Applications to vary and cancel Part IV permission

Part

SUP Supervision manual

Chapter

Applications to vary and cancel Part IV permission

Printed on: 28/08/2024

Rulebook at: 22/03/2012

SUP 6

Applications to vary and cancel Part IV permission

SUP 6.1

Application and purpose

01/12/2004

Application

SUP 6.1.1

This chapter applies to every firm with a Part IV permission which wishes to:

(1) vary its Part IV permission; or

(2) cancel its Part IV permission and end its authorisation.

21/06/2001

SUP 6.1.2

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.

01/04/2009

SUP 6.1.3

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.

21/06/2001

Purpose

SUP 6.1.4

This chapter explains:

(1) how a firm with Part IV permission can apply to the FSA to vary that permission;

(2) how a firm which has ceased to carry on any of the regulated activities for which it has Part IV permission, or which expects to do so in the short term (normally less than six months), should apply to the FSA to cancel that permission completely;

(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 FSA assesses those applications.

21/06/2001

SUP 6.1.5

This chapter also outlines the FSA's powers to withdraw authorisation from a firm whose Part IV permission has been cancelled at the firm's request. It does not, however, cover the FSA's use of its own-initiative powers to vary or cancel a firm's Part IV permission (see SUP 7 (Individual requirements) and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)).

28/08/2007

SUP 6.2

Introduction

01/12/2004

SUP 6.2.1

A firm authorised under Part IV of the Act (Permission to carry on regulated activity) has a single Part IV permission granted by the FSA. A firm's Part IV permission specifies all or some of the following elements (see PERG 2 Annex 2 (Regulated activities and the permission regime) and the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml):

(1) a description of the activities the firm may carry on, including any limitations;

(2) the specified investments involved; and

(3) if appropriate, requirements.

06/10/2007

SUP 6.2.2

Under section 20(1) 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.

21/06/2001

SUP 6.2.3

If a firm wishes to change its Part IV permission, it can apply to the FSA under section 44 of the Act (Variation etc. at request of authorised person) for a variation or cancellation of its Part IV permission. SUP 6.2.5 G sets out the differences between these types of application and the circumstances in which they should be made and SUP 6 Annex 1 gives an overview of the considerations in these cases.

21/06/2001

SUP 6.2.4

A firm intending to expand its business should assess, taking appropriate professional advice where necessary, whether it will need to apply to the FSA to vary its Part IV permission before making any changes to its business.

21/06/2001

SUP 6.2.4A

If a firm intends to transfer its business to a different legal entity (for example, the business is to be transferred from a sole trader to a partnership or the other way around) it will need to apply to the FSA for cancellation of its Part IV permission and the entity to which the business is to be transferred will need to apply for a Part IV permission.

01/08/2005

SUP 6.2.5

Variation and cancellation of Part IV permission. See ofSUP 6.2.3 G

Question

Variation of Part IV permission

Cancellation of Part IV permission

What does the application apply to?

Individual elements of a firm's Part IV permission. Variations may involve adding or removing categories of regulated activity or specified investments or varying or removing any limitations or requirements in the firm's Part IV permission.

A firm's entire Part IV permission and not individual elements within it.

In what circumstances is it usually appropriate to make an application?

If a firm:
1. wishes to change the regulated activities it carries on in the United Kingdom under a Part IV permission (SUP 6.3); or
2. has the ultimate intention of ceasing carrying on regulated activities but due to the nature of those regulated activities (for example, accepting deposits, or insurance business) it will require a long term (normally over six months) to wind down (run off) its business (see SUP 6.2.8 G to SUP 6.2.11 G and SUP 6 Annex 4).

If a firm:
1. has ceased to carry on all of the regulated activities for which it has Part IV permission (SUP 6.4); or
2. wishes or expects to cease carrying on all of the regulated activities for which it has Part IV permission in the short term (normally not more than six months). In this case, the firm may apply to cancel its Part IV permission prior to ceasing the regulated activities (see SUP 6.4.3 G).

Where do I find a summary of the application procedures?

See SUP 6 Annex 2 .

See SUP 6 Annex 3.

21/06/2001

SUP 6.2.6

A firm which is seeking to:

(1) vary its Part IV permission substantially; or

(2) cancel its Part IV permission;

should discuss its plans with its usual supervisory contact at the FSA as early as possible before making an application, in order to comply with Principle 11 (see SUP 15.3.7 G (Notifications to the FSA)). These discussions will help the FSA and the firm to agree the correct approach for the firm.

21/06/2001

SUP 6.2.7

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

21/06/2001

Firms with long term liabilities to customers

SUP 6.2.8

Discussions with the FSA 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.

06/08/2009

SUP 6.2.9

If an insurer , a bank, or a dormant account fund operator wishes to cease carrying on all regulated activities for which it has Part IV 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 IV permission 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.

