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SUP 4

Actuaries

SUP 4.1

Application

  • 31/12/2004

SUP 4.1.1

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

SUP 4.1.2

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

SUP 4.1.3

handbook-rule

Applicable sections

SUP 4.2

Purpose

  • 31/12/2004

SUP 4.2.1

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

SUP 4.2.2

handbook-guidance

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

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

SUP 4.2.3

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

SUP 4.2.4

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

SUP 4.2.5

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

SUP 4.2.6

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

SUP 4.3

Appointment of actuaries

  • 31/12/2004

Appointment by firms

SUP 4.3.1

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

SUP 4.3.2

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

Appointment by the PRA

SUP 4.3.3

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

SUP 4.3.4

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

SUP 4.3.5

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

SUP 4.3.6

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

SUP 4.3.7

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

Actuaries' qualifications

SUP 4.3.8

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

SUP 4.3.9

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

SUP 4.3.10

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

Disqualified actuaries

SUP 4.3.11

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

SUP 4.3.12

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

SUP 4.3.12A

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

SUP 4.3.12B

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

The actuarial function

SUP 4.3.13

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

SUP 4.3.14

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

SUP 4.3.15

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

The with-profits actuary function

SUP 4.3.16

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

SUP 4.4

Appropriate actuaries

  • 01/12/2004

Appointment of an appropriate actuary

SUP 4.4.1

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

Appropriate actuaries' qualifications

SUP 4.4.2

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

SUP 4.4.3

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

SUP 4.4.4

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

SUP 4.4.5

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

Specific duties of the appropriate actuary

SUP 4.4.6

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

SUP 4.5

Provisions applicable to all actuaries

  • 31/12/2004

Objectivity

SUP 4.5.1

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

SUP 4.5.2

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

SUP 4.5.3

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

SUP 4.5.4

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

SUP 4.5.5

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

SUP 4.5.6

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

Actuaries' statutory duty to report

SUP 4.5.7

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

SUP 4.5.7A

handbook-guidance
In relation to Lloyd's, an effect of the insurance market direction set out in Lloyd's (Auditors and Actuaries) 2 of the PRA Rulebook is that sections 342(5) and 343(5) of the Act (Information given by auditor or actuary to a regulator) apply also to actuaries who are appointed to evaluate the long-term insurance business of a syndicate.

Termination of term of office

SUP 4.5.8

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

SUP 4.5.9

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

SUP 4.5.10

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

SUP 4.5.11

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

Rights and duties

SUP 4.5.12

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

SUP 4.5.13

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

SUP 4.5.14

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

SUP 4.6

Lloyd's

  • 01/01/2005

Appointment of the Lloyd's actuary and syndicate actuaries

SUP 4.6.1

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

SUP 4.6.2

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

Qualifications

SUP 4.6.3

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

SUP 4.6.4

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

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

Disqualified actuaries

SUP 4.6.5

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

SUP 4.6.6

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

Conflicts of interest

SUP 4.6.7

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

The Lloyd's actuary function

SUP 4.6.8

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

Appointment of syndicate actuaries

SUP 4.6.9

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

SUP 4.6.10

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

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

Syndicate actuaries' qualifications

SUP 4.6.11

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

SUP 4.6.12

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

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

Disqualified actuaries

SUP 4.6.13

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

SUP 4.6.14

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

Duties of syndicate actuaries

SUP 4.6.15

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

SUP 4.6.16

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

SUP 4.6.17

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

SUP 4.6.18

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

SUP 4.6.19

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

Export chapter as

SUP 10B

PRA Approved Persons

SUP 10B.1

Application

  • 01/04/2013

General

SUP 10B.1.1

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

SUP 10B.1.2

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

SUP 10B.1.3

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

SUP 10B.1.4

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

Overseas firms: UK services

SUP 10B.1.5

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

Overseas firms: UK establishments

SUP 10B.1.6

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

Incoming EEA firms and incoming Treaty firms

SUP 10B.1.7

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

SUP 10B.1.8

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

SUP 10B.1.9

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

SUP 10B.1.10

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

Incoming EEA firms: passported activities from a branch

SUP 10B.1.11

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

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

SUP 10B.1.12

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

Committees of the Society of Lloyd's

SUP 10B.1.13

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

SUP 10B.1.14

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

Insolvency practitioners

SUP 10B.1.15

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

Appointed representatives

SUP 10B.1.16

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

SUP 10B.2

Purpose

  • 01/04/2013

SUP 10B.2.1

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

SUP 10B.3

Basic rules for all PRA controlled functions

  • 01/04/2013

The need for an arrangement

SUP 10B.3.1

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

SUP 10B.3.2

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

SUP 10B.3.3

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

SUP 10B.3.4

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

SUP 10B.3.5

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

Significant-influence functions

SUP 10B.3.6

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

SUP 10B.3.7

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

SUP 10B.3.8

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

SUP 10B.3.9

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

SUP 10B.3.10

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

Actions for damages

SUP 10B.3.11

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

SUP 10B.4

Specification of functions

  • 01/04/2013

SUP 10B.4.1

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

SUP 10B.4.2

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

SUP 10B.4.3

handbook-rule
  • 01/04/2013

SUP 10B.5

Temporary vacancies

  • 01/04/2013

SUP 10B.5.1

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

SUP 10B.5.2

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

SUP 10B.6

PRA governing functions

  • 01/04/2013

Director function (CF1)

SUP 10B.6.1

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

SUP 10B.6.2

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

Non-executive director function

SUP 10B.6.3

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

SUP 10B.6.4

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

SUP 10B.6.5

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

SUP 10B.6.6

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

Chief executive function (CF3)

SUP 10B.6.7

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

SUP 10B.6.8

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

SUP 10B.6.9

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

SUP 10B.6.10

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

SUP 10B.6.11

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

Partner function (CF4)

SUP 10B.6.12

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

SUP 10B.6.13

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

SUP 10B.6.14

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

Director of unincorporated association function (CF5)

SUP 10B.6.15

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

Small friendly society function (CF6)

SUP 10B.6.16

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

SUP 10B.6.17

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

SUP 10B.6.18

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

Insurance mediation

SUP 10B.6.19

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

SUP 10B.6.20

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

SUP 10B.7

Other functions included in the governing functions

  • 01/04/2013

Systems and controls function

SUP 10B.7.1

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

SUP 10B.7.2

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

The FCA's apportionment and oversight function (CF8)

SUP 10B.7.3

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

SUP 10B.7.4

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

SUP 10B.7.5

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

SUP 10B.7.6

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

SUP 10B.8

PRA required functions

  • 01/04/2013

Actuarial function (CF12)

SUP 10B.8.1

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

With-profits actuary function (CF12A)

SUP 10B.8.2

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

Lloyd's actuary function (CF12B)

SUP 10B.8.3

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

SUP 10B.9

Systems and controls function

  • 01/04/2013

Systems and controls function (CF28)

SUP 10B.9.1

handbook-rule
The systems and controls function is the function of acting in the capacity of an employee of the firm with responsibility for reporting to the governing body of a firm, or the audit committee (or its equivalent) in relation to:
(1) its financial affairs;
(2) setting and controlling its risk exposure (see SYSC 3.2.10 G, SYSC 7.1.6 R and, for CRR firms, Risk Control 2.5 of the PRA Rulebook); and
(3) adherence to internal systems and controls, procedures and policies (see SYSC 3.2.16 G, SYSC 6.2 and, for CRR firms, Compliance and Internal Audit 3.1 of the PRA Rulebook).

SUP 10B.9.2

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

SUP 10B.9.3

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

SUP 10B.10

Procedures relating to PRA-approved persons

  • 01/04/2013

Forms

SUP 10B.10.1

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

SUP 10B.10.2

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

SUP 10B.10.3

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

SUP 10B.10.4

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

SUP 10B.10.5

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

SUP 10B.10.6

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

PRA Firm Enquiries

Prudential Regulation Authority

20 Moorgate

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

SUP 10B.11

Application for approval and withdrawing an application for approval

  • 01/04/2013

When to apply for approval

SUP 10B.11.1

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

SUP 10B.11.2

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

Failure to apply for approval

SUP 10B.11.3

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

How to apply for approval

SUP 10B.11.4

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

SUP 10B.11.5

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

Who should make the application?

SUP 10B.11.6

handbook-guidance
(1) In accordance with section 60 of the Act (Applications for approval), applications must be submitted by, or on behalf of, the firm itself, not by:
(a) the PRA candidate; or
(b) (where the PRA candidate works for the firm's parent undertaking or holding company) by the firm's parent undertaking or holding company.
(2) Usually this will be the firm that is employing the PRA candidate to perform the PRA controlled function. Where a firm has outsourced the performance of a PRA controlled function, the details of the outsourcing determine where responsibility lies and whom the PRA anticipates will submit PRA-approved persons application forms. SUP 10B.11.7 G describes some common situations. The firm which is outsourcing is referred to as "A" and the person to whom the performance of the PRA controlled function has been outsourced, or which makes the arrangement for the PRA controlled function to be performed, is referred to as "B". In each situation, A must take reasonable care to ensure that, in accordance with section 59(2) of the Act, no person performs a PRA controlled function under an arrangement entered into by its contract or in relation to the carrying on by A of a regulated activity, without approval from the PRA. See also SYSC 3.2.4 G and SYSC 8.1.1 R, and, for CRR firms, Outsourcing 2.1 of the PRA Rulebookand SYSC 13.9 for insurers.

SUP 10B.11.7

handbook-guidance
Outsourcing arrangements

SUP 10B.11.7A

handbook-guidance
The reference to "SYSC 8" in in the table above must be read as "SYSC 8 or, in the case of a CRR firm, the Outsourcing Part of the PRA Rulebook".
  • 02/04/2015

Processing an application

SUP 10B.11.8

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

SUP 10B.11.9

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

SUP 10B.11.10

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

SUP 10B.11.11

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

SUP 10B.11.12

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

SUP 10B.11.13

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

SUP 10B.11.14

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

SUP 10B.11.15

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

SUP 10B.11.16

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

Decisions on applications

SUP 10B.11.17

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

SUP 10B.11.18

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

SUP 10B.11.19

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

Withdrawing an application for approval

SUP 10B.11.20

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

SUP 10B.11.21

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

SUP 10B.11.22

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

SUP 10B.12

Changes to a PRA-approved person's details

  • 01/04/2013

Moving within a firm

SUP 10B.12.1

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

SUP 10B.12.2

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

SUP 10B.12.3

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

SUP 10B.12.4

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

SUP 10B.12.5

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

SUP 10B.12.6

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

SUP 10B.12.7

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

Moving between firms

SUP 10B.12.8

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

SUP 10B.12.9

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

Ceasing to perform a PRA controlled function

SUP 10B.12.10

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

SUP 10B.12.11

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

SUP 10B.12.12

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

SUP 10B.12.13

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

SUP 10B.12.14

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

SUP 10B.12.15

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

Changes to a PRA-approved person's personal details

SUP 10B.12.16

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

SUP 10B.12.17

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

SUP 10B.12.18

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

SUP 10B.12.19

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

SUP 10B.12.20

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

SUP 10B.12.21

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

SUP 10B.12.22

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

SUP 10B.13

References and accurate information

  • 01/04/2013

References

SUP 10B.13.1

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

SUP 10B.13.2

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

SUP 10B.13.3

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

The need for complete and accurate information

SUP 10B.13.4

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

SUP 10B.13.5

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

SUP 10B.14

How to apply for approval and give notifications

  • 01/04/2013

SUP 10B.14.1

handbook-directions
(1) This direction applies to an application under Form A or Form E.
(2) An application by a firm other than a credit union must be made by submitting the Form online at http://fshandbook.info/FS/html/PRA/SUP/10B/14 using the form specified on the FCA's and PRA's ONA system.
(3) An application by a credit union must be made using the form in SUP 10B Annex 4D or SUP 10B Annex 8D and must be submitted in the way set out in Notifications 7 (Form and method of notification) of the PRA Rulebook.
(4) Where a firm is obliged to submit an application online under (2), if the information technology systems used by the PRA fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored a firm must use the form in SUP 10B Annex 4D or SUP 10B Annex 8D and submit it in the way set out in Notifications 7 (Form and method of notification) of the PRA Rulebook.

SUP 10B.14.2

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

SUP 10B.14.3

handbook-guidance
If the information technology systems used by the PRA fail and online submission is unavailable for 24 hours or more, the FCA and PRA will endeavour to publish a notice on their websites confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 10B.14.1D (4) and Notifications 7 (Form and method of notification) of the PRA Rulebook. should be used.

SUP 10B.14.4

handbook-guidance
Where SUP 10B.14.1D (4) or the equivalent situation under SUP 10B.14.2 R applies to a firm, General Provisions 2.2 of the PRA Rulebook does not apply.

SUP 10B Annex 1

[Not used]

  • 01/04/2013

handbook-rule
  • 01/04/2013

SUP 10B Annex 2

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

  • 01/04/2013

handbook-guidance
  • 01/04/2013

SUP 10B Annex 3

[Not used]

  • 01/04/2013

[Not used]
  • 01/04/2013

SUP 10B Annex 4

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

  • 01/04/2013

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

SUP 10B Annex 5

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

  • 01/04/2013

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

SUP 10B Annex 6

Form C: Notice of ceasing to perform controlled functions

  • 01/04/2013

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



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

SUP 10B Annex 7

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

  • 01/04/2013

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



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

SUP 10B Annex 8

Form E: Internal transfer of an approved person

  • 01/04/2013

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

Export chapter as

SUP 11

Controllers and close links

SUP 11.1

Application

  • 01/12/2004

Application to firms

SUP 11.1.1

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

SUP 11.1.2

handbook-rule

Applicable sections (see SUP 11.1.1 R)

SUP 11.1.3

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

Application to controllers

SUP 11.1.4

handbook-directions

SUP 11.1.5

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

SUP 11.2

Purpose

  • 01/12/2004

SUP 11.2.1

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

SUP 11.2.2

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

SUP 11.2.3

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

SUP 11.2.4

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

SUP 11.2.5

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

SUP 11.2.6

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

SUP 11.2.7

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

SUP 11.2.8

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

SUP 11.3

Requirements on controllers or proposed controllers under the Act

  • 01/12/2004

SUP 11.3.1

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

SUP 11.3.1A

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

SUP 11.3.1B

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

Requirement to notify a proposed change in control

SUP 11.3.2

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

SUP 11.3.2A

handbook-guidance

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

  1. (1) controllers and potential controllers of non-directive friendly societiesare exempt from the obligation to notify a change in control (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774));
  2. (2) controllers and potential controllers of building societies are exempt from the obligation to notify a change in control unless the change involves the acquisition of a holding of a specified percentage of a building society's capital or the increase or reduction by a specified percentage of a holding of a building society's capital (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774.)). The "capital" of a building society for these purposes consists of:
    1. (a) any shares of a class defined as deferred shares for the purposes of section 119 of the Building Societies Act 1986 which have been issued by the society (in practice, likely to be permanent interest bearing shares (PIBS)); and
    2. (b) the general reserves of that building society:
  3. (3) potential controllers of non-directive firms(other than, in the case of an FCA-authorised person, firms with only a limited permission) ("A") are exempt from the obligation to notify a change in control unless the change results in the potential controller holding:
    1. (a) 20% or more of the shares in A or in a parent undertaking of A ("P");
    2. (b) 20% or more of the voting power in A or P; or
    3. (c) shares or voting power in A or P as a result of which the controller is able to exercise significant influence over the management of A;
  4. or where the change in control over A would lead to the controller ceasing to fall into any of the cases (a), (b) or (c) above (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774)).
  5. (4) (in the case of a change in control over an FCA-authorised person) potential controllers of firms with only a limited permission) ("A") are exempt from the obligation to notify a change in control, unless the change would result in the potential controller holding:
    1. (a) 33% or more of the shares in A or in a parent undertaking of A ("P"); or
    2. (b) 33% or more of the voting power in A or P; or
    3. (c) shares or voting power in A or P as a result of which the controller is able to exercise significant influence over the management of A;
  6. or where the change in control over A would lead to the controller ceasing to fall into any of the cases (a), (b) or (c) above (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774)).

Approval required before acquiring or increasing control

SUP 11.3.4

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

SUP 11.3.5

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

Pre-notification and approval for fund managers

SUP 11.3.5A

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

SUP 11.3.5B

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

SUP 11.3.5C

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

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

Forms of notifications when acquiring or increasing control

SUP 11.3.7

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

SUP 11.3.7A

handbook-guidance

SUP 11.3.10

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

SUP 11.3.11

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

SUP 11.3.12

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

SUP 11.3.13

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

SUP 11.3.14

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

Notification when reducing control

SUP 11.3.15A

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

Joint notifications

SUP 11.3.17

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

SUP 11.4

Requirements on firms

  • 01/12/2004

SUP 11.4.1

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

Requirement to notify a change in control

SUP 11.4.2

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

SUP 11.4.2A

handbook-rule

A non-directive firm (including, in the case of an FCA-authorised person, a firm with only a limited permission) must notify the appropriate regulator of any of the following events concerning the firm:

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

SUP 11.4.4

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

SUP 11.4.6

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

Content and timing of the notification

SUP 11.4.7

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

SUP 11.4.8

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

SUP 11.4.9

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

Identity of controllers

SUP 11.4.10

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

SUP 11.4.11

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

SUP 11.5

Notifications by firms

SUP 11.5.1

handbook-rule

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

SUP 11.5.2

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

SUP 11.5.4

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

SUP 11.5.4A

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

Form of notification when a person reduces control

SUP 11.5.7

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

Joint notifications

SUP 11.5.8

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

SUP 11.5.9

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

SUP 11.5.10

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

SUP 11.6

Subsequent notification requirements by firms

  • 01/12/2004

Changes in the information provided to the appropriate regulator

SUP 11.6.1

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

SUP 11.6.2

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

SUP 11.6.3

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

Notification that the change in control has taken place

SUP 11.6.4

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

SUP 11.6.5

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

SUP 11.7

Acquisition or increase of control: assessment process and criteria

SUP 11.7.1

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

SUP 11.7.2

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

SUP 11.7.3

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

SUP 11.7.4

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

SUP 11.7.13

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

SUP 11.8

Changes in the circumstances of existing controllers

  • 01/12/2004

SUP 11.8.1

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

SUP 11.8.3

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

SUP 11.8.4

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

SUP 11.8.5

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

SUP 11.8.6

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

SUP 11.9

Changes in close links

  • 01/12/2004

Requirement to notify changes in close links

SUP 11.9.1B

handbook-rule
(1) A firm must notify the PRA that it has become or ceased to be closely linked with any person and ensure the following:
(a) where a firm has elected to report changes in close links on a monthly basis under SUP 11.9.5B R, the notification must be made in line with SUP 11.9.3CA R; and
(b) in any other case, the notification must be made by completing the Close Links Notification Form (see SUP 11.9.3C G) and must include the information in SUP 11.9.3D G.
(2) If a group includes more than one firm, a single close links notification may be made by completing the Close Links Notification Form or the Close Links Monthly Report (as applicable). and so satisfy the notification requirement for all firms in the group. Nevertheless, the requirement to notify, and the responsibility for notifying, remains with each firm in the group.

