C3C8 Part XIII Incoming Firms: Intervention by F15FCA or PRA
Pt. 13 modified (1.12.2001) by S.I. 2001/3592, arts. 1(2), 114(3)(a) (with art. 23(2))
Pt. 13 extended (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 32; S.I. 2001/3538, art. 2(1)
Pt. 13 extended (5.10.2001 for specified purposes otherwise 1.12.2001) by S.I. 2001/3084, art. 2(7); S.I. 2001/3538, art. 2(1)
Pt 13 excluded (1.12.2001) by S.I. 2001/3592, art. 107(2) (with art. 23(2))
Pt. 13 applied (with modifications) (26.7.2013 for specified purposes, 1.4.2014 in so far as not already in force) by The Financial Services Act 2012 (Consumer Credit) Order 2013 (S.I. 2013/1882), arts. 1(1), 3(6)
Interpretation
193 Interpretation of this Part.
1
In this Part—
“additional procedure” means the procedure described in section 199;
“incoming firm” means—
- a
an EEA firm which is exercising, or has exercised, its right to carry on a regulated activity in the United Kingdom in accordance with Schedule 3; or
- aa
F1an EEAUCITS which is a recognised scheme under section 264; F40...
- ab
F39an EEAAIFM which is exercising, or has exercised, its right to market an AIF in the United Kingdom in accordance with Schedule 3; or
- b
a Treaty firm which is exercising, or has exercised, its right to carry on a regulated activity in the United Kingdom in accordance with Schedule 4; and
- a
“power of intervention” means the power conferred on F16the FCA or the PRA by section 196.
F21A
In the definition of “incoming firm” references to an EEAUCITS include, in a case where the UCITS is not a body corporate, references to its management company.
2
In relation to an incoming firm which is an EEA firm F3or an EEAUCITS, expressions used in this Part and in Schedule 3 have the same meaning in this Part as they have in that Schedule.
C1I1194 General grounds on which power of intervention is exercisable.
1
The F17appropriate regulator may exercise its power of intervention in respect of an incoming firm if it appears to it that—
a
the firm has contravened, or is likely to contravene, a requirement which is imposed on it by or under this Act (in a case where the F17appropriate regulator is responsible for enforcing compliance in the United Kingdom);
b
the firm has, in purported compliance with any requirement imposed by or under this Act, knowingly or recklessly given the F17appropriate regulator information which is false or misleading in a material particular; or
i
in the case of the FCA, one or more of its operational objectives, and
ii
in the case of the PRA, any of its objectives.
F51A
For the purposes of subsection (1)(c) it does not matter whether there is a relationship between the incoming firm and the persons whose interests will be protected by the exercise of the power of intervention.
F191B
The “appropriate regulator” means—
a
where the incoming firm is a PRA-authorised person, the FCA or the PRA;
b
in any other case, the FCA.
F422
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F423
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F424
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F415
The FCA may exercise its power of intervention in respect of an EEAAIFM if it appears to the FCA that the EEAAIFM has contravened, or is likely to contravene, a requirement imposed by—
a
the Alternative Investment Fund Managers Regulations 2013; or
b
any directly applicable EU regulation made under the alternative investment fund managers directive.
194AF9 Contravention by relevant EEA firm with UK branch of requirement under markets in financial instruments directive: F22appropriate regulator primarily responsible for securing compliance
1
This section applies if—
a
a relevant EEA firm has a branch in the United Kingdom; and
b
F20the appropriate regulator ascertains that the firm has contravened, or is contravening, a requirement falling within subsection (3) (in a case to which Article 62.2 of the markets in financial instruments directive applies).
2
“Relevant EEA firm” means an EEA firm falling within paragraph 5(a) or (b) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the markets in financial instruments directive.
3
A requirement falls within this subsection if it is imposed on the firm—
a
by any provision of or made under this Act which implements the markets in financial instruments directive; or
b
by any directly applicable Community regulation made under that directive.
4
F20The appropriate regulator must give the firm written notice which—
a
requires the firm to put an end to the contravention;
b
states that F20the appropriate regulator's power of intervention will become exercisable in relation to the firm if the firm continues the contravention; and
c
indicates any requirements that F20the appropriate regulator proposes to impose on the firm in exercise of its power of intervention in the event of the power becoming exercisable.
5
F20The appropriate regulator may exercise its power of intervention in respect of the firm if—
a
a reasonable time has expired since the giving of the notice under subsection (4);
b
the firm has failed to put an end to the contravention within that time; and
c
F20the appropriate regulator has informed the firm's home state regulator of its intention to exercise its power of intervention in respect of the firm.
6
Subsection (5) applies whether or not F20the appropriate regulator's power of intervention is also exercisable as a result of section 194.