06/08/2009

SUP 6.2.10

A firm which is winding down (running off) its activities should contact its usual supervisory contact at the FSA to discuss its circumstances. The FSA will discuss the firm's winding down plans and the need for the firm to vary or cancel its Part IV permission. Following these discussions, an application for variation or cancellation of Part IV permission, as appropriate, should usually be made by the firm, although, in certain circumstances, the FSA may use its own-initiative powers under section 45 of the Act (Variation etc. on the FSA's own initiative) (see SUP 7 and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)).

28/08/2007

SUP 6.2.11

(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 IV permission before it applies for cancellation of Part IV 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,as advised by the FSA, 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 FSA 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 the FSA believes that the additional procedures would protect consumers.

21/06/2001

UK firms exercising EEA or Treaty rights

SUP 6.2.12

A UK firm should assess the effect of any change to its Part IV permission on its ability to continue to exercise any EEA right or Treaty right and discuss any concerns with its usual supervisory contact at the FSA. A variation of Part IV permission may also change the applicable provisions with which it is required to comply by a Host State.

21/06/2001

SUP 6.2.13

A UK firm which, as well as applying to vary or cancel its Part IV 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.

21/06/2001

The Lloyd's market

SUP 6.2.14

A firm making an application to vary or cancel its Part IV permission which requires any approval from the Society of Lloyd's should apply to the Society for this at the same time as applying to the FSA for the variation or cancellation. See SUP 6 Annex 4 for additional procedures.

21/06/2001

SUP 6.3

Applications for variation of permission

01/12/2004

What is a variation of permission?

SUP 6.3.1

Under section 44 of the Act, a firm may apply to the FSA to vary its Part IV 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 FSA's description of its regulated activities (including by the removal or variation of any limitations); or

(4) cancel any requirement applied for by the firm or imposed by the FSA under section 43 of the Act (Imposition of requirements); or

(5) vary any such requirement.

21/06/2001

SUP 6.3.2

An application for variation of Part IV permission may include one or more of SUP 6.3.1 G(1)-(5). For example, a firm may apply to vary its Part IV permission to add a new regulated activity and at the same time remove a regulated activity for which it currently has permission.

21/06/2001

SUP 6.3.3

In applying for a variation of Part IV 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.

06/10/2007

Applications to add additional regulated activities

SUP 6.3.4

In determining the activities and specified investments for which a Part IV 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 usual supervisory contact at the FSA.

21/06/2001

SUP 6.3.5

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 FSA will not grant a variation of Part IV 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 usual supervisory contact at the FSA.

06/10/2007

SUP 6.3.6

If a firm is seeking a variation of Part IV 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.

21/06/2001

Applications to remove certain regulated activities

SUP 6.3.7

If a firm wishes to cease carrying on an activity for which it has Part IV permission, it will usually apply to vary its Part IV 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 IV permission to remove that specified investment from the relevant activity.

21/06/2001

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

SUP 6.3.8

(1) Where a firm is submitting an application for variation of Part IV 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 to the FSA for an internal transfer of an approved person, Form E (Internal transfer), or make an application to the FSA 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 FSA of any approved person who has ceased to perform a controlled function, 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 to the FSA for approval of the individuals as approved persons as soon as possible using Form A (Application); see SUP 10.12.

01/11/2007

How a variation of permission may change a firm's prudential category

SUP 6.3.9

A variation of Part IV permission may, in some cases, lead to a change in a firm's prudential category or sub-category (see SUP App 1). For example, an investment management firm which varies its Part IV permission to include accepting deposits and as a result meets the definition of a bank, would move to the prudential category for a bank (see SUP App 1.3.1 G).

21/06/2001

SUP 6.3.10

Even if a variation of permission does not itself lead to a change in a firm's prudential category or sub-category, the FSA may use its own-initiative powers to require a firm to comply with a different category or sub-category of prudential rules where it considers this to be appropriate. For details of when and how the FSA may use its own-initiative powers in this context, see SUP 7.

21/06/2001

Variation of permission involving insurance business

SUP 6.3.11

A firm with Part IV permission to carry on insurance business, which is applying for a variation of its Part IV 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)).

21/06/2001

SUP 6.3.12

In applying to vary its Part IV 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 IV permission will be necessary, having regard to whether certain classes of contract may qualify to be effected or carried out on an ancillary or supplementary basis (see SUP 3.12.6G to SUP 3.12.12G).

21/06/2001

SUP 6.3.13

The application for variation of Part IV permission will need to provide information about the classes of contract of insurance for which variation of Part IV 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 FSA that it will meet, and continue to meet, threshold condition2A(Appointment of claims representatives). Firms should note that, although the FSA is able in principle to use its power to give Part IV permission for an applicant to carry on a regulated activity for which it did not originally apply, this 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.

06/10/2007

SUP 6.3.14

(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 IV 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 IV permission is granted by the FSA, the firm will have Part IV 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 IV permission to remove the relevant classes of specified investment.

