as reasonably practicable (whether before or after the change). See also SUP 14.2.9 G, as relevant to cross border services.

SUP 14.4

Notices of proposed changes: form and delivery

  • 01/12/2004

SUP 14.4.1

handbook-guidance
(1) Regulation 7 to 9 of the Financial Services and Markets Act 2000 (Services of Notices) Regulations 2001 (SI2001/1420) govern the manner in which notices may be submitted to the regulators under the EEA Passport Rights Regulations. In summary, they should be delivered or posted to the appropriate UK regulator's address (See (2) below) and will be treated as given when received by the appropriate UK regulator . They should not be sent by fax or electronic mail.
(2) [deleted]

SUP 14.4.1B

handbook-guidance
The address for PRA notices is: PRA authorisations team, The Prudential Regulation Authority, 20 Moorgate, London, EC2R 6DA.
  • 01/04/2013

SUP 14.5

Variation of a top-up permission to carry on regulated activities outside the scope of the Single Market Directives or the auction regulation

SUP 14.5.1

handbook-guidance
Where an incoming EEA firm has been granted top-up permission by the appropriate UK regulator and wishes to vary that permission, the Act requires it to apply to the appropriate UK regulator for a variation of the top-up permission.

SUP 14.5.2

handbook-guidance
Guidance on the procedures for applying for a variation of a permission granted under Part 4A of the Act, including a top-up permission, is given in SUP 6 (Applications to vary and cancel Part 4APermission).

SUP 14.6

Cancelling qualification for authorisation

  • 01/12/2004

Incoming EEA firms

SUP 14.6.1

handbook-guidance
Section 34 of the Act states that an incoming EEA firm no longer qualifies for authorisation under Schedule 3 to the Act if it ceases to be an incoming EEA firm as a result of:
(1) having its EEA authorisation withdrawn by its Home State regulator; or
(2) ceasing to have an EEA right in circumstances in which EEA authorisation is not required; this is relevant to a financial institution that is a subsidiary of a credit institution (of the kind mentioned in Article 19of the Banking Consolidation Directive ) which fulfils the conditions in articles 18 and 19of that Directive.

SUP 14.6.2

handbook-guidance
In addition, under section 34(2) an incoming EEA firm may ask the appropriate UK regulator to give a direction cancelling its authorisation under Schedule 3 to the Act.

SUP 14.6.3

handbook-guidance
Regulation 8 states that where an incoming EEA firm which qualifies for authorisation under Schedule 3:
(1) has ceased, or is to cease, to carry on regulated activities in the United Kingdom; and
(2) gives notice of that fact to the appropriate UK regulator ;
the notice is treated under regulation 8 as a request for cancellation of the incoming EEA firm's qualification for authorisation under Schedule 3 to the Act and so as a request under section 34(2) of the Act.

Financial institutions giving up right to authorisation

SUP 14.6.4

handbook-guidance
Where a financial institution (that is, a subsidiary of a credit institution) is passporting under the Banking Consolidation Directive (see SUP 14.6.1 G (2)), regulation 9(1) states that the incoming EEA firm may request the PRA to direct that its qualification for authorisation under Schedule 3 to the Act is cancelled from such date as may be specified in the direction.

SUP 14.6.5

handbook-guidance
The PRA may not, however, give a direction referred to in SUP 14.6.4 G unless:
(1) the incoming EEA firm has given notice to its Home State regulator; and
(2) the PRA has agreed with the Home State regulator that the direction should be given.

SUP 14.6.6

handbook-guidance
Regulation 9(3) requires that the date specified by the PRA in a direction referred to in SUP 14.6.4 G:
(1) must not be earlier than the date requested in the application; but
(2) subject to (1), is as agreed between the PRA and the incoming EEA firm's Home State regulator.

SUP 14.6.7

handbook-guidance
The PRA is required to send, as soon as practicable, a copy of the direction to the incoming EEA firm and to its Home State regulator (regulation 9(4)).

SUP 14.6.8

handbook-guidance
Where the PRA gives a direction referred to in SUP 14.6.4 G, the incoming EEA firm may apply for Part 4A permission (see the PRA website www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx ) to take effect not earlier than the date that its qualification for authorisation is cancelled (as specified in the direction).

Incoming Treaty firms

SUP 14.6.9

handbook-guidance
Section 35 of the Act states that an incoming Treaty firm no longer qualifies for authorisation under Schedule 4 to the Act if its Home State authorisation is withdrawn.

SUP 14.6.10

handbook-guidance
In addition, under section 35(2) an incoming Treaty firm may ask the appropriate UK regulator to give a direction cancelling its authorisation under Schedule 4 to the Act.

SUP 14.7

Cancellation of a top-up permission to carry on regulated activities outside the scope of the Single Market Directives or the auction regulation

SUP 14.7.1

handbook-guidance
Where an incoming EEA firm, an incoming Treaty firm or a UCITS qualifier wishes to cancel its top-up permission, either with or without cancellation of its qualification for authorisation under Schedule 3, 4, or 5 to the Act, it should make an application following the procedures set out in SUP 6 (Applications to vary and cancel Part 4APermission).

SUP 14.8

Further guidance

  • 01/12/2004

SUP 14.8.1

handbook-guidance
For further guidance on passporting procedures, an incoming EEA firm may contact the FCA or PRA authorisations team, or their usual supervisory contact at the appropriate UK regulator. Incoming Treaty firms and UCITS qualifiers may speak to their supervisory contact at the appropriate UK regulator in the first instance

Export chapter as

SUP 15

Notifications to the FCA or PRA

SUP 15.1

Application

  • 01/12/2004

Who?

SUP 15.1.1

handbook-guidance
This chapter applies to every firm except that:
(1) only SUP 15.10 applies to an ICVC or a UCITS qualifier; and
(2) SUP 15.3.22 D to SUP 15.3.25 D apply only to the Society.

SUP 15.1.2

handbook-rule
The application of this chapter to an incoming EEA firm or an incoming Treaty firm is set out in SUP 15 Annex 1.

SUP 15.1.3

handbook-guidance
In some cases, the application of provisions set out in SUP 15 Annex 1 depends on whether responsibility is reserved to a Home State regulator. SYSC App 1 contains guidance on this.

What?

SUP 15.1.4

handbook-rule
This chapter:
(1) applies with respect to the carrying on of both regulated activities and unregulated activities; and
(2) takes into account any activity of other members of a group of which the firm is a member.

Where?

SUP 15.1.5

handbook-guidance
Firms are reminded that, unless expressly stated otherwise, where a rule or guidance includes a reference to a firm this includes all UK and overseas branches and representative offices of that firm, whether or not those branches or offices carry on any regulated activities.

SUP 15.2

Purpose

  • 01/12/2004

SUP 15.2.1

handbook-guidance
A firm is required to provide the appropriate regulator with a wide range of information to enable the appropriate regulator to meet its responsibilities for monitoring the firm's compliance with requirements imposed by or under the Act. Some of this information is provided through regular reports, including those set out in SUP 16 (Reporting requirements) and SUP 17 (Transaction reporting). In addition, other chapters in the Handbook set out specific notification and reporting requirements. Principle 11 includes a requirement for a firm to disclose to the appropriate regulator appropriately anything relating to the firm of which the appropriate regulator would reasonably expect notice.

SUP 15.2.2

handbook-guidance

This chapter sets out:

  1. (1) guidance on the type of event or change in condition which a firm should consider notifying in accordance with Principle 11; the purpose of this guidance is to set out examples and not to give comprehensive advice to firms on what they should notify in order to be in compliance with Principle 11;
  2. (2) rules on events and changes in condition that a firm must notify; these are the types of event that the appropriate regulator must be informed about, usually as soon as possible, if it is to be able to carry out its monitoring function effectively and react in good time to developments that may require a regulatory response;
  3. (3) rules on the core information that a firm must provide to the appropriate regulator, for example its name and address and the names of its other regulators, so that the appropriate regulator is able to maintain a relationship with the firm and with those regulators;
  4. (4) rules requiring a firm to ensure that information provided to the appropriate regulator is accurate and complete; section 398 of the Act makes it an offence knowingly or recklessly to provide the appropriate regulator with information which is false or misleading in a material particular, in purported compliance with any requirement imposed by or under the Act; the purpose of the rules in SUP 15.6 is to ensure that firms take due care to ensure the accuracy of information and to require them to ensure that information is not only accurate but also complete; and
  5. (5) material (in SUP 15.10 (Notification of suspicious transactions (market abuse))) to implement the provisions of the Market Abuse Directive for the reporting of transactions about which there is reasonable suspicion of market abuse.

SUP 15.2.3

handbook-guidance
Rules and guidance have also been included to set out how firms should make a notification and to determine when it may be appropriate to discuss matters with their usual supervisory contact at the appropriate regulator by telephone (SUP 15.7).

SUP 15.2.4

handbook-guidance
Schedule 2 contains a consolidated summary of all the notification rules applicable to firms set out in the Handbook.

SUP 15.2.5

handbook-guidance
Where a PRA-authorised person is required to notify (a) the appropriate regulator by a PRA Handbook provision and (b) the FCA by the equivalent provision in the FCA Handbook, the PRA-authorised person is expected to comply with both provisions.
  • 01/04/2013

SUP 15.3

General notification requirements

  • 01/12/2004

Matters having a serious regulatory impact

SUP 15.3.1

handbook-rule
A firm must notify the appropriate regulator immediately it becomes aware, or has information which reasonably suggests, that any of the following has occurred, may have occurred or may occur in the foreseeable future:
(1) the firm failing to satisfy one or more of the threshold conditions; or
(2) any matter which could have a significant adverse impact on the firm's reputation; or
(3) any matter which could affect the firm's ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of the firm; or
(4) any matter in respect of the firm which could result in serious financial consequences to the UK financial system or to other firms.

SUP 15.3.2

handbook-guidance
The circumstances which may give rise to any of the events in SUP 15.3.1 R are wide-ranging and the probability of any matter resulting in such an outcome, and the severity of the outcome, may be difficult to determine. However, the appropriate regulator expects firms to consider properly all potential consequences of events.

SUP 15.3.3

handbook-guidance
In determining whether the appropriate regulator should be notified of an event that may occur in the foreseeable future, a firm should consider both the probability of the event happening and the severity of the outcome should it happen.

SUP 15.3.5

handbook-guidance
A firm making a notification in accordance with SUP 15.3.1 R should consider the guidance in SUP 15.7.2 G and notify the appropriate regulator by telephone if appropriate.

SUP 15.3.6

handbook-guidance
An insurer or friendly society making a notification under SUP 15.3.1 R (1) relating to satisfaction of the threshold condition set out in paragraph 4D of Schedule 6 to the Act should be aware of the requirements in SUP App 2 (Scheme of operations).

Communication with the appropriate regulator in accordance with Principle 11

SUP 15.3.7

handbook-guidance
Principle 11 requires a firm to deal with its regulators in an open and cooperative way and to disclose to the appropriate regulator appropriately anything relating to the firm of which the appropriate regulator would reasonably expect notice. Principle 11 applies to unregulated activities as well as regulated activities and takes into account the activities of other members of a group.

SUP 15.3.8

handbook-guidance
Compliance with Principle 11 includes, but is not limited to, giving the appropriate regulator notice of:
(1) any proposed restructuring, reorganisation or business expansion which could have a significant impact on the firm's risk profile or resources, including, but not limited to:
(a) setting up a new undertaking within a firm'sgroup, or a new branch (whether in the United Kingdom or overseas); or
(b) commencing the provision of cross border services into a new territory; or
(c) commencing the provision of a new type of product or service (whether in the United Kingdom or overseas); or
(d) ceasing to undertake a regulated activity or ancillary activity, or significantly reducing the scope of such activities; or
(e) entering into, or significantly changing, a material outsourcing arrangement (a bank , a building societyand a dormant account fund operatorshould also see SYSC 3.2.4 G and SYSC 8 , and an insurer should also see SYSC 13.9 for further details); or
(f) a substantial change or a series of changes in the governing body of an overseas firm (other than an incoming firm); or
(g) any change to the firm's prudential category or sub-category, as used in the Interim Prudential sourcebooks and SUP and on which guidance is given in SUP App 1; or
(h) any proposed change which limits the liability of any of the members or partners of a firm such as a general partner becoming a limited partner or re-registration as a limited liability company of a company incorporated with unlimited liability;or
(i) in relation to a dormant account fund operator, notify the appropriate regulator when the operator intends to rely on a third party for the performance of operational functions which are critical or important for the performance of relevant services and activities in connection with operating a dormant account fund on a continuous and satisfactory basis;
(2) any significant failure in the firm's systems or controls, including those reported to the firm by the firm's auditor;
(3) any action which a firm proposes to take which would result in a material change in its capital adequacy or solvency, including, but not limited to:
(a) any action which would result in a material change in the firm's financial resources or financial resources requirement; or
(b) a material change resulting from the payment of a special or unusual dividend or the repayment of share capital or a subordinated loan; or
(c) for firms which are subject to the rules on consolidated financial supervision, any proposal under which another group company may be considering such an action; or
(d) significant trading or non-trading losses (whether recognised or unrecognised).

SUP 15.3.9

handbook-guidance
The period of notice given to the appropriate regulator will depend on the event, although the appropriate regulator expects a firm to discuss relevant matters with it at an early stage, before making any internal or external commitments.

SUP 15.3.10

handbook-guidance
A notification under Principle 11 may be given orally or in writing (as set out in SUP 15.7.1 R and SUP 15.7.2 G), although the appropriate regulator may request written confirmation of a matter. However, it is the responsibility of a firm to ensure that matters are properly and clearly communicated to the appropriate regulator. A firm should provide a written notification if a matter either is complex or may be such as to make it necessary for the appropriate regulator to take action. A firm should also have regard to Principle 11 and the guidance in SUP 15.7.2 G in respect of providing important information promptly.

Breaches of rules and other requirements in or under the Act

SUP 15.3.11

handbook-rule
  1. (1) A firm must notify the appropriate regulator of:
    1. (a) a significant breach of a rule (which includes a Principle) or Statement of Principle; or
    2. (b) a breach of any requirement imposed by the Act or by regulations or an order made under the Act by the Treasury (except if the breach is an offence, in which case (c) applies);
    3. (c) the bringing of a prosecution for, or a conviction of, any offence under the Act;
    4. (d) a breach of a directly applicable provision in the MiFID Regulation; or
    5. (e) a breach of any requirement in regulation 4C(3) (or any successor provision) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007; or
    6. (ea) a breach of a directly applicable provision in the auction regulation; or
    7. (f) it exceeding (or becoming aware that it will exceed) the limit in BIPRU 10.5.6 R;
  2. by (or as regards (c) against) the firm or any of its directors, officers, employees, approved persons, or appointed representatives or, where applicable, tied agents.
  3. (2) A firm must make the notification in (1) immediately it becomes aware, or has information which reasonably suggests, that any of the matters in (1) has occurred, may have occurred or may occur in the foreseeable future.

SUP 15.3.11A

handbook-guidance
SUP 15.3.11 R (1)(e) relates to the standard requirement in the permission of those firms which fall outside MiFID because of the Treasury's implementation of Article 3 of MiFID. Guidance on how the Treasury has exercised the Article 3 exemption for the United Kingdom is given in Q48 and the following questions and answers in PERG 13.5 (Exemptions from MiFID).

SUP 15.3.12

handbook-guidance
In SUP 15.3.11 R(1)(a), significance should be determined having regard to potential financial losses to customers or to the firm, frequency of the breach, implications for the firm's systems and controls and if there were delays in identifying or rectifying the breach.

SUP 15.3.13

handbook-guidance
In assessing whether an event that may occur in the foreseeable future should be notified to the appropriate regulator, a firm should consider the guidance in SUP 15.3.3 G.

SUP 15.3.14

handbook-guidance
A notification under SUP 15.3.11 R should include:
(1) information about any circumstances relevant to the breach or offence;
(2) identification of the rule or requirement or offence; and
(3) information about any steps which a firm or other person has taken or intends to take to rectify or remedy the breach or prevent any future potential occurrence.

Civil, criminal or disciplinary proceedings against a firm

SUP 15.3.15

handbook-rule
A firm must notify the appropriate regulator immediately if:
(1) civil proceedings are brought against the firm and the amount of the claim is significant in relation to the firm's financial resources or its reputation; or
(2) any action is brought against the firm under section 71 of the Act (Actions for damages) or section 150 (Actions for damages); or
(3) disciplinary measures or sanctions have been imposed on the firm by any statutory or regulatory authority, professional organisation or trade body (other than the appropriate regulator) or the firm becomes aware that one of those bodies has started an investigation into its affairs; or
(4) the firm is prosecuted for, or convicted of, any offence involving fraud or dishonesty, or any penalties are imposed on it for tax evasion; or
(5) it is an OPS firm, which is a trustee, and is removed as trustee by a court order.

SUP 15.3.16

handbook-guidance
A notification under SUP 15.3.15 R should include details of the matter and an estimate of the likely financial consequences, if any.

Fraud, errors and other irregularities

SUP 15.3.17

handbook-rule
A firm must notify the appropriate regulator immediately if one of the following events arises and the event is significant:
(1) it becomes aware that an employee may have committed a fraud against one of its customers; or
(2) it becomes aware that a person, whether or not employed by it, may have committed a fraud against it; or
(3) it considers that any person, whether or not employed by it, is acting with intent to commit a fraud against it; or
(4) it identifies irregularities in its accounting or other records, whether or not there is evidence of fraud; or
(5) it suspects that one of its employees may be guilty of serious misconduct concerning his honesty or integrity and which is connected with the firm's regulated activities or ancillary activities.

SUP 15.3.18

handbook-guidance
In determining whether a matter is significant, a firm should have regard to:
(1) the size of any monetary loss or potential monetary loss to itself or its customers (either in terms of a single incident or group of similar or related incidents);
(2) the risk of reputational loss to the firm; and
(3) whether the incident or a pattern of incidents reflects weaknesses in the firm's internal controls.

SUP 15.3.19

handbook-guidance
The notifications under SUP 15.3.17 R are required as the appropriate regulator needs to be aware of the types of fraudulent and irregular activity which are being attempted or undertaken, and to act, if necessary, to prevent effects on consumers or other firms. A notification under SUP 15.7.3 G should provide all relevant and significant details of the incident or suspected incident of which the firm is aware.

SUP 15.3.20

handbook-guidance
In addition, the firm may have suffered significant financial losses as a result of the incident, or may suffer reputational loss, and the appropriate regulator will wish to consider this and whether the incident suggests weaknesses in the firm'sinternal controls.

Insolvency, bankruptcy and winding up

SUP 15.3.21

handbook-rule
A firm must notify the appropriate regulator immediately of any of the following events:
(1) the calling of a meeting to consider a resolution for winding up the firm; or
(2) an application to dissolve the firm or to strike it off the Register of Companies; or
(3) the presentation of a petition for the winding up of the firm; or
(4) the making of, or any proposals for the making of, a composition or arrangement with any one or more of its creditors; or
(5) an application for the appointment of an administrator or trustee in bankruptcy to the firm; or
(6) the appointment of a receiver to the firm (whether an administrative receiver or a receiver appointed over particular property); or
(7) an application for an interim order against the firm under section 252 of the Insolvency Act 1986 (or, in Northern Ireland, section 227 of the Insolvency (Northern Ireland) Order 1989); or
(8) if the firm is a sole trader:
(a) an application for a sequestration order on the firm; or
(b) the presentation of a petition for bankruptcy; or
(9) anything equivalent to (1) to (8) above occurring in respect of the firm in a jurisdiction outside the United Kingdom.

Lloyd's of London

SUP 15.3.22

handbook-directions
SUP 15.3.23 D to SUP 15.3.25 D are given in relation to the exercise of the powers of the Society and of the Council generally, with a view to achieving the objective of enabling the appropriate regulator to:
(1) comply with its general duty under section 314 of the Act (Regulators' general duty);
(2) determine whether underwriting agents, or approved persons acting for them or on their behalf, are complying with the requirements imposed on them by or under the Act;
(3) enforce the provisions of the Act, or requirements made under the Act, by enabling the appropriate regulator to consider, where appropriate, whether it should use its powers, for example, to:
(a) vary or cancel the permission of an underwriting agent, under section 55J of the Act (Variation or cancellation on initiative of regulator);
(b) withdraw approval from an approved person acting for or on behalf of an underwriting agent, under section 63 of the Act (Withdrawal of approval) (see EG 9 );
(c) prohibit an individual acting for or on behalf of an underwriting agent from involvement in regulated activities, under section 56 of the Act (Prohibition orders) (see EG 9 );
(d) require an underwriting agent to make restitution, under section 384 of the Act (Power of FCA or PRA to require restitution) (see EG 11 );
(e) discipline an underwriting agent, or an approved person acting for it or on its behalf, for a breach of a requirement made under the Act, including the Principles, Statements of Principle and rules (see DEPP 6 and EG 7);
(f) apply to court for an injunction, restitution order or insolvency order (see EG 10, EG 11 and EG 13); and
(g) prosecute any criminal offence that the appropriate regulator has power to prosecute under the Act (see EG 12 ).

SUP 15.3.23

handbook-directions
The Society must immediately inform the appropriate regulator in writing if it becomes aware that any matter likely to be of material concern to the appropriate regulator may have arisen in relation to:
(1) the regulated activities for which the Society has permission; or
(2) underwriting agents; or
(3) approved persons or individuals acting for or on behalf of underwriting agents.

SUP 15.3.24

handbook-directions
The Society must inform the appropriate regulator if it commences investigations or disciplinary proceedings relating to apparent breaches:
(1) of the Act or requirements made under the Act, including the threshold conditions or the Principles or other rules, by an underwriting agent; or
(2) of the Statements of Principle by an individual or other person who carries out controlled functions for or on behalf of an underwriting agent.

SUP 15.3.25

handbook-directions
The Society must inform the appropriate regulator if it commences investigations or disciplinary proceedings which do not fall within the scope of SUP 15.3.24 D but which:
(1) involve an underwriting agent, or an approved person who carries out controlled functions for it or on its behalf; or
(2) may indicate that an individual acting for or on behalf of an underwriting agent may not be a fit and proper person to perform functions in relation to regulated activities.

SUP 15.4

Notified persons

  • 01/12/2004

SUP 15.4.1

handbook-rule
(1) An overseas firm, which is not an incoming firm, must notify the appropriate regulator within 30 business days of any person taking up or ceasing to hold the following positions:
(a) the firm's worldwide chief executive (that is, the person who, alone or jointly with one or more others, is responsible under the immediate authority of the directors for the whole of its business) if the person is based outside the United Kingdom;
(b) the person within the overseas firm with a purely strategic responsibility for UK operations (see SUP 10.7.4 G);
(c) for a bank: the two or more persons who effectively direct its business in accordance with SYSC 4.2.2 R ;
(d) for an insurer: the authorised UK representative.
(2) The notification in (1) must be submitted in the form set out in Form F (SUP 15 Ann 2). However, if the person is an approved person, notification giving details of his name, the approved person's individual reference number and the position to which the notification relates, is sufficient.

SUP 15.4.2

handbook-guidance
SUP 15.4.1 R is not made under the powers conferred on the appropriate regulator by Part V of the Act (Performance of Regulated Activities). A person notified to the appropriate regulator under SUP 15.4.1 R is not subject to the Statements of Principle or Code of Practice for Approved Persons, unless he is also an approved person.

