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Notification to the FCA

Apr 28 2014

Notification to the FCA

Relevance:                   All firms authorised and regulated by the FCA.

Action required:           Be aware of the FCA’s notification requirements and the consequences for not following them.

Any firm or individual that carries out a regulated financial market activity in the UK must be authorised by the Financial Conduct Authority (FCA).

The FCA gets its powers from the Financial Services and Markets Act 2000 (FSMA), as amended, in particular by the Financial Services Act 2012 and sets out its required standards in their Handbook of Rules and Guidance.

The FCA expects an authorised firm to behave in accordance with its Principle 11:

A firm must deal with its regulators in an open and co-operative way and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.

There is a variety of events that require notification to be made within specified timescales and some of them require the firm to obtain the FCA’s agreement before proceeding.

So it is essential for firms to understand what they can go ahead with and then tell the FCA, as opposed to informing them of proposed action and getting permission to proceed.

There have been a couple of instances recently of the latter that have caused some concern and are worth using to remind firms that offences committed in breach of FCA rules or provisions do have sanctions attached to them.

First, a new Director was appointed to the Board before the firm applied to the FCA for him to be an Approved Person.

Second, a firm acquired an authorised firm without the benefit of confirmation from the FCA under the Change in Control requirements.

In both cases, the firms involved received a warning from the FCA that they had committed a criminal offence and had become liable to a fine, in the second case potentially unlimited.

Having issued this warning, the FCA then proceeded to offer up assistance to resolve the respective matters.

Therefore, firms should remember that they are authorised and regulated by the FCA and are obliged to abide by the FCA’s rules and requirements.  It is less stressful to work with the FCA in doing the right thing than owning up to an error and seeking their co-operation to put things right.  Also, one occasion might be forgiven but a repeat performance might put the firm firmly in the FCA’s sights for closer observation.

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