Part XIII Incoming Firms: Intervention by FCA or PRA
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
(c)
F3an EEAAIFM which is exercising, or has exercised, its right to market an AIF in the United Kingdom in accordance with Schedule 3; or
(d)
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
“power of intervention” means the power conferred on F4the FCA or the PRA by section 196.
F5(1A)
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 F6or an EEAUCITS, expressions used in this Part and in Schedule 3 have the same meaning in this Part as they have in that Schedule.
194 General grounds on which power of intervention is exercisable.
(1)
The F7appropriate 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 F7appropriate 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 F7appropriate 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.
F10(1A)
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.
F11(1AA)
Where an incoming firm is an EEA firm falling within paragraph 5(d) or (da) of Schedule 3, the appropriate regulator must not exercise its power of intervention under subsection (1)(c) in respect of that firm if doing so would, for the purposes of the Solvency 2 Directive, constitute financial supervision of that firm.
F12(1B)
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.
F13(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F13(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F13(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14(5)
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; F15...
(b)
any directly applicable EU regulation made under the alternative investment fund managers directive. F16; or
F17(c)
Regulation (EU) No 2015/760 of the European Parliament and of the Council of 29th April 2015 on European Long-term Investment Funds or any directly applicable regulation made under that Regulation.
F18194A Contravention by relevant EEA firm with UK branch of requirement under markets in financial instruments directive: F19appropriate 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.
(7)
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 F21 , 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.
F22(8)
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)).
F23(9)
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.
F24194B.Contravention by relevant EEA firm of requirement in capital requirements directive or capital requirements regulation
(1)
In this section—
(a)
“relevant EEA firm” means an EEA firm falling within paragraph 5(a) or 5(b) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from capital requirements directive; and
(b)
“Article 3” means Article 3 of Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions.
(2)
This section applies where—
(a)
a relevant EEA firm has a branch, or is providing services, in the United Kingdom; and
(b)
the appropriate regulator ascertains on the basis of information received from the home state regulator that the firm is contravening, or is at a material risk of contravening, a requirement of the capital requirements directive or capital requirements regulation.
(3)
The appropriate regulator must, without delay, notify the firm’s home state regulator of the need for it to take all appropriate measures to ensure that the firm remedies the contravention or averts the risk of contravention.
(4)
If notice has been given under subsection (3) and the appropriate regulator considers that the home state regulator is failing to comply with its obligations in respect of the contravention or the risk of contravention, the appropriate regulator may refer the matter to EBA (and EBA may act in accordance with the powers conferred on it under Article 19 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority)).
(5)
The appropriate regulator may exercise its power of intervention in respect of the relevant EEA firm if—
(a)
the requirement to be imposed under section 196 is necessary and appropriate to protect against financial instability that would seriously threaten the collective interests of consumers in the United Kingdom;
(b)
the situation is an emergency;
(c)
the home state regulator has not yet taken measures to ensure the contravention or risk of contravention is remedied; and
(d)
reorganisation measures of the kind referred to in Article 3 have not been commenced.
(6)
Any requirement imposed by virtue of paragraph (5)—
(a)
must not favour creditors in the United Kingdom over creditors in another EEA State;
(b)
must be rescinded if the administrative or judicial authorities of the home EEA State take reorganisation measures under Article 3;
(c)
must be rescinded if the appropriate regulator considers that the home state regulator has taken appropriate measures to ensure the firm remedies the contravention or averts the risk of contravention
(7)
The appropriate regulator must give the firm written notice of its reasons for imposing a requirement under subsection (5).
(8)
The appropriate regulator shall inform the Commission, EBA and regulators in affected Member States of the imposition of a requirement by virtue of subsection (5).
(9)
This section is without prejudice to the powers available to the appropriate regulator under section 199.
(10)
For the purposes of this section “appropriate regulator” means the PRA in relation to a PRA-authorised person and the FCA in relation to any other person.