SUP 11.9.2A

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

SUP 11.9.3-B

handbook-guidance
The PRA may ask the firm for additional information following a notification under SUP 11.9.1B R in order to satisfy itself that the firm continues to satisfy the threshold conditions.

Form of notification and method of submission

SUP 11.9.3C

handbook-guidance
The Close Links Notification Form approved by the PRA for notifications under may be found at the PRA website.

SUP 11.9.3CA

handbook-rule
The notification under SUP 11.9.1BR (1)(a) must be made electronically by completing the Close Links Monthly Report and submitting it through the relevant platform provided by the PRA.
  • 01/03/2014

SUP 11.9.3CB

handbook-rule
The Close Links Monthly Report must contain the information specified in SUP 16 Annex 35A.
  • 01/03/2014

SUP 11.9.3D

handbook-guidance
(1) The notification in SUP 11.9.1AR (1)(b) and SUP 11.9.1BR (1)(b) should contain a list of all persons with whom the firm is aware that it has close links, at the time the notification is made, and, for each such person, state:
(a) its name;
(b) the nature of the close links;
(c) if the close links are with a body corporate, its country of incorporation, address and registered number; and
(d) if the close links are with an individual, their date and place of birth.
(2) The firm must also submit a group organisation chart.
  • 01/03/2014

Timing of notification requirement

SUP 11.9.4B

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

Electing to notify changes in close links monthly

SUP 11.9.5B

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

SUP 11.9.6B

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

SUP 11 Annex 1

Summary of notification requirements

  • 01/12/2004

handbook-guidance

SUP 11 Annex 6G

Aggregation of holdings for the purpose of prudential assessment of controllers

  • 06/02/2011

Q1: What is this guidance about?

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

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

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

Acting in Concert

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

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

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

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

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

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

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

Deemed voting power

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

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

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

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

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

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

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

Practical application of aggregation of holdings

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Export chapter as

SUP 13

Exercise of passport rights by UK firms

SUP 13.1

Application and purpose

  • 01/12/2004

Application

SUP 13.1.1

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

SUP 13.1.2

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

SUP 13.1.3

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

SUP 13.1.4

handbook-guidance

Purpose

SUP 13.1.5

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

SUP 13.1.6

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

SUP 13.2

Introduction

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SUP 13.2.1

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

SUP 13.2.2

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

SUP 13.2.3

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

SUP 13.2.4

handbook-guidance
In SUP 13 the "appropriate UK regulator" amounts to whichever of the FCA and the PRA is the competent authority for authorising the relevant UK firm.
  • 01/04/2013

SUP 13.3

Establishing a branch in another EEA State

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What constitutes a branch

SUP 13.3.1

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

The conditions for establishing a branch

SUP 13.3.2

handbook-guidance

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

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

SUP 13.3.2A

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

SUP 13.3.2B

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

SUP 13.3.2D

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

SUP 13.3.2E

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

SUP 13.3.3

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

SUP 13.3.3A

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

Issue of a consent notice to the Host State regulator

SUP 13.3.5

handbook-guidance
  1. (1) If the UK firm's EEA right derives from the CRD or MiFID, the appropriate UK regulator will give the Host State regulator a consent notice within three months unless it has reason to doubt the adequacy of a UK firm's resources or its administrative structure. The Host State regulator then has a further two months to notify the applicable provisions (if any) and prepare for the supervision, as appropriate, of the UK firm, or in the case of a MiFID investment firm, to inform the UK firm that a branch can be established.
  2. (1A) If the UK firm's EEA right derives from the UCITS Directive, the FCA will give the Host State regulator a consent notice within two months unless it has reason to doubt the adequacy of the UK firm's resources or its administrative structure. The Host State regulator then has a further two months to prepare for the supervision of the UK firm.
  3. (1B) Where the UK firm's EEA right derives from AIFMD, the FCA will give the Host State regulator a consent notice within two months of having received the notice of intention and immediately inform the UK firm pursuant to SUP 13.3.6 G (1) if the FCA is satisfied that the firm complies, and continues to comply with:
    1. (a) the provisions implementing the AIFMD; and
    2. (b) any directly applicable EU regulation made under that directive.
  4. (2)
    1. (a) If the UK firm's EEA right derives from the Insurance Directives, the PRA will give the Host State regulator a consent notice within three months unless it has reason to:
      1. (i) doubt the adequacy of the UK firm's resources or its administrative structure; or
      2. (ii) question the reputation, qualifications or experience of the directors or managers of the UK firm or its proposed authorised agent;
    2. in relation to the business the UK firm intends to conduct through the proposed branch. The Host State regulator then has a further two months to notify the applicable provisions (if any) and prepare for the supervision, as appropriate, of the UK firm.
    3. (b) In assessing the matters in (2)(a), the PRA may, in particular, seek further information from the firm or require a report from a skilled person (see SUP 5 (skilled persons)).
    4. (c) If the PRA has required a financial recovery plan of a UK firm of the kind mentioned in paragraph 1 of article 38 of the Consolidated Life Directive or paragraph 1 of article 20a of the First Non-Life Directive, the PRA will not give a consent notice for so long as it considers that policyholders are threatened within the meaning of those provisions.
    5. (d) If the UK firm's EEA right derives from the Insurance Mediation Directive and SUP 13.3.2 G (2) applies, the appropriate UK regulator will give the Host State regulator a consent notice within one month of the date on which it received the UK firm's notice of intention. In cases where SUP 13.3.2 G (2) does not apply (see SUP 13.3.2A G), the UK firm may establish a branch as soon as it satisfies the conditions referred to in SUP 13.3.2 G.

SUP 13.3.5A

handbook-guidance
Where the PRA is the appropriate UK regulator, it will consult the FCA before deciding whether to give a consent notice, except where paragraph 19(7A) of Part III of Schedule 3 to the Act applies. Where the FCA is the appropriate UK regulator, it will consult the PRA before deciding whether to give a consent notice in relation to a UK firm whose immediate group includes a PRA-authorised person.
  • 01/04/2013

SUP 13.3.6

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

SUP 13.3.7

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

SUP 13.4

Providing cross border services into another EEA State

  • 01/12/2004

The conditions for providing cross border services into another EEA State

SUP 13.4.2

handbook-guidance

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

  1. (1) the UK firm has given the appropriate UK regulator, in the way specified by appropriate UK regulator's rules (see SUP 13.5.2 R), notice of its intention to provide cross border services (known as a notice of intention) which:
    1. (a) identifies the activities which it seeks to carry on by way of provision of cross border services; and
    2. (b) includes such other information as may be specified by the appropriate UK regulator (see SUP 13.5.2 R); and
  2. (2) if the UK firm is passporting under the Insurance Directives, the firm has received written notice from the PRA as described in SUP 13.4.6 G; or
  3. (3) if the UK firm is passporting under the Insurance Mediation Directive and the EEA State in which the UK firm is seeking to provide services has notified the European Commission of its wish to be informed of the intention of persons to provide cross border services in its territory in accordance with article 6(2) of that directive, one month has elapsed beginning with the date on which the UK firm received written notice from the appropriate UK regulator as described in SUP 13.4.5 G (paragraph 20 (3B)(c) of Schedule 3 to the Act); or
  4. (4) if the UK firm is passporting under AIFMD, the firm has received written notice from the FCA as described in SUP 13.4.4-AG (1)(c).

SUP 13.4.2A

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

SUP 13.4.2C

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

SUP 13.4.2D

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

SUP 13.4.2E

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

Issuing a consent notice or notifying the Host State regulator

SUP 13.4.4

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

SUP 13.4.4A

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

SUP 13.4.5

handbook-guidance
When the appropriate UK regulator sends a copy of a notice of intention , or if it gives a consent notice to the Host State regulator, it must inform the UK firm in writing that it has done so (paragraphs 20 (3B)(b), (3D)(a)(iii) and (4) and 20C(9) of Schedule 3 to the Act).

Applicable provisions for cross border services

SUP 13.4.6

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

SUP 13.5

Notices of intention

  • 01/12/2004

Specified contents: notice of intention to establish a branch

SUP 13.5.1

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

SUP 13.5.1A

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

SUP 13.5.1B

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

Specified contents: notice of intention to provide cross border services

SUP 13.5.2

handbook-rule

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

  1. (1) SUP 13 Annex 2 R if the UK firm is passporting under MiFID; or
  2. (1A) SUP 13 Annex 3 R if the UK firm is passporting under the Insurance Directives; or
  3. (2) SUP 13 Annex 4 R if the UK firm is passporting under the CRD; or
  4. (3) SUP 13 Annex 5 R if the UK firm is passporting under the Insurance Mediation Directive
  5. (4) SUP 13 Annex 6 R, if the UK firm is a management company passporting under the UCITS Directive.
  6. (5) SUP 13 Annex 8AR, if the UK firm is providing cross-border services under AIFMD to manage an AIF in another EEA State.
  7. (6) SUP 13 Annex 8BR, if the UK firm is providing cross-border services under AIFMD to market an AIF in another EEA State.

Method of submission of notices

SUP 13.5.3-A

handbook-rule
(1) A UK firm, other than a credit union, must submit any notice under SUP 13.5.1 R (1), SUP 13.5.1A R or SUP 13.5.2 R online at the PRA's website using the ONA system.
(2) Where a firm is obliged to submit a notice in accordance with (1), if the information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm must submit that notice in the way set out in Notifications 7 (Form and method of notification) of the PRA Rulebook.
  • 19/06/2014

Unregulated activities

SUP 13.5.5

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

Translations

SUP 13.5.6

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

Notifications to more than one EEA State

SUP 13.5.7

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

SUP 13.6

Changes to branches

  • 01/12/2004

SUP 13.6.1

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

SUP 13.6.2

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

SUP 13.6.3

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

Firms passporting under CRD and the UCITS Directive.

SUP 13.6.4

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

SUP 13.6.5

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

Firms passporting under MiFID

SUP 13.6.5A

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

SUP 13.6.5B

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

Firms passporting under the Insurance Directives

SUP 13.6.6

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

SUP 13.6.7

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

SUP 13.6.8

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

SUP 13.6.9

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

Firms passporting under the Insurance Mediation Directive

SUP 13.6.9A

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

Firms passporting under the Reinsurance Directive

SUP 13.6.9B

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

Changes arising from circumstances beyond the control of a UK firm

SUP 13.6.10

handbook-guidance
  1. (1) If the change arises from circumstances beyond the UK firm's control, the UK firm:
    1. (a) is required by regulation 11(3) or regulation 13(3) to give a notice to the appropriate UK regulator and to the Host State regulator stating the details of the change as soon as reasonably practicable;
    2. (b) may, if it is passporting under the Insurance Directives, make a change to its relevant UK details under regulation 15(1) if it has, as soon as practicable (whether before or after the change), given notice to the PRA stating the details of the change.
  2. (2) The appropriate UK regulator believes that for a change to arise from circumstances beyond the control of a UK firm, the circumstances should be outside the control of the firm as a whole and not just the branch in the EEA State.
  3. (3) This guidance is not applicable to MiFID investment firms or AIFMs.

The process

SUP 13.6.11

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

SUP 13.6.12

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

SUP 13.6.12A

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

SUP 13.6.13

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

SUP 13.6.14

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

SUP 13.6.15

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

SUP 13.6.16

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

The process: MiFID investment firms

SUP 13.6.17

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

SUP 13.7

Changes to cross border services

  • 01/12/2004

SUP 13.7.1

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

SUP 13.7.2

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

Firms passporting under MiFID

SUP 13.7.3A

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

SUP 13.7.3B

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

Firms passporting under the Insurance Directives

SUP 13.7.4

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

SUP 13.7.5

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

SUP 13.7.6

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

SUP 13.7.6A

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

SUP 13.7.7

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

SUP 13.7.7A

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

SUP 13.7.8

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

SUP 13.7.9

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

SUP 13.7.10

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

Firms passporting under the CRD and Insurance Mediation Directive

SUP 13.7.11

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

Firms passporting under the Reinsurance Directive

SUP 13.7.12

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

Liaison between regulators

SUP 13.7.13A

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

SUP 13.8

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

SUP 13.8.1

handbook-rule
(1) Where a firm is required to submit a notice of a change to a branch referred to in SUP 13.6.5 G (1), SUP 13.6.5BG (1), SUP 13.6.7 G (1) , SUP 13.6.8 G, SUP 13.6.9B R SUP 13.6.10 G (1) and SUP 13.6.9C G or a notice of a change to cross border services referred to in SUP 13.7.3 G (1) , SUP 13.7.3AG (1), SUP 13.7.5 G (1) SUP 13.7.6 G , SUP 13.7.13B G and SUP 13.7.14 G it must complete and submit that notice in accordance with the procedures set out in SUP 13.5 for notifying the establishing of a branch or the provision of cross border services.
(a) [deleted]
(b) [deleted]
(2) [deleted]
(a) [deleted]
(b) [deleted]
(c) [deleted]
(d) [deleted]
(e) [deleted]
(f) [deleted]
(3) [deleted]
(4) [deleted]

SUP 13.8.2

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

SUP 13.10

Applicable provisions

  • 01/12/2004

SUP 13.10.1

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

SUP 13.10.2

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

SUP 13.10.3

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

SUP 13.11

Record keeping

  • 01/12/2004

SUP 13.11.1

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

SUP 13.11.2

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

SUP 13.11.3

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

SUP 13.12

Sources of further information

  • 01/12/2004

SUP 13.12.1

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

SUP 13.12.2

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

SUP 13 Annex 1

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

handbook-rule


This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.bankofengland.co.uk/pra/Pages/authorisations/passporting/notifying.aspx for a PRA-authorised person or http://www.fca.org.uk/firms/being-regulated/passporting/notification-forms for an FCA-authorised person.

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

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



[Note: For CRR Firms, from 16th September 2014, forms found in Annex I of the Commission Implementing Regulation (EU) No 926/2014 replace the PDF form linked to in SUP 13 Annex 1R. CRR firms should no longer use this form from this date. Further information can be found on the PRA's website via the link above. SUP 13 Annex 1R will be updated in due course.]

SUP 13 Annex 2

Passporting: Markets in Financial Instruments Directive

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

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

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

SUP 13 Annex 3

Passporting: Consolidated Life Directive and Third Non-Life Directive

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

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

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

SUP 13 Annex 4

Passporting: Capital Requirements Directive

handbook-rule
http://www.bankofengland.co.uk/pra/Pages/authorisations/passporting/notifying.aspx

The forms are also to be found through the following address:
Passporting: Capital Requirements Directive SUP 13 Annex 4

[Note: From 16th September 2014, forms found in Commission Implementing Regulation (EU) No 926/2014 replace the PRA EEA CRD Cross Border Services PDF Form linked to in SUP 13 Annex 4R. CRR firms should no longer use this form from this date. Further information can be found on the PRA's website via the link above. SUP 13 Annex 4R will be updated in due course.]

SUP 13 Annex 5

Passporting: Insurance Mediation Directive

  • 04/10/2010

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

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

Passporting: Insurance Mediation Directive - SUP 13 Annex 5

SUP 13 Annex 7

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

  • 27/07/2012

handbook-rule
This annex consists of only one or more forms. Forms can be completed online now by visiting http://www.fca.org.uk/firms/systems-reporting/ona
The forms are also to be found through the following address:

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

Export chapter as

SUP 13A

Qualifying for authorisation under the Act

SUP 13A.1

Application and purpose

  • 01/02/2006

Application

SUP 13A.1.1

handbook-guidance
(1) This chapter applies to an EEA firm that wishes to exercise an entitlement to establish a branch in, or provide cross border services into, the United Kingdom under a Single Market Directive or the auction regulation. (The Act refers to such an entitlement as an EEA right and its exercise is referred to in the Handbook as "passporting".) (See SUP App 3 (Guidance on passporting issues) for further guidance on passporting.)
(2) This chapter also applies to:
(a) a Treaty firm that wishes to exercise rights under the Treaty in respect of regulated activities, those rights not being covered by passporting rights provided by the Single Market Directives, and qualifies for authorisation under Schedule 4 to the Act (Treaty Rights); and
(b) a UCITS qualifier, that is, an operator, trustee or depositary of a recognised collective investment scheme, constituted in another EEA State, and which qualifies for authorisation under Schedule 5 to the Act (Persons concerned in collective investment schemes).
(3) The provisions implementing the Single Market Directives are within the coordinated field (see PERG 2.9.18G (1)). So, where an incoming ECA provider intends to provide electronic commerce activity that consists of activities that fall within one of the Single Market Directives, the passporting requirements on exercising an EEA right in this chapter will apply.

SUP 13A.1.2

handbook-guidance

This chapter does not apply to:

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

SUP 13A.1.3

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

Purpose

SUP 13A.1.4

handbook-guidance
(1) This chapter explains how an EEA firm and a Treaty firm can qualify for authorisation under Schedules 3 and 4 to the Act and how a UCITS qualifier is authorised under Schedule 5 to the Act.
(2) This chapter also provides guidance on Schedule 3 to the Act for an incoming EEA firm that wishes to establish a branch in the United Kingdom instead of, or in addition to, providing cross border services into the United Kingdom or vice versa.