C4C67
If F20the appropriate regulator exercises its power of intervention in respect of a relevant EEA firm by virtue of subsection (5), it must at the earliest opportunity inform the firm's home state regulator F10 , ESMA and the Commission of—
a
the fact that F20the appropriate regulator has exercised that power in respect of the firm; and
b
any requirements it has imposed on the firm in exercise of the power.
F118
If the firm has failed to put an end to the contravention as described in subsection (5)(b), F20the appropriate regulator may refer the matter to ESMA (and ESMA may act in accordance with the powers conferred on it under Article 19 of Regulation ( EU ) No. 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority)).
F219
Subsection (4) is not to be regarded as requiring the PRA to take action in relation to the contravention of a requirement falling within subsection (3) in a case where it is satisfied that the FCA is required to act, and is acting or has acted, under subsection (4)—
a
in relation to that requirement, or
b
where that requirement is imposed by rules made by the PRA, in relation to an identical requirement imposed by rules made by the FCA.
10
“The appropriate regulator” means—
a
where the relevant EEA firm is a PRA-authorised person, the FCA or, subject to subsection (9), the PRA;
b
in any other case, the FCA.
C2I2195 Exercise of power in support of overseas regulator.
1
The F23appropriate regulator may exercise its power of intervention in respect of an incoming firm at the request of, or for the purpose of assisting, an overseas regulator.
2
Subsection (1) applies whether or not the F24appropriate regulator's power of intervention is also exercisable as a result of section 194.
F252A
“The appropriate regulator” means—
a
where the incoming firm is a PRA-authorised person, the FCA or the PRA;
b
in any other case, the FCA.
3
“An overseas regulator” means an authority in a country or territory outside the United Kingdom—
a
which is a home state regulator; or
b
which exercises any function of a kind mentioned in subsection (4).
4
The functions are—
a
a function corresponding to any function of F26either regulator under this Act;
F14b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c
a function corresponding to any function exercised by the Secretary of State under F6the Companies Acts (as defined in section 2 of the Companies Act 2006);
d
a function in connection with —
i
the investigation of conduct of the kind prohibited by Part V of the M1Criminal Justice Act 1993 (insider dealing); or
ii
the enforcement of rules (whether or not having the force of law) relating to such conduct;
e
a function prescribed by regulations made for the purposes of this subsection which, in the opinion of the Treasury, relates to companies or financial services.
5
If—
a
b
a home state regulator has notified the F27appropriate regulator that an EEA firm’s EEA authorisation has been withdrawn,
6
In deciding in any case in which the F27appropriate regulator does not consider that the exercise of its power of intervention is necessary in order to comply with F7an EU obligation, it may take into account in particular—
a
whether in the country or territory of the overseas regulator concerned, corresponding assistance would be given to a United Kingdom regulatory authority;
b
whether the case concerns the breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom;
c
the seriousness of the case and its importance to persons in the United Kingdom;
d
whether it is otherwise appropriate in the public interest to give the assistance sought.
7
8
195AF8Contravention by relevant EEA firm F32, EEAUCITS or EEAAIFM of directive requirements: home state regulator primarily responsible for securing compliance
1
This section applies if F28the appropriate regulator has clear and demonstrable grounds for believing—
a
that a relevant EEA firm has contravened, or is contravening, a requirement falling within subsection (2) (in a case to which Article 62.1 or 62.3 of the markets in financial instruments directive applies);
b
that a relevant EEAUCITS has contravened, or is contravening, a requirement falling within subsection (3) (in a case to which Article 108.4 of the UCITS directive applies) F37; or
c
that an EEAAIFM has contravened, or is contravening, a requirement falling within subsection (3A) (in a case to which Article 45.7 or 45.8 of the alternative investment fund managers directive applies).
2
A requirement falls within this subsection if it is imposed on the firm—
a
by or under any provision adopted in the firm's home state for the purpose of implementing the markets in financial instruments directive; or
b
by any directly applicable Community regulation made under that directive.
3
A requirement falls within this subsection if it is imposed on the EEAUCITS—
a
by or under any provision adopted in the home state of the EEAUCITS for the purpose of implementing the UCITS directive; or
b
by any directly applicable Community regulation or decision made under that directive.
F333A
A requirement falls within this subsection if it is imposed on the EEAAIFM—
a
by or under any provision adopted in the AIFM’s home state for the purpose of implementing the alternative investment fund managers directive; or
b
by any directly applicable EU regulation made under that directive.
4
F28The appropriate regulator must notify the home state regulator of the firm or EEAUCITS in writing of the situation mentioned in subsection (1).