F25194C.Contravention by relevant EEA firm with UK branch of requirement in mortgages directive: appropriate regulator primarily responsible for securing compliance
(1)
In this section “relevant EEA firm” means an EEA firm falling within paragraph 5(i) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the mortgages directive.
(2)
This section applies if —
(a)
a relevant EEA firm has a branch in the United Kingdom; and
(b)
the appropriate regulator ascertains that the firm has contravened, or is contravening, a requirement to which Article 34(2) of the mortgages directive applies.
(3)
The appropriate regulator must give the firm written notice which—
(a)
requires the relevant EEA firm to put an end to the contravention;
(b)
states that the 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 the appropriate regulator proposes to impose on the firm in exercise of its power of intervention in the event of the power becoming exercisable.
(4)
The appropriate regulator may exercise its power of intervention in respect of the relevant EEA firm if—
(a)
a reasonable time has expired since the giving of the notice under subsection (3);
(b)
the firm has failed to put an end to the contravention within that time; and
(c)
the appropriate regulator has informed the firm’s home state regulator of its intention to exercise its power of intervention in respect of the firm.
(5)
Subsection (4) applies whether or not the appropriate regulator’s power of intervention is also exercisable as a result of section 194.
(6)
If the appropriate regulator exercises its power of intervention in respect of a relevant EEA firm by virtue of subsection (4), it must at the earliest opportunity inform the firm’s home state regulator and the Commission of—
(a)
the fact that the 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.
(7)
Subsection (3) is not to be regarded as requiring the PRA to take action in relation to the contravention of a requirement falling within subsection (2)(b) in a case where it is satisfied that the FCA is required to act, and is acting or has acted, under subsection (3) in relation to that requirement.
(8)
In this section “appropriate regulator” means—
(a)
where the relevant EEA firm is a PRA-authorised person, the FCA or, subject to subsection (7), the PRA;
(b)
in any other case, the FCA.
195 Exercise of power in support of overseas regulator.
(1)
The F26appropriate 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 F27appropriate regulator's power of intervention is also exercisable as a result of section 194.
F28(2A)
“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 F29either regulator under this Act;
F30(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
a function corresponding to any function exercised by the Secretary of State under F31the 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 F32appropriate regulator that an EEA firm’s EEA authorisation has been withdrawn,
(6)
In deciding in any case in which the F32appropriate regulator does not consider that the exercise of its power of intervention is necessary in order to comply with F33an 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)
F34195AContravention by relevant EEA firm F35, EEAUCITS or EEAAIFM of directive requirements: home state regulator primarily responsible for securing compliance
(1)
This section applies if F36the 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 EEA UCITS 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 EEA UCITS—
(a)
by or under any provision adopted in the home state of the EEA UCITS for the purpose of implementing the UCITS directive; or
(b)
by any directly applicable Community regulation or decision made under that directive.
F38(3A)
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)
F36The appropriate regulator must notify the home state regulator of the firm or EEA UCITS 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 EEA UCITS puts an end to the contravention;
(b)
state that F36the appropriate regulator's powers of intervention are likely to become exercisable in relation to the firm or EEA UCITS if it continues the contravention; and
(c)
indicate any requirements that F36the appropriate regulator proposes to impose on the firm or EEA UCITS in exercise of its power of intervention in the event of the power becoming exercisable.
(6)
F36The appropriate regulator may exercise its power of intervention in respect of the firm or EEA UCITS 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 EEA UCITS 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.
F39(8)
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 F36the appropriate regulator has informed the home state regulator of the firm or EEA UCITS of its intention to exercise its power of intervention in respect of the firm or EEA UCITS.
(10)
Subsection (6) applies whether or not F36the appropriate regulator's power of intervention is also exercisable as a result of section 194 or 195.
