PROTECTING THE PERIMETER

Further changes to the Approved Persons Regime for dual-regulated firms may be needed; a consultation was issued in October 2012(11) on this and on the designation of specific functions between the two regulators.

As stated in that consultation paper, the FSA is considering what further enhancements to the Approved Persons Regime are needed for the FCA.

Change in control

Change-in-control applications are when individuals or corporate bodies wishing to acquire, increase or decrease control in a UK authorised firm have to seek prior approval from the FSA. Change-in-control applications for dual-regulated firms will be assessed by the PRA, which must consult us before deciding whether to approve or not. If we have concerns about money laundering or terrorist financing, we may require the PRA to reject the application regardless of its own view, or impose conditions that would address our concerns. Change-in-control applications for FCA-only regulated firms will be assessed by the FCA.

When assessing changes in control, we will ensure the firm’s business model remains viable and that consumers will not lose out as a result of the change.

We will not accept a change in control where we have significant concerns about the controller’s integrity or reputation. We will adopt a different approach where the proposed controller is known to us and there are no outstanding concerns.

If we are not told about a change in control until after the event has happened, we will consider taking appropriate action, up to and including prosecution.

Waivers

As is the case now, in some exceptional circumstances we will be able to put aside (‘waive’) rules for certain firms if they are able to demonstrate that they can meet our statutory test, which we explain in the orange box.

Firms should apply to the FCA to waive FCA rules, and to the PRA to waive PRA rules.

We will consult with the PRA where we intend to waive a rule that may be materially relevant to the PRA’s objectives.

We will consider granting a waiver if the applicant is able to demonstrate that:

• compliance with the rule would be unduly burdensome or would not achieve the rule’s purpose; and

• the direction would not adversely affect the advancement of any of our operational objectives, which are:

– to secure an appropriate degree of protection for consumers;

– to protect and enhance the integrity of the UK financial system; and

– to promote effective competition in the interests of consumers.

Passporting

‘Passporting’ rights allow authorised firms in the European Economic Area (EEA) to do business in another EEAMember State under a single market directive. UK-authorised firms that wish to carry out regulated activities within the EEA may do so by either physically establishing a branch or engaging an agent in a host Member State, or providing their business remotely through cross-border services.

11 CP12/26 Regulatory reform: the PRA and FCA regimes for Approved Persons – www.fsa.gov.uk/static/pubs/cp/cp12-26.pdf