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FINANCIAL SERVICES
AND MARKETS
ACT 2000
REPEALS,
TRANSITIONAL PROVISIONS AND SAVINGS
DECEMBER 2000
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PART V - SCOPE OF
PERMISSION NOTICES AND REQUIREMENTS FOR REAPPLICATIONS FOR PERMISSION
5.1
The Agrandfathering" arrangements described above will be automatic
(except in the specific cases indicated). Their effect will be determined
as a matter of fact, and will ensure that a person who is currently
able to carry on a regulated activity will be able to do so after
commencement, and that any restrictions that applied for the protection
of consumers will continue to apply.
5.2
However, we take the view that something more is needed to tidy matters
up. The matters discussed below will apply equally in relation to
Part IV permissions obtained by virtue of the transitional provisions
of the Mutuals Order.
Notices
of scope of permission
5.3
Part IV permissions are by their nature unique and infinitely variable.
The extent of a person's permission will be determined in line with
the provisions described above. However, particularly where firms
have in the past been subject to multiple authorisation regimes, with
the scope of their authorisation also defined in part by the rules
that applied to particular activities and by the exercise of any intervention
powers, the shape of the "grandfathered" Part IV permission
may not be clear. We therefore propose that, after the "grandfathering"
has taken place, there should be a process whereby the scope of a
person's Part IV permission can be subject to an audit process and
translation from the language and concepts in old law to that used
in the Regulated Activities Order (to be made under section 22 of
FSMA).
5.4
Part IV of the draft Transitionals Order therefore makes provision
for the FSA to issue "scope of permission" notices to authorised
firms. Those notices will set out a statement of the regulated activities
that the FSA considers a person has permission to carry on and any
restrictions that apply to the carrying on of those activities.
5.5
We hope that the FSA will be able to commence this process some way
in advance of commencement. That is why article 38(3) allows it to
issue “anticipatory notices”. The term “anticipatory
notice” just refers to a scope of permission notice issued before
commencement. Where the FSA has already issued an anticipatory notice
at commencement, that will take the place of the scope of permission
notice which will not then have to be issued. This process is designed
to allow the FSA to reach agreement with authorised persons as to
the scope of their permission under FSMA before commencement wherever
possible.
5.6
Authorised persons will need to consider the content of the notices
carefully. An authorised person will be obliged to reply within the
time available, either confirming or disputing the content of the
notice. We would expect any disagreement over the facts to be capable
of amicable resolution. However, if in discussion it is not possible
for the authorised person and the FSA to resolve a disagreement over
the scope of an authorised person's Part IV permission, the authorised
person will be able to refer the matter to the Financial Services
and Markets Tribunal which will determine the matter on the basis
of the evidence available. The Tribunal’s role is to decide
whether, as a matter of fact, the permission set out in the notice
accurately reflects the activities the authorised person was authorised
to carry on immediately before commencement. The Tribunal will not
consider the appropriateness of that person’s pre-commencement
authorisation.
5.7
We consider this an important procedure since it will expose any difficulties
at the outset so that it is clear to the FSA and the authorised person,
and of course any consumers who wish to consult the public register,
what an authorised person may and may not do. We intend that the
information on an authorised person contained in the public register
maintained by the FSA under section 347 of FSMA should derive from
permissions either agreed by that person or determined by the Tribunal
to reflect that person’s definitive permission at commencement.
The register will subsequently record any post-commencement changes
that the FSA may make to the permission. Without such a procedure
there would be ongoing uncertainty which we believe would be undesirable
for all concerned.
5.8
We would particularly welcome views from consultees on how long
authorised persons should be given to respond to a notice of scope
of permission. On the one hand, a short period will ensure clarity
at the earliest stage in the process. On the other, the effect of
agreeing to a notice will be determinative of a person's legal rights
to carry on regulated activities, and persons will need time to consider
the matter carefully, so we would want to ensure sufficient time is
allowed. Should we fix the time period to give everyone certainty,
or should we allow the FSA to vary the time period according to the
complexity of each case? As currently drafted, article 38 allows
the FSA to vary the time period, but requires that authorised persons
be given a minimum of three months after commencement to respond.
5.9
Notwithstanding the above, it will always be open to an authorised
person to seek a variation to its Part IV permission by making an
application under section 44(1) FSMA.
5.10
It is not our intention that authorised persons should have to apply
for variation of their permission in order to be able to continue
to carry on lawfully activities which are brought within the scope
of regulation solely as a result of subtle differences between definitions
and descriptions used in old law and those used in the Regulated Activities
Order. The notices issued by the FSA setting out a person’s
grandfatherd Part IV permission will reflect the concepts introduced
in the Regulated Activities Order rather than old law concepts. Once
agreed or determined by the Tribunal, as the case may be, those notices
will become the definitive statement of a person’s permission.
5.11
As noted above, the Agrandfathering" arrangements will establish
a person's permission at commencement. However, the permission will
not be cast in stone. The Part IV permission will be capable of being
varied at the request of the authorised person concerned, or on the
FSA's own initiative, in accordance with the arrangements set out
in FSMA. Therefore, if the FSA at any point after commencement considers
that a person no longer meets the required standards, it will be able
to vary or cancel the permission (subject to appropriate protections).
Requirement
to reapply for Part IV permission
5.12
While we consider that position adequate for the long term, we consider
that, as a precautionary measure, the FSA should in addition have
powers to require specific classes of person to reapply for permission.
This might be necessary if the FSA has reason to believe that a predecessor
regulator had not applied consistent standards when authorising the
firms, or particular groups of firms, within its remit. This provision
has not been included with any particular class of firm in mind, but
it is there as a protective measure should it appear to the FSA necessary
to take such a step after commencement. The FSA will only be able
to give such a direction within a period of two years from commencement.
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