SUP 15.4.3

handbook-rule
(1) A firm other than a credit union must submit the form in SUP 15 Ann 2 R online using the appropriate regulator's ONAsystem.
(2) A credit union must submit the form in SUP 15 Ann 2 R in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).
(3) Where a firm is obliged to submit an application online under (1), if the appropriate regulator's information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm must submit the form in SUP 15 Ann 2 R, in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

SUP 15.4.3A

handbook-guidance
(1) If the appropriate regulator's information technology systems fail and online submission is unavailable for 24 hours or more, the appropriate regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 15.4.3R(3) and SUP 15.7.4R to SUP 15.7.9G (Form and method of notification) should be used.
(2) Where SUP 15.4.3R (3) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 15.4.4

handbook-guidance
If adverse information is revealed about a person notified to the appropriate regulator under SUP 15.4.1 R, the appropriate regulator may exercise its own-initiative power against the firm (see SUP 7 (Individual requirements)).

SUP 15.5

Core information requirements

  • 01/12/2004

Change in name

SUP 15.5.1

handbook-rule
A firm must give the appropriate regulator reasonable advance notice of a change in:
(1) the firm's name (which is the registered name if the firm is a body corporate);
(2) any business name under which the firm carries on a regulated activity or ancillary activity either from an establishment in the United Kingdom or with or for clients in the United Kingdom.

SUP 15.5.2

handbook-guidance
A notification under SUP 15.5.1 R should include the details of the proposed new name and the date on which the firm intends to implement the change of name.

SUP 15.5.3

handbook-guidance
Firms are reminded that certain name changes (for example, to include 'Limited') may also require a notification under . SUP 5.5.1 R

Change in address

SUP 15.5.4

handbook-rule
A firm must give the appropriate regulator reasonable advance notice of a change in any of the following addresses, and give details of the new address and the date of the change:
(1) the firm's principal place of business in the United Kingdom;
(2) in the case of an overseas firm, its registered office (or head office) address.

Change in telephone numbers

SUP 15.5.5

handbook-rule
A firm must give the appropriate regulator reasonable advance notice of a change in any of the following telephone numbers, and give details of the new telephone number and the date of the change:
(1) the number of the firm's principal place of business in the United Kingdom;
(2) in the case of an overseas firm, the number of its head office.

SUP 15.5.6

handbook-guidance
SUP 15.5.4 R and SUP 15.5.5 R mean that a firm should notify the appropriate regulator of a change in telephone number even if the address of the office is not changing.

Other regulators

SUP 15.5.7

handbook-rule
A firm must notify the appropriate regulator immediately if it becomes subject to or ceases to be subject to the supervision of any overseas regulator (including a Home State regulator).

SUP 15.5.8

handbook-guidance
The appropriate regulator's approach to the supervision of a firm is influenced by the regulatory regime and any legislative or foreign provisions to which that firm, including its branches, is subject.

Submitting notifications to the appropriate regulator

SUP 15.5.9

handbook-rule
  1. (1) A firm other than a credit union must submit any notice under SUP 15.5.1R, SUP 15.5.4R and SUP 15.5.5 R by submitting the form in SUP 15 Ann 3R online at the appropriate regulator's website.
  2. (2) A credit union must submit any notice under SUP 15.5.1R, SUP 15.5.4R, SUP 15.5.5 R and SUP 15.5.7R by submitting the form in SUP 15 Ann 3R in the way set out in SUP 15.7.4R to SUP 15.7.9G (Form and method of notification).
  3. (3) Where a firm is obliged to submit a notice online under (1), if the appropriate regulator's information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm must submit any notice under SUP 15.5.1R, SUP 15.5.4R and SUP 15.5.5 R in the form in SUP 15 Ann 3R and in the way set out in SUP 15.7.4R to SUP 15.7.9G (Form and method of notification).
  4. (4) A firm must submit any notice required under SUP 15.5.7 R by submitting the form in SUP 15 Ann 4 in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

SUP 15.5.10

handbook-guidance
(1) If the appropriate regulator's information technology systems fail and online submission is unavailable for 24 hours or more, the appropriate regulator will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 15.5.9R(3) and SUP 15.7.4R to SUP 15.7.9G (Form and method of notification) should be used.
(2) Where SUP 15.5.9R (2) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 15.6

Inaccurate, false or misleading information

  • 01/12/2004

SUP 15.6.1

handbook-rule
A firm must take reasonable steps to ensure that all information it gives to the appropriate regulator in accordance with a rule in any part of the Handbook (including Principle 11) is:
(1) factually accurate or, in the case of estimates and judgments, fairly and properly based after appropriate enquiries have been made by the firm; and
(2) complete, in that it should include anything of which the appropriate regulator would reasonably expect notice.

SUP 15.6.2

handbook-guidance
SUP 15.6.1 R applies also in relation to rules outside this chapter, and even if they are not notification rules. Examples of rules and chapters to which SUP 15.6.1 R is relevant, are:
(1) Principle 11, and the guidance on Principle 11 in SUP 2 (Information gathering by the FCA and PRA on their own initiative);
(2) SUP 15 (Notifications to the appropriate regulator):
(3) SUP 16 (Reporting requirements);
(4) SUP 17 (Transaction reporting);
(5) any notification rule (see Schedule 2 which contains a consolidated summary of such rules);
(6) DISP 1.9 (Complaints record rule); and
(7) DISP 1.10 (Complaints reporting rule).

SUP 15.6.3

handbook-guidance
If a firm is unable to obtain the information required in SUP 15.6.1 R(2), then it should inform the appropriate regulator that the scope of the information provided is, or may be, limited.

SUP 15.6.4

handbook-rule
If a firm becomes aware, or has information that reasonably suggests that it has or may have provided the appropriate regulator with information which was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a material particular, it must notify the appropriate regulator immediately. Subject to SUP 15.6.5 R, the notification must include:
(1) details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;
(2) an explanation why such information was or may have been provided; and
(3) the correct information.

SUP 15.6.5

handbook-rule
If the information in SUP 15.6.4 R (3) cannot be submitted with the notification (because it is not immediately available), it must instead be submitted as soon as possible afterwards.

SUP 15.6.6

handbook-guidance
The appropriate regulator may request the firm to provide revised documentation containing the correct information, if appropriate.

SUP 15.6.7

handbook-guidance
Firms are reminded that section 398 of the Act (Misleading the FCA or PRA: residual cases) makes it an offence for a firm knowingly or recklessly to provide the appropriate regulator with information which is false or misleading in a material particular in purported compliance with the appropriate regulator's rules or any other requirement imposed by or under the Act. An offence by a body corporate, partnership or unincorporated association may be attributed to an officer or certain other persons (section 400 of the Act (Offences by bodies corporate etc)).

SUP 15.7

Form and method of notification

  • 01/12/2004

Form of notification: oral or written

SUP 15.7.1

handbook-rule
A notification required from a firm under any notification rule must be given in writing, and in English, and must be submitted on the form specified for that notification rule, or if no form is specified, on the form in SUP 15 Ann 4 R (Notification form), and must give the firm's Firm Reference Number unless:
(1) the notification rule states otherwise; or
(2) the notification is provided solely in compliance with Principle 11 (see SUP 15.3.7 G).

SUP 15.7.2

handbook-guidance
A firm should have regard to the urgency and significance of a matter and, if appropriate, should also notify its usual supervisory contact at the appropriate regulator by telephone or by other prompt means of communication, before submitting a written notification. Oral notifications should be given directly to the firm's usual supervisory contact at the appropriate regulator. An oral notification left with another person or left on a voicemail or other automatic messaging service is unlikely to have been given appropriately.

SUP 15.7.3

handbook-guidance
The appropriate regulator is entitled to rely on any information it receives from a firm and to consider any notification received as being made by a person authorised by the firm to do so. A firm should therefore consider whether it needs to put procedures in place to ensure that only appropriate employees make notifications to the appropriate regulator on its behalf.

Method of notification

SUP 15.7.4

handbook-rule
Unless stated in the notification rule, or on the relevant form (if specified), a written notification required from a firm under any notification rule must be:
(1) given to or addressed for the attention of the firm's usual supervisory contact at the appropriate regulator; and
(2) delivered to the appropriate regulator by one of the methods in SUP 15.7.5A R or SUP 15.7.5B R as applicable:

SUP 15.7.5B

handbook-rule
Methods of notification
  • 01/04/2013

SUP 15.7.7

handbook-guidance
If the firm or its group is subject to lead supervision arrangements by the appropriate regulator, the firm or group may give or address a notice under SUP 15.7.4 R(1) to the supervisory contact at the appropriate regulator, designated as lead supervisor, if the firm has chosen to make use of the lead supervisor as a central point of contact (see SUP 1.5).

SUP 15.7.8

handbook-guidance
If a firm is a member of a group which includes more than one firm, any one undertaking in the group may notify the appropriate regulator on behalf of all firms in the group to which the notification applies. In this way, that undertaking may satisfy the obligation of all relevant firms in the group to notify the appropriate regulator. Nevertheless, the obligation to make the notification remains the responsibility of the individual firm itself. See also SUP 15.7.3 G.

SUP 15.7.9

handbook-guidance
Firms wishing to communicate with the appropriate regulator by electronic mail or fax should obtain the appropriate address or number from the appropriate regulator.

Timely notification

SUP 15.7.10

handbook-rule
If a notification rule requires notification within a specified period:
(1) the firm must give the notification so as to be received by the appropriate regulator no later than the end of that period; and
(2) if the end of that period falls on a day which is not a business day, the notification must be given so as to be received by the appropriate regulator no later than the first business day after the end of that period.

SUP 15.7.11

handbook-guidance
If a notification rule does not require notification within a specified period, the firm should act reasonably in deciding when to notify.

Underwriting agents: notification to the Society of Lloyd's

SUP 15.7.14

handbook-guidance
The appropriate regulator has made arrangements with the Society of Lloyd's with respect to the monitoring of underwriting agents. Underwriting agents should check whether these arrangements provide for any notifications required under this chapter to be sent to the Society instead of to the appropriate regulator. [For further details see the appropriate regulator's website.]

Consequences of breach of form and method rules

SUP 15.7.15

handbook-guidance
If a firm fails to comply with the rules in this section then the notification is invalid and there may be a breach of the rule that required the notification to be given.

Service of Notices Regulations

SUP 15.7.16

handbook-guidance
The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) contain provisions relating to the service of documents on the appropriate regulator. They do not apply to notifications required under notification rules because of the specific rules in this section.

SUP 15.8

Notification in respect of particular products and services

  • 01/12/2004

CTF providers

SUP 15.8.9

handbook-rule
A BIPRU firm must report to the appropriate regulator immediately any case in which its counterparty in a repurchase agreement or reverse repurchase agreement or securities or commodities lending or borrowing transaction defaults on its obligations.

SUP 15.9

Notifications by members of financial conglomerates

  • 01/01/2005

SUP 15.9.1

handbook-rule
A firm that is a regulated entity must notify the appropriate regulator immediately it becomes aware that any consolidation group of which it is a member:
(1) is a financial conglomerate; or
(2) has ceased to be a financial conglomerate.

SUP 15.9.2

handbook-rule
(1) A firm that is a regulated entity must establish whether or not any consolidation group of which it is a member:
(a) is a financial conglomerate; or
(b) has ceased to be a financial conglomerate;


if:
(c) the firm believes; or
(d) a reasonable firm that is complying with the requirements of the regulatory system would believe;


that it is likely that (a) or (b) is true.
(2) A firm does not need to determine whether (1)(a) is the case if the consolidation group is already being regulated as a financial conglomerate.
(3) A firm does not need to determine whether (1)(b) is the case if notification has already been given as contemplated by SUP 15.9.4 R.

SUP 15.9.3

handbook-guidance
A firm should consider the requirements in SUP 15.9.2 R on a continuing basis, and in particular, when the group prepares its financial statements and on the occurrence of an event affecting the consolidated group. Such events include, but are not limited to, an acquisition, merger or sale.

SUP 15.9.4

handbook-rule
A firm does not have to give notice to the appropriate regulator under SUP 15.9.1 R if it or another member of the consolidation group has already given notice of the relevant fact to:
(1) the appropriate regulator; or
(2) (if another competent authority is co-ordinator of the financial conglomerate ) that competent authority; or
(3) (in the case of a financial conglomerate that does not yet have a co-ordinator ) the competent authority who would be co-ordinator under Article 10(2) of the Financial Groups Directive (Competent authority responsible for exercising supplementary supervision (the co-ordinator)).

SUP 15 Annex 1

Application of SUP 15 to incoming EEA firms and incoming Treaty firms

  • 01/12/2004

handbook-rule

SUP 15 Ann 2

Form F: Changes in notified persons

handbook-rule
This annex consists only of one or more forms. Forms can be completed online now by visiting: the appropriate regulator's website.



The forms are also to be found through the following address:



Supervision forms - SUP 15 Annex 2

SUP 15 Ann 3

Standing data form

  • 01/12/2004

handbook-rule
This annex consists only of one or more forms. Forms can be completed online now by visiting: the appropriate regulator's website.



The forms are also to be found through the following address:

Standing Data - SUP 15 Annex 3

SUP 15 Ann 4

Notification form

  • 01/12/2004

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:



Notifications Form - SUP 15 Annex 4

Export chapter as

SUP 16

Reporting requirements

SUP 16.1

Application

  • 01/12/2004

SUP 16.1.1

handbook-rule
This chapter applies to every firmwithin a category listed in column (2) of the table in SUP 16.1.3 R and in accordance with column (3) of that table.

SUP 16.1.2

handbook-guidance

The only categories of firm to which no section of this chapter applies are:

  1. (1) an ICVC;
  2. (2) an incoming EEA firm or incoming Treaty firm, unless it is:
    1. (a) a firm of a type listed in SUP 16.1.3 R as a type of firm to which SUP 16.6, SUP 16.9 ,SUP 16.12, or SUP 16.14 applies; or
    2. (b) an insurer with permission to effect or carry out life policies;
    3. (c) a firm with permission to establish, operate or wind up a personal pension scheme or a stakeholder pension scheme;
  3. (3) a UCITS qualifier.

SUP 16.1.3

handbook-rule

Application of different sections of SUP 16(excluding SUP 16.13, SUP 16.15, SUP 16.16 and SUP 16.17)

SUP 16.1.4

handbook-guidance
(1) This chapter contains requirements to report to the appropriate regulator on a regular basis. These requirements include reports relating to a firm's financial condition, and to its compliance with other rules and requirements which apply to the firm. Where the relevant requirements are set out in another section of the Handbook, this chapter contains cross references. An example of this is financial reporting for insurers and friendly societies.
(2) Where such requirements already apply to a firm under legislation other than the Act, they are not referred to in this chapter. An example of this is reporting to the appropriate regulator by building societies under those parts of the Building Societies Act 1986 which have not been repealed.
(3) Requirements for individual firms reflect:
(a) the category of firm;
(b) the nature of business carried on;
(c) whether a firm has its registered office (or if it does not have a registered office, its head office) in the United Kingdom;
(d) whether a firm is an incoming EEA firm or incoming Treaty firm; and
(e) the regulated activities the firm undertakes.

SUP 16.1.7

handbook-guidance
Where a PRA-authorised person is required to notify or provide any information to (a) the appropriate regulator by a PRA Handbook provision and (b) the FCA by the equivalent provision in the FCA Handbook, the PRA-authorised person is expected to comply with both provisions.
  • 01/04/2013

SUP 16.2

Purpose

  • 01/12/2004

SUP 16.2.1

handbook-guidance
(1) In order to discharge its functions under the Act, the appropriate regulator needs timely and accurate information about firms. The provision of this information on a regular basis enables the appropriate regulator to build up over time a picture of firms' circumstances and behaviour.
(2) Principle 11 requires a firm to deal with its regulators in an open and cooperative way, and to disclose to the appropriate regulatorappropriately anything relating to the firm of which the appropriate regulator would reasonably expect notice. The reporting requirements are part of the appropriate regulator's approach to amplifying Principle 11 by setting out in more detail the information that the appropriate regulator requires. They supplement the provisions of SUP 2 (Information gathering by the appropriate regulatoron its own initiative) and SUP 15 (Notifications to the FCA or PRA). The reports required under these rules help the appropriate regulator to monitor firms' compliance with Principles governing relationships between firms and their customers, with Principle 4, which requires firms to maintain adequate financial resources, and with other requirements and standards under the regulatory system.

SUP 16.3

General provisions on reporting

  • 01/12/2004

Application

SUP 16.3.1

handbook-guidance

The effect of SUP 16.1.1 R is that this section applies to every firm except:

  1. (1) an ICVC;
  2. (2) an incoming EEA firm or incoming Treaty firm, which is not:
    1. (a) a firm of a type listed in SUP 16.1.3 R as a firm to which section SUP 16.6 or SUP 16.12 applies;
    2. (b) an insurer with permission to effect or carry out life policies;
  3. (3) a UCITS qualifier.

Structure of the chapter

SUP 16.3.2

handbook-guidance
This chapter has been split into the following sections, covering:
(1) annual controllers reports (SUP 16.4);
(2) annual close links reports (SUP 16.5);
(3) compliance reports (SUP 16.6);
(4) [deleted]
(5) persistency reports (SUP 16.8);
(6) annual appointed representatives reports (SUP 16.9);
(7) Verification of standing data (SUP 16.10);
(8) product sales data reporting (SUP 16.11);
(9) integrated regulatory reporting (SUP 16.12);
(10) reporting under the Payment Services Regulations (SUP 16.13);
(11) client money and asset return (SUP 16.14); and
(12) reporting under the Electronic Money Regulations (SUP 16.15).
(13) prudent valuation reporting (SUP 16.16);
(14) remuneration reporting (SUP 16.17).

SUP 16.3.3

handbook-guidance
The annual controllers, annual close links, persistency and annual appointed representatives reports sections are the same for all categories of firm to which they apply.

SUP 16.3.4

handbook-guidance
The compliance section isset out by category of firm, with detailed requirements set out in tables giving:
(1) a brief description of each report;
(2) the frequency with which the report is required; and
(3) the due date for submission of the report.

SUP 16.3.5

handbook-guidance
Further requirements about the reports, such as form and content, are set out in the sections for each category of firm, where this is appropriate. In many cases, however, it is more appropriate to provide this information by means of a separate annex; in these cases the relevant section refers to the annex.

How to submit reports

SUP 16.3.6

handbook-rule
A periodic report required to be submitted under this chapter, or under any other rule, must be submitted in writing in accordance with SUP 16.3.7 R to SUP 16.3.10 G, unless:
(1) a contrary intention appears; or
(2) the report is required under the listing rules.

SUP 16.3.7

handbook-rule
A report or data item must:
(1) give the firm reference number (or all the firm reference numbers in those cases where a report is submitted on behalf of a number of firms,as set out in SUP 16.3.25 G); and
(2) if submitted in paper form, be submitted with the cover sheet contained in SUP 16 Annex 13 R fully completed.

SUP 16.3.8

handbook-rule
A written report must be delivered to the appropriate regulator by one of the methods listed in SUP 16.3.9 R.

SUP 16.3.9

handbook-rule

Method of submission of reports (see SUP 16.3.8 R)

SUP 16.3.10

handbook-guidance
(1) The current published address of the FCA for postal submission of reports is:
(2) The current published address of the FCA for hand delivery of reports is:
(a)
if the firm's usual supervisory contact at the appropriate regulator is based in London, or:
(b)
if the firm's usual supervisory contact at the FCA is based in Edinburgh.
(3) The current published email address and fax number for the FCA's Central Reporting team is regulatory.reports@fca.org.uk and 020 7066 3905. The Central Reporting team does not handle general correspondence between firms and the appropriate regulator . Accordingly, firms should not make submissions to the Central Reporting team's email address or fax number other than as directed in SUP 16.3.8 R.

Complete reporting

SUP 16.3.11

handbook-rule
A firm must submit reports required under this chapter to the appropriate regulator containing all the information required.

SUP 16.3.12

handbook-guidance
SUP 15.6 refers to and contains requirements regarding the steps that firms must take to ensure that information provided to the appropriate regulator is accurate and complete. Those requirements apply to reports required to be submitted under this chapter.

Timely reporting

SUP 16.3.13

handbook-rule
(1) A firm must submit a report required by this chapter in the frequency, and so as to be received by the appropriate regulator no later than the due date, specified for that report.
(2) If the due date for submission of a report required by this chapter falls on a day which is not a business day, the report must be submitted so as to be received by the appropriate regulator no later than the first business day after the due date.
(3) If the due date for submission of a report required by this chapter is a set period of time after the quarter end, the quarter ends will be the following dates, unless another rule or the reporting form states otherwise:
(a) the firm's accounting reference date;
(b) 3 months after the firm's accounting reference date;
(c) 6 months after the firm's accounting reference date; and
(d) 9 months after the firm's accounting reference date.
(4) If the due date for submission of a report required by this chapter is a set period of time after the end of a half-year, a quarter, or a month, the dates will be determined by (a) or (b) below except where otherwise indicated:
(a) the firm's accounting reference date;
(b) monthly, 3 monthly or 6 months after the firm's accounting reference date, as the case may be.

Failure to submit reports

SUP 16.3.14

handbook-rule
(1) If a firm does not submit a complete report by the date on which it is due in accordance with the rules in, or referred to in, this chapter or the provisions of relevant legislation and any prescribed submission procedures, the firm must pay an administrative fee of £250.
(2) The administrative fee in (1) does not apply in respect of quarterly reports required to be submitted by credit unions whose liability to pay a periodic fee under FEES 4.2.1 R in respect of the A.1 activity group in FEES 4 Annex 1A and FEES 4 Annex 1B R , for the financial year prior to the due date for submission of the report, was limited to the payment of the minimum fee.

SUP 16.3.14A

handbook-guidance
Failure to submit a report in accordance with the rules in, or referred to in, this chapter or the provisions of relevant legislation may also lead to the imposition of a financial penalty and other disciplinary sanctions. A firm may be subject to reporting requirements under relevant legislation other than the Act, not referred to in this chapter. An example of this is reporting to the appropriate regulator by building societies under those parts of the Building Societies Act 1986 which have not been repealed (see SUP 16.1.4 G). If it appears to the appropriate regulator that, in the exceptional circumstances of a particular case, the payment of any fee would be inequitable, the appropriate regulator may reduce or remit all or part of the fee in question which would otherwise be payable (see FEES 2.3).

SUP 16.3.15

handbook-guidance
The appropriate regulator may from time to time send reminders to firms when reports are overdue. Firms should not, however, assume that the appropriate regulator has received a report merely because they have not received a reminder.

SUP 16.3.16

handbook-guidance
The firm is responsible for ensuring delivery of the required report at the by the due date. If a report is received by the appropriate regulator after the due date and the firm believes its delivery arrangements were adequate, it may be required to provide proof of those arrangements. Examples of such proof would be:
(1) "proof of posting" receipts from a UK post office or overseas equivalent which demonstrates that the report was posted early enough to allow delivery by the due date in accordance with the delivery service standards prescribed by the relevant postal authority; or
(2) recorded postal delivery receipts showing delivery on the required day; or
(3) records of a courier service provider showing delivery on the required day.

Change of accounting reference date

SUP 16.3.17

handbook-rule
(1) A firm must notify the appropriate regulator if it changes its accounting reference date.
(2) When a firm extends its accounting period, it must make the notification in (1) before the previous accounting reference date.
(3) When a firm shortens its accounting period, it must make the notification in (1) before the new accounting reference date.
(4) SUP 16.10.4A R to SUP 16.10.4C G (Requirement to check the accuracy of standing data and to report changes to the appropriate regulator ) apply to any notification made under (1).

SUP 16.3.18

handbook-guidance
SUP 16.2.1 G emphasises the importance to the appropriate regulator of timely and accurate information. The extension of a firm's accounting period to more than 15 months may hinder the timely provision of relevant and important information to the appropriate regulator. This is because many due dates for reporting to the appropriate regulator are linked to firms' accounting reference dates. Indeed, for some categories of firm, the only reports required by the appropriate regulator have due dates for submission which are linked to the firm's accounting reference date. If the extension of a firm's accounting period appears likely to impair the effectiveness of the appropriate regulator's supervisory work, the appropriate regulator may take action to ensure that it continues to receive the information it requires on a timely basis. This may include the use of any of the tools of supervision set out in SUP 1.4.5 G.