21/06/2001

The application for variation of permission

SUP 6.3.15

(1) A firm other than a credit union wishing to vary its Part IV permissionmust apply online at www.fsa.gov.uk using the form specified on the FSA's ONA system.
(2) A credit union wishing to vary its Part IV permission must apply using the form in SUP 6 Ann 5D 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).
(3) Until the application has been determined, a firm which submits an application for variation of Part IV permission must inform the FSA of any significant change to the information given in the application immediately it becomes aware of the change.
(4) Where a firm is obliged to submit any form, notice or application online under (1), if the FSA'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 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).

04/10/2010

SUP 6.3.15A

(1) If the FSA's information technology systems fail and online submission is unavailable for 24 hours or more, the FSA 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.

04/10/2010

SUP 6.3.16

(1) Section 51(2) of the Act (Applications under this Part) requires that the application for variation of Part IV 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.

(2) The full form and content of the application for variation of Part IV permission is a matter for direction by the FSA, who will determine the additional information and documentation required on a case by case basis.

21/06/2001

SUP 6.3.17

(1) [deleted]

(2) A firm is advised to discuss its application with its usual supervisory contact at the FSA before submission, particularly if it is seeking a variation of permission 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.

01/11/2004

SUP 6.3.18

The FSA, 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 the FSA will require 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.

21/06/2001

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

SUP 6.3.19

A firm which is making an application for variation of Part IV 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.

21/06/2001

Applications involving significant changes

SUP 6.3.20

In certain cases, FSA may consider that granting an application for variation of Part IV permission which includes adding further regulated activities or changing a requirement or limitation would cause a significant change in the firm's business or risk profile. In these circumstances, the FSA may require the firm to complete appropriate parts of the full application pack (see the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml ), as directed by the FSA. Applications for variation involving significant changes may be processed by the firm's usual supervisory contact at the FSA, in conjunction with the Permissions department. Examples of an application for variation of Part IV 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; or

(4) which causes the firm to change prudential category by, for example, removing a requirement relating to prudential category (see SUP App 1).

06/10/2007

SUP 6.3.21

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 its usual supervisory contact at the FSA. The FSA 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.

21/06/2001

SUP 6.3.22

The fees payable for a firm applying for a variation of its part IV permission are set out in FEES 3.

01/01/2006

Information to be supplied to the FSA as part of the application

SUP 6.3.23

(1) The FSA 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 FSA's existing knowledge of the firm and the variation requested. The FSA 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 FSA's regulatory objectives by the regulated activities and any unregulated activities that the firm 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.

21/06/2001

SUP 6.3.24

(1) The information the FSA may require includes, but is not limited to, the examples given in SUP 6.3.25 G:

21/06/2001

SUP 6.3.25

Information which may be required. See SUP 6.3.24 G

Type of business

Information which may be required

All

1. Details of how the firm plans to comply with the FSA's regulatory requirements relating to any additional regulated activities it is seeking to carry on.

2. Descriptions of the firm's key controls, senior management arrangements and audit and proposed compliance arrangements in respect of any new regulated activity (see SYSC).

3. Organisation charts and details of individuals transferring or being recruited to perform new controlled functions (see SUP 10 for details of the application or transfer procedures under the approved persons regime).

Insurance business

1. A scheme of operations in accordance with SUP App 2.

2. (If the application seeks to vary a permission to include motor vehicle liability insurance business) details of the claims representatives required by threshold condition2A (Appointment of claims representatives), if applicable.

Accepting deposits and designated investment business

1. A business plan which includes the impact of the variation on the firm's existing or continuing business financial projections for the firm, including the impact of the requested variation of Part IV permission on the firm's financial resources and capital adequacy requirements.

06/01/2008

SUP 6.3.26

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

21/06/2001

SUP 6.3.27

When determining whether to grant an application, the FSA 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 FSA 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 FSA may also discuss the application with other regulators , exchanges.

21/06/2001

When will the FSA grant an application for variation of permission?

SUP 6.3.28

(1) The FSA is required by section 41(2) of the Act to ensure that a firm applying to vary its Part IV permission satisfies and will continue to satisfy the threshold conditions in relation to all the regulated activities for which the firm has or will have Part IV permission after the variation. However, the FSA's duty under 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 regulatory objectives. This may include granting a firm's application for variation of Part IV 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) In addition, the FSA may refuse the application if it appears that any of its regulatory objectives would be adversely affected if the application were to be granted and it is desirable in order to meet any of its regulatory objectives for the application to be refused.

06/08/2010

SUP 6.3.29

In determining whether the firm satisfies and continues to satisfy the threshold conditions, the FSA will consider whether the firm is ready, willing and organised to comply with the regulatory requirements it will be subject to if the requested variation of Part IV permission is granted.

21/06/2001

SUP 6.3.30

The FSA will also consider the specific requirements that apply to certain types of activity as these may not allow certain combinations of activity.

