FINAL NOTICE

ACTION

1. By an application dated 17 October 2014 (“the Application”) AR Capital LP (“AR

Capital”) applied under section 55A of the Financial Services and Markets Act 2000
(“the Act”) for Part 4A permission to carry on the regulated activity of managing
investments.

2. AR Capital will have one principal and adviser: Ashley Ryan Rudland

(“Mr Rudland”). In addition to applying for Part 4A permission, the firm submitted
an application for individual approval for Mr Rudland.

3. The Application is incomplete.

4. For the reasons listed below, the Authority has refused the Application.

SUMMARY OF REASONS

5. By its Warning Notice dated 26 June 2015 (“the Warning Notice”) the Authority

gave notice that it proposed to refuse the Application and that AR Capital was
entitled to make representations to the Authority about that proposed action.

6. As no representations have been received by the Authority from AR Capital within

the time allowed by the Warning Notice, the default procedures in paragraph 2.3.2
of the Authority’s Decision Procedure and Penalties Manual apply, permitting the
Authority to treat the matters referred to in its Warning Notice as undisputed and,
accordingly, to give a Decision Notice.

7. By its Decision notice dated 17 August 2015 (“the Decision Notice”), the Authority

gave AR Capital notice that it had decided to take the action described above.

8. AR Capital had 28 days from the date the Decision Notice was given to refer the

matter to the Upper Tribunal (formerly known as the Financial Services and
Markets Tribunal). No referral was made to the Upper Tribunal within this period of
time or to date.

9. Under section 390 (1) of the Act, the Authority, having decided to refuse the

Application and there having been no reference of that decision to the Tribunal,
must give AR Capital Final Notice of its refusal.

10. For the reasons set out herein the Authority cannot ensure that AR Capital will

satisfy, and continue to satisfy, the threshold conditions set out in Schedule 6 of
the Act. The Application does not contain sufficient information about AR Capital’s
business to allow the Authority to be satisfied that AR Capital will be able to meet
and continue to meet threshold conditions 2D (Appropriate Resources) and
2E (Suitability). Further what information that was provided gives rise to
significant concerns about the firm’s ability to satisfy those conditions. The
Authority considers that:

i.
the information provided by the firm and engagement with the Authority
generally indicates a lack of readiness, willingness and organisation to
comply with the requirements and standards under the regulatory system;

ii.
Mr Rudland, the sole approved person, does not have the required
competence and capability to carry out the controlled functions applied for,
because he has no financial services experience and had not obtained any
of the investment management industry qualifications, set out in the
Authority’s Training and Competence Handbook;

iii.
the information provided by the firm regarding its business plan including
its compliance arrangements was materially deficient, such that the
Authority is unable to ensure that its non-financial resources will be and
continue to be adequate; and

iv.
the firm lacks the required financial resources for the regulated activity it
wishes to engage in.

DEFINITIONS

11. The definitions below are used in this Final Notice.

“the Act” means the Financial Services and Markets Act 2000

“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct
Authority

“MiFID” means the Markets in Financial Instruments Directive

FACTS AND MATTERS

12. AR Capital sought Part 4A permission to manage investments in respect of

regulated investments. As part of the Application, AR Capital submitted to the
Authority a completed application form headed “Supplement for Investment
Managers” (“the IM Form”). Section 2 headed “Scope of Permission required” asks
the applicant firm to confirm its client type. AR Capital checked the “Professional”
client option. However, in response to section 1.11 of the IM form, in which the
firm was required to give details of the types of the intended investors in the
funds it would be managing, AR Capital stated, “Family, friends, private investors

and other third party (possibly high net worth) individuals.” The Authority is not
satisfied that the proposed clients of AR Capital will be limited to professional
clients, and it is therefore likely that AR Capital’s customers would be retail clients.

Application Fee

13. At Section 1 of the “Checklist & declaration” form, it states that the applicant firm

must tick the relevant fee for the Application. It also states that the fee is not
refundable, even if the applicant firm decides to withdraw its application.
AR Capital selected the £5,000 fee for moderately complex applications.

14. The Authority wrote to AR Capital on 16 December 2014 highlighting deficiencies

in the Application and informing the firm that it was minded to refuse the
Application. AR Capital replied on 31 December 2014 stating that it accepted the
Authority’s stance and sought a refund of the application fee. The Authority
referred AR Capital to the guidance on fees, and informed it that the fee was not
refundable; AR Capital replied that it wished to proceed with the Application given
that a refund was not possible. It informed the Authority that it would be providing
further information to address the deficiencies in the Application. The information
was not provided.

15. The Authority sent emails to Mr Rudland on 26 January 2015 and 10 February

2015 seeking the outstanding information in order to complete its assessment of
the Applicant. On 8 April 2015 the Authority sent AR Capital a letter setting out its
concerns and seeking a response. To date, the Authority has received no response
to communications sent to AR Capital.