(11)
If F36the appropriate regulator exercises its power of intervention in respect of a relevant EEA firm or EEA UCITS by virtue of subsection (6), it must at the earliest opportunity inform F40ESMA and the Commission of—
(a)
the fact that F36the appropriate regulator has exercised that power in respect of that firm or EEA UCITS; and
(b)
any requirements it has imposed on the firm or EEA UCITS in exercise of the power.
F41(11A)
If circumstances exist which enable F36the appropriate regulator to exercise its power of intervention under subsection (6), F36the 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)).
F42(11B)
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) F43, (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—
F44“the appropriate regulator” means—
(a)
F45in 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;
“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;
(b)
in relation to a relevant EEA UCITS, the EEA State in which the UCITS is authorised pursuant to Article 5 of the UCITS directive;
“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 EEA UCITS” 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 EEA UCITS include, in a case where the UCITS is not a body corporate, references to its management company.
F48195B.Contravention by relevant EEA firm of requirement in mortgages directive: home state regulator primarily responsible for securing compliance
(1)
In this section “relevant EEA firm” means an EEA firm falling within paragraph 5(i) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the mortgages directive.
(2)
This section applies if—
(a)
a relevant EEA firm has a branch, or is providing services, in the United Kingdom; and
(b)
the appropriate regulator has clear and demonstrable grounds for concluding that the firm has contravened, or is contravening, a requirement to which Article 34(4) of the mortgages directive applies.
(3)
The appropriate regulator must notify the relevant EEA firm’s home state regulator of the situation mentioned in subsection (2).
(4)
The notice under subsection (3) must—
(a)
request that the home state regulator take all appropriate measures for the purpose of ensuring that the relevant EEA firm puts an end to the contravention;
(b)
state that the appropriate regulator’s powers of intervention are likely to become exercisable in relation to the relevant EEA firm if it continues the contravention; and
(c)
indicate any requirements that the appropriate regulator proposes to impose on the relevant EEA firm in exercise of its power of intervention in the event of the power becoming exercisable.
(5)
The appropriate regulator may exercise its power of intervention in respect of the relevant EEA firm if—
(a)
a period of one month beginning with the date on which it gave the notification referred to in subsection (3) has expired, and
(b)
conditions A to C are satisfied.
(6)
Condition A is that—
(a)
the home state regulator of the relevant EEA firm has failed or refused to take measures for the purpose mentioned in subsection (4)(a); or
(b)
any measures taken by the home state regulator have proved inadequate for that purpose.
(7)
Condition B is that the relevant EEA firm is acting in a manner which is clearly prejudicial to the interests of consumers in the United Kingdom or to the orderly functioning of the markets.
(8)
Condition C is that the appropriate regulator has informed the home state regulator of the relevant EEA firm of its intention to exercise its powers of intervention in respect of the firm.
(9)
Subsection (5) applies whether or not the appropriate regulator’s power of intervention is also exercisable as a result of section 194 or 195.
(10)
If the appropriate regulator exercises its power of intervention in respect of the relevant EEA firm by virtue of subsection (5), it must inform the Commission and EBA, without undue delay, of—
(a)
the fact that the appropriate regulator has exercised that power in respect of that firm; and
(b)
any requirements it has imposed on the firm in exercise of the power.
(11)
If circumstances exist which enable the appropriate regulator to exercise its power of intervention under subsection (5), the appropriate regulator may refer the matter to EBA (and EBA may act in accordance with the powers conferred on it under Article 19 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24th November 2010 establishing a European Supervisory Authority (European Banking Authority)).
(12)
Subsection (3) is not to be regarded as requiring the PRA to notify the home state regulator in relation to the situation mentioned in subsection (2) in a case where the PRA is satisfied that the FCA is required to act, and is acting, or has acted, under subsection (3) in relation to that situation.
(13)
In this section “appropriate regulator” means—
(a)
where the relevant EEA firm is a PRA-authorised person, the FCA or, subject to subsection (12), the PRA;
(b)
in any other case, the FCA.
F49196 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.