06/10/2007

SUP 6.3.31

In considering whether to grant a firm's application to vary its Part IV permission, the FSA will also have regard, under section 49(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 FSA is exercising its functions under Part IV of the Act (Permission to carry on regulated activities) for the purposes of carrying on supplementary supervision . Broadly, where the FSA, in the course of carrying on supplementary supervision, is considering varying the Part IV permission of a person who is a member of a group which is a financial conglomerate, the consultation provisions in section 49(2) of the Act are disapplied. In their place, the regulations impose special obligations, linked to the Financial Groups Directive, to obtain the consent of the relevant competent authorities, to consult those authorities and to consult with the group itself.

06/10/2007

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

SUP 6.3.32

The FSA's power to vary a Part IV permission after it receives an application from a firm extends to including in the Part IV permission as varied any provision that could be included as though a fresh permission was being given in response to an application under section 40 of the Act (Application for permission). Under sections 42 (Giving permission) and 43 of the Act (Imposition of requirements), the FSA may:

(1) incorporate in the description of a regulated activity a limitation (for example, as to the circumstance in which a regulated activity may or may not be carried on); or

(2) specify a narrower or wider description of regulated activity than the firm applied for in the application for variation of Part IV permission (see SUP 3.9.29G(3) for restrictions on insurers); or

(3) require the firm not to take a specified action (for example, not to hold client money); or

(4) require the firm to take a specified action (for example, to submit financial returns more frequently than normal).

06/10/2007

SUP 6.3.33

Thus, when determining an application for variation of Part IV permission, the FSA can, therefore:

(1) 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 FSA under section 42(7)(a) of the Act; or

(2) include any new requirements and vary existing requirements, either on application from the firm or where considered appropriate by the FSA under section 43 of the Act to ensure that the firm satisfies and continues to satisfy the threshold conditions.

21/06/2001

SUP 6.3.34

If limitations or requirements are varied or imposed by the FSA which were not included in the firm's application for variation of Part IV permission, the FSA will be required to issue the firm with a warning notice and decision notice (see SUP 6.3.39 G).

21/06/2001

How long will an application take?

SUP 6.3.35

Under section 52(1) of the Act (Determination of applications), the FSA has six months to consider a completed application from the date of receipt.

21/06/2001

SUP 6.3.36

If the FSA receives an application which is incomplete (that is, if information or a document required as part of the application is not provided), section 52(2) of the Act requires the FSA to determine that incomplete application within 12 months of the initial receipt of the application.

21/06/2001

SUP 6.3.37

Within these time limits, however, the length of the process will relate directly to the complexity of the variation requested. The FSA publishes standard response times on its website at www.fsa.gov.uk setting out how long the application process is expected to take in practice. From time to time, the FSA also publishes its performance against these times.

21/06/2001

SUP 6.3.38

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

21/06/2001

How will the FSA make the decision?

SUP 6.3.39

A decision to grant an application for variation of Part IV permission, as applied for, will be taken by appropriately experienced FSA staff. However, if the FSA staff dealing with the application recommend that a firm's application for variation of Part IV 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 taken by either the RDC or executive procedures.

21/06/2001

SUP 6.3.40

DEPP gives guidance on the FSA's decision making procedures including the procedures it will follow if it proposes to refuse an application for variation of Part IV permission either in whole or in part (for example, an application granted by the FSA but subject to limitations or requirements not applied for).

28/08/2007

Commencing new regulated activities

SUP 6.3.41

If the variation of Part IV permission is given, the FSA 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 FSA.

21/06/2001

SUP 6.3.42

(1) Firms should be aware that the FSA may exercise its own-initiative power to vary or cancel their Part IV permission if they do not (see EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)):

(a) commence a regulated activity for which they have Part IV 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 IV permission for a period of at least 12 months (irrespective of the date of grant).

(1A) The FSA may exercise its own-initiative power to cancel an investment firm's Part IV 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 54(1) of the Act is given (see EG 8).

[Note: article 8(a) of MiFID]

(2) If the FSA considers that such a variation or cancellation of the firm's Part IV 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.

01/11/2007

SUP 6.3.43

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

21/06/2001

SUP 6.4

Applications for cancellation of permission

01/12/2004

SUP 6.4.1

Under section 44(2) of the Act (Variation etc. at request of authorised person), if an authorised person with a Part IV permission applies to the FSA, the FSA may cancel that permission. Cancellation applies to a firm's entire Part IV 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.

21/06/2001

SUP 6.4.2

Under section 44(3) of the Act, the FSA may refuse an application from a firm to cancel its Part IV permission if it appears that it is desirable for the application to be refused in order to meet any of the FSA's regulatory objectives.

(1) [deleted]

(2) [deleted]

06/08/2010

SUP 6.4.3

(1) A firm may apply to the FSA to cancel its Part IV 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 FSA 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 FSA will not grant an application for cancellation of Part IV permission until the firm can demonstrate that it has ceased carrying on all regulated activities (SUP 6.4.19 G).

(3) The FSA 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.

21/06/2001

SUP 6.4.4

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 IV permission while winding down (running off) its regulated activities and before applying to cancel its Part IV permission .