SUP 13A.1.5

handbook-guidance
(1) EEA firms should note that this chapter only addresses the procedures which the appropriate UK regulator will follow under the Act.So, an EEA firm should consider this guidance in conjunction with the requirements with which it will have to comply in its Home State.
(2) The guidance in this chapter represents the appropriate UK regulator's interpretation of the Single Market Directives, the auction regulation,the Act and the secondary legislation made under the Act. The guidance is not exhaustive and should not be seen as a substitute for a person consulting the legislation or taking legal advice.

SUP 13A.2

EEA firms and Treaty firms

  • 01/02/2006

SUP 13A.2.1

handbook-guidance
A person will only be an EEA firm or a Treaty firm if it has its head office in an EEA State other than the United Kingdom. EEA firms and Treaty firms are entitled to exercise both the right of establishment and the freedom to provide services under the Treaty. The difference, however, is that an EEA firm has a right to passport under a Single Market Directive or the auction regulation, whereas a Treaty firm carries on activities for which the right to carry on those activities does not fall within the scope of a Single Market Directive or the auction regulation. An EEA firm may also be a Treaty firm if it carries on such activities. A person may be a Treaty firm, where, for example, it carries on business thatincludes regulated activities, the right to carry on which does not fall within the scope of the Single Market Directiveor the auction regulationunder which it is entitled to exercise an EEA right, for example, reinsurance in the case of a direct insurer to which the Insurance Directives apply.
(1) [deleted]
(2) [deleted]

SUP 13A.2.2

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

SUP 13A.3

Qualifications for authorisation under the Act

  • 01/02/2006

EEA firms

SUP 13A.3.1

handbook-guidance
Section 31 of the Act (Authorised persons) states that an EEA firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 3 to the Act (EEA Passport Rights). Under paragraph 12 of Part II of that Schedule, an EEA firmthat is an EEA pure reinsurer, or an EEA firm that has received authorisation under article 18 of the auction regulation, qualifies for authorisation without condition. Other than those two types of EEA firm, an EEA firm qualifies for authorisation if:
(1) it is seeking to establish a branch in the United Kingdom in exercise of an EEA right and satisfies the establishment conditions (see SUP 13A.4.1 G and SUP 13A.4.2 G); or
(2) it is seeking to provide cross border services into the United Kingdom in exercise of an EEA right and satisfies the service conditions (see SUP 13A.5.3 G).

SUP 13A.3.1A

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

SUP 13A.3.1B

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

SUP 13A.3.2

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

SUP 13A.3.3

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

Treaty firms

SUP 13A.3.4

handbook-guidance
Under section 31 of the Act, a Treaty firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 4 (Treaty Rights), that is:
(1) the Treaty firm is seeking to carry on a regulated activity; and
(2) the conditions set out in paragraph 3(1) of Schedule 4 to the Act are satisfied.

SUP 13A.3.5

handbook-guidance
On qualifying for authorisation a Treaty firm will have permission to carry on each permitted activity which is a regulated activity. This permission will be treated on the same terms as those which apply to the Treaty firm's Home State authorisation. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

SUP 13A.3.6

handbook-guidance
The effect of paragraph 5(1) and 5(2) of Schedule 4 to the Act is that a Treaty firm which qualifies for authorisation under that Schedule must, at least seven days before it carries on any of the regulated activities covered by its permission, give the appropriate UK regulator written notice of its intention to do so. Failure to do so is a criminal offence under paragraph 6(1) of that Schedule.

SUP 13A.3.6A

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

SUP 13A.3.7

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

SUP 13A.3.8

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

SUP 13A.3.9

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

SUP 13A.3.10

handbook-guidance
(1) The guidance in PERG 2 is relevant to Treaty firms to help them determine if they require authorisation under the Act.
(2) A Treaty firm which qualifies for authorisation is referred to in the Handbook as an incoming Treaty firm.

SUP 13A.3.11

handbook-guidance
(1) An EEA firm that is carrying on both direct insurance and reinsurance business will be entitled to passport under Schedule 3 to the Act in relation to the direct insurance business. It will also have a Treaty right under Schedule 4 to the Act in relation to the reinsurance business if the firm has received Home State authorisation for the regulated activity of effecting and/or carrying out the relevant class of insurance business that includes reinsurance business for that class and the relevant provisions of the law of the Home State satisfy the conditions laid down by the Insurance Directives relating to the carrying on of that activity (see SUP App 3.10.13 G).
(1A) An insurance company with its head office in an EEA State other than the United Kingdom that is carrying on pure reinsurance business in that State, and which has received authorisation (or is deemed to be authorised) under the Reinsurance Directive from its Home State (an EEA pure reinsurer), has an automatic EEA right to passport into the United Kingdom by establishing a branch in the United Kingdom or by the provision of cross border services. Under the General Protocol, Home State regulators have agreed to inform Host State regulators if a pure reinsurer carries on business through a branch in the Host State.
(2) An insurance company with its head office in an EEA State other than the United Kingdom that is carrying on pure reinsurance business in that State, and which wishes to carry on such business in the United Kingdom and is authorised by its Home State but not yet under the Reinsurance Directive, is advised to discuss its particular requirements with the authorisations team in the PRA. It may be entitled to exercise a Treaty right provided it satisfies the conditions in paragraph 3(1) of Schedule 4 to the Act (see SUP 13A.3.4 G). Otherwise, it will have to seek a Part 4A permission (see www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx ).

SUP 13A.4

EEA firms establishing a branch in the United Kingdom

  • 01/02/2006

The conditions for establishing a branch

SUP 13A.4.2

handbook-guidance
Where an EEA firm exercises its EEA right to establish a branch in the United Kingdom under the Insurance Mediation Directive, the Act requires it to satisfy the establishment conditions, as set out in paragraph 13(1A) of Part II of Schedule 3 to the Act.

SUP 13A.4.3

handbook-guidance
For the purposes of paragraph 13(2)(b) of Part II of Schedule 3 to the Act, the applicable provisions may include the appropriate UK regulator's rules. The EEA firm is required to comply with relevant rules when carrying on a passported activity through a branch in the United Kingdom as well as with relevant UK legislation.

SUP 13A.4.3A

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

The notification procedure

SUP 13A.4.4

handbook-guidance
(1) When the appropriate regulator receives a consent notice from the EEA firm's Home State regulator, it will, under paragraphs 13(2)(b), (c) and 13(3) of Part II of Schedule 3 to the Act, notify the applicable provisions (if any) to:
(a) the EEA firm; and
(b) in the case of an EEA firm passporting under the Insurance Directives, the Home State regulator;
within two months of the notice date.
(1A) The notice date is:
(a) for a MiFID investment firm, the date on which the Home State gave the consent notice; and
(b) in any other case, the date on which the appropriate UK regulator received the consent notice.
(2) Although the appropriate UK regulator is not required to notify the applicable provisions to an EEA firm passporting under the Insurance Mediation Directive, MIFID or AIFMD, these provisions are set out in SUP 13A Annex 1 (Application of the Handbook to Incoming EEA Firms).

SUP 13A.4.4A

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

SUP 13A.5

EEA firms providing cross border services into the United Kingdom

  • 01/02/2006

Is the service provided within the United Kingdom?

SUP 13A.5.1

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

SUP 13A.5.2

handbook-guidance
An EEA firm (other than an EEA pure reinsurer or an EEA firm that received authorisation under article 18 of the auction regulation) should note that the requirement under the Single Market Directives to give a notice of intention to provide cross border services applies whether or not:
(1) it has established a branch in the United Kingdom; or
(2) those cross border services are regulated activities.

The conditions for providing cross border services into the United Kingdom

SUP 13A.5.3

handbook-guidance
(1) Before an EEA firm (other than an EEA pure reinsurer or an EEA firm that has received authorisation under article 18 of the auction regulation) exercises an EEA right to provide cross border services into the United Kingdom, the Act requires it to satisfy the service conditions, as set out in paragraph 14 of Part II of Schedule 3 to the Act.
(2) For the purposes of paragraph 14(1)(b) of Part II of Schedule 3 to the Act, the information to be contained in the regulator's notice has been prescribed under regulation 3 of the EEA Passport Rights Regulations and in the case of CRD, the information has been prescribed in the technical standards issued pursuant to and under Article 39 of the CRD.
(3) An EEA UCITS management company may not exercise an EEA right to provide collective portfolio management services for a UCITS scheme on a cross border services basis until approved by the FCA to do so (see SUP 13A.3.1C G).
(4) An EEA firm that has received authorisation under article 18 of the auction regulation is not subject to the service conditions in its exercise of an EEA right under the auction regulation to provide services in the United Kingdom. The notification procedure in SUP 13A.5.4 G does not apply to it and it does not need to notify the FCA prior to providing services into the United Kingdom because there are presently no applicable provisions that apply in these circumstances. Instead, its provision of these services is supervised by its Home State regulator.

The notification procedure

SUP 13A.5.4

handbook-guidance
(1) Unless the EEA firm (other than an EEA pure reinsurer or an EEA firm that received authorisation under article 18 of the auction regulation) is passporting under the Insurance Mediation Directive, if the appropriate UK regulator receives a regulator's notice or, where no notice is required , is informed of the EEA firm's intention to provide cross border services into the United Kingdom, the appropriate UK regulator will, under paragraphs 14(2) and 14(3) of Part II of Schedule 3 to the Act, notify the EEA firm of the applicable provisions (if any) within two months of the day on which the appropriate UK regulator received the regulator's notice or was informed of the EEA firm's intention.
(2) Although the appropriate UK regulator is not required to notify the applicable provisions to an EEA Firm passporting under the Insurance Mediation Directive, MIFID or AIFMD these provisions are set out in SUP 13A Annex 1 (Application of the Handbook to Incoming EEA Firms).

SUP 13A.5.4A

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

SUP 13A.5.5

handbook-guidance
An EEA firm (other than an EEA UCITS management company) that has satisfied the service conditions in paragraph 14 of Part II of Schedule 3 to the Act is entitled to start providing cross border services into the United Kingdom. In the case of an EEA UCITS management company, FCA approval must first be obtained, as explained in SUP 13A.5.3 G (see also SUP 13A.3.1C G). However, an EEA firm that wishes to start providing cross border services but has not yet received notification of the applicable provisions may wish to contact the authorisations team in the FCA or PRA, as appropriate (see SUP 13A.8.1G (2)).

SUP 13A.6

Which rules will an incoming EEA firm be subject to?

  • 01/02/2006

SUP 13A.6.1

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

SUP 13A.6.2

handbook-guidance
An incoming EEA firm (other than an EEA pure reinsurer or an EEA firm that has received authorisation under article 18 of the auction regulation and only provides services in the United Kingdom) or incoming Treaty firm carrying on business in the United Kingdom must comply with the applicable provisions (see SUP 13A.4.4 G, SUP 13A.4.6 G, and SUP 13A.5.4 G) and other relevant UK legislation. For example where the business includes:
(1) business covered by the Consumer Credit Act 1974, then an incoming EEA firm or incoming Treaty firm must comply with the provisions of that Act; or
(2) effecting or carrying out contracts covering motor vehicle third party liability risks as part of direct insurance business, then an incoming EEA firm or incoming Treaty firm is required to become a member of the Motor Insurers' Bureau.

SUP 13A.6.3

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

SUP 13A.6.4

handbook-guidance
Under the EEA Passport Rights Regulations, references in section 60 of the Act (applications for approval for persons to perform controlled functions) to "the authorised person concerned" include:
(1) an EEA MiFID investment firm whose Home State regulator has given a consent notice under paragraph 13 of Schedule 3 to the Act (see SUP 13A.4.1G (1) and SUP 13A.4.2 G) or a regulator's notice under paragraph 14 of that Schedule (see SUP 13A.5.3G (1)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule; and
(2) any other EEA firm with respect to which the appropriate UK regulator has received a consent notice or regulator's notice under paragraph 13 of Schedule 3 to the Act (see SUP 13A.4.1G (1) and SUP 13A.4.2 G) or a regulator's notice under paragraph 14 of that Schedule (see SUP 13A.5.3G (1)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule.

SUP 13A.6.5

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

SUP 13A.7

Top-up permission

  • 01/02/2006

SUP 13A.7.1

handbook-guidance
If a person established in the EEA:
(1) does not have an EEA right;
(2) does not have permission as a UCITS qualifier; and
(3) does not have, or does not wish to exercise, a Treaty right (see SUP 13A.3.4 G to SUP 13A.3.11 G);
to carry on a particular regulated activity in the United Kingdom, it must seek Part 4A permission from the appropriate UK regulator to do so (see the appropriate UK regulator's website: http://www.fca.org.uk/firms/about-authorisation/getting-authorised for the FCA and www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx for the PRA). This might arise if the activity itself is outside the scope of the Single Market Directives, or where the activity is included in the scope of a Single Market Directive but is not covered by the EEA firm's Home State authorisation. If a person also qualifies for authorisation under Schedules 3, 4 or 5 to the Act as a result of its other activities, the Part 4A permission is referred to in the Handbook as a top-up permission.

SUP 13A.7.2

handbook-guidance
Where the appropriate UK regulator grants a top-up permission to an incoming EEA firm to carry on regulated activities for which it has neither an EEA right nor a Treaty right, the appropriate UK regulator is responsible for the prudential supervision of the incoming EEA firm, to the extent that the responsibility is not reserved to the incoming EEA firm'sHome State regulator.

SUP 13A.7.4

handbook-guidance
For guidance on how to apply for Part 4A permission under the Act, see the appropriate UK regulator's website: http://www.fca.org.uk/firms/about-authorisation/getting-authorised for the FCA and www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx for the PRA. If an EEA firm or Treaty firm wishes to make any subsequent changes to its top-up permission, it can make an application for variation of that permission (see SUP 6 (Applications to vary and cancel Part 4A permission)).

SUP 13A.8

Sources of further information

  • 01/02/2006

SUP 13A.8.1

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

SUP 13A Annex 2

Matters reserved to a Home State regulator

  • 01/11/2007

handbook-guidance

Export chapter as

SUP 14

Incoming EEA firms changing details, and cancelling qualification for authorisation

SUP 14.1

Application and purpose

  • 01/12/2004

Application

SUP 14.1.1

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

SUP 14.1.2

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

SUP 14.1.3

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

Purpose

SUP 14.1.4

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

[Note: An EEA bank is required to comply with the requirements set out in the directly applicable regulations adopted under Articles 35, 36 and 39 CRD.]

SUP 14.1.5

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

SUP 14.1.6

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

SUP 14.1.7

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

SUP 14.1.8

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

SUP 14.2

Changes to branch details

  • 01/12/2004

SUP 14.2.1

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

Firms passporting under the CRD and the UCITS Directive

SUP 14.2.2

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

SUP 14.2.3

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

SUP 14.2.4

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

Firms passporting under the Insurance Directives

SUP 14.2.5

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

SUP 14.2.6

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

SUP 14.2.7

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

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

SUP 14.2.8

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

SUP 14.2.9

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

Firms passporting under MiFID

SUP 14.2.10

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

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

SUP 14.2.11

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

SUP 14.2.12

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

SUP 14.2.13

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

SUP 14.3

Changes to cross border services

  • 01/12/2004

SUP 14.3.1

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

SUP 14.3.4

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

Firms passporting under MiFID

SUP 14.3.4A

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

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

SUP 14.3.4B

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

SUP 14.3.4D

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

Firms passporting under the Insurance Directives

SUP 14.3.5

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

SUP 14.3.6

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

SUP 14.3.7

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

SUP 14.4

Notices of proposed changes: form and delivery

  • 01/12/2004

SUP 14.4.1

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

SUP 14.4.1B

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

SUP 14.5

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

SUP 14.5.1

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

SUP 14.5.2

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

SUP 14.6

Cancelling qualification for authorisation

  • 01/12/2004

Incoming EEA firms

SUP 14.6.1

handbook-guidance
Section 34 of the Act states that an incoming EEA firm no longer qualifies for authorisation under Schedule 3 to the Act if it ceases to be an incoming EEA firm as a result of:
(1) having its EEA authorisation withdrawn by its Home State regulator; or
(2) ceasing to have an EEA right in circumstances in which EEA authorisation is not required; this is relevant to a financial institution that is a subsidiary of a credit institution (of the kind mentioned in Article 34of the CRD ) which fulfils the conditions in articles 33 and 34of that Directive.

SUP 14.6.2

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

SUP 14.6.3

handbook-guidance
Regulation 8 states that where an incoming EEA firm which qualifies for authorisation under Schedule 3:
(1) has ceased, or is to cease, to carry on regulated activities in the United Kingdom; and
(2) gives notice of that fact to the appropriate UK regulator ;
the notice is treated under regulation 8 as a request for cancellation of the incoming EEA firm's qualification for authorisation under Schedule 3 to the Act and so as a request under section 34(2) of the Act.

Financial institutions giving up right to authorisation

SUP 14.6.4

handbook-guidance
Where a financial institution (that is, a subsidiary of a credit institution) is passporting under the CRD (see SUP 14.6.1 G (2)), regulation 9(1) states that the incoming EEA firm may request the PRA to direct that its qualification for authorisation under Schedule 3 to the Act is cancelled from such date as may be specified in the direction.

SUP 14.6.5

handbook-guidance
The PRA may not, however, give a direction referred to in SUP 14.6.4 G unless:
(1) the incoming EEA firm has given notice to its Home State regulator; and
(2) the PRA has agreed with the Home State regulator that the direction should be given.

SUP 14.6.6

handbook-guidance
Regulation 9(3) requires that the date specified by the PRA in a direction referred to in SUP 14.6.4 G:
(1) must not be earlier than the date requested in the application; but
(2) subject to (1), is as agreed between the PRA and the incoming EEA firm's Home State regulator.

SUP 14.6.7

handbook-guidance
The PRA is required to send, as soon as practicable, a copy of the direction to the incoming EEA firm and to its Home State regulator (regulation 9(4)).