SUP 16.3.19

handbook-guidance
If more than one firm in a group intends to change its accounting reference date at the same time, a single notification may be given to the appropriate regulator , as described in SUP 15.7.8 G.

Service of Notices Regulations

SUP 16.3.22

handbook-guidance
The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) contain provisions relating to the service of documents on the appropriate regulator . They do not apply to reports required under SUP 16, because of the specific rules in this section.

Confidentiality and sharing of information

SUP 16.3.23

handbook-guidance
When the appropriate regulator receives a report which contains confidential information and whose submission is required under this chapter, it is obliged under Part 23of the Act (Public Record, Disclosure of Information and Co-operation) to treat that information as confidential. (See SUP 2.2.4 G for the FCA and SUP 2.2.4A G for the PRA)

SUP 16.3.24

handbook-guidance
SUP 2.3.12A G and SUP 2.3.12B G state that the appropriate regulator may pass to other regulators information which it has in its possession. Such information includes information contained in reports submitted under this chapter. The appropriate regulator's disclosure of information to other regulators is subject to SUP 2.2.4 G or SUP 2.2.4A G (Confidentiality of information).

Reports from groups

SUP 16.3.25

handbook-guidance
If this chapter requires the submission of a report or data item covering a group, a single report or data item may be submitted, and so satisfy the requirements of all firms in the group. Such a report or data item should contain the information required from all of them, meet all relevant due dates and indicate all the firms on whose behalf it is submitted; if necessary a separate covering sheet should list the firms on whose behalf a report or data item is submitted. Nevertheless, the requirement to provide a report or data item, and the responsibility for the report or data item, remains with each firm in the group. However, reporting requirements that apply to a firm, by reason of the firm being a member of a financial conglomerate, are imposed on only one member of the financial conglomerate (see, for example, SUP 16.12.32 R).

SUP 16.3.26

handbook-guidance
Examples of reports covering a group are:
(1) the compliance reports required from banks under SUP 16.6.4 R;
(2) annual controllers reports required under SUP 16.4.5 R;
(3) annual close links reports required under SUP 16.5.4 R
(4) consolidated financial reports required from banks under SUP 16.12.5 R;
(5) consolidated reporting statements required from securities and futures firms under SUP 16.12.11 R;
(6) reporting in relation to defined liquidity groups under SUP 16.12.

SUP 16.4

Annual controllers report

  • 01/12/2004

Application

SUP 16.4.1

handbook-guidance
This section applies to every firm except those firms excluded from its operation by SUP 16.1.1.R and SUP 16.1.3 R.

SUP 16.4.2

handbook-guidance
This section may be of relevance to a directive friendly society:
(1) if it has 10 members or less;
(2) if it has a delegate voting system and has 10 delegates or less; or
(3) if it has 20 members or less and effects or carries out group insurance contracts where one person may exercise one vote on behalf of the members of a group and one vote in their private capacity; or
where a member or delegate, whether alone or acting in concert, is entitled to exercise, or control the exercise of, 10% or more of the total voting power.

SUP 16.4.2A

handbook-guidance
This section may be of relevance to non-directive firms.

SUP 16.4.3

handbook-guidance
Requirements for notifications of a change in control can be found in SUP 11 (Controllers and close links).

Purpose

SUP 16.4.4

handbook-guidance
A firm and its controllers are required to notify certain changes in control (see SUP 11 (Controllers and close links)). The purpose of the rules and guidance in this section is:
(1) to ensure that, in addition to such notifications, the appropriate regulator receives regular and comprehensive information about the identities of all of the controllers of a firm, which is relevant to a firm's continuing to satisfy the effective supervision threshold conditions;
(2) to implement certain requirements relating to annual reporting of controllers which must be imposed on firms under the Investment Services Directive, the Banking Consolidation Directive, the Consolidated Life Directive and the Third Non-Life Directive; and
(3) to support the regulatory functions under Part 12of the Act (Notices of acquisitions of control over UK authorised persons) (see SUP 11 (Controllers and close links)).

Reporting requirement

SUP 16.4.5

handbook-rule
(1) A firm must submit a report to the appropriate regulator annually, containing the information in (3) or (4) (as applicable).
(2) A firm must submit the report in (1) to the appropriate regulator within four months of the firm's accounting reference date.
(3) If a firm is not aware:
(a) that it has any controllers; or
(b) of any changes in the identity of its controllers since the submission of its previous report under (1); or
(c) of any changes in the percentage of shares or voting power in the firm held by any controllers (alone or acting in concert) since the submission of its previous report;
then the report in (1) must confirm this.
(4) Unless (3) applies, the report in (1) must contain a list of all the controllers as at the firm's accounting reference date of which it is aware and, for each such controller, state:
(a) its name;
(b) the percentage of voting power in the firm, or in the firm's parent undertaking, which it is entitled to exercise or control the exercise of, whether alone or acting in concert;
(c) the percentage of shares in the firm, or in the firm's parent undertaking, which it holds, whether alone or acting in concert;
(d) if the controller is a body corporate, its country of incorporation, address and registered number; and
(e) if the controller is an individual, his date and place of birth.
(4A) A firm that is a regulated entity must include in its report to the appropriate regulator under (1) whether any consolidation group of which it is a member is a third-country banking and investment group.
(4B) A firm does not have to give notice to the appropriate regulator under (4A) if it, or another member of the third-country banking and investment group, has already given notice to the appropriate regulator of the relevant fact.
(5) [deleted]

SUP 16.4.6

handbook-guidance
The information required by SUP 16.4.5 R(4) may be provided in the form of a group organisation chart.

SUP 16.4.7

handbook-guidance
If a group includes more than one firm, a single annual controllers report may be submitted, and so satisfy the requirements of all firms in the group. Such a report should contain the information required from all of them, meet all relevant due dates, indicate all the firms on whose behalf it is submitted and give their firm reference numbers. Nevertheless, the requirement to provide a report, and the responsibility for the report, remain with each firm in the group.

SUP 16.4.8

handbook-guidance
A firm may submit a single report satisfying the requirements of its annual controllers report (SUP 16.4.5 R) and its annual close links report (SUP 16.5.4 R). Such a report should contain the information required on both controllers and close links.

SUP 16.4.9

handbook-guidance
Firms are reminded of the requirement in SUP 11.4.10 R to take reasonable steps to keep themselves informed about the identity of their controllers.

Exceptions: friendly societies and building societies

SUP 16.4.10

handbook-rule
If a firm is a friendly society or a building society, then it is required to submit a report under SUP 16.4.5 R only if it is aware that it has a controller.

SUP 16.4.11

handbook-rule
In SUP 16.4.5 R and SUP 16.4.10 R, a building society may regard a person as not being a controller if that person is exempt from the obligation to notify a change in control under The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774) (see SUP 11.3.2A G (2)).

Exception: insurers

SUP 16.4.12

handbook-rule
An insurer need not submit a report under SUP 16.4.5 R to the extent that the information has already been provided to the appropriate regulator under IPRU(INS) 9.30R (Additional information on controllers).

SUP 16.5

Annual Close Links Reports

  • 01/12/2004

Application

SUP 16.5.1

handbook-guidance
This section applies to every firm listed in SUP 11.1.1 R (1) to SUP 11.1.1 R (6), except those firms excluded from its operation by SUP 16.1.1 R and SUP 16.1.3 R or which have elected to report on a monthly basis in accordance with SUP 11.9.5 R.

Purpose

SUP 16.5.2

handbook-guidance
A firm is required to notify the appropriate regulator of changes to its close links (see SUP 11.9). The effective supervision threshold conditions provide that, if a firm has close links with another person, the matters which are relevant in determining whether a firm satisfies the condition of being capable of being effective supervised include:
(1) the nature of the relationship between the firm and that person;
(2) whether those links or that relationship are likely to prevent the appropriate regulator's effective supervision of the firm; and
(3) if the person is subject to the laws, regulations or administrative provisions of a territory which is not an EEA State, whether those foreign provisions, or any deficiency in their enforcement, would prevent the appropriate regulator's effective supervision of the firm.

SUP 16.5.3

handbook-guidance
The purposes of the rules and guidance in this section are:
(1) to ensure that, in addition to such notifications, the appropriate regulator receives regular and comprehensive information about the identities of all persons with whom a firm has close links, which is relevant to a firm's continuing to satisfy the effective supervision threshold conditions and to the protection of consumers; and
(2) to implement certain requirements relating to the provision of information on close links which must be imposed on firms under the 'Post-BCCI Directive'.

Report

SUP 16.5.4

handbook-rule
(1) A firm must submit a report to the appropriate regulator annually by completing the Close Links Notification Form (see SUP 11.9.3B G for the FCA and SUP 11.9.3C G for the PRA) and must include the information in (3) or (4) (as applicable) and (5).
(2) A firm must submit the report in (1) to the appropriate regulator within four months of the firm's accounting reference date.
(3) If a firm is not aware:
(a) that it has any close links; or
(b) of any material changes to the details in (4) (a) to (c) in respect of its close links since the submission of its previous report under (1);
then the report in (1) must confirm this.
(4) Unless (3) applies, the report in (1) must contain a list of all persons with whom the firm has close links as at the firm'saccounting reference date of which it is aware, and for each such person state:
(a) its name;
(b) the nature of the close links;
(c) if the close link is with a body corporate, its country of incorporation, address and registered number; and
(d) if the close link is with an individual, his date and place of birth.
(5) The firm must also submit a group organisation chart.

SUP 16.5.6

handbook-guidance
If a group includes more than one firm, a single annual close links report may be submitted and so satisfy the requirements of all firms in the group. Such a report should contain the information required from all of them, meet all relevant due dates, indicate all the firms on whose behalf it is submitted and give their firm reference numbers. Nevertheless, the requirement to provide a report, and the responsibility for the report, remain with each firm in the group.

SUP 16.5.7

handbook-guidance
A firm may submit a single report satisfying the requirements of its annual controllers report (SUP 16.4.5 R) and its annual close links report (SUP 16.5.4 R). Such a report should contain the information required on both controllers and close links.

SUP 16.5.8

handbook-rule
If a firm is an unincorporated friendly society, then it is only required to submit a report under SUP 16.5.4 R if it is aware that it has close links.

SUP 16.6

Compliance reports

  • 01/12/2004

Application

SUP 16.6.1

handbook-guidance
The effect of SUP 16.1.1 R is that this section applies to every firm within a category listed in the left hand column of the table in SUP 16.6.2 G.

SUP 16.6.2

handbook-guidance

Applicable provisions of this section (see SUP 16.6.1 G)

Purpose

SUP 16.6.3B

handbook-guidance
The PRA performs part of its supervision work by reviewing and analysing information about firms' records of compliance with prudential requirements and standards. The type of report the PRA requires will vary, depending on the type of business a firm undertakes. This information helps the PRA to determine whether a firm is complying with the requirements applicable to its business, and what procedures it is operating to ensure its compliance.
  • 01/04/2013

Banks

SUP 16.6.4

handbook-rule
A bank must submit compliance reports to the appropriate regulator in accordance with SUP 16.6.5 R.

SUP 16.6.5

handbook-rule

Compliance reports from a bank (see SUP 16.6.4 R)

SUP 16.10

Verification of standing data

  • 01/04/2005

Application

SUP 16.10.1

handbook-guidance
The effect of SUP 16.1.1 R is that this section applies to every firm except:
(1) an ICVC; or
(2) a UCITS qualifier; or
(3) a credit union; or
(4) a dormant account fund operator.

Purpose

SUP 16.10.2

handbook-guidance
Standing data is used by the appropriate regulator :
(1) to ensure that a firm is presented with the correct regulatory return when it seeks to report electronically;
(2) in order to communicate with a firm;
(3) as the basis for some sections of the Financial Services Register; and
(4) in order to carry out thematic analysis across sectors and groups of firms.

SUP 16.10.3

handbook-guidance
In view of the importance attached to standing data, and the consequences which may result if it is wrong, this section provides the framework for a firm to check and correct it.

Requirement to check the accuracy of standing data and to report changes to the appropriate regulator

SUP 16.10.4

handbook-rule
(1) Within 30 business days of its accounting reference date, a firm must check the accuracy of its standing data through the relevant section of the appropriate regulator's website.
(2) [paragraph suspended by FSA 2004/79]
(3) If any standing data is incorrect, the firm must submit the corrected standing data to the appropriate regulator, using the appropriate form set out in SUP 15 Ann 3 and in accordance with SUP 16.10.4A R.

SUP 16.10.4A

handbook-rule
  1. (1) A firm other than a credit union must submit any corrected standing data under SUP 16.10.4R (3) online at the appropriate regulator's websiteusing the ONA system.
  2. (2) A credit union must submit any corrected standing data under SUP 16.10.4R (3) to static.data@fca.org.uk or via post or hand delivery to the FCA marked for the attention of the 'Static Data team'.
  3. (3) Where a firm is obliged to submit corrected standing data online under (1), if the FCA's information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm must submit its corrected standing data to static.data@fca.org.uk or via post or hand delivery to the FCA marked for the attention of the 'Static Data team'.

SUP 16.10.4B

handbook-guidance
If the FCA's information technology systems fail and online submission is unavailable for 24 hours or more, the FCA will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 16.3.9 R should be used.

SUP 16.10.4C

handbook-guidance
Where SUP 16.10.4AR (3) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 16.10.5

handbook-guidance
The standing data is made available to the firm when the firm logs into the appropriate section of the appropriate regulator's website. The firm should check the standing data and send any corrections to the appropriate regulator . The appropriate regulator's preferred method of receiving corrections to standing data is by the online forms available at the appropriate regulator's website.

SUP 16.10.6

handbook-guidance
A firm may check, and submit corrections to, its standing data more frequently than annually.

SUP 16.12

Integrated Regulatory Reporting

  • 01/01/2008

Application

SUP 16.12.1

handbook-guidance

The effect of SUP 16.1.1 R is that this section applies to every firm carrying on business set out in column (1) of SUP 16.12.4 R except:

  1. (1) an incoming EEA firm with permission for cross border services only;
  2. (1A) an incoming EEA firm in relation to its carrying on of bidding in emissions auctions;
  3. (2) an oil market participant that is not subject to the requirements of IPRU(INV) Chapter 3;
  4. (3) an authorised professional firm (other than one that must comply with IPRU(INV) 3, 5 or 13 in accordance with IPRU(INV) 2.1.4R, where SUP 16.12.4 R will apply in respect of the business the firm undertakes), which must comply with SUP 16.12.30 R and SUP 16.12.31 R; and
  5. (4) a financial conglomerate, which must comply with SUP 16.12.32 R: firms that are members of a financial conglomerate will have their own reporting requirements under SUP 16.12.32 R.

Purpose

SUP 16.12.2

handbook-guidance
  1. (1) Principle 4 requires firms to maintain adequate financial resources. The Interim Prudential sourcebooks, BIPRU and GENPRU set out the appropriate regulator's detailed capital adequacy requirements. By submitting regular data, firms enable the appropriate regulator to monitor their compliance with Principle 4 and their prudential requirements in the Handbook.
  2. (2) The data items submitted help the appropriate regulator analyse firms' financial and other conditions and performance and to understand their business. By means of further collation and review of the data which the data items provide, the appropriate regulator also uses the data items to identify developments across the financial services industry and its constituent sectors.
  3. (3) The requirements in this section differ according to a firm's regulated activity group (RAG), as different information is required to reflect different types of business. Standard formats are used for reporting, to assist compatibility between firms which carry on similar types of business. Timely submission is important to ensure the appropriate regulator has up-to-date information.

Reporting requirement

SUP 16.12.3

handbook-rule
(1) Any firmpermitted to carry on any of the activities within each of the RAGs set out in column (1) of the table in SUP 16.12.4 R must:
(a)
(i) unless (ii) or (iii) applies, submit to the appropriate regulator the duly completed data items or other items applicable to the firm as set out in the provision referred to in column (2) of that table;
(ii) unless (iii) applies, where a firm is required to submit completed data items for more than one RAG, that firm must only submit the data item of the same name and purpose in respect of the lowest numbered RAG applicable to it, RAG 1 being the lowest and RAG 10 the highest;
(iii) where a firm is, but for this rule, required to submit data items for more than one RAG and this includes the submission of data items in respect of fees, the FOS or FSCS levy, or threshold conditions, that firm must only submit these data items if they belong to the lowest numbered of the RAGs applicable to it;
(iv) in the case of a non-EEA bank, or an EEA bank (whether or not it has permission for accepting deposits) other than one with permission for cross border services only, any data items submitted should, unless indicated otherwise, only cover the activities of the branch operation in the United Kingdom;
in the format specified as applicable to the firm in the provision referred to in column (2);
(b) submit this information at the frequency and in respect of the periods set out in the provision referred to in column (3); and
(c) submit this information by the due date referred to in the provision referred to in column (4).
(2) Unless (3) applies, any data item in (1) must be submitted by electronic means made available by the appropriate regulator ;
(3) Paragraph(2) does not apply to:
(a) credit unions solely in relation to the reporting requirement for RAG 1 activities where the following submission methods apply:
(i) Post to the Bank of England for postal submission:
Regulatory Data Group
Statistics and Regulatory Data Division (HO5 A-B)
Bank of England
Threadneedle Street
London
EC2R 8AH
(ii) Leaving the report marked for the attention of "Regulatory Data Group, Statistics and Regulatory Data Division (HO 5 A-B) at the Bank of England, Threadneedle Street, London, EC2R 8AH, and obtaining a dated receipt
(iii) Electronic mail
(CreditUnionReporting@BankofEngland.co.uk) or fax (020 7601 3334) to the Regulatory Data Group of the Bank of England
(iv) Online submission via the appropriate systems accessible from the appropriate regulator's website;
(b) firms in RAG 2 in relation to the reporting requirements for RAG 2 activities; and
(c) those data items specified as "No standard format", where SUP 16.3.6 R to SUP 16.3.10 G will apply.
(4) A firm that is a member of a financial conglomerate must also submit financial reports as required by SUP 16.12.32 R.

SUP 16.12.3A

handbook-guidance
The following is designed to assist firms to understand how the reporting requirements set out in this chapter operate when the circumstances set out in SUP 16.12.3R (1)(a)(ii) apply.
(1) Example 1
A BIPRU 730K firm that undertakes activities in both RAG3 and RAG 7
Overlaying the requirements of RAG 3 ( data items ) with the requirements of RAG 7 shows the following: From this, the additional reports that are required are:
(a) [deleted]
(b) Professional indemnity insurance, where RAG 7 firms complete Section E of the RMAR, and therefore a RAG3 firm should complete that;
(c) [deleted]
(d) Training and competence data, where RAG3 firms should also complete Section G of RMAR;
(e) Conduct of business data, where RAG3 firms should complete Section H of RMAR.
(f) [deleted]
(g) [deleted]
The reporting frequency and submission times for items (b), (d) and (e) above are then derived from the rules applicable to BIPRU firms in SUP 16.12.23 R and SUP 16.12.24 R. Threshold conditions and fees and levies reports do not need to be submitted as they are not required under the lowest numbered of the two RAGs in this example, see SUP 16.12.3R (1)(a)(iii).
(2) Example 2
A UK bank in RAG 1 that also carries on activities in RAG 5
Again, overlaying the RAG 1 reporting requirements with the requirements for a RAG 5 firm gives the following : In this case, it is more obvious that the firm's reporting requirement in RAG 1 is not all the data items listed above. However, for the purposes of this exercise, it is the list of potential data items that is important. Thus comparing RAG 1 with RAG 5, the additional reporting requirements are:
(a) Lending - Business flow and rates, where Section D MLAR is required;
(b) Residential Lending to individuals - New business profile, where Section E MLAR is required;
(c) Lending - Arrears analysis, where Section F MLAR is required;
(d) Mortgage administration - Business profile, where Section G MLAR is required;
(e) Mortgage Administration - Arrears analysis, where Section H MLAR is required
(f) Analysis of loans to customers, where section A3 of MLAR is required
(g) Provisions analysis, where Section B2 of MLAR is required; and
Fees and levies are not applicable as they are not required to be submitted under the lowest numbered RAG in this example. The reporting frequency and submission times for items (a) to (g) above are then derived from the rules applicable to RAG 5 firms in SUP 16.12.18 R.

SUP 16.12.3B

handbook-guidance
Firms' attention is drawn to SUP 16.3.25 G regarding a single submission for all firms in the group.

SUP 16.12.4

handbook-rule
Table of applicable rules containing data items, frequency and submission periods

SUP 16.12.4A

handbook-guidance
RAG 1 includes an incoming EEA firm exercising a BCD right through a UK branch.

Group liquidity reporting

SUP 16.12.4B

handbook-guidance
Reporting at group level for liquidity purposes by firms falling within BIPRU 12 (Liquidity) is by reference to defined liquidity groups. Guidance about the different types of defined liquidity groups and related material is set out in SUP 16 Annex 26 (Guidance on designated liquidity groups in SUP 16.12.

Regulated Activity Group 1

SUP 16.12.5

handbook-rule
The applicable data items and forms or reports referred to in SUP 16.12.4 R are set out according to firm type in the table below:

SUP 16.12.6

handbook-rule
The applicable reporting frequencies for submission of data items and periods referred to in SUP 16.12.5 R are set out in the table below according to firm type. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.

SUP 16.12.7

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.6 R, unless indicated otherwise.

Regulated Activity Group 2.1

SUP 16.12.8

handbook-rule
(1) The financial reporting requirements for RAG 2.1 activities for insurers, excluding friendly societies, are set out in IPRU(INS).
(2) The financial reporting requirements for RAG 2.1 activities for friendly societies are set out in IPRU(FSOC).
(3) A UK insurance special purpose vehicle must submit a copy of its annual audited financial statements within 3 months of its accounting reference date, but the report is only required if it was audited as a result of a statutory provision other than under the Act.

Regulated Activity Group 3

SUP 16.12.10

handbook-rule
(1) SUP 16.12.11 R to SUP 16.12.13 R do not apply to:
(a) a lead regulated firm (except in relation to data items 47 to 55 (inclusive));
(b) an OPS firm;
(c) a local authority;
(d) a service company.
(2) A lead regulated firm and an OPS firm must submit a copy of its annual report and audited accounts within 80 business days from its accounting reference date.
(3) A service company must submit a copy of its annual audited financial statements within 6 months from its accounting reference date. However, the firm need only submit this if the report was audited as a result of a statutory provision other than the Act.

SUP 16.12.11

handbook-rule
The applicable data items referred to in SUP 16.12.4 R are set out according to firm type in the table below:

SUP 16.12.11A

handbook-guidance
The columns in the table in SUP 16.12.11 R that deal with BIPRU 50K firms and BIPRU 125K firms cover some liquidity items that only have to be reported by an ILAS BIPRU firm. In fact a BIPRU 50K firm and a BIPRU 125K firm cannot be an ILAS BIPRU firm. One reason for drafting the table in this way is that the classification of firms into ILAS BIPRU firms and non-ILAS BIPRU firms is not based on the classification into BIPRU 50K firms, BIPRU 125K firms and BIPRU 730K firms and the drafting of the table emphasises that. Also, the table covers consolidated reports and the conditions about what sort of group has to supply what type of liquidity report do not always depend on how the individual firm is classified.

SUP 16.12.12

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.4 R are set out in the table below according to firm type. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.

SUP 16.12.13

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.12 R, unless indicated otherwise.