06/08/2009

The application for cancellation of permission

SUP 6.4.5

(1) A firm other than a credit union wishing to cancel its Part IV permission, must apply online at www.fsa.gov.uk using the form specified on the FSA's ONA system.
(2) A credit union wishing to cancel its Part IV permission must apply using the form in SUP 6 Annex 6D 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 Cancellations Team at the FSA.

(a) [deleted]
(b) [deleted]

(3) [deleted]
(4) Until the application has been determined, a firm which submits an application for cancellation of Part IV permission must inform the FSA of any significant change to the information given in the application immediately it becomes aware of the change.
(5) Where a firm is obliged to submit any form, notice or application online under (1), if the FSA'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 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).

04/10/2010

SUP 6.4.5A

(1) If the FSA's information technology systems fail and online submission is unavailable for 24 hours or more, the FSA 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.

04/10/2010

SUP 6.4.6

(1) In addition to applying for cancellation of Part IV permission in accordance with SUP 6.4.5 D, a firm may discuss prospective cancellations with its usual supervisory contact at the FSA. Alternatively a firm can contact the Firms Contact Centre on 0845 606 9966.

(2) To contact the Cancellations Team:

(a) write to: Cancellations Team, The Financial ServicesAuthority, 25 The North Colonnade, Canary Wharf, London, E14 5HS; or

(b) email cancellation.team@fsa.gov.uk

(3) If a firm which has applied for cancellation decides to remain authorised it should inform the FSA immediately using one of the methods in SUP 6.4.6 G (2).

01/03/2005

SUP 6.4.7

When an application is received, the FSA will send the firm a written acknowledgement. The firm will be required to provide information which, in the opinion of the FSA, is necessary for it to determine whether to grant or refuse the application for cancellation of Part IV permission. The CancellationsTeam will work with the firm's usual supervisory contact at the FSA during this process.

01/03/2005

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

SUP 6.4.8

The information which the FSA may request on the circumstances of the application for cancellation and the confirmations which the FSA may require a firm to provide will differ according to the nature of the firm and the activities it has Part IV permission to carry on.

21/06/2001

SUP 6.4.9

A firm will be expected to demonstrate to the FSA that it has ceased carrying on regulated activities. The FSA 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 FSA 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).

21/06/2001

SUP 6.4.10

(1) If a firm is subject to the complaints rules in DISP, the FSA may request confirmation from the firm that there are no unresolved, unsatisfied or undischarged complaints against the firm from a customer of the firm.

(2) If there are unresolved or undischarged complaints against a firm from a customer of the firm, the FSA may request confirmation, as appropriate, of the steps (if any) which have been taken under the firm's complaints procedures and the amount of compensation claimed. The FSA may also request an explanation of the arrangements made for the future consideration of such complaints.

21/06/2001

SUP 6.4.11

If the firm is carrying on designated investment business with retail clients , the FSA may request confirmation that the firm has written, or intends to write, to all retail clients with, or for whom, the firm has conducted regulated activities within a certain period.

01/11/2007

Confirmations and resolutions

SUP 6.4.12

The FSA 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 IV 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.

21/06/2001

SUP 6.4.13

The FSA 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 FSA.

21/06/2001

SUP 6.4.14

Under section 397 of the Act (Misleading statements and practices), 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 FSA information that is false or misleading. If necessary, a firm should take appropriate professional advice when supplying information required by the FSA. An insurer, for example, may ask an actuary to check assumptions in respect of future claims made under contracts of insurance.

21/06/2001

Reports from professionals

SUP 6.4.15

The FSA 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 FSA include, but are not limited to those detailed in SUP 6.4.16 G.

21/06/2001

SUP 6.4.16

Types of reports. See SUP 6.4.15 G

Category of firm

Type of report

a bank or building society

• an audited balance sheet which confirms that, in the auditor's opinion, the firm has no remaining deposit liabilities to customers;
• a report from auditors or reporting accountants;

a securities and futures firm

• a report from auditors or reporting accountants

an insurer

• an audited closing balance sheet which demonstrates that the firm has no insurance liabilities to policyholders;
• a report from the auditors or reporting accountants; and
• in some cases, an actuarial opinion as to the likelihood of any remaining liabilities to policyholders.

21/06/2001

SUP 6.4.17

If a firm is transferring its business, the FSA may require a professional opinion in respect of certain aspects of the transfer. For example, the FSA 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).

21/06/2001

Approved persons

SUP 6.4.18

A firm which is applying for cancellation of Part IV 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 FSA of persons ceasing to perform controlled functions. These forms should give the effective date of withdrawal, if known (see SUP 10 (Approved persons)).

21/06/2001

When will the FSA grant an application for cancellation of permission?

SUP 6.4.19

The FSA will usually not cancel a firm's Part IV 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.

21/06/2001

SUP 6.4.20

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 the FSA that it has made adequate provisions for discharging any liabilities to clients which do not involve the firm carrying on regulated activities.