SUP 14.6.8

handbook-guidance
Where the PRA gives a direction referred to in SUP 14.6.4 G, the incoming EEA firm may apply for Part 4A permission (see the PRA website www.bankofengland.co.uk/pra/Pages/authorisations/newfirm/default.aspx ) to take effect not earlier than the date that its qualification for authorisation is cancelled (as specified in the direction).

Incoming Treaty firms

SUP 14.6.9

handbook-guidance
Section 35 of the Act states that an incoming Treaty firm no longer qualifies for authorisation under Schedule 4 to the Act if its Home State authorisation is withdrawn.

SUP 14.6.10

handbook-guidance
In addition, under section 35(2) an incoming Treaty firm may ask the appropriate UK regulator to give a direction cancelling its authorisation under Schedule 4 to the Act.

SUP 14.8

Further guidance

  • 01/12/2004

SUP 14.8.1

handbook-guidance
For further guidance on passporting procedures, an incoming EEA firm may contact the FCA or PRA authorisations team, or their usual supervisory contact at the appropriate UK regulator. Incoming Treaty firms and UCITS qualifiers may speak to their supervisory contact at the appropriate UK regulator in the first instance

Export chapter as

SUP 16

Reporting requirements

SUP 16.1

Application

  • 01/12/2004

SUP 16.1.1

handbook-rule
This chapter applies to every firm and qualifying parent undertaking within a category listed in column (2) of the table in SUP 16.1.3 R and in accordance with column (3) of that table.

SUP 16.1.2

handbook-guidance
The only categories of firm to which no section of this chapter applies are:
(1) an ICVC;
(2) an incoming EEA firm or incoming Treaty firm, unless it is:
(a) a firm of a type listed in SUP 16.1.3 R as a type of firm to which SUP 16.6, SUP 16.7A, SUP 16.9, SUP 16.12, or SUP 16.14 applies; or
(b) an insurer with permission to effect or carry out life policies;
(c) a firm with permission to establish, operate or wind up a personal pension scheme or a stakeholder pension scheme;
(3) a UCITS qualifier.

SUP 16.1.3

handbook-rule

Application of different sections of SUP 16 (excluding SUP 16.13, SUP 16.15, SUP 16.16 and SUP 16.17)

SUP 16.1.4

handbook-guidance
(1) This chapter contains requirements to report to the appropriate regulator on a regular basis. These requirements include reports relating to a firm's financial condition, and to its compliance with other rules and requirements which apply to the firm. Where the relevant requirements are set out in another section of the Handbook, this chapter contains cross references. An example of this is financial reporting for insurers and friendly societies.
(2) Where such requirements already apply to a firm under legislation other than the Act, they are not referred to in this chapter. An example of this is reporting to the appropriate regulator by building societies under those parts of the Building Societies Act 1986 which have not been repealed.
(3) Requirements for individual firms reflect:
(a) the category of firm;
(b) the nature of business carried on;
(c) whether a firm has its registered office (or if it does not have a registered office, its head office) in the United Kingdom;
(d) whether a firm is an incoming EEA firm or incoming Treaty firm; and
(e) the regulated activities the firm undertakes.

SUP 16.1.7

handbook-guidance
Where a PRA-authorised person is required to notify or provide any information to (a) the appropriate regulator by a PRA Handbook provision and (b) the FCA by the equivalent provision in the FCA Handbook, the PRA-authorised person is expected to comply with both provisions.
  • 01/04/2013

SUP 16.2

Purpose

  • 01/12/2004

SUP 16.2.1A

handbook-guidance
(1) In order to discharge its functions under the Act, the PRA needs timely and accurate information about firms. The provision of this information on a regular basis enables the PRA to build up over time a picture of firms' circumstances and behaviour.
(2) A firm is required to deal with the PRA in an open, cooperative and timely way, and to appropriately disclose to the PRA anything relating to the firm of which the PRA would reasonably expect notice. The reporting requirements are part of the PRA's approach to amplifying these requirements by setting out in more detail the information that the PRA requires. They supplement the rules relating to information gathering and notifications to the PRA. The reports required under these rules help the PRA to monitor firms' compliance with the requirement to maintain adequate financial resources, and with other requirements and standards under the regulatory system.
  • 19/06/2014

SUP 16.3

General provisions on reporting

  • 01/12/2004

Application

SUP 16.3.1

handbook-guidance

The effect of SUP 16.1.1 R is that this section applies to every firm except:

  1. (1) an ICVC;
  2. (2) an incoming EEA firm or incoming Treaty firm, which is not:
    1. (a) a firm of a type listed in SUP 16.1.3 R as a firm to which section SUP 16.6 or SUP 16.12 applies;
    2. (b) an insurer with permission to effect or carry out life policies;
  3. (3) a UCITS qualifier.

Structure of the chapter

SUP 16.3.2

handbook-guidance
This chapter has been split into the following sections, covering:
(1) annual controllers reports (SUP 16.4);
(2) annual close links reports (SUP 16.5);
(3) compliance reports (SUP 16.6);
(4) [deleted]
(4A) annual report and accounts (SUP 16.7A);
(5) persistency reports (SUP 16.8);
(6) annual appointed representatives reports (SUP 16.9);
(7) Verification of standing data (SUP 16.10);
(8) product sales data reporting (SUP 16.11);
(9) integrated regulatory reporting (SUP 16.12);
(10) reporting under the Payment Services Regulations (SUP 16.13);
(11) client money and asset return (SUP 16.14);
(12) reporting under the Electronic Money Regulations (SUP 16.15).
(13) prudent valuation reporting (SUP 16.16);
(14) remuneration reporting (SUP 16.17); and
(15) AIFMD reporting (SUP 16.18).

SUP 16.3.2A

handbook-guidance
This chapter has been split into the following sections, covering:
(1) annual controllers reports (SUP 16.4);
(2) annual close links reports (SUP 16.5);
(3) compliance reports (SUP 16.6);
(4) persistency reports (SUP 16.8);
(5) annual appointed representatives reports (SUP 16.9);
(6) product sales data reporting (SUP 16.11);
(7) integrated regulatory reporting (SUP 16.12);
(8) reporting under the Payment Services Regulations (SUP 16.13);
(9) client money and asset return (SUP 16.14);
(10) reporting under the Electronic Money Regulations (SUP 16.15).
(11) prudent valuation reporting (SUP 16.16);
(12) remuneration reporting (SUP 16.17); and
(13) AIFMD reporting (SUP 16.18).

SUP 16.3.3

handbook-guidance
The annual controllers, annual close links, persistency and annual appointed representatives reports sections are the same for all categories of firm to which they apply.

SUP 16.3.4

handbook-guidance
The compliance section isset out by category of firm, with detailed requirements set out in tables giving:
(1) a brief description of each report;
(2) the frequency with which the report is required; and
(3) the due date for submission of the report.

SUP 16.3.5

handbook-guidance
Further requirements about the reports, such as form and content, are set out in the sections for each category of firm, where this is appropriate. In many cases, however, it is more appropriate to provide this information by means of a separate annex; in these cases the relevant section refers to the annex.

How to submit reports

SUP 16.3.6

handbook-rule
A periodic report required to be submitted under this chapter, or under any other rule, must be submitted in writing in accordance with SUP 16.3.7 R to SUP 16.3.10 G, unless:
(1) a contrary intention appears; or
(2) the report is required under the listing rules.

SUP 16.3.7

handbook-rule
A report or data item must:
(1) give the firm reference number (or all the firm reference numbers in those cases where a report is submitted on behalf of a number of firms,as set out in SUP 16.3.25 G); and
(2) if submitted in paper form, be submitted with the cover sheet contained in SUP 16 Annex 13 R fully completed.

SUP 16.3.8

handbook-rule
A written report must be delivered to the appropriate regulator by one of the methods listed in SUP 16.3.9 R.

SUP 16.3.9

handbook-rule

Method of submission of reports (see SUP 16.3.8 R)

SUP 16.3.10

handbook-guidance
(1) The current published address of the FCA for postal submission of reports is:
(2) The current published address of the FCA for hand delivery of reports is:
(a)
if the firm's usual supervisory contact at the appropriate regulator is based in London, or:
(b)
if the firm's usual supervisory contact at the FCA is based in Edinburgh.
(3) The current published email address and fax number for the FCA's Central Reporting team is regulatory.reports@fca.org.uk and 020 7066 3905. The Central Reporting team does not handle general correspondence between firms and the appropriate regulator . Accordingly, firms should not make submissions to the Central Reporting team's email address or fax number other than as directed in SUP 16.3.8 R.

Complete reporting

SUP 16.3.11

handbook-rule
A firm must submit reports required under this chapter to the appropriate regulator containing all the information required.

SUP 16.3.12

handbook-guidance
SUP 15.6 refers to and contains requirements regarding the steps that firms must take to ensure that information provided to the appropriate regulator is accurate and complete. Those requirements apply to reports required to be submitted under this chapter.

Timely reporting

SUP 16.3.13

handbook-rule
(1) A firm must submit a report required by this chapter in the frequency, and so as to be received by the appropriate regulator no later than the due date, specified for that report.
(2) If the due date for submission of a report required by this chapter falls on a day which is not a business day, the report must be submitted so as to be received by the appropriate regulator no later than the first business day after the due date.
(3) If the due date for submission of a report required by this chapter is a set period of time after the quarter end, the quarter ends will be the following dates, unless another rule or the reporting form states otherwise:
(a) the firm's accounting reference date;
(b) 3 months after the firm's accounting reference date;
(c) 6 months after the firm's accounting reference date; and
(d) 9 months after the firm's accounting reference date.
(4) If the due date for submission of a report required by this chapter is a set period of time after the end of a half-year, a quarter, or a month, the dates will be determined by (a) or (b) below except where otherwise indicated:
(a) the firm's accounting reference date;
(b) monthly, 3 monthly or 6 months after the firm's accounting reference date, as the case may be.

Failure to submit reports

SUP 16.3.14

handbook-rule
(1) If a firm does not submit a complete report by the date on which it is due in accordance with the rules in, or referred to in, this chapter or the provisions of relevant legislation and any prescribed submission procedures, the firm must pay an administrative fee of £250.
(2) The administrative fee in (1) does not apply in respect of quarterly reports required to be submitted by credit unions whose liability to pay a periodic fee under FEES 4.2.1 R in respect of the A.1 activity group in FEES 4 Annex 1A and FEES 4 Annex 1B R , for the financial year prior to the due date for submission of the report, was limited to the payment of the minimum fee.

SUP 16.3.14A

handbook-guidance
Failure to submit a report in accordance with the rules in, or referred to in, this chapter or the provisions of relevant legislation may also lead to the imposition of a financial penalty and other disciplinary sanctions. A firm may be subject to reporting requirements under relevant legislation other than the Act, not referred to in this chapter. An example of this is reporting to the appropriate regulator by building societies under those parts of the Building Societies Act 1986 which have not been repealed (see SUP 16.1.4 G). If it appears to the appropriate regulator that, in the exceptional circumstances of a particular case, the payment of any fee would be inequitable, the appropriate regulator may reduce or remit all or part of the fee in question which would otherwise be payable (see FEES 2.3).

SUP 16.3.15

handbook-guidance
The appropriate regulator may from time to time send reminders to firms when reports are overdue. Firms should not, however, assume that the appropriate regulator has received a report merely because they have not received a reminder.

SUP 16.3.16

handbook-guidance
The firm is responsible for ensuring delivery of the required report at the by the due date. If a report is received by the appropriate regulator after the due date and the firm believes its delivery arrangements were adequate, it may be required to provide proof of those arrangements. Examples of such proof would be:
(1) "proof of posting" receipts from a UK post office or overseas equivalent which demonstrates that the report was posted early enough to allow delivery by the due date in accordance with the delivery service standards prescribed by the relevant postal authority; or
(2) recorded postal delivery receipts showing delivery on the required day; or
(3) records of a courier service provider showing delivery on the required day.

Change of accounting reference date

SUP 16.3.17

handbook-rule
(1) A firm must notify the appropriate regulator if it changes its accounting reference date.
(2) When a firm extends its accounting period, it must make the notification in (1) before the previous accounting reference date.
(3) When a firm shortens its accounting period, it must make the notification in (1) before the new accounting reference date.
(4) SUP 16.10.4A R to SUP 16.10.4C G (Requirement to check the accuracy of standing data and to report changes to the appropriate regulator ) apply to any notification made under (1).

SUP 16.3.17A

handbook-rule
(1) A firm must notify the appropriate regulator if it changes its accounting reference date.
(2) When a firm extends its accounting period, it must make the notification in (1) before the previous accounting reference date.
(3) When a firm shortens its accounting period, it must make the notification in (1) before the new accounting reference date.
(4) Notifications 5.3A and 5.5 (Core Information Requirements) apply to any notification made under (1).
  • 02/04/2015

SUP 16.3.18

handbook-guidance
SUP 16.2.1 G emphasises the importance to the appropriate regulator of timely and accurate information. The extension of a firm's accounting period to more than 15 months may hinder the timely provision of relevant and important information to the appropriate regulator. This is because many due dates for reporting to the appropriate regulator are linked to firms' accounting reference dates. Indeed, for some categories of firm, the only reports required by the appropriate regulator have due dates for submission which are linked to the firm's accounting reference date. If the extension of a firm's accounting period appears likely to impair the effectiveness of the appropriate regulator's supervisory work, the appropriate regulator may take action to ensure that it continues to receive the information it requires on a timely basis. This may include the use of any of the tools of supervision set out in SUP 1.4.5 G.

SUP 16.3.19

handbook-guidance
If more than one firm in a group intends to change its accounting reference date at the same time, a single notification may be given to the appropriate regulator , as described in SUP 15.7.8 G.

Notifications regarding financial information reporting under the EU CRR

SUP 16.3.19A

handbook-rule
(1) A firm must notify the PRA if it is required to report financial information in accordance with Article 99 (2) of the EU CRR.



[Note: Firms may use the "FINREP notification forms" that reside on this page of the Bank's website to make a notification according to SUP16.3.19A or B]
(2) A firm must notify the PRA when it ceases to report financial information in accordance with Article 99 (2) of the EU CRR.
  • 01/01/2014

SUP 16.3.19B

handbook-rule
A firm must notify the PRA if it adjusts its reporting reference dates for financial information under Article 99 of the EU CRR from the calendar year to its accounting year-end.
  • 01/01/2014

Service of Notices Regulations

SUP 16.3.22

handbook-guidance
The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) contain provisions relating to the service of documents on the appropriate regulator . They do not apply to reports required under SUP 16, because of the specific rules in this section.

Reports from groups

SUP 16.3.25

handbook-guidance
If this chapter requires the submission of a report or data item covering a group, a single report or data item may be submitted, and so satisfy the requirements of all firms in the group. Such a report or data item should contain the information required from all of them, meet all relevant due dates and indicate all the firms on whose behalf it is submitted; if necessary a separate covering sheet should list the firms on whose behalf a report or data item is submitted. Nevertheless, the requirement to provide a report or data item, and the responsibility for the report or data item, remains with each firm in the group. However, reporting requirements that apply to a firm, by reason of the firm being a member of a financial conglomerate, are imposed on only one member of the financial conglomerate (see, for example, SUP 16.12.32 R).

SUP 16.3.26

handbook-guidance
Examples of reports covering a group are:
(1) the compliance reports required from banks under SUP 16.6.4 R;
(2) annual controllers reports required under SUP 16.4.5 R;
(3) annual close links reports required under SUP 16.5.4 R
(4) consolidated financial reports required from banks under SUP 16.12.5 R;
(5) consolidated reporting statements required from securities and futures firms under SUP 16.12.11 R;
(6) reporting in relation to defined liquidity groups under SUP 16.12.

SUP 16.4

Annual controllers report

  • 01/12/2004

Application

SUP 16.4.1

handbook-guidance
This section applies to every firm except those firms excluded from its operation by SUP 16.1.1.R and SUP 16.1.3 R.

SUP 16.4.2

handbook-guidance
This section may be of relevance to a directive friendly society:
(1) if it has 10 members or less;
(2) if it has a delegate voting system and has 10 delegates or less; or
(3) if it has 20 members or less and effects or carries out group insurance contracts where one person may exercise one vote on behalf of the members of a group and one vote in their private capacity; or
where a member or delegate, whether alone or acting in concert, is entitled to exercise, or control the exercise of, 10% or more of the total voting power.

SUP 16.4.2A

handbook-guidance
This section may be of relevance to non-directive firms.

SUP 16.4.3

handbook-guidance
Requirements for notifications of a change in control can be found in SUP 11 (Controllers and close links).

Purpose

SUP 16.4.4

handbook-guidance
A firm and its controllers are required to notify certain changes in control (see SUP 11 (Controllers and close links)). The purpose of the rules and guidance in this section is:
(1) to ensure that, in addition to such notifications, the appropriate regulator receives regular and comprehensive information about the identities of all of the controllers of a firm, which is relevant to a firm's continuing to satisfy the effective supervision threshold conditions;
(2) to implement certain requirements relating to annual reporting of controllers which must be imposed on firms under the Investment Services Directive, the Banking Consolidation Directive, the Consolidated Life Directive and the Third Non-Life Directive; and
(3) to support the regulatory functions under Part 12of the Act (Notices of acquisitions of control over UK authorised persons) (see SUP 11 (Controllers and close links)).

Reporting requirement

SUP 16.4.5

handbook-rule
(1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(4A) [deleted]
(4B) [deleted]
(5) [deleted]
(6) A firm must submit annually by electronic means to the appropriate regulator the Controllers Report which contains the information specified in the form in SUP 16 Annex 37A, within four months of the firm's accounting reference date.

SUP 16.4.7

handbook-guidance
If a group includes more than one firm, a single annual controllers report may be submitted, and so satisfy the requirements of all firms in the group. Such a report should contain the information required from all of them, meet all relevant due dates, indicate all the firms on whose behalf it is submitted and give their firm reference numbers. Nevertheless, the requirement to provide a report, and the responsibility for the report, remain with each firm in the group.

SUP 16.4.9

handbook-guidance
Firms are reminded of the requirement in SUP 11.4.10 R to take reasonable steps to keep themselves informed about the identity of their controllers.