5
The notice under subsection (4) must—
a
request that the home state regulator take all appropriate measures for the purpose of ensuring that the firm or EEAUCITS puts an end to the contravention;
b
state that F28the appropriate regulator's powers of intervention are likely to become exercisable in relation to the firm or EEAUCITS if it continues the contravention; and
c
indicate any requirements that F28the appropriate regulator proposes to impose on the firm or EEAUCITS in exercise of its power of intervention in the event of the power becoming exercisable.
6
F28The appropriate regulator may exercise its power of intervention in respect of the firm or EEAUCITS if—
a
a reasonable time has expired since the giving of the notice under subsection (4); and
b
conditions A to C are satisfied.
7
Condition A is that—
a
the home state regulator of the firm or EEAUCITS has failed or refused to take measures for the purpose mentioned in subsection (5)(a); or
b
any measures taken by the home state regulator have proved inadequate for that purpose.
F388
Condition B is—
a
in the case of a relevant EEA firm, that the firm is acting in a manner which is clearly prejudicial to the interests of investors in the United Kingdom or the orderly functioning of the markets;
b
in the case of an EEAUCITS, that the EEAUCITS is acting in a manner which is clearly prejudicial to the interests of investors in the United Kingdom; or
c
in the case of an EEAAIFM, that the AIFM is acting in a manner which is clearly prejudicial to the interests of investors in the United Kingdom or the financial stability or integrity of the markets in the United Kingdom.
9
Condition C is that F28the appropriate regulator has informed the home state regulator of the firm or EEAUCITS of its intention to exercise its power of intervention in respect of the firm or EEA UCITS.
10
Subsection (6) applies whether or not F28the appropriate regulator's power of intervention is also exercisable as a result of section 194 or 195.
C5C711
If F28the appropriate regulator exercises its power of intervention in respect of a relevant EEA firm or EEAUCITS by virtue of subsection (6), it must at the earliest opportunity inform F12ESMA and the Commission of—
a
the fact that F28the appropriate regulator has exercised that power in respect of that firm or EEAUCITS; and
b
any requirements it has imposed on the firm or EEAUCITS in exercise of the power.
F1311A
If circumstances exist which enable F28the appropriate regulator to exercise its power of intervention under subsection (6), F28the appropriate regulator may refer the matter to ESMA (and ESMA may act in accordance with the powers conferred on it under Article 19 of Regulation ( EU ) No. 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority)).
F2911B
Subsection (4) is not to be regarded as requiring the PRA to notify the home state regulator in relation to the contravention of a requirement falling within subsection (2) F34, (3) or (3A) in a case where the PRA is satisfied that the FCA is required to act, and is acting or has acted, under subsection (4) in relation to that requirement.
12
In this section—
F30“the appropriate regulator” means—
- a
F35in the case of a relevant EEA firm which is a PRA-authorised person, the FCA or, subject to subsection (11B), the PRA;
- b
in any other case, the FCA;
- a
“home state” means—
- a
in relation to a relevant EEA firm—
- i
in the case of a firm which is a body corporate, the EEA State in which the firm has its registered office or, if it has no registered office, its head office; and
- ii
in any other case, the EEA State in which the firm has its head office;
- i
- b
in relation to a relevant EEAUCITS, the EEA State in which the UCITS is authorised pursuant to Article 5 of the UCITS directive;
- c
F36in relation to an EEAAIFM, the EEA State in which the AIFM
F43has its registered officeF43is authorised in accordance with the alternative investment fund managers directive;
- a
“relevant EEA firm” means an EEA firm falling within paragraph 5(a) or (b) of Schedule 3 which is exercising in the United Kingdom a right deriving from the markets in financial instruments directive;
“relevant EEAUCITS” means a UCITS which is authorised pursuant to Article 5 of the UCITS directive in an EEA State other than the United Kingdom, and references to an EEAUCITS include, in a case where the UCITS is not a body corporate, references to its management company.
196F31 The power of intervention.
1
If a regulator is entitled to exercise its power of intervention in respect of an incoming firm under this Part, it may impose any requirement in relation to the firm which that regulator could impose if—
a
the firm's permission was a Part 4A permission; and
b
the regulator was entitled to exercise its power under section 55L(3) or 55M(3).
2
The FCA must consult the PRA before exercising its powers by virtue of this section in relation to—
a
a PRA-authorised person, or
b
a member of a group which includes a PRA-authorised person.
3
The PRA must consult the FCA before exercising its powers by virtue of this section.
Words in Pt. 13 heading substituted (27.2.2013 for specified purposes, 1.4.2013 in so far as not already in force) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 4 para. 30 (with Sch. 20); S.I. 2013/423, arts. 2, 3, Sch.