21/06/2001

SUP 6.4.21

Before the FSA cancels a firm's Part IV 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 FSA may require the firm to confirm this by providing a report, in a form specified by the FSA:

(1) as part of the application for cancellation of permission, if the firm has ceased carrying on all regulated activities under its Part IV 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 IV permission at the time of application.

21/06/2001

SUP 6.4.22

In deciding whether to cancel a firm's Part IV permission, the FSA 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 4.3.99 R , CASS 5.5.80 R and CASS 7.2.15 R (Client money: discharge of fiduciary duty) and CASS 4.3.104 R 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 (including instructions set out in an agreement entered into in accordance with CASS 2.3.2 R (Custody: client agreement)) 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 FSA 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 IV permission cancelled by the FSA 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 FSA; and

(9) the factors set out in SUP 6.4.19 G apply.

01/11/2007

The FSA's enforcement and investigation powers against a former authorised person

SUP 6.4.23

If the FSA has granted an application for cancellation of Part IV permission and withdrawn a firm's status as an authorised person (see SUP 6.5) it will retain certain investigative and enforcement powers in relation to the firm 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)).

28/08/2007

SUP 6.4.24

However, the FSA will not be able to use the following powers 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 the FSA to require restitution).

21/06/2001

SUP 6.4.25

Consequently, the FSA considers that it will have good reason not to grant a firm's application for cancellation of permission where:

(1) it proposes to exercise any of the powers described in SUP 6.4.24 G; or

(2) it has already begun disciplinary and restitution proceedings against the firm by exercising either or both of these powers against the firm.

21/06/2001

SUP 6.4.26

The FSA's use of those powers is outlined in DEPP 6 (Penalties).

28/08/2007

How long will an application take?

SUP 6.4.27

(1) Under section 52(1)of the Act (Determination of applications), the FSA has six months to consider a completed application.

(2) If the FSA receives an application which is incomplete, that is, where information or a document required as part of the application is not provided, section 52(2) of the Act requires the FSA 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 variation requested and whether the firm has fully wound down (run off) its activities at the time it applies. The FSA publishes standard response times on its website setting out how long the application process is expected to take in practice. From time to time, the FSA also publishes its performance against these times.

21/06/2001

How will FSA make the decision?

SUP 6.4.28

A decision to grant an application for cancellation of permission will be taken by appropriately experienced FSA staff. Where, however, the FSA staff dealing with the application recommend that a firm's application for cancellation of Part IV permission be refused, the decision will be taken by the RDC if the applicant makes representations to the FSA. If there are no representations, the decision will be made under executive procedures.

20/10/2005

SUP 6.4.29

See DEPP for guidance on the FSA's decision making procedures, including the procedures it will follow if it proposes to refuse an application for cancellation of Part IV permission.

28/08/2007

SUP 6.5

Ending authorisation

01/12/2004

SUP 6.5.1

Under section 33(2) of the Act (Withdrawal of authorisation by the FSA), if the FSA cancels a firm's Part IV permission, and as a result there is no regulated activity for which the firm has permission, the FSA is required to give a direction withdrawing the firm's status as an authorised person.

21/06/2001

SUP 6.5.2

If the FSA concludes that it should grant a firm's application for cancellation of permission and end its authorisation, the FSA will:

(1) cancel the firm's Part IV permission under section 44(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) update the firm's entry in the FSA register to show it has ceased to be authorised.

21/06/2001

SUP 6 Annex 1

Applications for variation and cancellation of Part IV permission

01/12/2004

21/06/2001

SUP 6 Annex 2

Summary of procedures on application for variation of Part IV permission

01/12/2004

21/06/2001

SUP 6 Annex 3

Summary of procedures on application for cancellation of Part IV permission

01/12/2004

SUP 6 Annex 3.

21/06/2001

SUP 6 Annex 4

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

01/12/2004

SUP 6 Annex 4.1

If a firm has Part IV permission which enables it to hold client money or to carry on regulated activities including:

(a)

carrying out contracts of insurance and effecting contracts of insurance; or

(b)

accepting deposits;

(c)

safeguarding and administration of assets; or

(d)

meeting of repayment claims or managing dormant account funds (including the investment of such funds);

it may require a long period (usually in excess of six months) in which to wind down (run off) its business. In these circumstances, it will usually be appropriate for the firm to apply for a variation of Part IV permission before commencing the wind down.

A firm that believes that it may need to apply for a variation of Part IV permission as a first step towards cancellation of its permission should discuss its plans with its usual supervisory contact at the FSA.

If appropriate, in the interests of its regulatory objectives, the FSA will require details of the firm's plans and will discuss them with the firm and monitor the winding down or transfer of the firm's business. During the period in which it is winding down, a firm will also be required to notify the FSA of any material changes to the information provided such as, for example, receipt of new complaints and changes to plans.

If, after its Part IV permission has been varied, a firm has wound down its business, complied with any requirements imposed by the FSA and ceased to carry on regulated activities (or expects to do so within the next six months), it should then make an application for cancellation of its Part IV permission (see SUP 6.4 (Applications for cancellation of permission)).