Exceptions: friendly societies and building societies

SUP 16.4.10

handbook-rule
If a firm is a friendly society or a building society, then it is required to submit a report under SUP 16.4.5 R only if it is aware that it has a controller.

SUP 16.4.11

handbook-rule
In SUP 16.4.5 R and SUP 16.4.10 R, a building society may regard a person as not being a controller if that person is exempt from the obligation to notify a change in control under The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774) (see SUP 11.3.2A G (2)).

Exception: insurers

SUP 16.4.12

handbook-rule
An insurer need not submit a report under SUP 16.4.5 R to the extent that the information has already been provided to the appropriate regulator under IPRU(INS) 9.30R (Additional information on controllers).

SUP 16.5

Annual Close Links Reports

  • 01/12/2004

Application

SUP 16.5.1

handbook-guidance
This section applies to every firm listed in SUP 11.1.1 R (1) to SUP 11.1.1 R (6), except those firms excluded from its operation by SUP 16.1.1 R and SUP 16.1.3 R or which have elected to report on a monthly basis in accordance with SUP 11.9.5 R.

Purpose

SUP 16.5.2

handbook-guidance
A firm is required to notify the appropriate regulator of changes to its close links (see SUP 11.9). The effective supervision threshold conditions provide that, if a firm has close links with another person, the matters which are relevant in determining whether a firm satisfies the condition of being capable of being effective supervised include:
(1) the nature of the relationship between the firm and that person;
(2) whether those links or that relationship are likely to prevent the appropriate regulator's effective supervision of the firm; and
(3) if the person is subject to the laws, regulations or administrative provisions of a territory which is not an EEA State, whether those foreign provisions, or any deficiency in their enforcement, would prevent the appropriate regulator's effective supervision of the firm.

SUP 16.5.3

handbook-guidance
The purposes of the rules and guidance in this section are:
(1) to ensure that, in addition to such notifications, the appropriate regulator receives regular and comprehensive information about the identities of all persons with whom a firm has close links, which is relevant to a firm's continuing to satisfy the effective supervision threshold conditions and to the protection of consumers; and
(2) to implement certain requirements relating to the provision of information on close links which must be imposed on firms under the 'Post-BCCI Directive'.

Report

SUP 16.5.4

handbook-rule
(1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted]
(6) A firm must submit a report to the appropriate regulator annually by completing the Close Links Annual Report in SUP 16 Annex 36A which must be sent electronically to the appropriate regulator within four months of the firm'saccounting reference date.

SUP 16.5.4A

handbook-rule
If a group includes more than one firm, a single close links notification may be made by completing the Annual Close Links Report and so satisfy the notification requirement for all firms in the group. Nevertheless, the requirement to notify, and the responsibility for notifying, remains with each firm in the group.
  • 31/12/2013

SUP 16.5.6

handbook-guidance
If a group includes more than one firm, a single annual close links report may be submitted and so satisfy the requirements of all firms in the group. Such a report should contain the information required from all of them, meet all relevant due dates, indicate all the firms on whose behalf it is submitted and give their firm reference numbers. Nevertheless, the requirement to provide a report, and the responsibility for the report, remain with each firm in the group.

SUP 16.5.8

handbook-rule
If a firm is an unincorporated friendly society, then it is only required to submit a report under SUP 16.5.4 R if it is aware that it has close links.

SUP 16.6

Compliance reports

  • 01/12/2004

Application

SUP 16.6.1

handbook-guidance
The effect of SUP 16.1.1 R is that this section applies to every firm within a category listed in the left hand column of the table in SUP 16.6.2 G.

SUP 16.6.2

handbook-guidance

Applicable provisions of this section (see SUP 16.6.1 G)

Purpose

SUP 16.6.3B

handbook-guidance
The PRA performs part of its supervision work by reviewing and analysing information about firms' records of compliance with prudential requirements and standards. The type of report the PRA requires will vary, depending on the type of business a firm undertakes. This information helps the PRA to determine whether a firm is complying with the requirements applicable to its business, and what procedures it is operating to ensure its compliance.
  • 01/04/2013

Banks

SUP 16.6.4

handbook-rule
A bank must submit compliance reports to the appropriate regulator in accordance with SUP 16.6.5 R.

SUP 16.6.5

handbook-rule

Compliance reports from a bank (see SUP 16.6.4 R)

SUP 16.10.1

handbook-guidance
The effect of SUP 16.1.1 R is that this section applies to every firm except:
(1) an ICVC; or
(2) a UCITS qualifier; or
(2A) an AIFM qualifier; or
(3) a credit union; or
(4) a dormant account fund operator.

SUP 16.10.2

handbook-guidance
Standing data is used by the appropriate regulator :
(1) to ensure that a firm is presented with the correct regulatory return when it seeks to report electronically;
(2) in order to communicate with a firm;
(3) as the basis for some sections of the Financial Services Register; and
(4) in order to carry out thematic analysis across sectors and groups of firms.

SUP 16.10.3

handbook-guidance
In view of the importance attached to standing data, and the consequences which may result if it is wrong, this section provides the framework for a firm to check and correct it.

SUP 16.10.4

handbook-rule
(1) Within 30 business days of its accounting reference date, a firm must check the accuracy of its standing data through the relevant section of the appropriate regulator's website.
(2) [paragraph suspended by FSA 2004/79]
(3) If any standing data is incorrect, the firm must submit the corrected standing data to the appropriate regulator, using the appropriate form set out in SUP 15 Ann 3 and in accordance with SUP 16.10.4A R.

SUP 16.10.4A

handbook-rule
  1. (1) A firm other than:
    1. (a) a credit union; or
    2. (b) an FCA-authorised person with permission to carry on only credit-related regulated activity;
  2. must submit any corrected standing data under SUP 16.10.4R (3) online at the appropriate regulator's website using the ONA system.
  3. (2) A credit union or a firm with permission to carry on only credit-related regulated activity must submit any corrected standing data under SUP 16.10.4R (3) to static.data@fca.org.uk or via post or hand delivery to the FCA marked for the attention of the 'Static Data team'.
  4. (3) Where a firm is obliged to submit corrected standing data online under (1), if the FCA's information technology systems fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored, a firm must submit its corrected standing data to static.data@fca.org.uk or via post or hand delivery to the FCA marked for the attention of the 'Static Data team'.

SUP 16.10.4B

handbook-guidance
If the FCA's information technology systems fail and online submission is unavailable for 24 hours or more, the FCA will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 16.3.9 R should be used.

SUP 16.10.4C

handbook-guidance
Where SUP 16.10.4AR (3) applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 16.10.5

handbook-guidance
The standing data is made available to the firm when the firm logs into the appropriate section of the appropriate regulator's website. The firm should check the standing data and send any corrections to the appropriate regulator . The appropriate regulator's preferred method of receiving corrections to standing data is by the online forms available at the appropriate regulator's website.

SUP 16.10.6

handbook-guidance
A firm may check, and submit corrections to, its standing data more frequently than annually.

SUP 16.12

Integrated Regulatory Reporting

  • 01/01/2008

Application

SUP 16.12.1

handbook-guidance

The effect of SUP 16.1.1 R is that this section applies to every firm carrying on business set out in column (1) of SUP 16.12.4 R except:

  1. (1) an incoming EEA firm with permission for cross border services only;
  2. (1A) an incoming EEA firm in relation to its carrying on of bidding in emissions auctions;
  3. (2) an oil market participant that is not subject to the requirements of IPRU(INV) Chapter 3;
  4. (3) an authorised professional firm (other than one that must comply with IPRU(INV) 3, 5 or 13 in accordance with IPRU(INV) 2.1.4R,or that is a CASS debt management firm, where SUP 16.12.4 R will apply in respect of the business the firm undertakes), which must (unless it is within (3A)) comply with SUP 16.12.30 R SUP 16.12.31 R;
  5. (3A) an authorised professional firm if the only regulated activity it carries on is credit-related regulated activity as a non-mainstream regulated activity; and
  6. (4) a financial conglomerate, which must comply with SUP 16.12.32 R: firms that are members of a financial conglomerate will have their own reporting requirements under SUP 16.12.32 R.

Purpose

SUP 16.12.2

handbook-guidance
  1. (1) Principle 4 requires firms to maintain adequate financial resources. The Interim Prudential sourcebooks, BIPRU, GENPRU and IFPRU set out the appropriate regulator's detailed capital adequacy requirements. By submitting regular data, firms enable the appropriate regulator to monitor their compliance with Principle 4 and their prudential requirements.
  2. (2) The data items submitted help the appropriate regulator analyse firms' financial and other conditions and performance and to understand their business. By means of further collation and review of the data which the data items provide, the appropriate regulator also uses the data items to identify developments across the financial services industry and its constituent sectors.
  3. (3) The requirements in this section differ according to a firm's regulated activity group (RAG), as different information is required to reflect different types of business. Standard formats are used for reporting, to assist compatibility between firms which carry on similar types of business. Timely submission is important to ensure the appropriate regulator has up-to-date information.

Reporting requirement

SUP 16.12.3

handbook-rule
(1) Any firm permitted to carry on any of the activities within each of the RAGs set out in column (1) of the table in SUP 16.12.4 R must:
(a)
(i) unless (ii) or (iii) applies, submit to the appropriate regulator the duly completed data items or other items applicable to the firm as set out in the provision referred to in column (2) of that table;
(ii) unless (iii) applies, where a firm is required to submit completed data items for more than one RAG, that firm must only submit the data item of the same name and purpose in respect of the lowest numbered RAG applicable to it, RAG 1 being the lowest and RAG12 the highest;
(iii) where a firm is, but for this rule, required to submit data items for more than one RAG and this includes the submission of data items in respect of fees, the FOS or FSCS levy, or threshold conditions, that firm must only submit these data items if they belong to the lowest numbered of the RAGs applicable to it;
(iv) in the case of a non-EEA bank, or an EEA bank (whether or not it has permission for accepting deposits) other than one with permission for cross border services only, any data items submitted should, unless indicated otherwise, only cover the activities of the branch operation in the United Kingdom;
in the format specified as applicable to the firm in the provision referred to in column (2);
(b) submit this information at the frequency and in respect of the periods set out in the provision referred to in column (3); and
(c) submit this information by the due date referred to in the provision referred to in column (4).
(2) Unless (3) applies, any data item in (1) must be submitted by electronic means made available by the appropriate regulator;
(3) Paragraph(2) does not apply to:
(a) credit unions solely in relation to the reporting requirement for RAG 1 activities where the following submission methods apply:
(i) Post to the Bank of England for postal submission:
Regulatory Data Group
Statistics and Regulatory Data Division (HO5 A-B)
Bank of England
Threadneedle Street
London
EC2R 8AH
(ii) Leaving the report marked for the attention of "Regulatory Data Group, Statistics and Regulatory Data Division (HO 5 A-B) at the Bank of England, Threadneedle Street, London, EC2R 8AH, and obtaining a dated receipt
(iii) Electronic mail
(CreditUnionReporting@BankofEngland.co.uk) or fax (020 7601 3334) to the Regulatory Data Group of the Bank of England
(iv) Online submission via the appropriate systems accessible from the appropriate regulator's website;
(aa) data item CCR008 from RAG 12 , where SUP 16.3.6 R to SUP 16.3.10 G will apply; (FCA Handbook only)
(b) firms in RAG 2 in relation to the reporting requirements for RAG 2 activities; and
(c) those data items specified as "No standard format", where SUP 16.3.6 R to SUP 16.3.10 G will apply.
(4) A firm that is a member of a financial conglomerate must also submit financial reports as required by SUP 16.12.32 R.

SUP 16.12.3A

handbook-guidance
The following is designed to assist firms to understand how the reporting requirements set out in this chapter operate when the circumstances set out in SUP 16.12.3R (1)(a)(ii) apply.
(1) Example 1
A UK designated investment firm that undertakes activities in both RAG3 and RAG 7
Overlaying the requirements of RAG 3 ( data items ) with the requirements of RAG 7 shows the following: From this, the additional reports that are required are:
(a) [deleted]
(b) Professional indemnity insurance, where RAG 7 firms complete Section E of the RMAR, and therefore a RAG3 firm should complete that;
(c) [deleted]
(d) Training and competence data, where RAG3 firms should also complete Section G of RMAR;
(e) Conduct of business data, where RAG3 firms should complete Section H of RMAR.
(f) [deleted]
(g) [deleted]
The reporting frequency and submission times for items (b), (d) and (e) above are then derived from the rules applicable to firms in SUP 16.12.23 R and SUP 16.12.224 R. Threshold conditions and fees and levies reports do not need to be submitted as they are not required under the lowest numbered of the two RAGs in this example, see SUP 16.12.3R (1)(a)(iii).
(2) Example 2
A UK bank that is not a FINREP firm in RAG 1 that also carries on activities in RAG 5
Again, overlaying the RAG 1 reporting requirements with the requirements for a RAG 5 firm gives the following : In this case, it is more obvious that the firm's reporting requirement in RAG 1 is not all the data items listed above. However, for the purposes of this exercise, it is the list of potential data items that is important. Thus comparing RAG 1 with RAG 5, the additional reporting requirements are:
(a) Lending - Business flow and rates, where Section D MLAR is required;
(b) Residential Lending to individuals - New business profile, where Section E MLAR is required;
(c) Lending - Arrears analysis, where Section F MLAR is required;
(d) Mortgage administration - Business profile, where Section G MLAR is required;
(e) Mortgage Administration - Arrears analysis, where Section H MLAR is required
(f) Analysis of loans to customers, where section A3 of MLAR is required
(g) Provisions analysis, where Section B2 of MLAR is required; and
Fees and levies are not applicable as they are not required to be submitted under the lowest numbered RAG in this example. The reporting frequency and submission times for items (a) to (g) above are then derived from the rules applicable to RAG 5 firms in SUP 16.12.18 R.

SUP 16.12.3B

handbook-guidance
Firms' attention is drawn to SUP 16.3.25 G regarding a single submission for all firms in the group.

SUP 16.12.4

handbook-rule
Table of applicable rules containing data items, frequency and submission periods

SUP 16.12.4A

handbook-guidance
RAG 1 includes an incoming EEA firm exercising a BCD right through a UK branch.

Group liquidity reporting

SUP 16.12.4B

handbook-guidance
Reporting at group level for liquidity purposes by firms falling within BIPRU 12 (Liquidity) is by reference to defined liquidity groups. Guidance about the different types of defined liquidity groups and related material is set out in SUP 16 Annex 26 (Guidance on designated liquidity groups in SUP 16.12.

Regulated Activity Group 1

SUP 16.12.5

handbook-rule
The applicable data items and forms or reports referred to in SUP 16.12.4 R are set out according to firm type in the table below:

SUP 16.12.6

handbook-rule
The applicable reporting frequencies for submission of data items and periods referred to in SUP 16.12.5 R are set out in the table below according to firm type. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.

SUP 16.12.7

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.6 R, unless indicated otherwise.

Regulated Activity Group 2.1

SUP 16.12.8

handbook-rule
(1) The financial reporting requirements for RAG 2.1 activities for insurers, excluding friendly societies, are set out in IPRU(INS).
(2) The financial reporting requirements for RAG 2.1 activities for friendly societies are set out in IPRU(FSOC).
(3) A UK insurance special purpose vehicle must submit a copy of its annual audited financial statements within 3 months of its accounting reference date, but the report is only required if it was audited as a result of a statutory provision other than under the Act.

Regulated Activity Group 3

SUP 16.12.10

handbook-rule
(1) SUP016.12.11 R to SUP 16.12.13 R do not apply to:
(a) a lead regulated firm (except in relation to data items 47 to 55 (inclusive));
(b) an OPS firm;
(c) a local authority;
(d) a service company.
(2) A PRA lead regulated firm and an OPS firm must submit a copy of its annual report and audited accounts within 80 business days from its accounting reference date.
(3) A PRA service company must submit a copy of its annual audited financial statements within 6 months from its accounting reference date. However, the firm need only submit this if the report was audited as a result of a statutory provision other than the Act.

SUP 16.12.11B

handbook-rule
The applicable data items referred to in SUP 16.12.4 R for UK designated investment firms are set out below:

SUP 16.12.12A

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.4 R are set out in the table below. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.
  • 01/01/2014

SUP 16.12.13A

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.12A R, unless indicated otherwise.
  • 01/01/2014

Regulated Activity Group 4

SUP 16.12.15B

handbook-rule
The applicable data items referred to in SUP 16.12.4 R for UK designated investment firms are set out below:

SUP 16.12.16A

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.15B R are set out in the table below. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.
  • 01/01/2014

SUP 16.12.17A

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.16A, unless indicated otherwise.
  • 01/01/2014

Regulated Activity Group 7

SUP 16.12.22C

handbook-rule
The applicable data items referred to in SUP 16.12.4 R for UK designated investment firms are set out in the table below:

SUP 16.12.23

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.22A R are set out in the table below. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.

SUP 16.12.24

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.23 R, unless indicated otherwise.

Regulated Activity Group 8

SUP 16.12.25C

handbook-rule
The applicable data items referred to in SUP 16.12.4 R are set out in the table below:

SUP 16.12.26A

handbook-rule
The applicable reporting frequencies for data items referred to in SUP 16.12.25C R are set out in the table below. Reporting frequencies are calculated from a firm's accounting reference date, unless indicated otherwise.
  • 01/01/2014

SUP 16.12.27A

handbook-rule
The applicable due dates for submission referred to in SUP 16.12.4 R are set out in the table below. The due dates are the last day of the periods given in the table below following the relevant reporting frequency period set out in SUP 16.12.26 R, unless indicated otherwise.
  • 01/01/2014

Financial conglomerates

SUP 16.12.32

handbook-rule
(1) A firm that is a member of a financial conglomerate must submit financial reports to the appropriate regulator in accordance with the table in SUP 16.12.33 R if:
(a) it is at the head of a UK-regulated EEA financial conglomerate; or
(b) its Part 4A permission contains a relevant requirement.
(2) In (1)(b), a relevant requirement is one which:
(a) applies SUP 16.12.33 R to the firm; or
(b) applies SUP 16.12.33 R to the firm unless the mixed financial holding company of the financial conglomerate to which the firm belongs submits the report required under this rule (as if the rule applied to it).