Regulated Activity Group 4

SUP 16.12.15

handbook-rule
The applicable data items referred to in SUP 16.12.4 R according to type of firm are set out in the table below:

SUP 16.12.15A

handbook-guidance
The columns in the table in SUP 16.12.15 R that deal with BIPRU 50K firms and BIPRU 125K firms cover some liquidity items that only have to be reported by an ILAS BIPRU firm. In fact a BIPRU 50K firm and a BIPRU 125K firm cannot be an ILAS BIPRU firm. One reason for drafting the table in this way is that the classification of firms into ILAS BIPRU firms and non-ILAS BIPRU firms is not based on the classification into BIPRU 50K firms, BIPRU 125K firms and BIPRU 730K firms and the drafting of the table emphasises that. Also, the table covers consolidated reports and the conditions about what sort of group has to supply what type of liquidity report do not always depend on how the individual firm is classified.

SUP 16.12.16

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.15 R are set out in the table below according to firm type. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.

SUP 16.12.17

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.16 R, unless indicated otherwise.

Regulated Activity Group 5

SUP 16.12.18

handbook-rule
(1) SUP 16.12.18A R does not apply to:
(a) a lead regulated firm;
(b) an OPS firm;
(c) a local authority.
(2) A lead regulated firm and an OPS firm must submit a copy of its annual report and audited accounts within 80 business days from its accounting reference date.

SUP 16.12.18A

handbook-rule
The applicable data items, reporting frequencies and submission deadlines referred to in SUP 16.12.4 R are set out in the table below. Reporting frequencies are calculated from a firm's accounting reference date , unless indicated otherwise. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period.

Regulated Activity Group 7

SUP 16.12.22A

handbook-rule
The applicable data items referred to in SUP 16.12.4 R are set out according to type of firm in the table below:

SUP 16.12.22B

handbook-guidance
The columns in the table in SUP 16.12.22A R that deal with BIPRU 50K firms and BIPRU 125K firms cover some liquidity items that only have to be reported by an ILAS BIPRU firm. In fact a BIPRU 50K firm and a BIPRU 125K firm cannot be an ILAS BIPRU firm. One reason for drafting the table in this way is that the classification of firms into ILAS BIPRU firms and non-ILAS BIPRU firms is not based on the classification into BIPRU 50K firms, BIPRU 125K firms and BIPRU 730K firms and the drafting of the table emphasises that. Also, the table covers consolidated reports and the conditions about what sort of group has to supply what type of liquidity report do not always depend on how the individual firm is classified.

SUP 16.12.23

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.22A R are set out in the table below. Reporting frequencies are calculated from a firm'saccounting reference date, unless indicated otherwise.

SUP 16.12.24

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.23 R, unless indicated otherwise.

Regulated Activity Group 8

SUP 16.12.25A

handbook-rule
The applicable data items referred to in SUP 16.12.4 R are set out according to type of firm in the table below:

SUP 16.12.25B

handbook-guidance
The columns in the table in SUP 16.12.25A R that deal with BIPRU 50K firms and BIPRU 125K firms cover some liquidity items that only have to be reported by an ILAS BIPRU firm. In fact a BIPRU 50K firm and a BIPRU 125K firm cannot be an ILAS BIPRU firm. One reason for drafting the table in this way is that the classification of firms into ILAS BIPRU firms and non-ILAS BIPRU firms is not based on the classification into BIPRU 50K firms, BIPRU 125K firms and BIPRU 730K firms and the drafting of the table emphasises that. Also, the table covers consolidated reports and the conditions about what sort of group has to supply what type of liquidity report do not always depend on how the individual firm is classified.

SUP 16.12.26

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.25A R are set out according to the type of firm in the table below. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.

SUP 16.12.27

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.26 R, unless indicated otherwise.

Financial conglomerates

SUP 16.12.32

handbook-rule
(1) A firm that is a member of a financial conglomerate must submit financial reports to the appropriate regulator in accordance with the table in SUP 16.12.33 R if:
(a) it is at the head of a UK-regulated EEA financial conglomerate; or
(b) its Part 4A permission contains a relevant requirement.
(2) In (1)(b), a relevant requirement is one which:
(a) applies SUP 16.12.33 R to the firm; or
(b) applies SUP 16.12.33 R to the firm unless the mixed financial holding company of the financial conglomerate to which the firm belongs submits the report required under this rule (as if the rule applied to it).

SUP 16.12.33

handbook-rule
Financial reports from a member of a financial conglomerate (see SUP 16.12.32 R)

SUP 16.16

Prudent valuation reporting

  • 30/06/2012

Application

SUP 16.16.1

handbook-rule
This section applies to a UK bank or a BIPRU 730k firm which meets the condition in SUP 16.16.2 R.

SUP 16.16.2

handbook-rule
The condition referred to in SUP 16.16.1 R is that, on its last accounting reference date, the firm had balance sheet positions measured at fair value which, on a gross basis (the sum of the absolute value of each of the assets and liabilities), exceeded £3 billion.

Purpose

SUP 16.16.3

handbook-guidance
(1) The purpose of this section is to set out the requirements for a firm specified in SUP 16.16.1 R to report the outcomes of its prudent valuation assessmentsunder the prudent valuation rules, in GENPRU 1.3.4 R and GENPRU 1.3.14 R to GENPRU 1.3.34 R, to the appropriate regulator and to do so in a standard format.
(2) The purpose of collecting this data on the prudent valuation assessments made by a firmunder GENPRU 1.3.4 R and GENPRU 1.3.14 R to GENPRU 1.3.34 Ris to assist the appropriate regulator in assessing the capital resources of firms, to enable the appropriate regulator to gain a wider understanding of the nature and sources of measurement uncertainty in fair-valued financial instruments, and to enable comparison of the nature and level of that measurement uncertainty across firms and over time.

Reporting requirement

SUP 16.16.4

handbook-rule
(1) A firm to which this section applies must submit to the appropriate regulator quarterly (on a calendar year basis and not from a firm's accounting reference date), within six weeks of each quarter end, a Prudent Valuation Return in respect of its fair-value assessments under GENPRU 1.3.4 R and GENPRU 1.3.14 R to GENPRU 1.3.34 R in the format set out in SUP 16 Annex 31A.
(2) A PRA-authorised person to which this section applies must submit the report via electronic mail to prudentvaluationreturns@bankofengland.co.uk or via post or hand delivery to Regulatory Data Group, Statistics and Regulatory Data Division (HO5 A-B), Bank of England, Threadneedle Street, London EC2R 8AH; or via fax to the Regulatory Data Group of the Bank of England (020 7601 3334)

SUP 16.16.5

handbook-rule
Where a firm to which SUP 16.16.4 R applies is a member of a UK consolidation group , the firm must comply with SUP 16.16.4 R:
(1) on a solo-consolidation basis if the firm has a solo consolidation waiver, or on an unconsolidated basis if the firm does not have a solo consolidation waiver; and
(2) separately, on the basis of the consolidated financial position of the UK consolidation group. (Firms' attention is drawn to SUP 16.3.25 G regarding a single submission for all firms in the group.)

SUP 16.17

Remuneration reporting

  • 01/11/2012

Purpose

SUP 16.17.1

handbook-guidance
The purpose of this section is to ensure that the appropriate regulator receives regular and comprehensive information about remuneration in a standard format to assist it to benchmark remuneration trends and practices and to collect remuneration information on high earners. It also takes account of the Capital Requirements (Amendment) Regulations 2012 (SI 2012/917) together with the European Banking Authority's Guidelines to article 22(3) and (5) of the Banking Consolidation Directive.

Interpretation

SUP 16.17.2

handbook-rule
In this section "UK lead regulated group" means a UK consolidation groupthat is headed eitherby an EEA parent institutionor by an EEA parent financial holding company.

Remuneration Benchmarking Reporting Requirements

SUP 16.17.3

handbook-rule
(1) A firm to which this rule applies must submit a Remuneration Benchmarking Information Report to the PRA annually.
(2) The firm must complete that report in the format set out in SUP 16 Annex 33A R.
(3) The firm must submit that report to the PRA within four months of the firm'saccounting reference date.
(4) A firm that:
(a) is not part of a UK lead regulated group must complete that report on an unconsolidated basis in respect of remuneration awarded to employees of the firm in the last completed financial year;
(b) is part of a UK lead regulated group must not complete that report on either a solo consolidation basis or an unconsolidated basis. The firm must complete that report on a consolidated basis in respect of remuneration awarded to all employees in the UK lead regulated group in the last completed financial year.
(5) The firm must complete the report in the currency of its annual audited accounts.
(6) A firm to which this rule applies on the date it comes into effect must submit two reports by 31 December 2012: one for each of the previous two complete financial years that ended before this rule came into effect.
(7) This rule applies to:
(a) a BIPRUfirm; and
(b) a third country BIPRU firm;

that:
(c) is not a BIPRUlimited licence firm or a BIPRU limited activity firm; and
(d) is not, and does not have, an EEA parent institution or an EEA parent financial holding company;



and that firm had total assets equal to or greater than £50 billion on an unconsolidated basis on the accounting reference date immediately prior to the firm's last complete financial year.
(8) This rule also applies to:
(a) a BIPRU firm; and
(b) a third country BIPRU firm;

a bank;
(c) is not a BIPRUlimited licence firm or a BIPRU limited activity firm; and
(d) is part of a UK lead regulated group;



and that firm had total assets equal to or greater than £50 billion on an unconsolidated basis on the accounting reference date immediately prior to the firm's last complete financial year.


that:
(9) In this rule "total assets" means
(a) in relation to a BIPRU firm , the firm's total assets as set out in its balance sheet on the relevant accounting reference date; and
(b) in relation to a third country BIPRU firm, the total assets of the firm as set out in its balance sheet on the relevant accounting reference date that cover the activities of the branch operation in the United Kingdom.

High Earners Reporting Requirements

SUP 16.17.4

handbook-rule
  1. (1) A firm to which this rule applies must submit a High Earners Report to the appropriate regulator annually.
  2. (2) The firm must submit that report to the appropriate regulator within four months of the end of the firm's accounting reference date.
  3. (3) A firm that is not part of a UK lead regulated group must complete that report on an unconsolidated basis in respect of remuneration awarded in the last completed financial year to all high earners of the firm who mainly undertook their professional activities within the EEA.
  4. (4) A firm that is part of a UK lead regulated group must not complete that report on either a solo consolidation basis or an unconsolidated basis. The firm must complete that report on a consolidated basis in respect of remuneration awarded in the last completed financial year to all high earners who mainly undertook their professional activities within the EEA at:
    1. (a) the EEA parent institution or EEA parent financial holding company of the UK lead regulated group; and
    2. (b) each subsidiary of the UK lead regulated group that has its registered office (or, if it has no registered office, its head office) in an EEA State; and
    3. (c) each branch of the UK lead regulated group that is established or operating in an EEA State.
  5. (5) The firm must complete a separate template, in the format set out in SUP 16 Annex 34A R, for each EEA State in which there is a high earner. Those templates together form the report.
  6. (6) High earners who carried out their professional activities in an EEA State should be classified under that EEA State.
  7. (7) High earners who carried out their professional activities in more than one EEA State should be classified under the EEA State where they mainly undertook their professional activities.
  8. (8) A firm to which this section applies on the date it comes into effect must submit two reports by 31 December 2012: one for each of the previous two complete financial years that ended before this section came into force.
  9. (9) The information in the reportmust be denominated in euros determined, if necessary, by reference to the conversion rate table specified from time to time by the European Banking Authority as applicable to that year's High Earners Report.
  10. (10) This rule applies to BIPRU firm and a third country BIPRU firm that
    1. (a) is not a BIPRU limited licence firm or a BIPRU limited activity firm; and
    2. (b) is not, and does not have, an EEA parent institution or an EEA parent financial holding company.
  11. (11) This rule also applies to a BIPRU firm and a third country BIPRU firm that:
    1. (a) is not a BIPRU limited licence firm or a BIPRU limited activity firm; and
    2. (b) is part of a UK lead regulated group.
  12. (12) This rule also applies to a BIPRU limited licence firm or a BIPRU limited activity firm:
    1. (a) that is part of a UK lead regulated group; and
    2. (b) where that UK lead regulated group contains a BIPRU firm or a third country BIPRU firm that is not a BIPRU limited licence firm or a BIPRU limited activity firm.

SUP 16.17.5

handbook-guidance
Firms' attention is drawn to SUP 16.3.25 G regarding a single submission for all firms in a group.

SUP 16 Annex 13

Return cover sheet

  • 01/12/2004

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:



Return Cover Sheet - Forms/sup/sup_chapter16_annex13r_20130401.pdf

SUP 16 Annex 14

Quarterly and annual returns for Credit Unions

  • 01/12/2004

handbook-rule

SUP 16 Annex 15

Notes on completing the quarterly and annual returns for Credit Unions

  • 01/12/2004

handbook-guidance

SUP 16 Annex 16A

Standing data (See SUP 16.10.4 R)

  • 01/04/2005

SUP 16 Annex 16A.1

handbook-rule
A: Communications with a firm



1. Name of the firm

2. Trading name(s) of the firm

3.

4. Registered office

5. Principal place of business

6. Website address

7. Complaints contact and complaints officer

8. The name and email address of the primary compliance contact



B: Information about a firm on the Financial Services Register

9.

10.

11.



C: Other information about a firm

12.

13.

14. Name and address of firm's auditor

15.

16. Accounting reference date

17. Locum

SUP 16 Annex 19A

Mortgage Lending and Administration Return ('MLAR')

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:



Mortgage Lending and Administration Return ('MLAR') - Forms/sup/sup_Chapter16_annex19ar_20130401.pdf

SUP 16 Annex 19B

Notes for Completion of the Mortgage Lending and Administration Return ('MLAR')

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:

Notes for Completion of the Mortgage Lending and Administration Return ('MLAR') - Forms/sup/sup_Chapter16_annex19bg_20130401.pdf

SUP 16 Annex 24

Data items for SUP 16.12

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:

Data items for SUP 16.12 SUP Chapter 16 Annex 24 R

SUP 16 Annex 25

Guidance notes for data items in SUP 16 Annex 24R

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:

Guidance notes for data items in SUP 16 Annex 24R - SUP Chapter 16 Annex 25g

SUP 16 Annex 26

Guidance on designated liquidity groups in SUP 16.12

  • 01/12/2009

handbook-guidance

SUP 16 Annex 31A

Prudent Valuation Return

  • 30/06/2012

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:

Prudent Valuation Return - SUP 16 Annex 31AR

SUP 16 Annex 31B

Guidance notes for data items in SUP 16 Annex 31AR

  • 30/06/2012

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:



Guidance notes for data items in SUP 16 Annex 31AR - SUP 16 Annex 31BG

SUP 16 Annex 32

Bidding in emissions auctions return

  • 27/07/2012

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:

Bidding in emissions auctions return - SUP 16 Annex 32 R

SUP 16 Annex 33A

Remuneration Benchmarking Information Report

  • 01/11/2012

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:



Remuneration Benchmarking Information Report - SUP 16 Annex 33AR

SUP 16 Annex 33B

Guidance notes for data items in SUP 16 Annex 33AR

  • 01/11/2012

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:



Guidance notes for data items in SUP 16 Annex 33AR - SUP 16 Annex 33BG

SUP 16 Annex 34A

High Earners Report

  • 01/11/2012

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:



High Earners Report - SUP 16 Annex 34AR

SUP 16 Annex 34B

Guidance notes for data items in SUP 16 Annex 34AR

  • 01/11/2012

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:



Guidance notes for data items in SUP 16 Annex 34AR - SUP 16 Annex 34BG

Export chapter as

SUP 18

Transfers of business

SUP 18.1

Application

  • 01/12/2004

SUP 18.1.1

handbook-guidance
This chapter provides guidance in relation to business transfers.
(1) SUP 18.2 applies to any firm or to any underwriting member or any former memberof Lloyd's proposing to transfer the whole or part of its business by an insurance business transfer scheme or to accept such a transfer. Some of the guidance in this chapter, for example, at SUP 18.2.31 G to SUP 18.2.41 G also appliesto the independent expert making the scheme report.
(2) SUP 18.3 applies to any firm proposing to accept certain transfers of insurance business taking place outside the United Kingdom.
(3) SUP 18.4 applies to any friendly societies proposing to amalgamate under section 85 of the Friendly Societies Act 1992, to any friendly society proposing to transfer engagements under section 86 of that Act to another body and to any body (whether or not it is a friendly society) proposing to accept such a transfer. SUP 18.4 also provides guidance to those wishing to make representations to the appropriate authority about an application for confirmation of an amalgamation or transfer.

Interpretation

SUP 18.1.1A

handbook-guidance
The 'appropriate authority' in this chapter means the regulator within the meaning of section 119 of the Friendly Societies Act 1992.
  • 01/04/2013

SUP 18.1.1B

handbook-guidance
References to the 'regulator' and 'regulators' in this chapter means the FCA and/or the PRA.
  • 01/04/2013

SUP 18.1.1C

handbook-guidance
References to the 'Memorandum of Understanding' in this chapter is to the memorandum of understanding in force between the regulators under section 3E of the Act.
  • 01/04/2013

Introduction

SUP 18.1.3

handbook-guidance
Insurance business transfers are subject to Part VII of the Act and must be approved by the court under section 111. The following statutory pieces of legislation also apply:
(1) The Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 (SI 2001/3625), as amended by the Financial Services and Markets Act 2000 (Control of Business Transfers)(Requirements on Applicants) (Amendment) Regulations 2008 (SI 2008/1467) and the Financial Services and Markets Act 2000 (Amendments to Part 7) Regulations 2008 (SI 2008/1468);
(2) the Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd's) Order 2001(SI 2001/3626), as amended by The Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd's) (Amendment) Order (2008/1725); and
(3) the Reinsurance Directive Regulations 2007 (SI 2007/3253) and the Financial Services and Markets Act 2000 (Reinsurance Directive) Regulations 2007 (SI 2007/3255),
These regulations set out minimum requirements for publicising schemes, notifying certain interested parties directly (subject to the discretion of the court), and giving information to anyone who requests it.

SUP 18.1.4

handbook-guidance
An insurance business transfer scheme is defined in section 105 of the Act and the definition has been extended to transfers from underwriting members and former members of Lloyd's.
(1) [deleted]
(a) [deleted]
(b) [deleted]
(c) [deleted]
(2) [deleted]
The business transferred may include liabilities and potential liabilities on expired policies, liabilities on current policies and liabilities on contracts to be written in the period until the transfer takes effect. The parties to schemes approved under foreign legislation or involving novations of reinsurance or a captive insurer can apply to the court for an order sanctioning the scheme.

SUP 18.1.5

handbook-guidance
The regulators are likely to consider a novation or a number of novations as amounting toan insurance business transfer only if their number or value were such that the novation was to be regarded as a transfer of part of the business. A novation is an agreement between the policyholder and two insurers whereby a contract with one insurer is replaced by a contract with the other. If an insurer agrees to meet the liabilities (this may include undertaking the administration of the policies) of another insurer by means of a reinsurance contract, including Lloyd's reinsurance to close, this would not constitute an insurance business transfer because the contractual liability remains with the original insurer; nor would an arrangement whereby an insurer offers to renew the policies of another insurer on their expiry date.

SUP 18.1.6

handbook-guidance
Under section 112 of the Act, the court has wide discretion to transfer property and liabilities to the transferee and to make orders in relation to incidental, consequential and supplementary matters.

SUP 18.1.7

handbook-guidance
Amalgamations of friendly societies and transfers of engagements from friendly societies to other bodies (whether or not friendly societies) are governed by part VIII of the Friendly Societies Act 1992 and Schedule 15 to that Act applies.

SUP 18.1.8

handbook-guidance
Legislation in respect of other transactions, for example, cross-border mergers, does not negate the requirements under Part VII of the Act. It is for the firms participating in such transactions to determine whether or not the proposed transfer gives rise to an insurance business transfer. The regulators expect firms proposing such transactions to discuss the proposal with them as soon as practicable.
  • 01/04/2013

SUP 18.2

Insurance business transfers

  • 01/12/2004

Purpose

SUP 18.2.1

handbook-guidance
Transfers may enable firms to manage their affairs more effectively. However they represent an interference in the contracts between a firm and its customers, without the consent of each customer,, and may also affect the rights of third parties. An important protection is the requirement for the consent of the court.

The regulators

SUP 18.2.1A

handbook-guidance
(1) Part VII of the Act prescribes certain statutory functions in relation to insurance business transfer schemes for both the PRA and the FCA. In accordance with the Act, the PRA and the FCA maintain a Memorandum of Understanding, which describes each regulator's role in relation to the exercise of its functions under the Act relating to matters of common regulatory interest and how each regulator intends to ensure the coordinated exercise of such functions. Under the Memorandum of Understanding, the PRA will lead the process for insurance business transfers and will be responsible for specific regulatory functions connected with Part VII applications, including the provision of certificates under section 111 of the Act. Further, the PRA will consult with the FCA both at the outset and throughout the insurance business transfer process. As such, the scheme promoters should first approach the PRA but should also consider whether any aspect of their proposals should be discussed with the FCA at an early stage. Scheme promoters should also consider SUP 18.2.13 G.
(2) By virtue of section 110 of the Act, both the PRA and the FCA are entitled to be heard in the proceedings. The Memorandum of Understanding confirms that both the PRA and the FCA may provide the court with written representations setting out their views on the proposed transfer scheme, for example, by way of a report to the court. Each regulator will decide in relation to each insurance business transfer whether it is necessary or appropriate to prepare a report bearing in mind its objectives and other relevant matters.
(3) As set out in the Memorandum of Understanding, before nominating or approving an independent expert under section 109(2)(b) of the Act or approving the form of a scheme report under section 109(3) the PRA will first consult the FCA. Further, where the PRA is the appropriate regulator it will consult appropriately with the FCA before approving the notices required under the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001(SI 2001/3625).
  • 01/04/2013

SUP 18.2.1B

handbook-guidance
In exercising its functions under the Act, each regulator will, so far as is reasonably possible, act in a way which is compatible with, and most appropriate for advancing, its statutory objectives as set out in the Act and will have regard to the regulatory principles in section 3B of the Act.
  • 01/04/2013

SUP 18.2.5

handbook-guidance
Transfers may have both positive and negative effects on individual consumers.A key concern in this regard for each regulator will be to be satisfy itself that each consumer has adequate information and reasonable time within which to determine whether or not he is adversely affected and, if adversely affected, whether to make representations to the court.

Procedure: initial steps

SUP 18.2.12

handbook-guidance
When an insurance business transfer scheme is being considered, the scheme promoters should discuss the scheme with the appropriate regulator as soon as reasonably practical, to enable the regulators to consider what issues are likely to arise, and to enable a practical timetable for the scheme to be established.
(1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted]

SUP 18.2.13

handbook-guidance
The initial documentaryinformation on the scheme should be provided to the PRA, who will share it with the FCA, and should include its broad outline and its purpose. Each regulator may indicate to the promoters how closely it wishes to monitor the progress of the scheme, including the extent to which it wishes to see draft documentation.

Independent expert: qualifications

SUP 18.2.14

handbook-guidance
Under section 109(2) of the Act a scheme report may only be made by a person:
(1) appearing to the appropriate regulator to have the skills necessary to enable him to make a proper report; and
(2) nominated or approved for the purpose by the appropriate regulator .

SUP 18.2.14A

handbook-guidance
The promoters should ensure that any relevant fees are paid before any application will be considered.
  • 01/04/2013

SUP 18.2.15

handbook-guidance
The general principles set out in SUP 5.4.8 G, for suitability of a skilled person, apply also to the independent expert. The regulators expect the independent expert making the scheme report to be a natural person, who:
(1) is independent, that is any direct or indirect interest or connection he has or has had in either the transferor or transferee should not be such as to prejudice his status in the eyes of the court; and
(2) has relevant knowledge, both practical and theoretical, and experience of the types of insurance business transacted by the transferor and transferee.