Use of own-initiative powers

If, for example, the FSA has concerns relating to any of the regulatory objectives, it may, however, use its own-initiative power under section 45 of the Act (Variation etc. on the Authority's own initiative) (see SUP 7 (Individual requirements) and EG 8 (Variation and cancellation of permission on the FSA's own initiative and intervention against incoming firms)), to vary the Part IV permission of a firm which is winding down or transferring its regulated activities.

Reporting requirements: general

If a firm is winding down (running-off) its business, the routine reporting requirements in SUP 16 (Reporting requirements) will apply unless the firm is granted a waiver. In addition, a firm may be asked to submit additional reports, for example, to enable the FSA to monitor the wind down.

06/08/2010

SUP 6 Annex 4.2

If a firm makes an application to vary its Part IV permission to effect the winding down of regulated activities which it is carrying on including the repayment of client money, or the return of client deposits, custody assets or any other property belonging to clients, the FSA will expect it to have formal plans to ensure that:

(1)

the regulated activities are wound down in an orderly manner;

(2)

the regulated activities are properly completed and all client deposits, client money, custody assets or any other property belonging to clients are repaid, returned or transferred to another Authorised person; and

(3)

the interests of customers are not adversely affected.

A firm must comply with CASS 4.3.99 R, CASS 5.5.80 R and CASS 7.2.15 R(Client money: discharge of fiduciary duty) and CASS 4.3.104 Rand CASS 7.2.19 R(Allocated but unclaimed client money) if it is ceasing to hold client money. A firm must also cease to hold or control custody assets in accordance with instructions received from clients (including instructions set out in an agreement entered into in accordance with CASS 2.3.2 R (Custody: client agreement) and COBS 6.1.7 R (Information concerning safeguarding of designated investments belonging to clients and client money). These rules apply to both repayment and transfer to a third party.

01/11/2007

SUP 6 Annex 4.3

A firm carrying on insurance business which, ultimately, intends to cease insurance business completely, will first need to apply for a variation of its Part IV permission while it is running off its business. The firm should apply for a variation of Part IV permission to remove the activity of effecting contracts of insurance from its permission, thus restricting its activities to carrying out insurance contracts to enable it to run off its remaining insurance liabilities (see SUP 6.2.9 G ).

Examples of variations of Part IV permission which may be appropriate in the context of winding down insurance business include:

(1)

removing one or more regulated activities (for example, when a firm which has Part IV permission to carry on insurance business enters into run-off, its Part IV permission will need to be varied to remove the activity of effecting contracts of insurance in relation to new contracts of insurance); a new contract of insurance excludes contracts effected under a term of a subsisting contract of insurance. Thus the firm's permission will be restricted to carrying out contracts of insurance to enable it to run off its existing liabilities; or

(2)

imposing a limitation on regulated activities in a firm's Part IV permission or imposing a requirement on the type of investments a firm holds to support its insurance liabilities.

An insurer ceasing to effect contracts of insurance is required to submit a scheme of operations in accordance with SUP App 2 (Insurers: scheme of operations). The FSA may require other information depending on the circumstances, for example an actuarial assessment of the firm's run-off.

A firm that is ceasing effecting newcontracts of insurance in all categories of specified investment should refer to SUP App 2 for details of the specific reporting requirements that apply.

An insurer should note that the FSA will not cancel a firm's permission until all the firm's insurance liabilities have been discharged, including any potential insurance liabilities. A firm is, therefore, advised to submit an application for cancellation of its Part IV permission when its run-off is completed.

21/06/2001

SUP 6 Annex 4.4

A firm making an application to vary or cancel its Part IV permission which requires any approval from the Society of Lloyd's should apply to the Society for this in addition to applying to the FSA for the variation or cancellation.

Where a firm has Part IV permission to manage the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's then, if it wishes to vary its Part IV permission to remove this regulated activity or to cancel its Part IV permission completely, special procedures will apply.

(1)

As a first step, the firm should apply to the FSA for a variation of its Part IV permission to limit the regulated activity, after the Lloyd's syndicates have been closed, to permit no new business. Once the syndicates have been closed, the firm's consent from the Society to manage syndicates will also lapse

(2)

After a period of one year from the date of closure of the Lloyd's syndicates the firm may apply to the FSA to vary its Part IV permission, to remove the regulated activity or to cancel its Part IV permission entirely, as appropriate. At this time, a firm's approval from the Society of Lloyd's as a managing agent will cease.

Firms which wish to discuss these procedures in more detail should contact their usual supervisory contactat the FSA and the Society of Lloyd's, as appropriate.

21/06/2001

SUP 6 Annex 4.5

1. As stated in SUP 6.2.9 G, where a bank, or other firm with permission that includes accepting deposits, wishes to cancel its Part IV permission, it will generally need to apply for a variation of that permission while it winds down its business.

2. When a firm is winding down its business activities, it may be appropriate to vary its Part IV permission by imposing:
(1) a limitation that no new deposits will be accepted; or
(2) a limitation on the purchasing of investments for its own account; or
(3) requirements concerning solvency.