SUP 16.12.33

handbook-rule
Financial reports from a member of a financial conglomerate (see SUP 16.12.32 R)

SUP 16.16

Prudent valuation reporting

  • 30/06/2012

Application

SUP 16.16.1

handbook-rule
This section applies to a UK bank, a UK designated investment firm or a full-scope IFPRU investment firm which meets the condition in SUP 16.16.2 R.

SUP 16.16.2

handbook-rule
The condition referred to in SUP 16.16.1 R is that, on its last accounting reference date, the firm had balance sheet positions measured at fair value which, on a gross basis (the sum of the absolute value of each of the assets and liabilities), exceeded £3 billion.

Purpose

SUP 16.16.3

handbook-guidance
(1) The purpose of this section is to set out the requirements for a firm specified in SUP 16.16.1 R to report the outcomes of its prudent valuation assessments to the appropriate regulator and to do so in a standard format.
(2) The purpose of collecting this data on the prudent valuation assessments made by a firmis to assist the appropriate regulator in assessing the capital resources of firms, to enable the appropriate regulator to gain a wider understanding of the nature and sources of measurement uncertainty in fair-valued financial instruments, and to enable comparison of the nature and level of that measurement uncertainty across firms and over time.

[Note: articles 24 and 105 of the EU CRR]

Reporting requirement

SUP 16.16.4

handbook-rule
(1) A firm to which this section applies must submit to the appropriate regulator quarterly (on a calendar year basis and not from a firm's accounting reference date), within six weeks of each quarter end, a Prudent Valuation Return in respect of its fair-value assessments in the format set out in SUP 16 Annex 31A.
(2) A PRA-authorised person to which this section applies must submit the report via electronic mail to prudentvaluationreturns@bankofengland.co.uk or via post or hand delivery to Regulatory Data Group, Statistics and Regulatory Data Division (HO5 A-B), Bank of England, Threadneedle Street, London EC2R 8AH; or via fax to the Regulatory Data Group of the Bank of England (020 7601 3334)

SUP 16.16.5

handbook-rule
Where a firm to which SUP 16.16.4 R applies is a member of a consolidation group , the firm must comply with SUP 16.16.4 R:
(1) on an individualconsolidation basis if the firm has an individual consolidation permission, or on an unconsolidated basis if the firm does not have an individual consolidation permission; and
(2) separately, on the basis of the consolidated financial position of the consolidation group. (Firms' attention is drawn to SUP 16.3.25 G regarding a single submission for all firms in the group.)

SUP 16 Annex 13

Return cover sheet

  • 01/12/2004

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



Return Cover Sheet - Forms/sup/sup_chapter16_annex13r_20130401.pdf

SUP 16 Annex 14

Quarterly and annual returns for Credit Unions

  • 01/12/2004

handbook-rule

SUP 16 Annex 15

Notes on completing the quarterly and annual returns for Credit Unions

  • 01/12/2004

handbook-guidance

This annex consists only of one or more forms.

Notes on completing the Quarterly Return (CQ) for credit unions, including notes on completing the supplementary analysis of the CQ

Notes on completing the Annual Return (CY) for credit unions, including notes on completing the supplementary analysis of the CY

SUP 16 Annex 16A

Standing data (See SUP 16.10.4 R)

  • 01/04/2005

SUP 16 Annex 16A.1

handbook-rule
A: Communications with a firm



1. Name of the firm

2. Trading name(s) of the firm

3.

4. Registered office

5. Principal place of business

6. Website address

7. Complaints contact and complaints officer

8. The name and email address of the primary compliance contact



B: Information about a firm on the Financial Services Register

9.

10.

11.



C: Other information about a firm

12.

13.

14. Name and address of firm's auditor

15.

16. Accounting reference date

17. Locum

SUP 16 Annex 19A

Mortgage Lenders & Administrators Return ('MLAR')

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

Mortgage Lenders and Administrators Return ('MLAR') - Forms/sup/sup_Chapter16_annex19ar_20150101.pdf

SUP 16 Annex 19B

Notes for completion of the Mortgage Lenders & Administrators Return ('MLAR')

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

Notes for Completion of the Mortgage Lenders and Administrators Return ('MLAR') Forms/sup/sup_chapter16_annex19bg_20150101.pdf

SUP 16 Annex 24

Data items for SUP 16.12

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

Data items for SUP 16.12 SUP Chapter 16 Annex 24 R

SUP 16 Annex 25A

Guidance notes for data items in SUP 16 Annex 24R

  • 01/01/2014

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:
Guidance notes for data items in SUP 16 Annex 24R - Forms/sup/SUP16_Annex25A.pdf
  • 01/01/2014

SUP 16 Annex 26

Guidance on designated liquidity groups in SUP 16.12

  • 01/12/2009

handbook-guidance

SUP 16 Annex 31A

Prudent Valuation Return

  • 30/06/2012

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

Prudent Valuation Return - SUP 16 Annex 31AR

SUP 16 Annex 31B

Guidance notes for data items in SUP 16 Annex 31AR

  • 30/06/2012

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

Guidance notes for data items in SUP 16 Annex 31AR - SUP 16 Annex 31BG

SUP 16 Annex 32

Bidding in emissions auctions return

  • 27/07/2012

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

Bidding in emissions auctions return - SUP 16 Annex 32 R

SUP 16 Annex 35A

Close Links Monthly Report

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



SUP 16 Annex 35AR

SUP 16 Annex 35B

Guidance notes for completion of the close links monthly report in SUP 16 Annex 35AR

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



SUP 16 Annex 35BG

SUP 16 Annex 36A

Close Links Annual Report

  • 31/12/2013

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

SUP 16 Annex 36AR
  • 31/12/2013

SUP 16 Annex 36B

Guidance notes for completion of close links annual report in SUP 16 Annex 36AR

  • 31/12/2013

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

SUP 16 Annex 36BG
  • 31/12/2013

SUP 16 Annex 37A

Controllers Report

  • 31/12/2013

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

SUP 16 Annex 37AR
  • 31/12/2013

SUP 16 Annex 37B

Guidance notes for completion of controllers report in SUP 16 Annex 37AR

  • 31/12/2013

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

SUP 16 Annex 37BG
  • 31/12/2013

Export chapter as

SUP App 2

Insurers: Regulatory intervention points and run-off plans

SUP App 2.1

Application

  • 31/12/2004

SUP App 2.1.1

handbook-rule
SUP App 2.1 to 2.15 apply to an insurer, unless it is:
(1) a Swiss general insurer; or
(2) an EEA-deposit insurer; or
(3) an incoming EEA firm; or
(4) an incoming Treaty firm.

SUP App 2.1.2

handbook-guidance
SUP App 2.1 to 2.15 apply to every friendly societythat is an insurer.

SUP App 2.1.3

handbook-rule
SUP App 2.16 applies to the Society.

SUP App 2.1.4

handbook-guidance
SUP App 2.15 applies to an insurer carrying on with-profits business, but only if COBS 20.2.53 R (Ceasing to effect new contracts of insurance in a with-profits fund) also applies.

SUP App 2.2

Interpretation

  • 31/12/2004

SUP App 2.2.1

handbook-rule

For the purpose of SUP App 2.1 to 2.14:

  1. (1) "capital resources":
    1. (a) in relation to a non-directive friendly society, has the meaning given to "margin of solvency" in rule 4.1(4) of IPRU(FSOC);
    2. (b) in relation to a participating insurance undertaking, means P+T, where P and T have the meanings given by INSPRU 6.1.45R (3)(a) and (e) respectively, as calculated in accordance with INSPRU 6.1.43 R ; and
    3. (c) in relation to any other firm, means the firm's capital resources as calculated in accordance with GENPRU 2.2.17 R;
  2. (2) "guarantee fund":
    1. (a) in relation to a non-directive friendly society, has the meaning given to that term in IPRU(FSOC);
    2. (b) in relation to a participating insurance undertaking, means the amount of capital resources which that firm must hold to comply with INSPRU 6.1.45R (2);
    3. (c) in relation to a firm which is not covered by (a) or (b), carrying on general insurance business, means the amount of capital resources which that firm must hold to comply with GENPRU 2.2.34 R; and
    4. (d) in relation to a firm which is not covered by (a) or (b), carrying on long-term insurance business, means the amount of capital resources which that firm must hold to comply with GENPRU 2.2.33 R;
  3. (3) "material transaction" means a transaction (when aggregated with any similar transactions) in which:
    1. (a) the price actually paid or received for the transfer of assets or liabilities or the performance of services; or
    2. (b) the price which would have been paid or received had that transaction been negotiated at arm's length between unconnected parties;
    3. exceeds:
    4. (c) in the case of a firm which carries on long-term insurance business, but not general insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its long-term insurance business, excluding property-linked liabilities and net of reinsurance ceded; or
    5. (d) in the case of a firm which carries on general insurance business, but not long-term insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its general insurance business, net of reinsurance ceded; or
    6. (e) in the case of a firm which carries on both long-term insurance business and general insurance business:
      1. (i) where the transaction is in connection with the firm's long-term insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its long-term insurance business, excluding property-linked liabilities and net of reinsurance ceded; and
      2. (ii) in all other cases, the sum of €20,000 and 5% of the firm's liabilities arising from its general insurance business, net of reinsurance ceded; and
  4. (4) "required margin of solvency":
    1. (a) in relation to a non-directive friendly society, has the meaning given to that term in IPRU(FSOC);
    2. (b) in relation to a participating insurance undertaking, means R-S-U, where R, S and U have the meanings given by INSPRU 6.1.45R (3)(c), (d) and (f) respectively;
    3. (c) in relation to a firm which is not covered by (a) or (b), carrying on general insurance business, means the general insurance capital requirement applicable to that firm; and
    4. (d) in relation to a firm which is not covered by (a) or (b), carrying on long-term insurance business, means the long-term insurance capital requirement applicable to that firm.

SUP App 2.2.2

handbook-guidance


The calculation of each of the base capital resources requirement, the long-term insurance capital requirement and the general insurance capital requirement is set out in GENPRU 2.1 . The calculation of each of the "guarantee fund" and "required margin of solvency" for non-directive friendly societies is set out in chapter 4 of IPRU(FSOC).

SUP App 2.3

Purpose

  • 31/12/2004

SUP App 2.3.1

handbook-guidance
To fulfil its obligations under the Insurance Directives, and as part of the PRA's risk-based approach to supervision, there are certain times when the PRA needs to monitor a firm more closely than it normally would. This is so the PRA can fulfil its function of supervising the safety and soundness of firms properly and meet the statutory objective of securing an appropriate degree of protection for policyholders .

SUP App 2.3.2

handbook-guidance
The rules in SUP App 2.1 to 2.14require a firm to submit reports and information to the PRA when:
(1) a firm is failing to satisfy threshold condition 4D or 5D as applicable, and its capital resources have fallen below its required margin of solvency, or its guarantee fund; or
(2) the capital resources of a firm have fallen below its capital resources requirement; or
(3) a firm has decided to cease to effect new contracts of insurance; or
(4) a firm is going through periods of potential uncertainty, for example, when it has come under the control of a new parent undertaking or following the grant or variation of permission.

SUP App 2.3.3

handbook-guidance
The PRA may also ask a firm to submit reports and information to it when the firm's capital resources fall below the level advised in individual capital guidance given to the firm.

SUP App 2.3.4

handbook-guidance
In accordance with the Insurance Directives, a firm whose capital resources have fallen below its required margin of solvency, or its guarantee fund, is required, by the rule set out in this appendix, to submit a scheme of operations, together with an explanation of how its capital resources will be adequately restored. In order to secure an appropriate degree of protection for policyholders , the PRA applies the rule in this appendix to firms to which the provisions of the Insurance Directives would not otherwise apply.

SUP App 2.3.5

handbook-guidance
A firm which is entering into run-off is required to submit a scheme of operations, including an explanation of how its liabilities to policyholders will be met in full. Where the capital resources of such a firm subsequently fall below its required margin of solvency, the firm is required to submit a plan for restoration.

SUP App 2.3.6

handbook-guidance
Following a change in control, or the grant or variation of permission, the reports submitted help the PRA to identify when a firm departs from the scheme of operations submitted as part of the notification of a change in control, or an application for the grant or variation of permission, and on which basis such notification or application was approved.

SUP App 2.3.7

handbook-guidance
Principle 4 of the PRA's Principles for Businesses provides that firm's should hold adequate financial resources, while GENPRU 1.2.26 R requires a firm to maintain overall financial resources which are adequate to ensure that there is no significant risk that it cannot meet its liabilities as they fall due. In considering these requirements, a firm may decide to maintain capital resources above the level advised in individual capital guidance given by the PRA , or, if no individual capital guidance has been given, above its capital resources requirement. The amount of any such additional capital resources held is at the discretion of the firm. However, the extent to which a firm matches these additional capital resources to the volatility of its capital base, in conjunction with the strength of its systems and controls environment, is likely to affect the frequency with which it is subject to intervention under this appendix.

SUP App 2.3.8

handbook-guidance
In relation to a firm carrying on with-profits insurance business, action which it takes either to restore its capital resources to the levels set by the intervention points in this appendix, or to prevent its capital resources falling below those points, should be consistent with Principle 6 of the FCA's Principles for Businesses. The FCA's Principle 6 requires a firm to pay due regard to the interests of its customers and treat them fairly.

SUP App 2.3.9

handbook-guidance
These rules are in addition to the other rules and guidance in SUP and in the PRA Rulebook.

SUP App 2.4

Capital resources below guarantee fund

  • 31/12/2004

SUP App 2.4.1

handbook-rule
If a firm's capital resources fall below its guarantee fund, it must, within 14 days of the firm becoming aware of this event, submit to the PRA a short-term financial plan, including:
(1) a scheme of operations (see SUP App 2.12); and
(2) an explanation of how, if at all, and by when, it expects its capital resources to be adequately restored to the guarantee fund.

SUP App 2.4.2

handbook-guidance
See SUP App 2.11.2 G for guidance on the period that the scheme of operations should cover.

SUP App 2.5

Capital resources below required margin of solvency

  • 31/12/2004

SUP App 2.5.1

handbook-rule
Unless SUP App 2.5.3 R applies:
(1) if a firm's capital resources are such that they no longer equal or exceed its required margin of solvency; or
(2) if a firm no longer complies with GENPRU 2.2.32 R and GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable;


it must, within 28 days of becoming aware of this event, submit to the PRA a plan for the restoration of a sound financial position, including:
(3) a scheme of operations; and
(4) an explanation of how, if at all, and by when:
(a) it expects its capital resources to be restored to the required margin of solvency; or
(b) as the case may be, it expects to comply with GENPRU 2.2.32 R and GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable.

SUP App 2.5.2

handbook-guidance
See SUP App 2.11.2 G for guidance on the period that the scheme of operations should cover.

SUP App 2.5.3

handbook-rule
If a firm:
(1) falls into SUP App 2.5.1 R (1) or SUP App 2.5.1 R (2); and
(2) it has previously submitted either a run-off plan in accordance with SUP App 2.8.1 R or a scheme of operations in accordance with SUP App 2.5.1 R;


it must, within 28 days of becoming aware that it falls into SUP App 2.5.1 R (1) or SUP App 2.5.1 R (2):
(3) notify the PRA ; and
(4) submit a plan for restoration which:
(a) explains why the firm's capital resources have fallen below its required margin of solvency or, as the case may be, it no longer complies with GENPRU 2.2.32 R or GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable; and
(b) demonstrates how, if at all, and by when, the firm will restore it or, as the case may be, resume compliance with GENPRU 2.2.32 R and GENPRU 2.2.28 R, or INSPRU 6.1.45R (1)(a) and INSPRU 6.1.45R (1)(b), as applicable.

SUP App 2.6

Capital resources below capital resources requirement

  • 31/12/2004

SUP App 2.6.1

handbook-rule
Unless any of SUP App 2.4.1 R, SUP App 2.5.1 R or SUP App 2.5.3 R applies, if a firm's capital resources fall below its capital resources requirement, it must, within 28 days of becoming aware of this event:
(1) notify the PRA ; and
(2) submit a plan for restoration, which:
(a) explains why the firm's capital resources have fallen below its capital resources requirement; and
(b) demonstrates how, if at all, and by when, the firm will restore it.

SUP App 2.7

Capital resources below the level of individual capital guidance

  • 31/12/2004

SUP App 2.7.1

handbook-guidance
Unless any of SUP App 2.4.1 R, SUP App 2.5.1 R, SUP App 2.5.3 R or SUP App 2.6.1 R applies, if a firm's circumstances change, such that its capital resources have fallen, or are expected to fall, below the level advised in individual capital guidance given to the firm by the appropriate regulator , then, consistent with PRIN 2.1.1 RPrinciple 11 (Relations with regulators), a firm should inform the appropriate regulator of this fact as soon as practicable, explaining why capital resources have fallen, or are expected to fall, below the level advised in individual capital guidance , and:
(1) what action the firm intends to take to increase its capital resources; or
(2) what modification the firm considers should be made to the individual capital guidance which it has been given.

SUP App 2.7.2

handbook-guidance
In the circumstance set out in SUP App 2.7.1 G, the PRA may ask a firm for alternative or more detailed proposals and plans or further assessments and analyses of capital adequacy and risks faced by the firm. The PRA will seek to agree with the firm appropriate timescales and scope for any such additional work, in light of the circumstances which have arisen.

SUP App 2.7.3

handbook-guidance
In relation to a firm carrying on with-profits insurance business, if it intends either (a) to remedy a fall in the level of capital resources advised in its individual capital guidance , or (b) to prevent a fall in the level advised in that guidance, for example, in either case, by taking management action to de-risk a with-profits fund or by reducing non-contractual benefits for policyholders, it should explain to the appropriate regulator how such proposed actions are consistent with the firm's obligations under the FCA's Principle 6 (Customers' interests).

SUP App 2.7.4

handbook-guidance
If a firm's capital resources fall below the level advised in individual capital guidance given to the firm and, at the same time, any one or more of SUP App 2.4.1 R, SUP App 2.5.1 R, SUP App 2.5.3 R or SUP App 2.6.1 R applies, the firm should first comply with those rules. Those rules are concerned with circumstances where capital resources are likely to have fallen to levels much lower than the level advised in individual capital guidance and are, in some cases, requirements imposed by the Insurance Directives.