SUP 18.2.16

handbook-guidance
For a transfer of long-term insurance business the independent expert should be an actuary familiar with the role and responsibilities of the actuarial function holder and (if the relevant insurance business includes with-profits insurance business) a with-profits actuary.

SUP 18.2.17

handbook-guidance
For a transfer of general insurance business the independent expert should normally be competent at assessing technical provisions and the uncertainties of the liabilities they represent (such as an actuary). Exceptionally, where issues other than the ability of the transferee to meet the liabilities to be transferred are much more significant in assessing the likely effects of the scheme, this criterion might not be applied. In such a case the independent expert would be expected to take advice from an appropriately qualified practitioner about the adequacy of the financial resources of the transferee.

SUP 18.2.18

handbook-guidance
The independent expert would not normally be expected to be knowledgeable:
(1) about general insurance business if the business being transferred is long-term insurance business only; nor
(2) about long-term insurance business if the business being transferred is general insurance business only;
but, where either the transferor or transferee is a composite, he should understand the relevance of the general insurance business to the security of the long-term insurance business policyholders and vice versa and may need to seek independent specialist advice.

Independent expert: appointment

SUP 18.2.19

handbook-guidance
The suitability of a person to act as an independent expert depends on the nature of the scheme and the firms concerned. On the basis of the preliminary information supplied by the scheme promoters (and any other knowledge it has of the circumstances and the firms), the appropriate regulator will consider what skills are needed to make a proper report on the scheme and what criteria should therefore be applied to the choice of independent expert. The appropriate regulator will inform the promoters of any such criteria it is minded to apply.

SUP 18.2.20

handbook-guidance
Under section 107(2) of the Act, the application to the court may be made by the transferor or the transferee or both. As soon as reasonably practical, the intended applicant should choose their nominee for independent expert in the light of any criteria advised by the appropriate regulator. The intended applicant(s) should then advise the appropriate regulator of their choice, unless the appropriate regulator wishes them to defer nomination or to make its own nomination. The notification should be accompanied by reasons why the party considers the nominee to be a suitable person to act as independent expert. Relevant details provided should usually include information about the nominee's experience and qualifications; the proposed terms and conditions of the nominee's appointment, including any remuneration arrangements; and any current or previous professional or commercial arrangements with the transferor or transferee or their associated companies, including the remuneration (direct or indirect) for those arrangements with the nominee and/or with any professional firm or company in which the nominee has or has had any interest..

SUP 18.2.21

handbook-guidance
The regulators may wish to have preliminary discussions with the nominee about the transfer before the appropriate regulator determines if he is suitably qualified to address issues arising from the transfer. The regulators will consider the suitability of the nominee and the appropriate regulator willinform the firm that nominated him whether he has been approved. Since the nature of the scheme is a factor in determining the suitability of the nominee, the appropriate regulator cannot approve a nominee before the broad outlines of the scheme have been determined.

SUP 18.2.22

handbook-guidance
The appropriate regulator may itself nominate the independent expert, either where it indicates that a nomination is not required by the parties, or where it does not approve the parties' own nomination. In either case the appropriate regulatorwill inform the promoters of its nominee.

SUP 18.2.23

handbook-guidance
Firms should co-operate fully with the independent expert and provide him with access to all relevant information and appropriate staff.

Consultation with EEA regulators and/or other foreign regulators

SUP 18.2.23A

handbook-guidance
Under the terms of the Memorandum of Understanding, the PRA will lead when carrying out consultation with EEA regulators and/or other foreign regulators.
  • 01/04/2013

SUP 18.2.24

handbook-guidance
The guidance set out in SUP 18.2.25 G to SUP 18.2.30 G derives from the requirements of the Insurance Directives , the Reinsurance Directive and the associated agreements between EEA regulators. Schedule 12 of the Act implements some of these requirements.

SUP 18.2.25

handbook-guidance
(1) If the transferee is (or will be) an EEA firm (authorised in its Home State to carry on insurance business under the Insurance Directives ) or a Swiss general insurance company, then the appropriate regulator has to consult the transferee's Home State regulator, who has 3 months to respond. It will be necessary for the appropriate regulator to obtain from the transferee's Home State regulator a certificate confirming that the transferee will meet the Home State's solvency margin requirements (if any) after the transfer.
(1A) If the transferee is (or will be) an EEA firm (authorised in its Home State to carry on insurance business under the Reinsurance Directive) it will be necessary for the appropriate regulator to obtain from the transferee's Home State regulator a certificate confirming that the transferee will meet the Home State's solvency margin requirements (if any) after the transfer.
(2) If the transferee is authorised in the United Kingdom, the appropriate regulator will need to certify that the transferee will meet its solvency margin requirements after the transfer. If the appropriate regulator has required of a UK firm a financial recovery plan of the kind mentioned in paragraph 1 of article 38 of the Consolidated Life Directive(2002/83/EC) or paragraph 1 of article 20a of the First Non-Life Directive, or paragraphs 1 and 2 of article 43 of the Reinsurance Directive, the appropriate regulator will not issue a certificate for so long as it considers that policyholders' rights are threatened within the meaning of these paragraphs.

SUP 18.2.26

handbook-guidance
The transferor will need to provide the appropriate regulator with the information that the Home State regulator requires from the appropriate regulator. This information includes:
(1) the transfer agreement or a draft, with:
(a) the names and addresses of the transferor and transferee; and
(b) the classes of insurance business and details of the nature of the risks or commitments to be transferred;
(2) for the business to be transferred (both before and after reinsurance):
(a) the amount of technical provisions;
(b) the amount of premiums (in the most recent financial period); and
(c) for general insurance business, the claims incurred (in the most recent financial period);
(3) details of assets to be transferred;
(4) details of any guarantees (including reinsurance arrangements), whether provided by the transferor or a third party, to protect the provisions for the business transferred against deterioration; and
(5) the states of the risks or the states of the commitmentsof the businessbeing transferred.

SUP 18.2.27

handbook-guidance
If the transferee is not (and will not be) authorised and will be neither an EEA firm nor a Swiss general insurance company, then the appropriate regulator will need to consult the transferee'sinsurance supervisor in the place where the business is to be transferred. The appropriate regulator will need confirmation from this supervisor that the transferee will meet his solvency margin requirements there (if any) after the transfer.

SUP 18.2.28

handbook-guidance
If the transferor is a UK insurer (other than a pure reinsurer)and the business to be transferred includes business carried on from a branch in another EEA State, then the appropriate regulator has to consult the Host State regulator, who has 3 months to respond. The appropriate regulator will need to be given the information that the Host State regulator requires from it. This information should identify the parties to the transfer and include the transfer agreement or draft transfer agreement or a summary containing relevant information, and describe arrangements for settling claims if the branch is to be closed.

SUP 18.2.29

handbook-guidance
If the transferor is a UK insurer and the business to be transferred includes a long-term insurance contract (other than reinsurance) for which the state of the commitment is an EEA state other than the United Kingdom, then the appropriate regulator has to consult the Host State regulator. If the transferor is a UK insurer and the business to be transferred includes a general insurance contract (other than reinsurance) for which the state of the risk is an EEA state other than the United Kingdom, then the appropriate regulator must consult the Host State regulator. The appropriate regulator will need to be given the information that the Host State regulator requires from it. This information should identify the parties to the transfer and include the transfer agreement or draft transfer agreement or a summary containing relevant information. It would be helpful (especially for long-term insurance business) if a draft of the scheme report was also available. The appropriate regulator will also need to have sufficient information about the business proposed to be transferred to be satisfied that the applicants have undertaken sufficient steps to identify the state of the risk or the state of the commitment, as the case may be.The consent of the Host State regulator to the transfer is required, unless he does not respond within 3 months.

SUP 18.2.30

handbook-guidance
Where the transferor is a UK-deposit insurer and, following the transfer, it will no longer be carrying on insurance business in the United Kingdom, the appropriate regulator will need to collaborate with regulatory bodies in the other EEA States in which it is carrying on business to ensure that effective supervision of the business carried on in the EEA continues. The transferor should cooperate with the appropriate regulator and the other regulatory bodies in this process and demonstrate that it will meet the requirements of its regulators following the transfer.

Form of scheme report

SUP 18.2.31

handbook-guidance
Under section 109 of the Act, a scheme report must accompany an application to the court to approve an insurance business transfer scheme. This report must be made in a form approved by the appropriate regulator. The appropriate regulator would generally expect a scheme report to contain at least the information specified in SUP 18.2.33 G before giving its approval.

SUP 18.2.31A

handbook-guidance
When the appropriate regulator has approved the form of a scheme report, the scheme promoter may expect to receive written confirmation to that effect from that regulator.
  • 01/04/2013

SUP 18.2.32

handbook-guidance
There may be matters relating to the scheme or the parties to the transfer that the regulators wish to draw to the attention of the independent expert. The regulators may also wish the report to address particular issues. The independent expert should therefore contact the regulators at an early stage to establish whether there are such matters or issues. The independent expert should form his own opinion on such issues, which may differ from the opinion of the regulators.

SUP 18.2.33

handbook-guidance
The scheme report should comply with the applicable rules on expert evidence and contain the following information:
(1) who appointed the independent expert and who is bearing the costs of that appointment;
(2) confirmation that the independent expert has been approved or nominated by the appropriate regulator ;
(3) a statement of the independent expert's professional qualifications and (where appropriate) descriptions of the experience that fits him for the role;
(4) whether the independent expert has, or has had, direct or indirect interest in any of the parties which might be thought to influence his independence, and details of any such interest;
(5) the scope of the report;
(6) the purpose of the scheme;
(7) a summary of the terms of the scheme in so far as they are relevant to the report;
(8) what documents, reports and other material information the independent expert has considered in preparing his report and whether any information that he requested has not been provided;
(9) the extent to which the independent expert has relied on:
(a) information provided by others; and
(b) the judgment of others;
(10) the people on whom the independent expert has relied and why, in his opinion, such reliance is reasonable;
(11) his opinion of the likely effects of the scheme on policyholders (this term is defined to include persons with certain rights and contingent rights under the policies), distinguishing between:
(a) transferring policyholders;
(b) policyholders of the transferor whose contracts will not be transferred; and
(c) policyholders of the transferee;
(11A) his opinion on the likely effects of the scheme on any reinsurer of a transferor, any of whose contracts of reinsurance are to be transferred by the scheme;
(12) what matters (if any) that the independent expert has not taken into account or evaluated in the report that might, in his opinion, be relevant to policyholders' consideration of the scheme; and
(13) for each opinion that the independent expert expresses in the report, an outline of his reasons.

SUP 18.2.34

handbook-guidance
The purpose of the scheme report is to inform the court and the independent expert, therefore, has a duty to the court. However reliance will also be placed on it by policyholders, by reinsurers,by others affected by the scheme and by the regulators. The amount of detail that it is appropriate to include will depend on the complexity of the scheme, the materiality of the details themselves and the circumstances.

SUP 18.2.35

handbook-guidance
The summary of the terms of the scheme should include:
(1) a description of any reinsurance arrangements that it is proposed should pass to the transferee under the scheme; and
(2) a description of any guarantees or additional reinsurance that will cover the transferred business or the business of the transferor that will not be transferred.

SUP 18.2.36

handbook-guidance
The independent expert's opinion of the likely effects of the scheme on policyholders should:
(1) include a comparison of the likely effects if it is or is not implemented;
(2) state whether he considered alternative arrangements and, if so, what;
(3) where different groups of policyholders are likely to be affected differently by the scheme, include comment on those differences he considers may be material to the policyholders; and
(4) include his views on:
(a) the effect of the scheme on the security of policyholders' contractual rights, including the likelihood and potential effects of the insolvency of the insurer;
(b) the likely effects of the scheme on matters such as investment management, new business strategy, administration, expense levels and valuation bases in so far as they may affect:
(i) the security of policyholders' contractual rights;
(ii) levels of service provided to policyholders; or
(iii) for long-term insurance business, the reasonable expectations of policyholders; and
(c) the cost and tax effects of the scheme, in so far as they may affect the security of policyholders' contractual rights, or for long-term insurance business, their reasonable expectations.

SUP 18.2.37

handbook-guidance
The independent expert is not expected to comment on the likely effects on new policyholders, that is, those whose contracts are entered into after the effective date of the transfer.

SUP 18.2.38

handbook-guidance
For any mutual company involved in the scheme, the report should:
(1) describe the effect of the scheme on the proprietary rights of members of the company, including the significance of any loss or dilution of the rights of those members to secure or prevent further changes which could affect their entitlements as policyholders;
(2) state whether, and to what extent, members will receive compensation under the scheme for any diminution of proprietary rights; and
(3) comment on the appropriateness of any compensation, paying particular attention to any differences in treatment between members with voting rights and those without.

SUP 18.2.39

handbook-guidance
For a scheme involving long-term insurance business, the report should:
(1) describe the effect of the scheme on the nature and value of any rights of policyholders to participate in profits;
(2) if any such rights will be diluted by the scheme, how any compensation offered to policyholders as a group (such as the injection of funds, allocation of shares, or cash payments) compares with the value of that dilution, and whether the extent and method of its proposed division is equitable as between different classes and generations of policyholders;
(3) describe the likely effect of the scheme on the approach used to determine:
(a) the amounts of any non-guaranteed benefits such as bonuses and surrender values; and
(b) the levels of any discretionary charges;
(4) describe what safeguards are provided by the scheme against a subsequent change of approach to these matters that could act to the detriment of existing policyholders of either firm;
(5) include the independent expert's overall assessment of the likely effects of the scheme on the reasonable expectations of long-term insurance businesspolicyholders;
(6) state whether the independent expert is satisfied that for each firm the scheme is equitable to all classes and generations of its policyholders; and
(7) state whether, in the independent expert's opinion, for each relevant firm the scheme has sufficient safeguards (such as principles of financial management or certification by a with-profits actuary or actuarial function holder) to ensure that the scheme operates as presented.

SUP 18.2.40

handbook-guidance
Where the transfer forms part of a wider chain of events or corporate restructuring, it may not be appropriate to consider the transfer in isolation and the independent expert should seek sufficient explanations on corporate plans to enable him to understand the wider picture. Likewise he will need information on the operational plans of the transferee and, if only part of the business of the transferor is transferred, of the transferor. These will need to have sufficient detail to allow him to understand in broad terms how the business will be run.

SUP 18.2.41

handbook-guidance
A transfer may provide for benefits to be reduced for some or all of the policies being transferred. This might happen if the transferor is in financial difficulties. If there is such a proposal, the independent expert should report on what reductions he considers ought to be made, unless either:
(1) the information required is not available and will not become available in time for his report, for instance it might depend on future events; or
(2) otherwise, he is unable to report on this aspect in the time available.
Under such circumstances, the transfer might be urgent and it might be appropriate for the reduction in benefits to take place after the event, by means of an order under section 112 of the Act. Each regulator would wish to consider any such reduction against its statutory objectivesand section 113 of the Actallows the court, on the application of either regulator, to appoint an independent actuary to report on any such post-transfer reduction in benefits.

Notice provisions

SUP 18.2.42

handbook-guidance
Under the Financial Services and Markets Act 2000 (Control of Business Transfers)(Requirements on Applicants) Regulations 2001 (SI 2001/3625), unless the court directs otherwise, notice of the application must be sent to all policyholders of the parties and reinsurers (or a person acting on its behalf) any of whose contracts of reinsurance are proposed to be transferred as part of the insurance business transfer scheme.

It may also be appropriate to give notice to others affected, for example, to anyone with an interest in the policies being transferred who has notified the transferor of their interest.

SUP 18.2.43

handbook-guidance
The regulations referred to in SUP 18.2.42 G require that notice of the application must be published in:
(1) the London, Edinburgh and Belfast Gazettes; and
(2) unless the court directs otherwise, in accordance with requirements in those regulations.
Wider publication may be appropriate in some circumstances.

SUP 18.2.44

handbook-guidance
The regulations referred to in SUP 18.2.42 G require that the appropriate regulator approves in advance the notices sent to policyholders and published in the press.

SUP 18.2.45

handbook-guidance
Where a transfer involves underwriting members of Lloyd's as transferor or transferee, any notice requirements of the Society will also apply.

SUP 18.2.46

handbook-guidance
The regulators are entitled to be heard by the court on any application for a transfer. A consideration for the regulators in determining whether to oppose a transfer would be theirview on whether adequate steps had been taken to tell policyholdersand, as appropriate, other affected persons,about the transfer and whether they had adequate information and time to consider it. The regulators would not normally consider adequate a period of less than six weeks between sending notices to policyholders and the date of the court hearing. Therefore it would be sensible, before requesting fromthe court a waiver of the publication requirements or the requirement to send statements direct to policyholders, to consult the regulators on theirviews about what waivers might be appropriate and what substitute arrangements might be made. The regulators will take into account the practicality and costs of sending notices to policyholders (especially for firms in financial difficulty), the likely benefits for policyholders of receiving notices and the efficacy of other arrangements proposed for informing policyholders (including additional advertising or, where appropriate, electronic communication).

SUP 18.2.47

handbook-guidance
As the consent (or presumed consent) of the Host State is required for a transfer covering contracts for which another EEA State is the state of the risk (for general insurance business) or the state of the commitment (for long-term insurance business), it is advisable to obtain the consent of regulatory body in the Host State to any waiver of publication in that state. The approval of the court will still be required.

Statement to policyholders

SUP 18.2.48

handbook-guidance
It would normally be appropriate to include with the notice referred to in SUP 18.2.42 G a statement setting out the terms of the scheme and containing a summary of the scheme report. Ideally every recipient should understand in broad terms from the summary how the scheme is likely to affect him. This objective will be most nearly achieved if the summary is clear and concise while containing sufficient detail for the purpose. A lengthy summary or one that was hard to understand would not be appropriate. Regulations require the scheme report, the notice and the statement to be made available to anyone requesting them. The internet can be used for this purpose if it is suitable for the person making the request.

SUP 18.2.49

handbook-guidance
Where the transferee is a friendly society, the notice should include information about the meeting at which a special resolution in accordance with paragraph 7 of Schedule 12 to the Friendly Societies Act 1992 is to be voted on, including the date of the meeting, how notice of the meeting is to be given to members and the terms of the special resolution. After the meeting the friendly society should inform the appropriate regulator whether the special resolution has been passed. The court will also need to be informed, so oneway of informing the appropriate regulator may be to include it in the affidavit to the court.

SUP 18.2.50

handbook-guidance
The regulators should be given the opportunity to comment on the statement referred to in SUP 18.2.48 G before it is sent, unless the promoters have been informed in writing that this is not necessary.

Assessment of scheme and the regulators' report(s) to the court

SUP 18.2.51

handbook-guidance
The assessment is a continuing process, starting when the scheme promoters first approach the appropriate regulator about a proposed scheme. Each regulator will have an interest in assessing the scheme.Among the considerations that may be relevant to both the depth of consideration each gives to, and each regulator's opinion on, a scheme are:
(1) the potential risk posed by the transfer to its statutory objectives;
(2) the purpose of the scheme;
(3) how the security of policyholders' (who include persons with certain rights and contingent rights under the policies) contractual rights appears to be affected;
(4) how the scheme compares with possible alternatives, particularly those that do not require approval (whether by the court or the appropriate regulator );
(5) how policyholders' rights and reasonable expectations appear to be affected;
(6) the compensation offered to policyholders for any loss of rights or expectations;
(6A) how any reinsurer of a transferor, any of whose contracts of reinsurance are to be transferred by the scheme may be affected;
(7) how for other persons (besides policyholders and reinsurers) who have an interest in policies, their rights and the security of those rights appear to be affected;
(8) the opportunity given to policyholdersand other persons affected by the schemeto consider the scheme, that is whether they have been properly notified, whether they have had adequate information and whether they have had adequate time to consider that information;
(9) the opinion of the independent expert;
(10) for a transfer that involves underwriting members or former members of Lloyd's as transferor or transferee, the effect on the Society;
(11) the views of other regulatory bodies consulted in connection with the proposed transfer; and
(12) any views expressed by policyholders, reinsurers or any other affected parties.

SUP 18.2.52

handbook-guidance
The scheme report will be an important factor in the view each of the regulators forms on a scheme. Considerable reliance will be placed on the opinions of the independent expert and the reasons for them. However each regulator will form its own view taking into account other relevant information and having regard to its statutory objectives.

SUP 18.2.53

handbook-guidance
The regulators are likely to object to a scheme if they concludethat it is unfair to a class of policyholders, unless the policyholders of that class have approved the scheme on the basis of information the regulators consider to be adequate, clear and accurate.

SUP 18.2.53A

handbook-guidance
If at any time the regulators, or either of them, conclude that policyholders and/or, as appropriate, other relevant affected persons have not had adequate information and/or sufficient time to consider information, they will seek to resolve such issues with the scheme promoters. This may require further notification. If either regulator remains unsatisfied that such policyholders and/or other persons have received adequate information and sufficient time to consider it they are likely to object to a transfer.
  • 01/04/2013

SUP 18.2.54

handbook-guidance
Either regulator may exercise its other powers under the Act, if it considers this a more effective method of advancing its statutory objectives.

SUP 18.2.55

handbook-guidance
Neither regulator is required under its statutory objectives to object to a scheme merely because some other scheme might have been in the better interests of policyholders, if the scheme itself is not adverse to their interests. However there may be circumstances where either regulator mightrequire a firm to consider or to implement an alternative scheme.

SUP 18.2.56

handbook-guidance
Where a transfer involves underwriting members or former members of Lloyd's as transferor or transferee, the appropriate regulator will consult the Society. Where the business of a syndicate is being transferred, the transfer involves all members participating in the relevant syndicate years.

SUP 18.2.57

handbook-guidance
Regulations require that copies of the application to the court, the scheme report and the statement for policyholders referred to in SUP 18.2.48 G are also given to the appropriate regulator.