Fitness and Propriety of sole director

16. In section 1 of the IM Form headed “Regulatory Business Plan,” AR Capital set out

Mr Rudland’s background and experience as follows:

“Over the past 2 years I have been investing my personal savings in US
equities. At this point family and friends asked me to manage for
them…My background is in Software Architecture; I’ve been building
software for over 13 years.”

17. An Authority approved person who provides investment management services for

retail clients must have one of the relevant qualifications set out in the Training
and Competency Sourcebook of the Authority’s Handbook. Mr Rudland has not
provided any information that suggests that he possesses any of these
qualifications. Mr Rudland has also not provided any information to suggest that
he has any financial services industry experience.

18. Where an investment management firm only has one individual who will perform

the CF30 customer function, the Authority advises that such a firm has a locum
arrangement with another Authority regulated firm, which has at least the same
level of permissions, in the event of the incapacity of the sole CF30. AR Capital
only has one proposed approved person and has not entered into a locum
arrangement.

19. Overall the content of the Application indicates a lack of knowledge of the

investment services industry and the regulatory framework on the part of
AR Capital and therefore a lack of readiness, willingness and organisation to
comply with the regulatory requirements. Sections of the Application which were
deficient are set out below:

i.
AR Capital failed to apply for its sole approved person, Mr Rudland to
perform the CF10 compliance oversight and CF11 money laundering
reporting functions. These are required functions. Conversely, it has
applied for Mr Rudland to perform CF1 and CF29 when these functions are
not required. As a Limited Partnership, there is no requirement for the CF1
function. The CF29 function is not required when also applying for CF1.

ii.
AR Capital failed to apply for permission to deal in investments as an
agent despite requiring permission for this regulated activity to effect an
investment management decision. In addition, it states that it will be
managing discretionary investment client portfolio, when the structure of
the scheme as set out in its partnership agreement suggests it in fact
intends to establish and manage a collective investment scheme.

iii.
At section 5.1 of the IM Form, AR Capital indicated that it had documented
compliance procedures in place. AR Capital attached a document entitled
“Compliance Monitoring Programme” which in summary states that
investors would be subject to a money laundering check and be obliged to
comply with “investment rules.” The document fails to set out how
customer classification checks will be conducted. Given that AR Capital
only intends to deal with Professional clients, it would be essential to have
proper checks in place to ensure that customers are appropriately
classified.

iv.
At section 1.17 of the IM Form, in response to the question of whether it
would be carrying on MiFID business, AR Capital replied “No” and stated
that it meets the criteria set out in article 3 of MiFID. The article 3
exemption is only relevant to firms carrying on the regulated activities of
arranging deals in investments and providing investment advice. According
to the IM Form, AR Capital seeks to manage investments and is therefore
not exempt.

20. On 8 April 2015, the Authority sought more information about the firm’s business

plan. The firm did not provide the Authority with any further information about its
business plan.

Insufficient Regulatory Capital

21. The minimum base capital resources requirement for MiFID firms which are BIPRU

firms is €50,000 (£36,000) as set out in GENPRU 2.1.47R. AR Capital states that
its capital is £33,453. The lack of sufficient capital was drawn to AR Capital’s
attention in an email on 16 December 2014, and in a letter on 8 April 2015. To
date, there is no indication that AR Capital will be increasing its capital.

IMPACT ON THE THRESHOLD CONDITIONS

22. The regulatory provisions relevant to this Final Notice are referred to in Annex A

and the threshold conditions are set out in Schedule 6 of the Act.

Threshold Condition 2D: Appropriate Resources

23. In light of the lack of coherence in the Application, and the failure to respond to

requests for information, the Authority is not satisfied that AR Capital is ready,
willing and organised to comply with requirements and standards under the
regulatory system. In addition, given the lack of expertise of the person who will
manage AR Capital’s affairs and lack of sufficient capital the Authority is not
satisfied that AR Capital’s resources, both non-financial and financial, are sufficient
to enable AR Capital to comply with the Authority’s requirements.

Threshold Condition 2E: Suitability

24. Having regard to AR Capital’s connection with Mr Rudland, the Authority cannot be

satisfied that AR Capital’s affairs will be managed by a person who has adequate
skills and experience, and is therefore a fit and proper person. In addition, AR
Capital’s failure to comply with requests made by the Authority further suggests a
lack of fitness and propriety.

25. The procedures proposed by AR Capital in its business plan are not compliant with

the requirements and standards under the regulatory system and the regulatory
activity for which it seeks permission. Therefore the Authority is not satisfied that
AR Capital has considered and mitigated any risks AR Capital may pose to
consumers. In addition, the business it intends to conduct appears to be at odds
with the scope of permission sought.

26. On the basis of the facts and matters described above, the Authority has

concluded that AR Capital will not satisfy, or continue to satisfy, the threshold
conditions in relation to all of the regulated activities for which AR Capital would
have permission if the application was granted.