SUP App 2.7.5

handbook-guidance
If a firm has not accepted individual capital guidance given by the PRA it should, nevertheless, inform the PRA as soon as practicable if its capital resources have fallen below the level suggested by that individual capital guidance . In such circumstances, the PRA may ask the firm for further explanation as to why it does not consider the individual capital guidance to be appropriate. The PRA may also consider using its powers under section 55M of the Act to, on its own initiative, require a firm to hold such capital as the PRA considers is necessary for the firm to comply with GENPRU 1.2.26 R .

SUP App 2.8

Ceasing to effect contracts of insurance

  • 31/12/2004

SUP App 2.8.1

handbook-rule
If a firm decides to cease to effect new contracts of insurance, it must, within 28 days of that decision, submit a run-off plan to the appropriate regulator including:
(1) a scheme of operations; and
(2) an explanation of how, or to what extent, all liabilities to policyholders (including, where relevant, liabilities which arise from the regulatory duty to treat customers fairly in setting discretionary benefits) will be met in full as they fall due.

SUP App 2.8.2

handbook-guidance
SUP App 2.8.1 R only applies if a firm ceases to effecting new contracts of insurance in respect of the whole of its insurance business.

SUP App 2.8.3

handbook-guidance
For the purposes of SUP App 2.8.1 R, a new contracts of insurance excludes contracts effected under a term in a subsisting contract of insurance.

SUP App 2.8.4

handbook-guidance
Under Principle 11, the appropriate regulator normally expects to be notified by a firm when it decides to cease effecting new contracts of insurance in respect of one or more classes of contract of insurance (see SUP 15.3.8 G). At the same time, the appropriate regulator would normally expect the firm to discuss with it the need for the firm to apply to vary its permission (see SUP 6.2.6 G and SUP 6.2.7 G) and, if appropriate, to submit a scheme of operations in accordance with SUP App 2.8.1 R.

SUP App 2.8.5

handbook-guidance
See SUP App 2.11.2 G for guidance on the period that the scheme of operations should cover.

SUP App 2.10

Grant or variation of permission

  • 31/12/2004

SUP App 2.10.1

handbook-guidance
The PRA may ask a firm seeking a grant or variation of permission to provide a scheme of operations as part of the application process (see SUP 6.3.25 G). Such a firm is not required to submit to the PRA a further scheme of operations under this appendix unless SUP App 2.4, SUP App 2.5 or SUP App 2.8 applies. SUP App 2.13 and SUP 6 Annex 4 do, however, apply to such a firm.

SUP App 2.11

Submission of a scheme of operations or a plan for restoration

SUP App 2.11.1

handbook-guidance
A firm should discuss its plan in draft with the PRA before submitting it. If a plan is submitted which does not satisfy the PRA that the firm can restore its capital resources (as appropriate), or meet its liabilities as they fall due, the PRA may use its own-initiative power to vary or cancel the firm's permission. If a firm submitting a plan is part of a group of companies, the PRA may ask that firm to provide additional information in relation to other companies in the group, if this is necessary to establish how the firm will restore its own sound financial position. The firm should agree in discussion with the PRA the nature of such additional information.

SUP App 2.11.2

handbook-guidance
The schemes of operations required when a firm's capital resources have fallen below its required margin of solvency or its guarantee fund (see SUP App 2.5.1 R and SUP App 2.4.1 R, respectively) should cover a period which is sufficient to demonstrate that the firm's capital resources will be adequately restored. Typically this would be a period of at least three years. However, if a scheme of operations has expired, but SUP App 2.4.1 R or SUP App 2.5.1 R continues to apply, the firm should submit a new scheme of operations. The scheme of operations required by SUP App 2.8.1 R, when a firm ceases to effect new contracts of insurance, should cover the run-off period until all liabilities to policyholders are met.

SUP App 2.11.3

handbook-guidance
The period to be covered by, and the details to be included in, the plan for restoration required by SUP App 2.5.3 R will depend on the circumstances of the firm, why its capital resources have fallen below its required margin of solvency and the degree of risk that that fall will be repeated, even if the firm restores its capital resources in accordance with its plan.

SUP App 2.11.4

handbook-guidance
In relation to a firm which carries on with-profits insurance business and which submits a plan, the appropriate regulator would expect an explanation of how any actions it plans to take to restore capital resources to the level of the guarantee fund, required margin of solvency or capital resources requirement are consistent with the firm's obligations under the FCA's Principle 6 (Customers' interests).

SUP App 2.12

Content of a scheme of operations

SUP App 2.12.1

handbook-rule
A scheme of operations must:
(1) describe the firm's business strategy;
(2) include financial projections (including appropriate scenarios and stress-tests) as follows:
(a) a forecast summary profit and loss account in accordance with SUP App 2.12.7 R;
(b) a forecast summary balance sheet in accordance with SUP App 2.12.8 R; and
(c) a forecast statement of capital resources in accordance with SUP App 2.12.9 R; and
(3) as at the end of each financial year which falls (in whole or part) within the period to which the scheme of operations relates:
(a) describe the assumptions which underlie those forecasts and the reasons for adopting those assumptions; and
(b) identify any material transactions proposed to be effected or carried out with, or in respect of, any associate.

SUP App 2.12.2

handbook-guidance
The business strategy referred to at SUP App 2.12.1R (1) should include a description of the nature of the risks which the firm is underwriting, or intends to underwrite. It should also give an explanation of the firm's strategy for managing the risks associated with carrying on insurance business (including, in particular, reinsurance).

SUP App 2.12.3

handbook-guidance
The amount of detail to be given on the firm's business strategy required by SUP App 2.12.1R (1) should be appropriate to the scale and complexity of the firm's operations and the degree of risk involved.

SUP App 2.12.4

handbook-rule
The information required by SUP App 2.12.1R (1) must reflect the nature and content of the rules relating to capital resources applicable to a firm.

SUP App 2.12.5

handbook-guidance
In relation to firms covered by SUP App 2.1 to 2.14, IPRU(FSOC) 4.1 sets out the rules relating to capital resources for non-directive friendly societies and GENPRU 2.1, GENPRU 2.2 and INSPRU 6.1 set out the rules relating to capital resources for every other firm. The capital resources which a firm is required to maintain vary according to whether the firm has its head office in the United Kingdom or overseas, and depending on the nature of the insurance business it carries on. The information which a firm is required to submit under SUP App 2.12.1 R should reflect the nature and content of the rules relating to capital resources identified above. For example, in order to satisfy SUP App 2.12.1 R, a firm with its head office outside the United Kingdom which is carrying on direct insurance business in the United Kingdom should submit separate information concerning its world-wide activities and its UK activities.

SUP App 2.12.6

handbook-guidance
To reflect its obligations under GENPRU 2.2.22 G or IPRU(FSOC) 4.1(2) (as applicable), in order to comply with SUP App 2.12.1 R, a firm which carries on both long-term insurance business and general insurance business should submit separate information for each type of insurance business.

SUP App 2.12.7

handbook-rule
Summary profit and loss account (see SUP App 2.12.1R (2)(a))

SUP App 2.12.8

handbook-rule
Summary balance sheet (see SUP App 2.12.1R (2)(b))

SUP App 2.12.9

handbook-rule
A forecast statement of capital resources (under SUP App 2.12.1R (2)(c)) must include the forecast capital resources and the forecast required margin of solvency at the end of each financial year or part financial year.

SUP App 2.13

Obligations on firms which have previously submitted a scheme of operations

  • 01/12/2004

SUP App 2.13.1

handbook-rule
A firm which has submitted a scheme of operations to the PRA, whether required by SUP App 2.4, SUP App 2.5 or SUP App 2.8, or as part of an application under Permissions and Waivers 2 of the PRA Rulebook or SUP 11.5 (see SUP 11.5.5 G), or an amended scheme of operations, must during the period covered by that scheme of operations:
(1) notify the PRA at least 28 days before entering into or carrying out any material transaction with, or in respect of, an associate, unless that transaction is in accordance with a scheme of operations which has been submitted to the PRA;
(2) submit a quarterly financial return to the PRA which must include for, or as at the end of, each quarter:
(a) a summary profit and loss account prepared in accordance with SUP App 2.12.7 R;
(b) a summary balance sheet prepared in accordance with SUP App 2.12.8 R; and
(c) a statement of capital resources prepared in accordance with SUP App 2.12.9 R;


and which must identify and explain differences between the actual results and the forecasts submitted in the scheme of operations; and
(3) notify the PRA promptly of any matter which has either happened or is likely to happen and which represents a significant departure from the scheme of operations; the firm must either:
(a) explain the nature of the departure and the reasons for it and provide revised forecast financial information in the scheme of operations for its remaining term; or
(b) include an amended scheme of operations and explain the amendments and the reasons for them.

SUP App 2.13.2

handbook-rule
A report under SUP App 2.13.1R (2) must be submitted in accordance with the rules in SUP 16.3.6R to SUP 16.3.13R.

SUP App 2.13.3

handbook-guidance
For the purpose of SUP App 2.13.1R (1), the PRA considers that transactions with, or in respect of, associates include:
(1) contracting (as either party), advancing, repaying, writing off or agreeing to change the terms of any loan;
(2) entering into (in any capacity), releasing, calling upon or agreeing to change the terms of any guarantee, pledge, security, charge or any off-balance-sheet transaction;
(3) entering into agreements to acquire or dispose of property or which otherwise affect the nature or value of the firm's assets;
(4) making an investment (directly or indirectly) in an associate;
(5) entering into (as either party), commuting or agreeing to change the terms of, any contract of reinsurance; and
(6) entering into, or changing the terms of, any agreement to give or provide services or to share costs.

SUP App 2.13.4

handbook-guidance
The PRA considers that a significant departure referred to in SUP App 2.13.1R (3) includes:
(1) entry or withdrawal from a line of insurance business;
(2) significant revision of the firm's strategy for managing risks, in particular the basis upon which risks are reinsured;
(3) forecast premiums being exceeded, by more than 10%, for a single financial year (or part year if the period covered by the scheme of operations is or includes part of a financial year);
(4) claims experience being significantly worse than forecast for a single financial year (or part year if the period covered by the scheme of operations is or includes part of a financial year);
(5) the actual level of capital resources being significantly worse than forecast;
(6) paid or proposed dividends being greater than those forecast; and
(7) any other transaction or circumstance which is likely to have a material effect upon available assets (as defined in IPRU(INS) 11.1).

SUP App 2.14

Financial Recovery Plan

  • 01/12/2004

SUP App 2.14.1

handbook-guidance
When:
(1) the PRA has required a financial recovery plan within the meaning of article 20a of the First Non-Life Directive;
(2) the PRA is of the view that policyholders' rights are threatened because the financial position of the firm is deteriorating; and
(3) the PRA decides to require the firm to hold more capital than would otherwise be required under the Handbook to ensure that the firm will be able to fulfil the required margin of solvency in the near future;


any such higher capital requirement will be based on the financial recovery plan.

SUP App 2.16

Regulatory intervention points for Lloyd's

  • 31/12/2006

Application

SUP App 2.16.1

handbook-rule

Interpretation

SUP App 2.16.2

handbook-rule
For the purpose of SUP App 2.16 and the application of SUP App 2 to the Society:
(1) "capital resources", as the context requires:
(a) in relation to the Society's own capital resources, means its own capital resources calculated in accordance with the capital resources table;
(b) in relation to a member's capital resources, means the member's capital resources calculated in accordance with GENPRU 2.3.22 R;
(c) in relation to the aggregate capital resources of the Society and the members supporting the insurance business of the members, means the aggregate of the capital resources in (1)(a) and (b) but excluding the Society's callable contributions;
(2) "guarantee fund":
(a) in relation to the general insurance business carried on by members, means the amount of capital resources required in order to comply with GENPRU 2.2.26 R, GENPRU 2.3.17 G and GENPRU 2.3.26 R; and the "member's share of the guarantee fund" for general insurance business means the result of the calculation set out in GENPRU 2.3.27 R;
(b) in relation to the long-term insurance business carried on by members, means the amount of capital resources required in order to comply with GENPRU 2.2.25 R and GENPRU 2.3.17 G; and the "member's share of the guarantee fund" for long-term insurance business means the result of the calculation set out in GENPRU 2.3.25 R;
(3) "required margin of solvency":
(a) in relation to the general insurance business carried on by members, means the higher of the Society GICR and the general insurance capital requirement for the members in aggregate; and
(b) in relation to the long-term insurance business carried on by members, means the long-term insurance capital requirement for the members in aggregate.

Capital resources below guarantee fund

SUP App 2.16.3

handbook-rule
For the purposes of SUP App 2.4.1 R and SUP App 2.4.2 G, capital resources will have fallen below the guarantee fund if the Society's own capital resources are such that they are no longer sufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's share of the guarantee fund.

Capital resources below required margin of solvency

SUP App 2.16.4

handbook-rule
For the purposes of SUP App 2.5.1 R to SUP App 2.5.3 R, capital resources will be such that they no longer equal or exceed the required solvency margin if the Society's own capital resources are insufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's share of the required solvency margin.

Capital resources below capital resources requirement

SUP App 2.16.5

handbook-rule
For the purposes of SUP App 2.6.1 R, capital resources will have fallen below the capital resources requirement if the Society's own capital resources are insufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's share of the capital resources requirement for the members in aggregate.

Capital resources below the level of individual capital guidance

SUP App 2.16.6

handbook-guidance
For the purposes of SUP App 2.7.1 G to SUP App 2.7.5 G, capital resources will have fallen below the level of individual capital guidance if the Society's own capital resources have fallen below the level advised in individual capital guidance given to the Society in respect of those capital resources.

Export chapter as

SUP App 3

Guidance on passporting issues

SUP App 3.1

Application

  • 01/12/2004

SUP App 3.1.1

handbook-guidance
This appendix applies to all firms when carrying on a passported activity, except for a firm which is only carrying on a passported activity under the auction regulation.

SUP App 3.2

Purpose

  • 01/12/2004

SUP App 3.2.1

handbook-guidance
The purpose of this appendix is to give guidance:
(1) to UK firms on some of the issues that arise when carrying on passported activities(see SUP App 3.5and SUP App 3.6);
(2) to all firms on the relationship between regulated activities and activities passported under the Single Market Directives (see SUP App 3.9and SUP App 3.10).

SUP App 3.3

Background

  • 01/12/2004

The Treaty on the Functioning of the European Union

SUP App 3.3.1

handbook-guidance
(1) The Treaty establishes in EU law the rights of freedom of establishment and freedom to provide services in the EU.
(2) The Treaty lays down central principles governing the legal framework for freedom of establishment and the free movement of services in the EU. There are, however, a number of areas where the legal position is not clear. This includes, for example, identifying whether a service is provided through an establishment, where the issues involved are complex. Therefore, this Appendix is intended to provide guidance but cannot be regarded as comprehensive. Ultimately, the construction of the Treaty and relevant Directive provisions is a matter for the European Court of Justice.

SUP App 3.3.2

handbook-guidance
The Treaty provides the framework for the provision of banking, insurance business, investment business, UCITS management services and insurance mediation, while the Single Market Directives clarify the rights and freedoms within that framework.

EU and EEA

SUP App 3.3.3

handbook-guidance
The agreement on the European Economic Area, signed at Oporto on 2 May 1992, extends certain EU legislation to those EEA States that are not Member States of the EU.

Interpretative communications

SUP App 3.3.4

handbook-guidance
In 1997, the European Commission published an interpretative communication (Freedom to provide services and the interests of the general good in the Second Banking Directive (97/C 209/04)) (the text of this directive and the First Banking Directive is now consolidated in the Banking Consolidation Directive). The European Commission's objective in publishing this communication was to explain and clarify the EU rules. The European Commission deemed it desirable "to restate in a Communication the principles laid down by the Court of Justice and to set out its position regarding the application of these Principles to the specific problems raised by the Second Banking Directive".

SUP App 3.3.5

handbook-guidance
In 2000, the European Commission published a further interpretative communication (Freedom to provide services and the general good in the insurance sector (2000/C43/03)). This allowed the European Commission to publicise its own interpretation of the rules on the freedom to provide services.

SUP App 3.3.6

handbook-guidance
  1. (1) The European Commission has not produced an interpretative communication on MiFID. It is arguable, however, that the principles in the communication on the Second Banking Directive can be applied to investment services and activities. This is because Chaper II of Title II of MiFID (containing provisions relating to operating conditions for investment firms) also applies to the investment services and activities of firms operating under the Banking Consolidation Directive, which is repealed and replaced by the CRD.
  2. (2) The European Commission has not produced an interpretative communication on the Insurance Mediation Directive, AIFMD or the UCITS Directive.

SUP App 3.3.7

handbook-guidance
In giving its views, communications made by the European Commission have the status of guidance and are not binding on the national courts of EEA States. This is because it is the European Court of Justice that has ultimate responsibility for interpreting the Treaty and secondary legislation. Accordingly, the communications "do not prejudge the interpretation that the Court of Justice ..., which is responsible in the final instance for interpreting the Treaty and secondary legislation, might place on the matter at issue." (European Commission interpretative communication: Freedom to provide services and the general good in the insurance sector (C(99) 5046). However, the Courts may take account of European Commission communications when interpreting the Treaty and secondary legislation.

SUP App 3.3.8

handbook-guidance
Firms should also note that European Commission communications do not necessarily represent the views taken by all EEA States.

E-Commerce

SUP App 3.3.9

handbook-guidance
The E-Commerce Directive covers services provided at a distance by means of electronic equipment for the processing (including digital compression) and storage of data. The services would normally be provided in return for remuneration and must be provided at the individual request of a recipient (see recital 17 of the E-Commerce Directive). The Directive implements the country of origin approach to regulation. This approach makes firms subject to the conduct of business requirements of the EEA State from which the service is provided. This is subject to certain derogations (see SUP App 3.3.11 G).