SUP 18.2.57A

handbook-guidance
The provision of reports from one or other (or both) regulators to assist the court is common practice. In most cases, a first report will be provided to the court in advance of the directions hearing and a second report will be provided to the court in advance of the final hearing. Where additional information needs to be given to the court by either regulator, this will be provided using the most appropriate format for the circumstances in each case, and may include the provision of one or more additional reports to the court.
  • 01/04/2013

SUP 18.2.57B

handbook-guidance
When assessing a proposed scheme under Part VII of the Act each regulator will, taking into account all relevant matters in each case, consider whether it should provide a report to the court. As it will lead the Part VII process for insurance business transfers, the PRA will usually provide such a report.
  • 01/04/2013

SUP 18.2.57C

handbook-guidance
In order to enable each of the regulators to assess the scheme and to facilitate the process, the parties to the proposed scheme will need to ensure timely provision of all relevant information to each regulator for its consideration of that scheme.
  • 01/04/2013

SUP 18.2.57D

handbook-guidance
In relation to the matters at SUP 18.2.57A G to SUP 18.2.57C G above and to facilitate the provision to the court of a first report in advance of a directions hearing, near final versions of relevant documents will need to be made available to each of the regulators as soon as practicable. Scheme promoters should be aware that where such documents are produced less than six weeks before the date set for the hearing the regulators will be less likely to be in a position to complete their assessment in advance of the hearing. Final versions of any such documents should be provided as soon as they are available.
  • 01/04/2013

SUP 18.2.57E

handbook-guidance
Relevant documents in SUP 18.2.57D G above will usually include:
(1) the scheme report;
(2) if the business to be transferred includes long-term insurance business, copies of reports on the transfer by the actuarial function holder and (if the insurance business includes with-profits business) the with-profits actuary of both firms;
(3) draft notices under article 3 of the Financial Services and Markets Act 2000 (Control of Business Transfers)(Requirements on Applicants) Regulations 2001(SI 2001/3625), as amended by the Financial Services and Markets Act 2000 (Control of Business Transfers)(Requirements on Applicants) (Amendment) Regulations 2008 (SI 2008/1467) and the Financial Services and Markets Act 2000 (Amendments to Part 7) Regulations 2008 (SI 2008/1468);
(4) where a proposed transfer involves an underwriting member or former underwriting member of the Society as transferor or transferee, a copy of the resolution or certificate required by article 4 of the Financial Services and Markets Act 2000(Control of Transfers of Business Done at Lloyd's) Order 2001 (SI 2001/3626), as amended by the Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd's) (Amendment) Order 2008 (SI 2008/1725;
(5) any witness statements or other evidence which the parties to the proposed transfer intend to submit to the court for the directions hearing;
(6) the draft order.
  • 01/04/2013

SUP 18.2.57F

handbook-guidance
Matters included at SUP 18.2.57EG (5) should include sufficient information to enable:
(1) the appropriate regulator to decide which other non-UK regulators must be consulted. This information should be provided to the appropriate regulator as soon as it is available;
(2) the appropriate regulator to decide whether to approve the notices at SUP 18.2.57EG (3); and
(3) each regulator to form an opinion on any matters arising in connection with press advertising and notifications, including in relation to any waivers the parties to the proposed transfer intend to seek from the court under article 4 of those regulations.
  • 01/04/2013

SUP 18.2.57G

handbook-guidance
A copy of any order made at the directions hearing should be provided by the applicant to the appropriate regulator as soon as it is available.
  • 01/04/2013

SUP 18.2.57H

handbook-guidance
In relation to the matters at SUP 18.2.57A G to SUP 18.2.57C G and to facilitate the provision to the court of a second or final report in advance of the final hearing, near-final versions of relevant documents will need to be made available to each of the regulators as soon as practicable. Scheme promoters should be aware that where such documents are produced less than six weeks before the date set for that hearing, the regulators will be less likely to be in a position to complete their assessment in advance of the hearing. Final versions of any such documents should be provided as soon as they are available.
  • 01/04/2013

SUP 18.2.58A

handbook-guidance
Relevant documents in SUP 18.2.57H G will usually include:
(1) any witness statements or other evidence which the parties to the proposed transfer intend to submit to the court for the final hearing;
(2) the notice or notices published and sent in accordance with the order of the court at SUP 18.2.57G G;
(3) proof of publication of the notice or notices at (2);
(4) any final and/or additional reports of the independent expert;
(5) any objections or other representations received from policyholders and/or other affected persons together with any responses to any such objections or representations;
(6) the draft final order.
  • 01/04/2013

SUP 18.2.59A

handbook-guidance
Provided that any necessary consents have been obtained in respect of confidential information, where either regulator has made a report it will give a copy of its report to the court and will give a copy of its report as filed with the court to each of the parties to the proposed transfer as soon as practicable after such filing.
  • 01/04/2013

SUP 18.2.59B

handbook-guidance
Provided that any necessary consents have been obtained in respect of confidential information, the parties to the proposed transfer should give a copy of any report at SUP 18.2.59A G to the independent expert.
  • 01/04/2013

SUP 18.2.59C

handbook-guidance
The parties to the proposed transfer should, in each case, consider whether it would facilitate the effective running of the process to give copies to any other person, including any person who alleges that he would be adversely affected by the carrying out of the scheme and intends to be heard in accordance with section 110 of the Act. Where any such provision is to be made, any necessary consents should first be obtained in respect of confidential information.
  • 01/04/2013

SUP 18.2.59D

handbook-guidance
The court is likely to wish to know the opinion of each of the regulators. Each regulator will decide in each case, taking all relevant matters into account, the most effective method to make known to the court its opinion.
  • 01/04/2013

SUP 18.2.59E

handbook-guidance
Where either regulator has indicated to the parties to the proposed transfer that it intends to appear at any hearing before the court in relation to a proposed scheme under Part VII of the Act a copy set of the bundle of documents filed with the court should be provided to it as soon as practicable.
  • 01/04/2013

Post-transfer advertising

SUP 18.2.61

handbook-guidance
Under section 114 of the Act the court must direct that notice of the transfer be published by the transferee in any EEA State other than the United Kingdom which is the state of the commitment or the state of the risk as regards any policy included in the transfer which evidences a contract of insurance (other than a contract of reinsurance). The regulators would expect the transferee to publish notice in at least one national newspaper in each relevant EEA State. Such publication should include the notification of the transfer to the policyholders in the state of the commitment or the state of the risk. The parties should also be mindful of relevant provisions of the national laws of the relevant state of the commitment or the state of the risk.
  • 01/04/2013

SUP 18.2.62

handbook-guidance
Under section 114A of the Act the court may direct that notice of a transfer be published by the transferee in any EEA State which is the state of the commitment or the state of the risk as regards any policy included in the transfer which evidences a contract of reinsurance.
  • 01/04/2013

SUP 18.3

Insurance business transfers outside the United Kingdom

  • 01/12/2004

Purpose

SUP 18.3.1

handbook-guidance
Under section 115 of the Act, the appropriate regulator has the power to give a certificate confirming that a firm possesses any required minimum margin, to facilitate an insurance business transfer to the firm under overseas legislation from a firm authorised in another EEA State or from a Swiss general insurance company. This section provides guidance on how the appropriate regulator would exercise this power and on related matters.

Appropriate regulator response to proposal

SUP 18.3.1A

handbook-guidance
Unless otherwise expressly stated by the appropriate regulator, all the procedural aspects for dealing with insurance business transfers outside the United Kingdom should be discussed by firms with the PRA in the first instance.
  • 01/04/2013

SUP 18.3.2

handbook-guidance
Under cooperation agreements between EEA regulators, if it has serious concerns about the proposed transferee, the appropriate regulator should inform the regulatory body of the transferor within 3 months of the original request from that regulatory body. The appropriate regulator is not obliged to reply, but if it does not, its opinion is taken to be favourable. Although the protocol does not apply to Switzerland, the appropriate regulator is required to cooperate with the Swiss regulatory body and would apply similar principles to a proposed transfer from a Swiss general insurance company.

SUP 18.3.3

handbook-guidance
The information that the regulatory body of the transferor is required to supply will normally be sufficient for the appropriate regulator to determine whether the transfer is likely to have a material effect on the transferee.

SUP 18.3.4

handbook-guidance
If the effect of the transfer is not likely to be material and the appropriate regulator does not already have serious concerns about the transferee, the appropriate regulator can reply favourably.

SUP 18.3.5

handbook-guidance
If the effect of the transfer may be material, the appropriate regulator will need to consider whether to request a scheme of operations or other information from the proposed transferee to assist in determining whether the likely effect of the transfer is such that the appropriate regulator should have serious concerns.

SUP 18.3.6

handbook-guidance
If the effect of the transfer may have a material adverse effect on the transferee or the security of policyholders, the appropriate regulator will consider whether it is appropriate to exercise its powers under the Act to achieve its statutory objectives .

SUP 18.4

Friendly Society transfers and amalgamations

  • 01/12/2004

Purpose

SUP 18.4.1

handbook-guidance
It is for the committee of management of a friendly society to decide whether to recommend an amalgamation or a transfer of engagements to the society's members. This section provides some guidance on the procedures to be followed and the information to be provided to a friendly society's members so that they are appropriately informed before they exercise their right to vote on the proposals.

General considerations

SUP 18.4.1A

handbook-guidance
In general, although the legislation governing transfers of engagements involves friendly societies is the Friendly Societies Act 1992, similar issues arise in these transfers as in insurance business transfers under Part VII of the Act and so the regulators would expect firms to be subject to a similar process followed under the Act. Accordingly, firms should usually first discuss the procedural aspects for dealing with friendly society transfers and amalgamations with the PRA. The PRA will consult the FCA as required by the Friendly Societies Act 1992, or as may otherwise appear to be appropriate.
  • 01/04/2013

SUP 18.4.2

handbook-guidance
Friendly societies are encouraged to discuss a proposed transfer or amalgamation with the appropriate authority, at an early stage to help ensure that a workable timetable is developed. This is particularly important where there are notification requirements for supervisory authorities in EEA States other than the United Kingdom, or for an amalgamation where additional procedures are required.

SUP 18.4.3

handbook-guidance
The regulators will want to satisfy themselvesthat after an amalgamation or a transfer the business will be prudently managed and continue to comply with all applicable requirements.

SUP 18.4.4

handbook-guidance
For a transfer to another friendly society, if the conditions of 87(1) and 87(2) of the Friendly Societies Act 1992 are met a report is required from the appropriate actuary of the transferee to confirm that it will meet the necessary margin of solvency. Where the conditions of 87(1) and 87(3) are met the appropriate authority may require a report from the appropriate actuary of the transferee to confirm that it will have an excess of assets over liabilities.

SUP 18.4.5

handbook-guidance
For a transfer of long-term insurance business, the appropriate authority may, under section 88 of the Friendly Societies Act 1992, require a report from an independent actuary on the terms of the proposed transfer and on his opinion of the likely effects of the transfer on long-term policyholder members of either the transferor or (if it is a friendly society) the transferee. A summary is included in the statement sent to members (see SUP 18.4.13 G) and the full report is required to be made available to anyone on payment of a reasonable fee. The general principles in SUP 18.2.32 G to SUP 18.2.40 G apply to the independent actuary's report.

SUP 18.4.6

handbook-guidance
Under the Friendly Societies Act 1992 the appropriate authority is required to confirm a proposed transfer of engagements. It will do so only where it is satisfied that the transfer is in the interests of the members of each friendly society participating in the transfer (see SUP 18.4.25 G (2)(b)). The appropriate authoritywill therefore ask that the participating societies' actuaries confirm that the transfer is in the interests of the members.

SUP 18.4.7

handbook-guidance
Under the Friendly Societies Act 1992, members will normally have the opportunity to vote on a proposed transfer or amalgamation (SUP 18.4.11 G and SUP 18.4.12 G describe exceptions). A friendly society has to ensure that, before casting their votes, its members are clearly and fully informed of the terms on which the amalgamation or transfer of engagements is to take place and that they have all the information needed to understand how their interests will be affected. If the society's rules permit, delegates can vote except on an "affected members' resolution" under section 86. The appropriate authority may not confirm an amalgamation or a transfer if it considers that information material to the members' decision was not made available to all the members eligible to vote.

SUP 18.4.8

handbook-guidance
Amendments to a friendly society's registered rules may be necessary to permit a transfer to it. The FCA will need to be consulted in the usual way about registration of the appropriate rules. Similarly for an amalgamation, each of the amalgamating societies has to approve the memorandum and rules of the new society and the requirements of schedule 3 to the Friendly Societies Act 1992 have to be met. It will be necessary to allow adequate time for these processes.

SUP 18.4.9

handbook-guidance
For an amalgamation the successor society, and for a transfer the transferee, may need to apply for permission, or to vary its permission, under Part 4Aof the Act. The regulators will need sufficient time before a transfer is confirmedto consider whether any necessary permission or variation should be given. If the transferee is an EEA firm or a Swiss general insurance company, then confirmation will be needed from its Home State regulator that it meets the Home State's solvency margin requirements (see SUP 18.4.25 G (3)).

SUP 18.4.10

handbook-guidance
It is likely that the information sent to members will include a statement explaining the reasons for the amalgamation or transfer and the choice of partner. Although this is not a statutory statement and not subject to either regulator's approval, the regulator's views on the content of the statement will be a factor that the appropriate authority will take into account beforeconsidering whether to confirm the amalgamation or transfer. A friendly society will therefore find it helpful to consult the regulators about the content of such a statement.

Exercise of discretion by the appropriate authority

SUP 18.4.11

handbook-guidance
The appropriate authority has discretion under section 86(3)(b) of the Friendly Societies Act 1992 to allow a transferee society to resolve to undertake to fulfil the engagements of a transferor society by resolution of the committee of management, rather than by special resolution. Among the issues on which the appropriate authority will wish to be satisfied before exercising this discretion, are that the transfer will be in the interests of the members of both societies and that the transfer will not mean a change of policy by the transferee society. The appropriate authority is unlikely to exercise this discretion unless the transferee is significantly larger than the business to be transferred.

SUP 18.4.12

handbook-guidance
The appropriate authority has discretion under section 89 of the Friendly Societies Act 1992 to modify some of the requirements for a transfer of engagements from a friendly society, on the application of a specified number of its members, if it is satisfied that it is expedient to do so in the interests of its members or potential members.

Schedule 15 statement to members

SUP 18.4.13

handbook-guidance
Schedule 15 to the Friendly Societies Act 1992 requires a statement to be sent to every member of a friendly society entitled to vote on a transfer or amalgamation. Among other matters this statement has to cover the financial position of the friendly society and every other participant in the transfer or amalgamation. The members should be provided with sufficient financial information about the respective financial positions of the participants to gain an understanding of the relative financial strengths and key features of the participants. The statement has to include a summary of any actuary's report under section 88, though the appropriate authority may direct that the summary is to be provided separately if inclusion appears impractical.

SUP 18.4.14

handbook-guidance
The financial information provided under SUP 18.4.13 G would normally contain comparative statements of balance sheets at the same date, and include main investments, reserves and funds or technical provisions, with details of the number of members of each participant as at the balance sheet date and the premium income of the relevant fund of each participant during the financial year to which the balance sheet relates. SUP 18.4.15 G to SUP 18.4.18 G give further guidance on the financial information to be included.

SUP 18.4.15

handbook-guidance
If the information relates to a position some time in the past, the information should state that there has been no significant change or include a clear description of the changes. Differences in accounting policies and reporting requirements could lead to the loss of some comparability between participants. Such differences and their estimated financial effects (if any) should be explained.

SUP 18.4.16

handbook-guidance
The information should state whether any of the participants has any significant future capital commitments. The appropriate authority will require it to state that the transfer of engagements or amalgamation will not conflict with any contractual commitment by a society, any subsidiary or any body jointly controlled by it and others.

SUP 18.4.17

handbook-guidance
Brief details should be given of the date of the last actuarial valuation and the position revealed (surplus/deficit, necessary margin of solvency and free assets) for each participant.

SUP 18.4.18

handbook-guidance
The appropriate authority may require confirmation from the auditors of either friendly society involved in the transfer or amalgamation about the reasonableness of any part of the information in the statement. For instance such confirmation would normally be required if the financial information relates to a date more than six months previously.

SUP 18.4.19

handbook-guidance
The statement is required to include particulars of:
(1) any interest of the members of the committee of management in the amalgamation or transfer; and
(2) any compensation or other consideration proposed to be paid to committee members or other officers of the society and to the officers of every other society or person participating in the amalgamation or transfer.
Under section 92 of the Friendly Societies Act 1992, any compensation must be approved by a special resolution, separate from any resolution approving other terms of the amalgamation or transfer. This enables members to vote on this as a separate issue.

SUP 18.4.20

handbook-guidance
Under schedule 15 to the Friendly Societies Act 1992, the appropriate authority may require the statement to include any other matter. Under this provision, inclusion of the terms on which the amalgamation or the transfer of engagements is to be made will usually be required.

SUP 18.4.21

handbook-guidance
The statement should be clearly separate from other information sent to members. It has to be approved by the appropriate authority and if it is not in a self-contained document, the approved element should appear in a separate section.

SUP 18.4.22

handbook-guidance
SUP 18 Annex 1 provides an example of the information for members required by Schedule 15.

Confirmation procedures and criteria

SUP 18.4.23

handbook-guidance
Under the Friendly Societies Act 1992:
(1) when the members of a transferor society have approved the transfer of its engagements by passing a special resolution and the transferee has approved the transfer (by passing a resolution where the transferee is a friendly society); or
(2) when two or more societies have approved a proposed amalgamation by passing a special resolution;
it, or they jointly, must then obtain confirmation by the appropriate authority of the transfer. Notice of the application will need to be published in one or more of the London, Edinburgh or Belfast Gazettes and other newspapers as directed by the appropriate authority. If the appropriate authority confirms a transfer, then the FCAwill register the society's instrument of transfer after receiving an application on the appropriate form by the transferor society and the transferee. If the appropriate authority confirms an amalgamation, the FCA will register the successor society. All the property, rights and liabilities pass on the transfer date specified by the appropriate authority.

SUP 18.4.24

handbook-guidance
For a directive friendly society, if the transfer or amalgamation includes policies where the state of the risk or the state of the commitment is an EEA State other than the United Kingdom, consultation with the Host State regulator is required and SUP 18.2.25 G to SUP 18.2.29 G apply (for an amalgamation they apply as if the business of the amalgamating societies is to be transferred to the successor society). Paragraph 6(1) of Schedule 15 to the Friendly Societies Act 1992 requires publication of the application to the appropriate authority for confirmation of an amalgamation or transfer and the appropriate authority may require the notice of the application to be published in two national newspapers in the Host State.

SUP 18.4.25

handbook-guidance
The criteria that the appropriate authority must use in determining whether to confirm a proposed amalgamation or transfer are set out in schedule 15 to the Friendly Societies Act 1992. These criteria include that:
(1) confirmation must not be given if the appropriate authority considers that:
(a) there is a substantial risk that the successor society or transferee will be unable lawfully to carry out the engagements to be transferred to it;
(b) information material to the members' decision about the amalgamation or transfer was not made available to all the members eligible to vote;
(c) the vote on any resolution approving the amalgamation or transfer does not represent the views of the members eligible to vote; or
(d) some relevant requirement of the Friendly Societies Act 1992 or the rules of any of the participating societies was not fulfilled (but it can modify some requirements and direct that certain failures may be disregarded, see SUP 18.4.12 G and SUP 18.4.27 G);
(2) the appropriate authority must be satisfied that:
(a) the transferee or successor society will have any permissions necessary under Part 4Aof the Act;
(b) for a transfer, it is in the interests of the members of each friendly society participating in it (see SUP 18.4.6 G); and
(c) for a directive friendly society where a transfer includes policies where the state of the risk or the state of the commitment is an EEA State other than the United Kingdom, the Host State regulator has been notified of the transfer and has consented or has not refused consent to the transfer; and
(3) for a transfer, the transferee possesses the necessary margin of solvency after taking the proposed transfer into account or, where it is not required to maintain a necessary margin of solvency, possesses an excess of assets over liabilities (for a transferee that is a Swiss general insurance company or an EEA firm, this is evidenced by a certificate from its home state regulator).

SUP 18.4.26

handbook-guidance
If authorisation or a Part 4A permission is needed, the appropriate authority will need to consider the application for authorisation or permission in the usual way. If the authorisation or permission is refused, confirmation cannot be given even if all the other criteria are met.

SUP 18.4.27

handbook-guidance
The appropriate authority may (as an alternative to refusing confirmation) direct the society or societies to remedy certain procedural defects in a proposed transfer or amalgamation, and after they have been remedied confirm the application. If it appears to the appropriate authority that failure to meet a "relevant requirement" of the Friendly Societies Act 1992 or the rules of the friendly society could not be material to the members' decision, then it may direct that this failure is to be disregarded.

Confirmation procedures: representations

SUP 18.4.28

handbook-guidance
Any interested party has the right to make representations to the appropriate authority about an application for confirmation of a transfer or amalgamation. This includes any person (whether a member of the friendly society or not) who claims that he would be adversely affected by the amalgamation or transfer. The person making the representations should state clearly why he or she claims to be an interested party and the ground or grounds to which the representations are directed.

SUP 18.4.29

handbook-guidance
Written representations, or written notice of a person's intention to make oral representations, or both, are required to reach the appropriate authority by the date published in the relevant Gazettes and other newspapers. Those giving notice of intent to make oral representations are advised to state the nature and general grounds of the oral representations they intend to make. Persons who make written representations but subsequently decide also to make oral representations are required, nevertheless, to give notice of that intention, in writing, to the appropriate authority by the same date.

SUP 18.4.30

handbook-guidance
The appropriate authority will send copies of all written representations to the society(ies), and will afford them an opportunity to comment on the representations. It may consider the written representations and a society's response to them, before the date set for hearing oral representations. A synopsis of the written representations (probably in the form of a summary of each of the points made and the numbers of persons making each point) and a society's responses will be made available to those participating in the hearing. This is intended to inform those making oral representations of the points already being considered by the appropriate authority.

SUP 18.4.31

handbook-guidance
The regulators expect that any documents referred to in a society's comments will be made available by the society for inspection at its registered office and, if reasonably possible, at the venue of the hearing on the date of the hearing. However if a society applies to put documents which it considers to be sensitive to the regulator(s) in confidence, the regulators will balance any disadvantage this might cause interested parties in making representations against the commercial damage that publication of the documents might cause, and the appropriate authoritymay permit the documents or sensitive parts of them not to be available for inspection.

Confirmation hearing

SUP 18.4.32

handbook-guidance
Interested parties may be represented and may make collective representations. Such arrangements should be notified to the appropriate authority in advance to enable it to make appropriate arrangements.

SUP 18.4.33

handbook-guidance
The hearing referred to in SUP 18.4.30 G will be at a time and place that will be notified to the participants and will be conducted by the appropriate authority's representatives. The hearing may last longer than one day and may be adjourned. The appropriate authority will try to tell participants when they may expect to make their representations and when the society may be expected to respond.

SUP 18.4.34

handbook-guidance
The appropriate authority expects that oral hearings will be held in public though this is not required. At the start members of the general public and the press will be asked to wait outside while participants are asked if any of them has good reason to object to the admission of the general public or the press. Unless an objection by a participant is upheld by the appropriate authority'srepresentatives, the press and the general public will then be admitted, within the limits of the space available. However, the appropriate authority's representatives may decide that parts of the hearing will be in private if that appears to them to be desirable.

SUP 18.4.35

handbook-guidance
The procedure will be informal. All participants will be expected to speak concisely and avoid repetition. The appropriate authoritywill, as far as practicable, help those who are not professionally represented. Those taking the hearing may question the participants. The sequence of events will normally be broadly:
(1) any preliminary matters (such as the admission of the public or other procedural questions) will be dealt with;
(2) the chair of the hearing will introduce the proceedings;
(3) the society representatives will be invited to speak on the application, including a description of the events at the meeting at which the resolution to amalgamate or transfer was put to the members, a statement of the voting on the resolution, and any other matters which they wish to introduce at that stage;
(4) the other participants will be invited to speak to their representations. The appropriate authority expects to call them in order of a list arranged, so far as possible, by subject matter;
(5) the society representatives will be invited to reply to, or comment on, the points made by the other participants; and
(6) the other participants will be invited to comment on the society replies.

SUP 18.4.36

handbook-guidance
The above procedure may be varied according to the circumstances at the hearing, and is intended only as a guide. The hearing may be adjourned if the appropriate authority's representatives consider that necessary to enable facts to be checked or additional information to be obtained.

SUP 18.4.37

handbook-guidance
The appropriate authority will not decide whether to confirm the transfer or amalgamation at the hearing. A copy of its written decision, including its findings on the points made in representations, will be sent to the society(ies) and to those making representations. It will also be available to any other person on request and may be published.

SUP 18 Annex 1

Friendly Society transfer or amalgamation (Information requirements related to Schedule 15 Friendly Societies Act 1992) (This belongs to SUP 18.4.22G)

  • 01/12/2004

handbook-guidance

Export chapter as

SUP App 2

Insurers: Regulatory intervention points and run-off plans

SUP App 2.1

Application

  • 31/12/2004

SUP App 2.1.1

handbook-rule
SUP App 2.1 to 2.15 apply to an insurer, unless it is:
(1) a Swiss general insurer; or
(2) an EEA-deposit insurer; or
(3) an incoming EEA firm; or
(4) an incoming Treaty firm.

SUP App 2.1.2

handbook-guidance
SUP App 2.1 to 2.15 apply to every friendly societythat is an insurer.

SUP App 2.1.3

handbook-rule
SUP App 2.16 applies to the Society.

