FIRST SUPERVISORY NOTICE

To:
Enterprise The Business Credit Union Limited

ACTION

1.
For the reasons listed below and pursuant to section 45 of the Financial Services and
Markets Act 2000 (the “Act”), the FSA has varied the permission granted to
Enterprise The Business Credit Union Limited (“EBCU”), pursuant to Part IV of the
Act (“EBCU’s permission”), by removing its only regulated activity with effect from
close of business on 21 September 2011. Accordingly, EBCU’s permission will no
longer include the regulated activity of accepting deposits with effect from close of
business on 21 September 2011.

2.
The FSA has further varied EBCU’s permission pursuant to section 43 of the Act by
including the following requirements with effect from close of business on 21
September 2011, namely that EBCU must not:

(1)
make new loans, or make further advances in relation to, or otherwise vary the
terms of, any existing loans;

(2)
redeem any member’s shares;

(3)
effect any share to loan transfers;

(4)
repay any deposits; or

(5)
without the written consent of the FSA, make any payment, or otherwise
dispose of, deal with or diminish the value of any of its assets, except to pay
expenses incurred in the ordinary course of EBCU’s business.

3.
For the avoidance of doubt, the expenses referred to in paragraph 2(5) do not include
gifts, or payments of unusual or significant amounts to EBCU’s employees or officers
or any persons connected to them.

4.
The FSA has also varied EBCU’s permission by including the following
requirements, namely that after 21 September 2011 and before 06 October 2011
EBCU must:

(1)
advise in writing all members of EBCU that it is no longer permitted by the
FSA to carry on accepting deposits and of the other restrictions placed upon it
by the FSA; and

(2)
provide the FSA with a copy of the written advice sent to all members for its
regulated activity pursuant to paragraph 4(1) above, together with a list of all
members to whom such advice has been sent.

REASONS FOR ACTION

5.
On the basis of the facts and matters described below, EBCU is failing and will
continue to fail to satisfy the threshold conditions set out in Schedule 6 to the Act (the
"Threshold Conditions") in that, in the opinion of the FSA, EBCU has failed to
maintain positive capital, and presents a risk to consumers by continuing to be
permitted to conduct the regulated activity it carries on.

6.
The FSA considers that EBCU should not be permitted to accept new deposits nor
should it make any further loan advances or redeem any membership shares, when it
has failed to maintain adequate capital.

7.
The FSA considers, on the basis of those facts and matters, that it is necessary, in order
to protect the interests of consumers, for the action specified above to take effect from
close of business on 21 September 2011.

FACTS AND MATTERS RELIED ON

8.
EBCU is a version 1 credit union. In its Quarterly Return to the FSA for the period
ended 30 June 2011, EBCU reported that it had 230 members and no juvenile
depositors.

9.
The latest audited financial information available to the FSA reported that EBCU had
negative capital of £16,360 as at 30 September 2010. EBCU has had negative capital
since September 2009. In its Quarterly Return to the FSA for the period ended 30 June
2011, EBCU reported negative capital of £19,156. EBCU has failed to rectify its
negative capital position, despite having had a reasonable opportunity to do so.

FAILINGS

10.
The regulatory provisions relevant to this First Supervisory Notice are set out in the
Annex.

11.
From the facts and matters described above the FSA, having regard to its regulatory

objectives, has identified that:

•
EBCU is in breach of CRED 8.3.1R by failing to maintain a positive amount of
capital at all times and therefore the amount saved by its members is worth less
than they deposited;

•
this failing is material in relation to the regulated activity for which EBCU has
permission and it therefore fails to satisfy Principle 4 (Financial prudence) and
Threshold Condition 4 (Adequate resources); and

•
the risk of loss or other adverse effect on consumers because of EBCU’s failings
causes the FSA to have serious concerns about EBCU such that the exercise of
the FSA’s own-initiative powers to vary EBCU’s permission with effect from
close of business on 21 September 2011 is an appropriate response to those
concerns.

PROCEDURAL MATTERS

Decision Maker

12.
The decision which gave rise to the obligation to give this First Supervisory Notice was

made by the Deputy Chairman of the Regulatory Decisions Committee.