SUP App 3.3.10

handbook-guidance
The E-Commerce Directive does not affect the responsibilities of Home State under the Single Market Directives. This includes the obligation of a Home State regulator to notify the Host State regulator of a firm's intention to establish a branch in, or provide cross border services into, the other EEA State.

SUP App 3.3.11

handbook-guidance
There are, however, general derogations from the internal market provisions under article 3(3) of the E-Commerce Directive. The derogations include consumer contracts, the permissibility of unsolicited e-mail and certain insurance services (both life and non-life). Where these derogations apply, the EEA States in which the recipients of the service are based may continue to be able to impose their own requirements.

Notification of establishing a branch or of providing cross border services

SUP App 3.3.13

handbook-guidance
The Single Market Directives require credit institutions, insurance undertakings (other than reinsurance undertakings), MiFID investment firms , AIFMs, UCITS management companies and insurance intermediaries to make a notification to the Home State before establishing a branch or providing cross border services.

SUP 13.5 (Notices of intention) sets out the notification requirements for a firm seeking to establish a branch or provide cross border services. As firms will note, the decision whether a passport notification needs to be made will be a matter of interpretation. The onus is on firms to comply with the requirements of the Act and, where relevant, the laws of other EEA States. So, in cases of doubt, firms should obtain their own legal advice on the specific issues involved.

SUP App 3.3.14

handbook-guidance
Blanket notification is the practice of the Home State regulator notifying all Host State regulators in respect of all activities regardless of any genuine intention to carry on the activity. This practice is discouraged by the FCA and PRA. However, a firm may be carrying on activities in the United Kingdom or elsewhere in a way that necessarily gives rise to a real possibility of the provision of services in other EEA States. In such cases, the firm should consider with its advisers whether it should notify the relevant authorities and include that possibility in its business plan.

SUP App 3.6

Freedom to provide services

  • 01/12/2004

SUP App 3.6.1

handbook-guidance
Article 56 (Services) of the Treaty grants to EEA nationals established in one EEA State the freedom to provide cross border services to other EEA States.

How services may be provided

SUP App 3.6.2

handbook-guidance
Under the Treaty, the freedom to provide services within the EC may be exercised in three broad ways:
(1) where the provider of a service moves temporarily to another EEA State in order to provide the service;
(2) where the service is provided without either the provider or the recipient moving (in this situation the provision, and receipt, of the service may take place by post, telephone or fax, through computer terminals or by other means of remote control);
(3) where the recipient of a service moves temporarily to another EEA State in order to receive (or, perhaps, commission the receipt of) the service within that State.

SUP App 3.6.3

handbook-guidance
Under the Single Market Directives, however, EEA rights for the provision of services are concerned only with services provided in one of the ways referred to in SUP App 3.6.2 G (1) and (2) (How services may be provided).

Place of supply

SUP App 3.6.5

handbook-guidance
In the opinion of the European Commission (and in the wording of the Single Market Directives) "only activities carried on within the territory of another Member State should be the subject of prior notification" (Commission interpretative communication: Freedom to provide services and the interests of the general good in the Second Banking Directive (97/C 209/04)). In determining, for the purposes of notification, whether a service is to be provided 'within' another EEA State, it is necessary to determine the place of supply of the service.

SUP App 3.6.6

handbook-guidance
An insurance undertaking that effects contracts of insurance covering risks or commitments situated in another EEA State should comply with the notification procedures for the provision of services within that EEA State. The location of risks and commitments is found by reference to the rules set out in paragraph 6 of schedule 12 to the Act, which derive from article 1 of the Consolidated Life Directive and article 2 of the Second Non-Life Directive. It may be appropriate for insurers to take legal advice as to how these rules are interpreted and applied in other EEA States. The need to passport may arise because of only one of the risks covered by an insurance policy. This includes, for example, where a policy covers a number of property risks and one of those properties is in another EEA State.

SUP App 3.6.7

handbook-guidance
In respect of banking services, the European Commission believes that "...to determine where the activity was carried on, the place of provision of what may be termed the 'characteristic performance' of the service i.e. the essential supply for which payment is due, must be determined" (Commission interpretative communication: Freedom to provide services and the interests of the general good in the Second Banking Directive (97/C 209/04)). In the view of the FCA and PRA, this requires consideration of where the service is carried out in practice.

SUP App 3.6.8

handbook-guidance
The FCA and PRA are of the opinion that UK firms that are credit institutions and MiFID investment firms should apply the 'characteristic performance' test (as referred to in SUP App 3.6.7 G ) when considering whether prior notification is required for services business. Firms should note that other EEA States may take a different view. Some EEA States may apply a solicitation test. This is a test as to whether it is the consumer or the provider that initiates the business relationship.

SUP App 3.6.9

handbook-guidance
In the case of a UK firm conducting portfolio management, for example, this would mean looking at where the investment decisions and management are actually carried on in order to determine where the service is undertaken. Similarly, a UK stockbroker that receives orders by telephone from a customer in France for execution on a UK exchange may be deemed to be dealing or receiving and transmitting orders within the territory of the United Kingdom. In such a case, whether the firm solicited the overseas investor would be irrelevant.

SUP App 3.6.10

handbook-guidance
Where, however, a credit institution or MiFID investment firm:
(1) intends to send a member of staff or a temporarily authorised intermediary to the territory of another EEA State on a temporary basis to provide financial services; or
(2) provides advice, of the type that requires notification under either MiFID or the Banking Consolidation Directive, to customers in another EEA State;
the firm should make a prior notification under the freedom to provide services.

Temporary activities

SUP App 3.6.11

handbook-guidance
The key distinction in relation to temporary activities is whether a firm should make its notification under the freedom of establishment in a Host State, or whether it should notify under the freedom to provide services into a Host State. It would be inappropriate to discuss such a complex issue in guidance of this nature. It is recommended that, where a firm is unclear on the distinction, it should seek appropriate advice. In either case, where a firm is carrying on activities in another EEA State under a Single Market Directive, it should make a notification.

Monitoring procedures

SUP App 3.6.15

handbook-guidance
The FCA and PRA consider that, in order to comply with Principle 3:Management and control (see PRIN 2.1.1 R), a firm should have appropriate procedures to monitor the nature of the services provided to its customers. Where a UK firm has non-resident customers but has not notified the EEA State in which the customers are resident that it wishes to exercise its freedom to provide services, the FCA and PRA would expect the firm's systems to include appropriate controls. Such controls would include procedures to prevent the supply of services covered by the Single Market Directives in the EEA State in which the customers are resident if a notification has not been made and it is proposed to provide services otherwise than by remote communication. In respect of insurance business, the insurer's records should identify the location of the risk at the time the policy is taken out or last renewed. That will, in most cases, remain the location of the risk thereafter, even if, for example, the policyholder changes his habitual residence after that time.

Membership of regulated markets

SUP App 3.6.25

handbook-guidance
  1. (1) The FCA and PRA are of the opinion that where a UK firm becomes a member of:
    1. (a) a regulated market that has its registered office or, if it has no registered office, its head office, in another EEA State; or
    2. (b) an MTF operated by a MiFID investment firm or a market operator in another EEA State, the same principles as in the 'characteristic performance' test should apply. Under this test, the fact that a UK firm has a screen displaying the regulated market's or the MTF's prices in its UK office does not mean that it is dealing within the territory of the Home State of the regulated market or of the MTF.
  2. (2) In such a case, the FCA and PRA would consider that:
    1. (a) the market operator operating the regulated market or the MTF is providing a cross-border service into the UK and so, provided it has given notice to its Home State regulator in accordance with articles 42(6) or 31(5) MiFID, it will be exempt from the general prohibition in respect of any regulated activity carried on as part of the business of the regulated market or of operating an MTF (see section 312A of the Act);
    2. (b) the MiFID investment firm operating the MTF is providing a cross-border service into the UK and so needs to comply with SUP 13A.

SUP App 3.6.26

handbook-guidance
Firms are reminded of their rights, under article 33 of MiFID , to become members of, or have access to, the regulated markets in other Member States.

SUP App 3.6.27

handbook-guidance
Firms should note that, in circumstances where the FCA or PRA take the view that a notification would not be required, other EEA States may take a different view.

SUP App 3.9

Mapping of MiFID, CRD, AIFMD, UCITS Directive and Insurance Mediation Directive to the Regulated Activities Order

SUP App 3.9.1

handbook-guidance
The following Tables 1, 2, 2ZA 2A and 2B provide an outline of the regulated activities and specified investments that may be of relevance to firms considering undertaking passported activities under the CRD, MiFID, AIFMD, the UCITS Directive and the Insurance Mediation Directive. The tables may be of assistance to UK firms that are thinking of offering financial services in another EEA State and to EEA firms that may offer those services in the United Kingdom.

SUP App 3.9.2

handbook-guidance
The tables provide a general indication of the investments and activities specified in the Regulated Activities Order that may correspond to categories provided for in the CRD, MiFI , AIFMD, the UCITS Directive or the Insurance Mediation Directive. The tables do not provide definitive guidance as to whether a firm is carrying on an activity that is capable of being passported, nor do the tables take account of exceptions that remove the effect of articles. Whether a firm is carrying on a passported activity will depend on the particular circumstances of the firm. If a firm's activities give rise to potential passporting issues, it should obtain specialist advice on the relevant issues.

SUP App 3.9.3

handbook-guidance
In considering the issues raised in the tables, firms should note that:
(1) article 64 of the Regulated Activities Order (Agreeing to carry on specific kinds of activity) applies in respect of agreeing to undertake the specified activity; and
(2) article 89 of the Regulated Activities Order (Rights to or interests in investments) applies in respect of rights to and interests in the types of investments to which the category applies.

SUP App 3.9.4

handbook-guidance

Activities set out in Annex 1 of the CRD

SUP App 3.9.5

handbook-guidance

Services set out in Annex I to MiFID

SUP App 3.9.7

handbook-guidance

Activities set out in Article 2(3) of the IMD

SUP App 3.10

Mapping of Insurance Directives to the Regulated Activities Order

  • 01/12/2004

Introduction

SUP App 3.10.1

handbook-guidance
The guidance in Table 3 describes in broad outline the relationship between:
(1) the insurance-related regulated activities specified in the Regulated Activities Order; and
(2) the activities within the scope of the Insurance Directives

SUP App 3.10.2

handbook-guidance

This is a guide only and should not be used as a substitute for legal advice

in individual cases.

Meaning of contract of insurance

SUP App 3.10.3

handbook-guidance
The meaning of contract of insurance is set out in article 3(1) of the Regulated Activities Order (Interpretation). It does not include benefit-in-kind funeral plans, which are specified in article 60 of the Regulated Activities Order (plans covered by insurance or trust arrangements). Such funeral plans (to the extent that they are insurance) are also excluded from the Insurance Directives. It covers some contracts which might not otherwise be viewed as insurance in the United Kingdom (for example, contracts of guarantee). These contracts are also governed by the Insurance Directives. For the purpose of the Regulated Activities Order, a contract of insurance includes a contract of reinsurance as well as a contract of direct insurance.

The Insurance Directives

SUP App 3.10.4

handbook-guidance
Article 1 of the First Non-Life Directive and article 2 of the Consolidated Life Directive provides that the Directives "concern the taking up and pursuit of the self-employed activity of direct insurance". By contrast, article 10 of the Regulated Activities Order (Effecting and carrying out contracts of insurance) also covers reinsurance.

SUP App 3.10.5

handbook-guidance
Articles 2, 3 and 4 of the First Non-Life Directive and article 3 of the Consolidated Life Directive set out certain exclusions by reference to:
(1) types of insurance;
(2) types of insurer;
(3) particular conditions under which insurance activities are carried out.
(4) annual income; and
(5) particular identified institutions.

SUP App 3.10.6

handbook-guidance
Some of the exclusions referred to mirror exclusions in the Regulated Activities Order. So, the exclusion for breakdown insurance in article 2(3) of the First Non-Life Directive is matched by a slightly narrower exclusion in article 12 of the Regulated Activities Order (Breakdown insurance). The separate treatment of benefit-in-kind funeral plans under the Regulated Activities Order (see SUP App 3.10.4 G) is matched by their exclusion on a slightly wider basis in article 3(5) of the Consolidated Life Directive. Other requirements from these Directives are also excluded from regulation by the Exemption Order.

SUP App 3.10.7

handbook-guidance
Most of the exclusions under the Directives, however, are not excluded from being regulated activities. For example, article 3 of the Consolidated Life Directive and article 3 of the Non-Life Directive exclude certain mutual associations whose annual contribution income falls below a defined threshold. In the United Kingdom, these include certain smaller friendly societies commonly referred to as "non-directive friendly societies". The activities of such societies are regulated under the Act, on a "lighter basis" than the activities of other insurers.

Territorial scope of the Regulated Activities Order and the Directives

SUP App 3.10.8

handbook-guidance
Under the Act and the Regulated Activities Order, the activities of effecting and carrying out contracts of insurance are treated as being carried on in the United Kingdom on the basis of legal tests under which the location of the risk is only one factor. If the risk is located in the United Kingdom, then (other relevant factors being taken into account) the activity will, in the vast majority of cases, also be viewed as carried on in the United Kingdom. There are exceptions, however, and overseas insurers may insure risks in the United Kingdom without carrying on business here and so without requiring to be regulated (although the financial promotion regime may apply). By contrast, under the Directives, the responsibility, as between EEA States, for regulating the conduct of passported insurance services is determined by reference to the location of the risk or commitment, as defined in article 1 of the Consolidated Life Directive and article 2 of the Second Non-Life Directive.

SUP App 3.10.9

handbook-guidance
So, the effect of App 3.12.1 is that an insurer may be carrying on insurance business in the United Kingdom which is to be treated as a regulated activity under article 10 to the Regulated Activities Order (Effecting and carrying out contracts of insurance) in circumstances where the risks covered are treated as located in another EEA State. In that event, the insurer is required by Schedule 3 to the Act to passport into the State concerned and may be subject to conduct of business requirements in that State (see SUP 13.10 (Applicable provisions)).

SUP App 3.10.10

handbook-guidance
An insurer authorised in another EEA State who is insuring UK risks and so passports on a services basis under the Insurance Directives into the United Kingdom(see ),may not be carrying on a regulated activity in the United Kingdom. But, if it passports into the United Kingdom, it will qualify for authorisation under paragraph 12 of Schedule 3 to the Act (Firms qualifying for authorisation). Where this is the case, the insurer will be subject to conduct of business requirements in the United Kingdom (see SUP 13A.6 (Which rules will an incoming EEA firm be subject to?)).

Activities carried on by incoming EEA firms in connection with insurance business.

SUP App 3.10.11

handbook-guidance
Although the Insurance Directives are concerned with the regulated activities of effecting and carrying out contracts of insurance, an incoming EEA firm passported under the Insurance Directives will be entitled to carry on certain other regulated activities without the need for top-up permission. This is where the regulated activities are carried on for the purposes of or in connection with the incoming EEA Firm's insurance business. These regulated activities may include:
(1) dealing in investments as principal;
(2) dealing in investments as agent;
(3) arranging (bringing about) deals in investments;
(4) making arrangements with a view to transactions in investments;
(5) managing investments;
(6) safeguarding and administering investments;
(7) advising on investments;
(8) agreeing to carry on a regulated activity of the above kind.

Financial promotion

SUP App 3.10.12

handbook-guidance
The financial promotion regime under section 21 of the Act (Restrictions on financial promotion) may also apply to EEA insurance undertakings regardless of whether they carry on a regulated activity in the United Kingdom or passport into the United Kingdom.

Position of EEA insurers carrying out both direct and reinsurance business

SUP App 3.10.13

handbook-guidance
The Insurance Directives do not apply to the authorisation to carry on reinsurance. But, the Insurance Directives do not prevent insurance undertakings authorised under those Directives from carrying out reinsurance as well as direct insurance business. Article 13(2) of the First Non-Life Directive and article 10(2) of the Consolidated Life Directive state that financial supervision of insurance undertakings "shall include verification, with respect to the insurance undertaking's entire business, of its state of solvency, of the establishment of technical provisions and of the assets covering them". On that basis, an insurance undertaking authorised in another EEA State which carries on a mixed direct insurance and reinsurance business, and is, therefore, subject to the requirements of the Directives, will generally be treated as satisfying the conditions laid down by an EU instrument relating to the carrying on of the regulated activity of effecting or carrying out contracts of insurance. This is for the purpose of paragraph 3 of Schedule 4 to the Act (Exercise of treaty rights). The insurance undertaking will, therefore, generally be able to qualify for permission as a Treaty firm for its reinsurance business if it follows the procedure provided for by Schedule 4 (see SUP 13A.3.4 G to SUP 13A.3.11 G (Treaty Firms) ). This will be in addition to the insurance undertaking being an EEA firm under Schedule 3 of the Act for its direct insurance business.

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Transitional Provisions and Schedules

SUP TP 1

Transitional provisions

SUP TP 1.1

Transitional provisions applying to the Supervision manual only

SUP TP 1.2
SUP TP 1.3

[deleted]

SUP TP 1.4

[deleted]

SUP TP 1.5

[expired]

SUP TP 1.6

[deleted]

SUP TP 3

Transitional provisions relating to SUP 10A and SUP 10B: Transition from the FSA to the FCA and PRA

  • 01/04/2013

SUP Sch 1

Record keeping requirements

  • 31/12/2004

SUP Sch 1.1

handbook-guidance

SUP Sch 1.2

handbook-guidance

SUP Sch 5A

Rights of actions for damages

  • 01/04/2013

SUP Sch 5A.1

handbook-guidance
The table below sets out the rules in SUP contravention of which by an authorised person may be actionable under section 138D of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.
  • 01/04/2013

SUP Sch 5A.2

handbook-guidance
  • 01/04/2013

SUP Sch 6

Rules that can be waived

  • 01/12/2004

SUP Sch 6.1B

handbook-guidance
As a result of section 138A of the Act (Modification or waiver of rules) the PRA has power to waive all its rules, other than rules made under section 137O (Threshold condition code). However, if the rules incorporate requirements laid down in European directives, it will not be possible for the PRA to grant a waiver that would be incompatible with the United Kingdom's responsibilities under those directives.
  • 01/04/2013

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