SUP App 2.1.4

handbook-guidance
SUP App 2.15 applies to an insurer carrying on with-profits business, but only if COBS 20.2.53 R (Ceasing to effect new contracts of insurance in a with-profits fund) also applies.

SUP App 2.2

Interpretation

  • 31/12/2004

SUP App 2.2.1

handbook-rule

For the purpose of SUP App 2.1 to 2.14:

  1. (1) "capital resources":
    1. (a) in relation to a non-directive friendly society, has the meaning given to "margin of solvency" in rule 4.1(4) of IPRU(FSOC);
    2. (b) in relation to a participating insurance undertaking, means P+T, where P and T have the meanings given by INSPRU 6.1.45R (3)(a) and (e) respectively, as calculated in accordance with INSPRU 6.1.43 R ; and
    3. (c) in relation to any other firm, means the firm's capital resources as calculated in accordance with GENPRU 2.2.17 R;
  2. (2) "guarantee fund":
    1. (a) in relation to a non-directive friendly society, has the meaning given to that term in IPRU(FSOC);
    2. (b) in relation to a participating insurance undertaking, means the amount of capital resources which that firm must hold to comply with INSPRU 6.1.45R (2);
    3. (c) in relation to a firm which is not covered by (a) or (b), carrying on general insurance business, means the amount of capital resources which that firm must hold to comply with GENPRU 2.2.34 R; and
    4. (d) in relation to a firm which is not covered by (a) or (b), carrying on long-term insurance business, means the amount of capital resources which that firm must hold to comply with GENPRU 2.2.33 R;
  3. (3) "material transaction" means a transaction (when aggregated with any similar transactions) in which:
    1. (a) the price actually paid or received for the transfer of assets or liabilities or the performance of services; or
    2. (b) the price which would have been paid or received had that transaction been negotiated at arm's length between unconnected parties;
    3. exceeds:
    4. (c) in the case of a firm which carries on long-term insurance business, but not general insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its long-term insurance business, excluding property-linked liabilities and net of reinsurance ceded; or
    5. (d) in the case of a firm which carries on general insurance business, but not long-term insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its general insurance business, net of reinsurance ceded; or
    6. (e) in the case of a firm which carries on both long-term insurance business and general insurance business:
      1. (i) where the transaction is in connection with the firm's long-term insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its long-term insurance business, excluding property-linked liabilities and net of reinsurance ceded; and
      2. (ii) in all other cases, the sum of €20,000 and 5% of the firm's liabilities arising from its general insurance business, net of reinsurance ceded; and
  4. (4) "required margin of solvency":
    1. (a) in relation to a non-directive friendly society, has the meaning given to that term in IPRU(FSOC);
    2. (b) in relation to a participating insurance undertaking, means R-S-U, where R, S and U have the meanings given by INSPRU 6.1.45R (3)(c), (d) and (f) respectively;
    3. (c) in relation to a firm which is not covered by (a) or (b), carrying on general insurance business, means the general insurance capital requirement applicable to that firm; and
    4. (d) in relation to a firm which is not covered by (a) or (b), carrying on long-term insurance business, means the long-term insurance capital requirement applicable to that firm.

SUP App 2.2.2

handbook-guidance


The calculation of each of the base capital resources requirement, the long-term insurance capital requirement and the general insurance capital requirement is set out in GENPRU 2.1 . The calculation of each of the "guarantee fund" and "required margin of solvency" for non-directive friendly societies is set out in chapter 4 of IPRU(FSOC).

SUP App 2.3

Purpose

  • 31/12/2004

SUP App 2.3.1

handbook-guidance
To fulfil its obligations under the Insurance Directives, and as part of the PRA's risk-based approach to supervision, there are certain times when the PRA needs to monitor a firm more closely than it normally would. This is so the PRA can fulfil its function of supervising the safety and soundness of firms properly and meet the statutory objective of securing an appropriate degree of protection for policyholders .

SUP App 2.3.2

handbook-guidance
The rules in SUP App 2.1 to 2.14require a firm to submit reports and information to the PRA when:
(1) a firm is failing to satisfy threshold condition 4D or 5D as applicable, and its capital resources have fallen below its required margin of solvency, or its guarantee fund; or
(2) the capital resources of a firm have fallen below its capital resources requirement; or
(3) a firm has decided to cease to effect new contracts of insurance; or
(4) a firm is going through periods of potential uncertainty, for example, when it has come under the control of a new parent undertaking or following the grant or variation of permission.

SUP App 2.3.3

handbook-guidance
The PRA may also ask a firm to submit reports and information to it when the firm's capital resources fall below the level advised in individual capital guidance given to the firm.

SUP App 2.3.4

handbook-guidance
In accordance with the Insurance Directives, a firm whose capital resources have fallen below its required margin of solvency, or its guarantee fund, is required, by the rule set out in this appendix, to submit a scheme of operations, together with an explanation of how its capital resources will be adequately restored. In order to secure an appropriate degree of protection for policyholders , the PRA applies the rule in this appendix to firms to which the provisions of the Insurance Directives would not otherwise apply.

SUP App 2.3.5

handbook-guidance
A firm which is entering into run-off is required to submit a scheme of operations, including an explanation of how its liabilities to policyholders will be met in full. Where the capital resources of such a firm subsequently fall below its required margin of solvency, the firm is required to submit a plan for restoration.

SUP App 2.3.6

handbook-guidance
Following a change in control, or the grant or variation of permission, the reports submitted help the PRA to identify when a firm departs from the scheme of operations submitted as part of the notification of a change in control, or an application for the grant or variation of permission, and on which basis such notification or application was approved.

SUP App 2.3.7

handbook-guidance
Principle 4 of the PRA's Principles for Businesses provides that firm's should hold adequate financial resources, while GENPRU 1.2.26 R requires a firm to maintain overall financial resources which are adequate to ensure that there is no significant risk that it cannot meet its liabilities as they fall due. In considering these requirements, a firm may decide to maintain capital resources above the level advised in individual capital guidance given by the PRA , or, if no individual capital guidance has been given, above its capital resources requirement. The amount of any such additional capital resources held is at the discretion of the firm. However, the extent to which a firm matches these additional capital resources to the volatility of its capital base, in conjunction with the strength of its systems and controls environment, is likely to affect the frequency with which it is subject to intervention under this appendix.

SUP App 2.3.8

handbook-guidance
In relation to a firm carrying on with-profits insurance business, action which it takes either to restore its capital resources to the levels set by the intervention points in this appendix, or to prevent its capital resources falling below those points, should be consistent with Principle 6 of the FCA's Principles for Businesses. The FCA's Principle 6 requires a firm to pay due regard to the interests of its customers and treat them fairly.

SUP App 2.3.9

handbook-guidance
These rules are in addition to the other rules and guidance in SUP, in particular SUP 2 (Information gathering by the appropriate regulator on its own initiative), SUP 15 (Notifications to the FCA or PRA), SUP 16(Reporting requirements) and the Principles for Businesses (PRIN).

SUP App 2.4

Capital resources below guarantee fund

  • 31/12/2004

SUP App 2.4.1

handbook-rule
If a firm's capital resources fall below its guarantee fund, it must, within 14 days of the firm becoming aware of this event, submit to the PRA a short-term financial plan, including:
(1) a scheme of operations (see SUP App 2.12); and
(2) an explanation of how, if at all, and by when, it expects its capital resources to be adequately restored to the guarantee fund.

SUP App 2.4.2

handbook-guidance
See SUP App 2.11.2 G for guidance on the period that the scheme of operations should cover.

SUP App 2.5

Capital resources below required margin of solvency

  • 31/12/2004

SUP App 2.5.1

handbook-rule
Unless SUP App 2.5.3 R applies:
(1) if a firm's capital resources are such that they no longer equal or exceed its required margin of solvency; or
(2) if a firm no longer complies with GENPRU 2.2.32 R and GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable;


it must, within 28 days of becoming aware of this event, submit to the PRA a plan for the restoration of a sound financial position, including:
(3) a scheme of operations; and
(4) an explanation of how, if at all, and by when:
(a) it expects its capital resources to be restored to the required margin of solvency; or
(b) as the case may be, it expects to comply with GENPRU 2.2.32 R and GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable.

SUP App 2.5.2

handbook-guidance
See SUP App 2.11.2 G for guidance on the period that the scheme of operations should cover.

SUP App 2.5.3

handbook-rule
If a firm:
(1) falls into SUP App 2.5.1 R (1) or SUP App 2.5.1 R (2); and
(2) it has previously submitted either a run-off plan in accordance with SUP App 2.8.1 R or a scheme of operations in accordance with SUP App 2.5.1 R;


it must, within 28 days of becoming aware that it falls into SUP App 2.5.1 R (1) or SUP App 2.5.1 R (2):
(3) notify the PRA ; and
(4) submit a plan for restoration which:
(a) explains why the firm's capital resources have fallen below its required margin of solvency or, as the case may be, it no longer complies with GENPRU 2.2.32 R or GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable; and
(b) demonstrates how, if at all, and by when, the firm will restore it or, as the case may be, resume compliance with GENPRU 2.2.32 R and GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable.

SUP App 2.6

Capital resources below capital resources requirement

  • 31/12/2004

SUP App 2.6.1

handbook-rule
Unless any of SUP App 2.4.1 R, SUP App 2.5.1 R or SUP App 2.5.3 R applies, if a firm's capital resources fall below its capital resources requirement, it must, within 28 days of becoming aware of this event:
(1) notify the PRA ; and
(2) submit a plan for restoration, which:
(a) explains why the firm's capital resources have fallen below its capital resources requirement; and
(b) demonstrates how, if at all, and by when, the firm will restore it.

SUP App 2.7

Capital resources below the level of individual capital guidance

  • 31/12/2004

SUP App 2.7.1

handbook-guidance
Unless any of SUP App 2.4.1 R, SUP App 2.5.1 R, SUP App 2.5.3 R or SUP App 2.6.1 R applies, if a firm's circumstances change, such that its capital resources have fallen, or are expected to fall, below the level advised in individual capital guidance given to the firm by the appropriate regulator , then, consistent with PRIN 2.1.1 RPrinciple 11 (Relations with regulators), a firm should inform the appropriate regulator of this fact as soon as practicable, explaining why capital resources have fallen, or are expected to fall, below the level advised in individual capital guidance , and:
(1) what action the firm intends to take to increase its capital resources; or
(2) what modification the firm considers should be made to the individual capital guidance which it has been given.

SUP App 2.7.2

handbook-guidance
In the circumstance set out in SUP App 2.7.1 G, the PRA may ask a firm for alternative or more detailed proposals and plans or further assessments and analyses of capital adequacy and risks faced by the firm. The PRA will seek to agree with the firm appropriate timescales and scope for any such additional work, in light of the circumstances which have arisen.

SUP App 2.7.3

handbook-guidance
In relation to a firm carrying on with-profits insurance business, if it intends either (a) to remedy a fall in the level of capital resources advised in its individual capital guidance , or (b) to prevent a fall in the level advised in that guidance, for example, in either case, by taking management action to de-risk a with-profits fund or by reducing non-contractual benefits for policyholders, it should explain to the appropriate regulator how such proposed actions are consistent with the firm's obligations under the FCA's Principle 6 (Customers' interests).

SUP App 2.7.4

handbook-guidance
If a firm's capital resources fall below the level advised in individual capital guidance given to the firm and, at the same time, any one or more of SUP App 2.4.1 R, SUP App 2.5.1 R, SUP App 2.5.3 R or SUP App 2.6.1 R applies, the firm should first comply with those rules. Those rules are concerned with circumstances where capital resources are likely to have fallen to levels much lower than the level advised in individual capital guidance and are, in some cases, requirements imposed by the Insurance Directives.

SUP App 2.7.5

handbook-guidance
If a firm has not accepted individual capital guidance given by the PRA it should, nevertheless, inform the PRA as soon as practicable if its capital resources have fallen below the level suggested by that individual capital guidance . In such circumstances, the PRA may ask the firm for further explanation as to why it does not consider the individual capital guidance to be appropriate. The PRA may also consider using its powers under section 55M of the Act to, on its own initiative, require a firm to hold such capital as the PRA considers is necessary for the firm to comply with GENPRU 1.2.26 R .

SUP App 2.8

Ceasing to effect contracts of insurance

  • 31/12/2004

SUP App 2.8.1

handbook-rule
If a firm decides to cease to effect new contracts of insurance, it must, within 28 days of that decision, submit a run-off plan to the appropriate regulator including:
(1) a scheme of operations; and
(2) an explanation of how, or to what extent, all liabilities to policyholders (including, where relevant, liabilities which arise from the regulatory duty to treat customers fairly in setting discretionary benefits) will be met in full as they fall due.

SUP App 2.8.2

handbook-guidance
SUP App 2.8.1 R only applies if a firm ceases to effecting new contracts of insurance in respect of the whole of its insurance business.

SUP App 2.8.3

handbook-guidance
For the purposes of SUP App 2.8.1 R, a new contracts of insurance excludes contracts effected under a term in a subsisting contract of insurance.

SUP App 2.8.4

handbook-guidance
Under Principle 11, the appropriate regulator normally expects to be notified by a firm when it decides to cease effecting new contracts of insurance in respect of one or more classes of contract of insurance (see SUP 15.3.8 G). At the same time, the appropriate regulator would normally expect the firm to discuss with it the need for the firm to apply to vary its permission (see SUP 6.2.6 G and SUP 6.2.7 G) and, if appropriate, to submit a scheme of operations in accordance with SUP App 2.8.1 R.

SUP App 2.8.5

handbook-guidance
See SUP App 2.11.2 G for guidance on the period that the scheme of operations should cover.

SUP App 2.10

Grant or variation of permission

  • 31/12/2004

SUP App 2.10.1

handbook-guidance
The PRA may ask a firm seeking a grant or variation of permission to provide a scheme of operations as part of the application process (see SUP 6.3.25 G). Such a firm is not required to submit to the PRA a further scheme of operations under this appendix unless SUP App 2.4, SUP App 2.5 or SUP App 2.8 applies. SUP App 2.13 and SUP 6 Annex 4 do, however, apply to such a firm.

SUP App 2.11

Submission of a scheme of operations or a plan for restoration

SUP App 2.11.1

handbook-guidance
A firm should discuss its plan in draft with the PRA before submitting it. If a plan is submitted which does not satisfy the PRA that the firm can restore its capital resources (as appropriate), or meet its liabilities as they fall due, the PRA may use its own-initiative power to vary or cancel the firm's permission. If a firm submitting a plan is part of a group of companies, the PRA may ask that firm to provide additional information in relation to other companies in the group, if this is necessary to establish how the firm will restore its own sound financial position. The firm should agree in discussion with the PRA the nature of such additional information.

SUP App 2.11.2

handbook-guidance
The schemes of operations required when a firm's capital resources have fallen below its required margin of solvency or its guarantee fund (see SUP App 2.5.1 R and SUP App 2.4.1 R, respectively) should cover a period which is sufficient to demonstrate that the firm's capital resources will be adequately restored. Typically this would be a period of at least three years. However, if a scheme of operations has expired, but SUP App 2.4.1 R or SUP App 2.5.1 R continues to apply, the firm should submit a new scheme of operations. The scheme of operations required by SUP App 2.8.1 R, when a firm ceases to effect new contracts of insurance, should cover the run-off period until all liabilities to policyholders are met.

SUP App 2.11.3

handbook-guidance
The period to be covered by, and the details to be included in, the plan for restoration required by SUP App 2.5.3 R will depend on the circumstances of the firm, why its capital resources have fallen below its required margin of solvency and the degree of risk that that fall will be repeated, even if the firm restores its capital resources in accordance with its plan.

SUP App 2.11.4

handbook-guidance
In relation to a firm which carries on with-profits insurance business and which submits a plan, the appropriate regulator would expect an explanation of how any actions it plans to take to restore capital resources to the level of the guarantee fund, required margin of solvency or capital resources requirement are consistent with the firm's obligations under the FCA's Principle 6 (Customers' interests).

SUP App 2.12

Content of a scheme of operations

SUP App 2.12.1

handbook-rule
A scheme of operations must:
(1) describe the firm's business strategy;
(2) include financial projections (including appropriate scenarios and stress-tests) as follows:
(a) a forecast summary profit and loss account in accordance with SUP App 2.12.7 R;
(b) a forecast summary balance sheet in accordance with SUP App 2.12.8 R; and
(c) a forecast statement of capital resources in accordance with SUP App 2.12.9 R; and
(3) as at the end of each financial year which falls (in whole or part) within the period to which the scheme of operations relates:
(a) describe the assumptions which underlie those forecasts and the reasons for adopting those assumptions; and
(b) identify any material transactions proposed to be effected or carried out with, or in respect of, any associate.

SUP App 2.12.2

handbook-guidance
The business strategy referred to at SUP App 2.12.1R (1) should include a description of the nature of the risks which the firm is underwriting, or intends to underwrite. It should also give an explanation of the firm's strategy for managing the risks associated with carrying on insurance business (including, in particular, reinsurance).

SUP App 2.12.3

handbook-guidance
The amount of detail to be given on the firm's business strategy required by SUP App 2.12.1R (1) should be appropriate to the scale and complexity of the firm's operations and the degree of risk involved.

SUP App 2.12.4

handbook-rule
The information required by SUP App 2.12.1R (1) must reflect the nature and content of the rules relating to capital resources applicable to a firm.

SUP App 2.12.5

handbook-guidance
In relation to firms covered by SUP App 2.1 to 2.14, IPRU(FSOC) 4.1 sets out the rules relating to capital resources for non-directive friendly societies and GENPRU 2.1, GENPRU 2.2 and INSPRU 6.1 set out the rules relating to capital resources for every other firm. The capital resources which a firm is required to maintain vary according to whether the firm has its head office in the United Kingdom or overseas, and depending on the nature of the insurance business it carries on. The information which a firm is required to submit under SUP App 2.12.1 R should reflect the nature and content of the rules relating to capital resources identified above. For example, in order to satisfy SUP App 2.12.1 R, a firm with its head office outside the United Kingdom which is carrying on direct insurance business in the United Kingdom should submit separate information concerning its world-wide activities and its UK activities.

SUP App 2.12.6

handbook-guidance
To reflect its obligations under GENPRU 2.2.22 G or IPRU(FSOC) 4.1(2) (as applicable), in order to comply with SUP App 2.12.1 R, a firm which carries on both long-term insurance business and general insurance business should submit separate information for each type of insurance business.

SUP App 2.12.7

handbook-rule
Summary profit and loss account (see SUP App 2.12.1R (2)(a))

SUP App 2.12.8

handbook-rule
Summary balance sheet (see SUP App 2.12.1R (2)(b))

SUP App 2.12.9

handbook-rule
A forecast statement of capital resources (under SUP App 2.12.1R (2)(c)) must include the forecast capital resources and the forecast required margin of solvency at the end of each financial year or part financial year.

SUP App 2.13

Obligations on firms which have previously submitted a scheme of operations

  • 01/12/2004

SUP App 2.13.1

handbook-rule
A firm which has submitted a scheme of operations to the PRA, whether required by SUP App 2.4, SUP App 2.5 or SUP App 2.8, or as part of an application under SUP 6.3 (see SUP 6.3.25 G), SUP 6.4 (see SUP 6 Annex 4), or SUP 11.5 (see SUP 11.5.5 G), or an amended scheme of operations, must during the period covered by that scheme of operations:
(1) notify the PRA at least 28 days before entering into or carrying out any material transaction with, or in respect of, an associate, unless that transaction is in accordance with a scheme of operations which has been submitted to the PRA;
(2) submit a quarterly financial return to the PRA which must include for, or as at the end of, each quarter:
(a) a summary profit and loss account prepared in accordance with SUP App 2.12.7 R;
(b) a summary balance sheet prepared in accordance with SUP App 2.12.8 R; and
(c) a statement of capital resources prepared in accordance with SUP App 2.12.9 R;


and which must identify and explain differences between the actual results and the forecasts submitted in the scheme of operations; and
(3) notify the PRA promptly of any matter which has either happened or is likely to happen and which represents a significant departure from the scheme of operations; the firm must either:
(a) explain the nature of the departure and the reasons for it and provide revised forecast financial information in the scheme of operations for its remaining term; or
(b) include an amended scheme of operations and explain the amendments and the reasons for them.

SUP App 2.13.2

handbook-rule
A report under SUP App 2.13.1R (2) must be submitted in accordance with the rules in SUP 16.3.6R to SUP 16.3.13R.

SUP App 2.13.3

handbook-guidance
For the purpose of SUP App 2.13.1R (1), the PRA considers that transactions with, or in respect of, associates include:
(1) contracting (as either party), advancing, repaying, writing off or agreeing to change the terms of any loan;
(2) entering into (in any capacity), releasing, calling upon or agreeing to change the terms of any guarantee, pledge, security, charge or any off-balance-sheet transaction;
(3) entering into agreements to acquire or dispose of property or which otherwise affect the nature or value of the firm's assets;
(4) making an investment (directly or indirectly) in an associate;
(5) entering into (as either party), commuting or agreeing to change the terms of, any contract of reinsurance; and
(6) entering into, or changing the terms of, any agreement to give or provide services or to share costs.

SUP App 2.13.4

handbook-guidance
The PRA considers that a significant departure referred to in SUP App 2.13.1R (3) includes:
(1) entry or withdrawal from a line of insurance business;
(2) significant revision of the firm's strategy for managing risks, in particular the basis upon which risks are reinsured;
(3) forecast premiums being exceeded, by more than 10%, for a single financial year (or part year if the period covered by the scheme of operations is or includes part of a financial year);
(4) claims experience being significantly worse than forecast for a single financial year (or part year if the period covered by the scheme of operations is or includes part of a financial year);
(5) the actual level of capital resources being significantly worse than forecast;
(6) paid or proposed dividends being greater than those forecast; and
(7) any other transaction or circumstance which is likely to have a material effect upon available assets (as defined in IPRU(INS) 11.1).

SUP App 2.14

Financial Recovery Plan

  • 01/12/2004

SUP App 2.14.1

handbook-guidance
When:
(1) the PRA has required a financial recovery plan within the meaning of article 20a of the First Non-Life Directive;
(2) the PRA is of the view that policyholders' rights are threatened because the financial position of the firm is deteriorating; and
(3) the PRA decides to require the firm to hold more capital than would otherwise be required under the Handbook to ensure that the firm will be able to fulfil the required margin of solvency in the near future;


any such higher capital requirement will be based on the financial recovery plan.

SUP App 2.16

Regulatory intervention points for Lloyd's

  • 31/12/2006

Application

SUP App 2.16.1

handbook-rule

Interpretation

SUP App 2.16.2

handbook-rule
For the purpose of SUP App 2.16 and the application of SUP App 2 to the Society:
(1) "capital resources", as the context requires:
(a) in relation to the Society's own capital resources, means its own capital resources calculated in accordance with the capital resources table;
(b) in relation to a member's capital resources, means the member's capital resources calculated in accordance with GENPRU 2.3.22 R;
(c) in relation to the aggregate capital resources of the Society and the members supporting the insurance business of the members, means the aggregate of the capital resources in (1)(a) and (b) but excluding the Society's callable contributions;
(2) "guarantee fund":
(a) in relation to the general insurance business carried on by members, means the amount of capital resources required in order to comply with GENPRU 2.2.26 R, GENPRU 2.3.17 G and GENPRU 2.3.26 R; and the "member's share of the guarantee fund" for general insurance business means the result of the calculation set out in GENPRU 2.3.27 R;
(b) in relation to the long-term insurance business carried on by members, means the amount of capital resources required in order to comply with GENPRU 2.2.25 R and GENPRU 2.3.17 G; and the "member's share of the guarantee fund" for long-term insurance business means the result of the calculation set out in GENPRU 2.3.25 R;
(3) "required margin of solvency":
(a) in relation to the general insurance business carried on by members, means the higher of the Society GICR and the general insurance capital requirement for the members in aggregate; and
(b) in relation to the long-term insurance business carried on by members, means the long-term insurance capital requirement for the members in aggregate.