IMPORTANT NOTICES

27. This Final Notice is given under section 390 (1) of the Act.

28. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this Notice relates. Under those provisions,
the Authority must publish such information about the matter to which this Notice
relates as the Authority considers appropriate. The information may be published
in such manner as the Authority considers appropriate. However, the Authority
may not publish information if such publication would, in the opinion of the
Authority, be unfair to you or prejudicial to the interests of consumers or
detrimental to the stability of the UK financial system.

29. The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

30. For more information concerning this matter generally, contact Karen Avis,

Manager, Permissions Department at the Authority (direct line: 020 7066 3380/
email: karen.avis@fca.org.uk).

Graeme McLean
Chair of the Regulatory Transactions Committee

ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS FINAL NOTICE

1. Section 55A(1) of the Act provides for an application for permission to carry on

one or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.

2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing

or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the
person has or will have permission, the threshold conditions for which that
regulator is responsible.

3. Schedule 6 of the Act specifies that paragraphs 2B to 2F of Schedule 6 set out the

Threshold Conditions that are relevant to the discharge by the Authority of its
functions in relation to the Application.

Relevant provisions of the Authority’s Handbook

4. In exercising its powers in relation to the granting of a Part 4A permission, the

Authority must have regard to guidance published in the Authority Handbook,
including the part titled Threshold Conditions (“COND”). The main considerations
in relation to the action specified are set out below.

Threshold Condition 2D: Appropriate Resources

5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the

Authority will consider whether a firm is ready, willing and organised to comply
on a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.

6. COND 2.4.2G(2) states that the Authority will interpret the term 'appropriate' as

meaning sufficient in terms of quantity, quality and availability, and 'resources'
as including all financial resources (though only in the case of firms not carrying
on, or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against
liabilities, holdings of or access to cash and other liquid assets, human resources
and effective means by which to manage risks.

7. COND 2.4.1A(4) states that the resources of the Applicant must be appropriate in

relation to the regulated activities that the Applicant carries on or seeks to carry
on. The matters which are relevant in determining whether the Applicant has
appropriate non-financial resources include:

(1)
the skills and experience of those who manage the Applicant’s affairs;

(2)
whether the Applicant’s non-financial resources are sufficient to enable
the Applicant to comply with:

requirements imposed or likely to be imposed on the Applicant
by the Authority in the course of the exercise of its functions;
and

any other requirement in relation to whose contravention the
Authority would be the appropriate regulator.

Threshold Condition 2E: Suitability

8. COND 2.5.1A(1) states that the Applicant must be a fit and proper person having

regard to all the circumstances, including, amongst other things:

(1)
the Applicant's connection with any person;

(2)
the need to ensure that the Applicant’s affairs are conducted in an
appropriate manner, having regard in particular to the interests of
consumers and the integrity of the UK financial system;

(3)
whether the Applicant has complied and is complying with requirements
imposed by the Authority in the exercise of its functions, or requests
made by the Authority, relating to the provision of information to the
Authority and, where the Applicant has so complied or is so complying,
the manner of that compliance;

(4)
whether those who manage the Applicant’s affairs have adequate skills
and experience and act with probity; and

(5)
whether the Applicant’s business is being, or is to be, managed in such a
way as to ensure that its affairs will be conducted in a sound and
prudent manner.

9. In addition, COND 2.5.4(2)G states that the Authority may have regard to a

number of factors when assessing whether the Applicant will satisfy, and continue
to satisfy, this threshold condition including whether:

(1)
the Applicant will conduct its business with integrity and in compliance
with proper standards;

(2)
the Applicant has, or will have, a competent and prudent management;
and,

(3)
the Applicant can demonstrate that it will conduct its affairs with the
exercise of due skill, care and diligence.

10. In addition, COND 2.5.6G states that the Authority may have regard to a number

of factors when assessing whether the Applicant will satisfy, and continue to
satisfy, this threshold condition including whether:

(1)
the Applicant has been co-operative in all its dealings with the Authority
and is ready, willing and organised to comply with the requirements and
standards under the regulatory system;

(2)
the Applicant has made arrangements to put in place an adequate
system of internal control to comply with the requirements and
standards for which the Authority is responsible under the regulatory
system; and,

(3)
the Applicant has put in place procedures which are reasonably designed
to ensure that it has made employees aware of, and compliant with,
those requirements and standards under the regulatory system that
apply to the firm for which Authority is responsible and the regulated
activities for which it has, or will have permission; and

(4)
the Applicant has put in place procedures which are reasonably designed
to ensure that its approved persons are aware of those requirements
and standards under the regulatory system applicable to them; and

(5)
the governing body of the Applicant is made up of individuals with an
appropriate range of skills and experience to understand, operate and
manage the firm’s regulated activities.