3. After a bank has discussed with the FSA the type of variation of Part IV permission the bank requires to wind down its business, it should make an application for variation of Part IV permission as directed in SUP 6.3.15 D and follow the guidance and procedures in SUP 6 as well as the additional procedures set out in this annex.

4. The FSA may vary the firm's Part IV permission to impose one or more of:
(1) a requirement that the firm takes certain steps or refrains from adopting or pursuing a particular course of action or to restrict the scope of its business in a particular way;
(2) a limitation on accepting deposits, for example a limitation that no new deposits will be accepted;
(3) a requirement restricting the granting of credit or the making of investments;
(4) a requirement prohibiting the firm from soliciting deposits either generally or from persons who are not already depositors.

5. The information concerning the circumstances of the application for variation of Part IV permission and the confirmations a firm is required to give to the FSA will differ according to the nature of the bank and its Part IV permission. If appropriate, it may include, but will not necessarily be limited to:
(1) a plan containing the arrangements made in respect of the business of any current depositors, for example how and when the firm intends to repay or novate arrangements with depositors; or
(2) confirmation that the bank will not take any new deposits, will not roll over or renew any existing deposits at maturity and will repay all remaining deposits (including accrued interest) as they fall due for repayment

Dealing with residual deposits: general
6. Where a firm has residual deposits which, for whatever reason, cannot be repaid, they may be protected by a number of different methods. The precise applicability of the courses to be followed depends upon the particular circumstances of the individual firm. The FSA's supervisory approach will be determined by the course of action taken.

Holding funds on trust
7. In some circumstances, it may be appropriate for the firm to make an irrevocable transfer of funds, at least equal to the total of its deposits, to an independent trustee to be held on trust for the benefit of the depositors. Any such proposal should be discussed in advance with the FSA. The amount of funds held on trust should at all times exceed the total of all deposits, in order to provide for contingencies. Trust account arrangements are appropriate only in respect of solvent institutions. The guidance in paragraph 13 of this section applies in most cases.

8. (1) A plan containing the arrangements should be made by the firm in respect of the business of any current depositors, for example how and when the firm intends to repay or novate arrangements with depositors.
(2) The trustee should be an independent and appropriately qualified third party, nominated by the institution and acceptable to the FSA.
(a) The trustee should usually be a major UK bank. If appropriate, an additional trustee from within the institution may be appointed, preferably in an advisory role. An internal trustee may help to ensure continuity if the firm and the trust are likely to remain in existence for the foreseeable future.
(b) The FSA should be consulted about, or pre-notified of, a potential change of trustee.
(c) Trustees are responsible for fulfilling their obligations under the trust deed. In practice, the FSA may wish to point out that certain factors need to be given consideration by the trustees and the institution (for example, the procedures for paying out to depositors).

9. The FSA would require to see an opinion by the firm's legal advisers, confirming the validity and enforceability of the trust and in particular specifying the extent (if any) to which the trust arrangements may be set aside in future. The FSA reserves the right to request sight of the proposed trust documentation itself.

10. The trustee has the right (and probably the obligation) to invest the funds, and in doing so should normally seek to "match" the maturity profile of the firm's deposit base. However, the following could result in deposit liabilities exceeding trust funds at any time:
(a) maturity mismatches, that is, whether there are insufficient liquid funds across the maturity bands to repay depositors; or
(b) changes in interest rates; or
(c) the trustee's fees and disbursements.

11. The trustee should not deposit, or otherwise invest, trust funds except in segregated accounts with third-party authorised institutions.

(1) An auditor's report, similar to that used to determine whether all the deposits have been repaid by a firm, should be provided to confirm that all depositors have been repaid before the discharge of a trust is allowed.
(2) Auditors' reports, from the trust's auditors, should subsequently be obtained at intervals to demonstrate that funds in the trust continue to be at least equal to the remaining liabilities to depositors and that repayments have been properly made. The firm retains the ultimate responsibility to provide information to the FSA.
(3) The FSA may, however, require the inclusion of a clause in the trust deed requiring the trustee to provide such information as may be requested.

12. Entering into a trust arrangement does not "transfer" deposits or discharge the firm's contractual obligations to its depositors.

Holding the funds in segregated accounts
13. The firm may place and retain an amount at all times at least equal to its deposit liabilities in a segregated account with its usual bankers. The advantage of this course of action is that if all deposit liabilities are matched by funds in such an account, then the firm is not carrying on the regulated activity of accepting deposits in contravention of the Act.

14. Placing funds in a segregated account does not discharge a firm's contractual obligations to its depositors.

21/06/2001

SUP 6 Annex 5

Variation of permission application form

01/12/2004

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

Supervision forms - FSA/form_links.jsp#supAnc

01/11/2004

SUP 6 Annex 6

Cancellation of permission application form

01/12/2004

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

Cancellation of permission application form - sup/cancellation_form.doc

30/11/2009