Capital resources below guarantee fund

SUP App 2.16.3

handbook-rule
For the purposes of SUP App 2.4.1 R and SUP App 2.4.2 G, capital resources will have fallen below the guarantee fund if the Society's own capital resources are such that they are no longer sufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's share of the guarantee fund.

Capital resources below required margin of solvency

SUP App 2.16.4

handbook-rule
For the purposes of SUP App 2.5.1 R to SUP App 2.5.3 R, capital resources will be such that they no longer equal or exceed the required solvency margin if the Society's own capital resources are insufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's share of the required solvency margin.

Capital resources below capital resources requirement

SUP App 2.16.5

handbook-rule
For the purposes of SUP App 2.6.1 R, capital resources will have fallen below the capital resources requirement if the Society's own capital resources are insufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's share of the capital resources requirement for the members in aggregate.

Capital resources below the level of individual capital guidance

SUP App 2.16.6

handbook-guidance
For the purposes of SUP App 2.7.1 G to SUP App 2.7.5 G, capital resources will have fallen below the level of individual capital guidance if the Society's own capital resources have fallen below the level advised in individual capital guidance given to the Society in respect of those capital resources.

Export chapter as

SUP App 3

Guidance on passporting issues

SUP App 3.1

Application

  • 01/12/2004

SUP App 3.1.1

handbook-guidance
This appendix applies to all firms when carrying on a passported activity, except for a firm which is only carrying on a passported activity under the auction regulation.

SUP App 3.2

Purpose

  • 01/12/2004

SUP App 3.2.1

handbook-guidance
The purpose of this appendix is to give guidance:
(1) to UK firms on some of the issues that arise when carrying on passported activities(see SUP App 3.5and SUP App 3.6);
(2) to all firms on the relationship between regulated activities and activities passported under the Single Market Directives (see SUP App 3.9and SUP App 3.10).

SUP App 3.3

Background

  • 01/12/2004

The Treaty on the Functioning of the European Union

SUP App 3.3.1

handbook-guidance
(1) The Treaty establishes in EU law the rights of freedom of establishment and freedom to provide services in the EU.
(2) The Treaty lays down central principles governing the legal framework for freedom of establishment and the free movement of services in the EU. There are, however, a number of areas where the legal position is not clear. This includes, for example, identifying whether a service is provided through an establishment, where the issues involved are complex. Therefore, this Appendix is intended to provide guidance but cannot be regarded as comprehensive. Ultimately, the construction of the Treaty and relevant Directive provisions is a matter for the European Court of Justice.

SUP App 3.3.2

handbook-guidance
The Treaty provides the framework for the provision of banking, insurance business, investment business, UCITS management services and insurance mediation, while the Single Market Directives clarify the rights and freedoms within that framework.

EU and EEA

SUP App 3.3.3

handbook-guidance
The agreement on the European Economic Area, signed at Oporto on 2 May 1992, extends certain EU legislation to those EEA States that are not Member States of the EU.

Interpretative communications

SUP App 3.3.4

handbook-guidance
In 1997, the European Commission published an interpretative communication (Freedom to provide services and the interests of the general good in the Second Banking Directive (97/C 209/04)) (the text of this directive and the First Banking Directive is now consolidated in the Banking Consolidation Directive). The European Commission's objective in publishing this communication was to explain and clarify the EU rules. The European Commission deemed it desirable "to restate in a Communication the principles laid down by the Court of Justice and to set out its position regarding the application of these Principles to the specific problems raised by the Second Banking Directive".

SUP App 3.3.5

handbook-guidance
In 2000, the European Commission published a further interpretative communication (Freedom to provide services and the general good in the insurance sector (2000/C43/03)). This allowed the European Commission to publicise its own interpretation of the rules on the freedom to provide services.

SUP App 3.3.6

handbook-guidance
  1. (1) The European Commission has not produced an interpretative communication on MiFID. It is arguable, however, that the principles in the communication on the Second Banking Directive can be applied to investment services and activities. This is because Chaper II of Title II of MiFID (containing provisions relating to operating conditions for investment firms) also applies to the investment services and activities of firms operating under the Banking Consolidation Directive.
  2. (2) The European Commission has not produced an interpretative communication on either the Insurance Mediation Directive or on the UCITS Directive.

SUP App 3.3.7

handbook-guidance
In giving its views, communications made by the European Commission have the status of guidance and are not binding on the national courts of EEA States. This is because it is the European Court of Justice that has ultimate responsibility for interpreting the Treaty and secondary legislation. Accordingly, the communications "do not prejudge the interpretation that the Court of Justice ..., which is responsible in the final instance for interpreting the Treaty and secondary legislation, might place on the matter at issue." (European Commission interpretative communication: Freedom to provide services and the general good in the insurance sector (C(99) 5046). However, the Courts may take account of European Commission communications when interpreting the Treaty and secondary legislation.

SUP App 3.3.8

handbook-guidance
Firms should also note that European Commission communications do not necessarily represent the views taken by all EEA States.

E-Commerce

SUP App 3.3.9

handbook-guidance
The E-Commerce Directive covers services provided at a distance by means of electronic equipment for the processing (including digital compression) and storage of data. The services would normally be provided in return for remuneration and must be provided at the individual request of a recipient (see recital 17 of the E-Commerce Directive). The Directive implements the country of origin approach to regulation. This approach makes firms subject to the conduct of business requirements of the EEA State from which the service is provided. This is subject to certain derogations (see SUP App 3.3.11 G).

SUP App 3.3.10

handbook-guidance
The E-Commerce Directive does not affect the responsibilities of Home State under the Single Market Directives. This includes the obligation of a Home State regulator to notify the Host State regulator of a firm's intention to establish a branch in, or provide cross border services into, the other EEA State.

SUP App 3.3.11

handbook-guidance
There are, however, general derogations from the internal market provisions under article 3(3) of the E-Commerce Directive. The derogations include consumer contracts, the permissibility of unsolicited e-mail and certain insurance services (both life and non-life). Where these derogations apply, the EEA States in which the recipients of the service are based may continue to be able to impose their own requirements.

Notification of establishing a branch or of providing cross border services

SUP App 3.3.13

handbook-guidance
The Single Market Directives require credit institutions, insurance undertakings (other than reinsurance undertakings), MiFID investment firms , UCITS management companies and insurance intermediaries to make a notification to the Home State before establishing a branch or providing cross border services.

SUP 13.5 (Notices of intention) sets out the notification requirements for a firm seeking to establish a branch or provide cross border services. As firms will note, the decision whether a passport notification needs to be made will be a matter of interpretation. The onus is on firms to comply with the requirements of the Act and, where relevant, the laws of other EEA States. So, in cases of doubt, firms should obtain their own legal advice on the specific issues involved.

SUP App 3.3.14

handbook-guidance
Blanket notification is the practice of the Home State regulator notifying all Host State regulators in respect of all activities regardless of any genuine intention to carry on the activity. This practice is discouraged by the FCA and PRA. However, a firm may be carrying on activities in the United Kingdom or elsewhere in a way that necessarily gives rise to a real possibility of the provision of services in other EEA States. In such cases, the firm should consider with its advisers whether it should notify the relevant authorities and include that possibility in its business plan.

SUP App 3.6

Freedom to provide services

  • 01/12/2004

SUP App 3.6.1

handbook-guidance
Article 56 (Services) of the Treaty grants to EEA nationals established in one EEA State the freedom to provide cross border services to other EEA States.

How services may be provided

SUP App 3.6.2

handbook-guidance
Under the Treaty, the freedom to provide services within the EC may be exercised in three broad ways:
(1) where the provider of a service moves temporarily to another EEA State in order to provide the service;
(2) where the service is provided without either the provider or the recipient moving (in this situation the provision, and receipt, of the service may take place by post, telephone or fax, through computer terminals or by other means of remote control);
(3) where the recipient of a service moves temporarily to another EEA State in order to receive (or, perhaps, commission the receipt of) the service within that State.

SUP App 3.6.3

handbook-guidance
Under the Single Market Directives, however, EEA rights for the provision of services are concerned only with services provided in one of the ways referred to in SUP App 3.6.2 G (1) and (2) (How services may be provided).

Place of supply

SUP App 3.6.5

handbook-guidance
In the opinion of the European Commission (and in the wording of the Single Market Directives) "only activities carried on within the territory of another Member State should be the subject of prior notification" (Commission interpretative communication: Freedom to provide services and the interests of the general good in the Second Banking Directive (97/C 209/04)). In determining, for the purposes of notification, whether a service is to be provided 'within' another EEA State, it is necessary to determine the place of supply of the service.

SUP App 3.6.6

handbook-guidance
An insurance undertaking that effects contracts of insurance covering risks or commitments situated in another EEA State should comply with the notification procedures for the provision of services within that EEA State. The location of risks and commitments is found by reference to the rules set out in paragraph 6 of schedule 12 to the Act, which derive from article 1 of the Consolidated Life Directive and article 2 of the Second Non-Life Directive. It may be appropriate for insurers to take legal advice as to how these rules are interpreted and applied in other EEA States. The need to passport may arise because of only one of the risks covered by an insurance policy. This includes, for example, where a policy covers a number of property risks and one of those properties is in another EEA State.

SUP App 3.6.7

handbook-guidance
In respect of banking services, the European Commission believes that "...to determine where the activity was carried on, the place of provision of what may be termed the 'characteristic performance' of the service i.e. the essential supply for which payment is due, must be determined" (Commission interpretative communication: Freedom to provide services and the interests of the general good in the Second Banking Directive (97/C 209/04)). In the view of the FCA and PRA, this requires consideration of where the service is carried out in practice.

SUP App 3.6.8

handbook-guidance
The FCA and PRA are of the opinion that UK firms that are credit institutions and MiFID investment firms should apply the 'characteristic performance' test (as referred to in SUP App 3.6.7 G ) when considering whether prior notification is required for services business. Firms should note that other EEA States may take a different view. Some EEA States may apply a solicitation test. This is a test as to whether it is the consumer or the provider that initiates the business relationship.

SUP App 3.6.9

handbook-guidance
In the case of a UK firm conducting portfolio management, for example, this would mean looking at where the investment decisions and management are actually carried on in order to determine where the service is undertaken. Similarly, a UK stockbroker that receives orders by telephone from a customer in France for execution on a UK exchange may be deemed to be dealing or receiving and transmitting orders within the territory of the United Kingdom. In such a case, whether the firm solicited the overseas investor would be irrelevant.

SUP App 3.6.10

handbook-guidance
Where, however, a credit institution or MiFID investment firm:
(1) intends to send a member of staff or a temporarily authorised intermediary to the territory of another EEA State on a temporary basis to provide financial services; or
(2) provides advice, of the type that requires notification under either MiFID or the Banking Consolidation Directive, to customers in another EEA State;
the firm should make a prior notification under the freedom to provide services.

Temporary activities

SUP App 3.6.11

handbook-guidance
The key distinction in relation to temporary activities is whether a firm should make its notification under the freedom of establishment in a Host State, or whether it should notify under the freedom to provide services into a Host State. It would be inappropriate to discuss such a complex issue in guidance of this nature. It is recommended that, where a firm is unclear on the distinction, it should seek appropriate advice. In either case, where a firm is carrying on activities in another EEA State under a Single Market Directive, it should make a notification.

Monitoring procedures

SUP App 3.6.15

handbook-guidance
The FCA and PRA consider that, in order to comply with Principle 3:Management and control (see PRIN 2.1.1 R), a firm should have appropriate procedures to monitor the nature of the services provided to its customers. Where a UK firm has non-resident customers but has not notified the EEA State in which the customers are resident that it wishes to exercise its freedom to provide services, the FCA and PRA would expect the firm's systems to include appropriate controls. Such controls would include procedures to prevent the supply of services covered by the Single Market Directives in the EEA State in which the customers are resident if a notification has not been made and it is proposed to provide services otherwise than by remote communication. In respect of insurance business, the insurer's records should identify the location of the risk at the time the policy is taken out or last renewed. That will, in most cases, remain the location of the risk thereafter, even if, for example, the policyholder changes his habitual residence after that time.

Membership of regulated markets

SUP App 3.6.25

handbook-guidance
  1. (1) The FCA and PRA are of the opinion that where a UK firm becomes a member of:
    1. (a) a regulated market that has its registered office or, if it has no registered office, its head office, in another EEA State; or
    2. (b) an MTF operated by a MiFID investment firm or a market operator in another EEA State, the same principles as in the 'characteristic performance' test should apply. Under this test, the fact that a UK firm has a screen displaying the regulated market's or the MTF's prices in its UK office does not mean that it is dealing within the territory of the Home State of the regulated market or of the MTF.
  2. (2) In such a case, the FCA and PRA would consider that:
    1. (a) the market operator operating the regulated market or the MTF is providing a cross-border service into the UK and so, provided it has given notice to its Home State regulator in accordance with articles 42(6) or 31(5) MiFID, it will be exempt from the general prohibition in respect of any regulated activity carried on as part of the business of the regulated market or of operating an MTF (see section 312A of the Act);
    2. (b) the MiFID investment firm operating the MTF is providing a cross-border service into the UK and so needs to comply with SUP 13A.

SUP App 3.6.26

handbook-guidance
Firms are reminded of their rights, under article 33 of MiFID , to become members of, or have access to, the regulated markets in other Member States.

SUP App 3.6.27

handbook-guidance
Firms should note that, in circumstances where the FCA or PRA take the view that a notification would not be required, other EEA States may take a different view.

SUP App 3.9

Mapping of MiFID, Banking Consolidation Directive, UCITS Directive and Insurance Mediation Directive to the Regulated Activities Order

SUP App 3.9.1

handbook-guidance
The following Tables 1, 2, 2A and 2B provide an outline of the regulated activities and specified investments that may be of relevance to firms considering undertaking passported activities under the Banking Consolidation Directive, MiFID, the UCITS Directive and the Insurance Mediation Directive. The tables may be of assistance to UK firms that are thinking of offering financial services in another EEA State and to EEA firms that may offer those services in the United Kingdom.

SUP App 3.9.2

handbook-guidance
The tables provide a general indication of the investments and activities specified in the Regulated Activities Order that may correspond to categories provided for in the Banking Consolidation Directive, MiFID, the UCITS Directive or the Insurance Mediation Directive. The tables do not provide definitive guidance as to whether a firm is carrying on an activity that is capable of being passported, nor do the tables take account of exceptions that remove the effect of articles. Whether a firm is carrying on a passported activity will depend on the particular circumstances of the firm. If a firm's activities give rise to potential passporting issues, it should obtain specialist advice on the relevant issues.

SUP App 3.9.3

handbook-guidance
In considering the issues raised in the tables, firms should note that:
(1) article 64 of the Regulated Activities Order (Agreeing to carry on specific kinds of activity) applies in respect of agreeing to undertake the specified activity; and
(2) article 89 of the Regulated Activities Order (Rights to or interests in investments) applies in respect of rights to and interests in the types of investments to which the category applies.

SUP App 3.9.4

handbook-guidance

Activities set out in Annex I of the BCD

SUP App 3.9.5

handbook-guidance

Services set out in Annex I to MiFID

SUP App 3.9.7

handbook-guidance

Activities set out in Article 2(3) of the IMD

SUP App 3.10

Mapping of Insurance Directives to the Regulated Activities Order

  • 01/12/2004

Introduction

SUP App 3.10.1

handbook-guidance
The guidance in Table 3 describes in broad outline the relationship between:
(1) the insurance-related regulated activities specified in the Regulated Activities Order; and
(2) the activities within the scope of the Insurance Directives

SUP App 3.10.2

handbook-guidance

This is a guide only and should not be used as a substitute for legal advice

in individual cases.

Meaning of contract of insurance

SUP App 3.10.3

handbook-guidance
The meaning of contract of insurance is set out in article 3(1) of the Regulated Activities Order (Interpretation). It does not include benefit-in-kind funeral plans, which are specified in article 60 of the Regulated Activities Order (plans covered by insurance or trust arrangements). Such funeral plans (to the extent that they are insurance) are also excluded from the Insurance Directives. It covers some contracts which might not otherwise be viewed as insurance in the United Kingdom (for example, contracts of guarantee). These contracts are also governed by the Insurance Directives. For the purpose of the Regulated Activities Order, a contract of insurance includes a contract of reinsurance as well as a contract of direct insurance.

The Insurance Directives

SUP App 3.10.4

handbook-guidance
Article 1 of the First Non-Life Directive and article 2 of the Consolidated Life Directive provides that the Directives "concern the taking up and pursuit of the self-employed activity of direct insurance". By contrast, article 10 of the Regulated Activities Order (Effecting and carrying out contracts of insurance) also covers reinsurance.

SUP App 3.10.5

handbook-guidance
Articles 2, 3 and 4 of the First Non-Life Directive and article 3 of the Consolidated Life Directive set out certain exclusions by reference to:
(1) types of insurance;
(2) types of insurer;
(3) particular conditions under which insurance activities are carried out.
(4) annual income; and
(5) particular identified institutions.

SUP App 3.10.6

handbook-guidance
Some of the exclusions referred to mirror exclusions in the Regulated Activities Order. So, the exclusion for breakdown insurance in article 2(3) of the First Non-Life Directive is matched by a slightly narrower exclusion in article 12 of the Regulated Activities Order (Breakdown insurance). The separate treatment of benefit-in-kind funeral plans under the Regulated Activities Order (see SUP App 3.10.4 G) is matched by their exclusion on a slightly wider basis in article 3(5) of the Consolidated Life Directive. Other requirements from these Directives are also excluded from regulation by the Exemption Order.

SUP App 3.10.7

handbook-guidance
Most of the exclusions under the Directives, however, are not excluded from being regulated activities. For example, article 3 of the Consolidated Life Directive and article 3 of the Non-Life Directive exclude certain mutual associations whose annual contribution income falls below a defined threshold. In the United Kingdom, these include certain smaller friendly societies commonly referred to as "non-directive friendly societies". The activities of such societies are regulated under the Act, on a "lighter basis" than the activities of other insurers.

Territorial scope of the Regulated Activities Order and the Directives

SUP App 3.10.8

handbook-guidance
Under the Act and the Regulated Activities Order, the activities of effecting and carrying out contracts of insurance are treated as being carried on in the United Kingdom on the basis of legal tests under which the location of the risk is only one factor. If the risk is located in the United Kingdom, then (other relevant factors being taken into account) the activity will, in the vast majority of cases, also be viewed as carried on in the United Kingdom. There are exceptions, however, and overseas insurers may insure risks in the United Kingdom without carrying on business here and so without requiring to be regulated (although the financial promotion regime may apply). By contrast, under the Directives, the responsibility, as between EEA States, for regulating the conduct of passported insurance services is determined by reference to the location of the risk or commitment, as defined in article 1 of the Consolidated Life Directive and article 2 of the Second Non-Life Directive.

SUP App 3.10.9

handbook-guidance
So, the effect of App 3.12.1 is that an insurer may be carrying on insurance business in the United Kingdom which is to be treated as a regulated activity under article 10 to the Regulated Activities Order (Effecting and carrying out contracts of insurance) in circumstances where the risks covered are treated as located in another EEA State. In that event, the insurer is required by Schedule 3 to the Act to passport into the State concerned and may be subject to conduct of business requirements in that State (see SUP 13.10 (Applicable provisions)).

SUP App 3.10.10

handbook-guidance
An insurer authorised in another EEA State who is insuring UK risks and so passports on a services basis under the Insurance Directives into the United Kingdom(see ),may not be carrying on a regulated activity in the United Kingdom. But, if it passports into the United Kingdom, it will qualify for authorisation under paragraph 12 of Schedule 3 to the Act (Firms qualifying for authorisation). Where this is the case, the insurer will be subject to conduct of business requirements in the United Kingdom (see SUP 13A.6 (Which rules will an incoming EEA firm be subject to?)).

Activities carried on by incoming EEA firms in connection with insurance business.

SUP App 3.10.11

handbook-guidance
Although the Insurance Directives are concerned with the regulated activities of effecting and carrying out contracts of insurance, an incoming EEA firm passported under the Insurance Directives will be entitled to carry on certain other regulated activities without the need for top-up permission. This is where the regulated activities are carried on for the purposes of or in connection with the incoming EEA Firm's insurance business. These regulated activities may include:
(1) dealing in investments as principal;
(2) dealing in investments as agent;
(3) arranging (bringing about) deals in investments;
(4) making arrangements with a view to transactions in investments;
(5) managing investments;
(6) safeguarding and administering investments;
(7) advising on investments;
(8) agreeing to carry on a regulated activity of the above kind.

Financial promotion

SUP App 3.10.12

handbook-guidance
The financial promotion regime under section 21 of the Act (Restrictions on financial promotion) may also apply to EEA insurance undertakings regardless of whether they carry on a regulated activity in the United Kingdom or passport into the United Kingdom.

Position of EEA insurers carrying out both direct and reinsurance business

SUP App 3.10.13

handbook-guidance
The Insurance Directives do not apply to the authorisation to carry on reinsurance. But, the Insurance Directives do not prevent insurance undertakings authorised under those Directives from carrying out reinsurance as well as direct insurance business. Article 13(2) of the First Non-Life Directive and article 10(2) of the Consolidated Life Directive state that financial supervision of insurance undertakings "shall include verification, with respect to the insurance undertaking's entire business, of its state of solvency, of the establishment of technical provisions and of the assets covering them". On that basis, an insurance undertaking authorised in another EEA State which carries on a mixed direct insurance and reinsurance business, and is, therefore, subject to the requirements of the Directives, will generally be treated as satisfying the conditions laid down by an EU instrument relating to the carrying on of the regulated activity of effecting or carrying out contracts of insurance. This is for the purpose of paragraph 3 of Schedule 4 to the Act (Exercise of treaty rights). The insurance undertaking will, therefore, generally be able to qualify for permission as a Treaty firm for its reinsurance business if it follows the procedure provided for by Schedule 4 (see SUP 13A.3.4 G to SUP 13A.3.11 G (Treaty Firms) ). This will be in addition to the insurance undertaking being an EEA firm under Schedule 3 of the Act for its direct insurance business.

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Transitional Provisions and Schedules

SUP TP 1

Transitional provisions

SUP TP 1.1

Transitional provisions applying to the Supervision manual only

SUP TP 1.2
SUP TP 1.3

[deleted]

SUP TP 1.4

[deleted]

SUP TP 1.5
SUP TP 1.6

[deleted]

SUP TP 3

Transitional provisions relating to SUP 10A and SUP 10B: Transition from the FSA to the FCA and PRA

  • 01/04/2013

SUP Sch 1

Record keeping requirements

  • 31/12/2004

SUP Sch 1.1

handbook-guidance

SUP Sch 1.2

handbook-guidance

SUP Sch 5A

Rights of actions for damages

  • 01/04/2013

SUP Sch 5A.1

handbook-guidance
The table below sets out the rules in SUP contravention of which by an authorised person may be actionable under section 138D of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.
  • 01/04/2013

SUP Sch 5A.2

handbook-guidance
  • 01/04/2013

SUP Sch 6

Rules that can be waived

  • 01/12/2004

SUP Sch 6.1B

handbook-guidance
As a result of section 138A of the Act (Modification or waiver of rules) the PRA has power to waive all its rules, other than rules made under section 137O (Threshold condition code). However, if the rules incorporate requirements laid down in European directives, it will not be possible for the PRA to grant a waiver that would be incompatible with the United Kingdom's responsibilities under those directives.
  • 01/04/2013

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