13.
This First Supervisory Notice is given to EBCU under section 53(4) and in accordance
with section 53(5) of the Act, and is being served on EBCU at its principal place of
business last notified to the FSA. The following statutory rights are important.

The Tribunal

14.
EBCU has the right to refer the matter to which this First Supervisory Notice relates to
the Upper Tribunal (the “Tribunal”). The Tax and Chancery Chamber is the part of the
Upper Tribunal which, amongst other things, hears references arising from decisions of
the FSA. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, EBCU has 28 days from the date on which this First Supervisory
Notice is given to EBCU to refer the matter to the Tribunal.

15.
A reference to the Tribunal can be made by way of a reference notice (Form FTC3)
signed by EBCU and filed with a copy of this First Supervisory Notice. The Tribunal’s
contact details are:

The Upper Tribunal, Tax and Chancery Chamber, 45 Bedford Square, London WC1B
3DN (telephone: 020 7612 9700; email: financeandtaxappeals@tribunals.gsi.gov.uk).

16.
Further details are contained in “Making a Reference to the UPPER TRIBUNAL (Tax

and Chancery Chamber)” which is available from the Tribunal website:

17.
EBCU should note that a copy of the reference notice (Form FTC3) must also be
sent to the FSA at the same time as filing a reference with the Tribunal. A copy of the
reference notice should be sent to Alexander Banerjea at the FSA, 25 The North
Colonnade, Canary Wharf, London E14 5HS.

Representations

18.
EBCU has the right to make written and oral representations to the FSA (whether or
not it refers this matter to the Tribunal). If EBCU wishes to make written
representations it must do so by 20 October 2011 or such later date as may be permitted
by the FSA. Written representations should be made to the Regulatory Decisions
Committee and sent to Adam Taylor, Regulatory Decisions Committee Professional
Support Services. The Regulatory Decisions Committee Professional Support Services'
address is: 25 The North Colonnade, Canary Wharf, London E14 5HS. If EBCU
wishes to make oral representations, it should inform the FSA of its intention to do so
by 26 September 2011. If EBCU does not notify the FSA by 26 September 2011, it
will not, other than in exceptional circumstances, be able to make oral representations.

Confidentiality and publicity

19.
EBCU should note that this First Supervisory Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose of
obtaining advice on its contents). EBCU should also note that section 391 of the Act
requires the FSA when the First Supervisory Notice takes effect (and this First
Supervisory Notice takes immediate effect), to publish such information about the
matter as it considers appropriate.

FSA contacts

20.
For more information concerning this matter generally, EBCU should contact
Alexander Banerjea at the FSA (direct line: 020 7066 7206 / fax: 020 7066 7207).

21.
If EBCU has any questions regarding the procedures of the Regulatory Decisions

Committee, it should contact Adam Taylor (direct line: 020 7066 2546).

Andrew Long
Deputy Chairman, Regulatory Decisions Committee







ANNEX TO THE FIRST SUPERVISORY NOTICE ISSUED BY THE FINANCIAL
SERVICES AUTHORITY TO ENTERPRISE THE BUSINESS CREDIT UNION
LIMITED ON 14 SEPTEMBER 2011


RELEVANT STATUTORY PROVISIONS

1.
The FSA’s regulatory objectives established in section 2(2) of the Act include the
protection of consumers.

2.
Section 45 of the Act authorises the FSA to exercise the following powers:

(1)
to vary an authorised person’s permission where it appears to the FSA that
such person is failing to satisfy the Threshold Conditions;

(2)
to vary such a permission by removing a regulated activity from those for
which the permission is given; and

(3)
to include any provision in the permission as varied that could be included if a
fresh permission were being given in response to an application under section
40 of the Act, including the imposition pursuant to section 43 of the Act of
such requirements as the FSA considers appropriate.

3.
Section 43(3) of the Act permits a requirement to extend to activities which are not
regulated activities.

4.
Section 53(3) of the Act allows such variations to take effect immediately if the FSA
reasonably considers that it is necessary for the variations to take effect immediately.

5.
Paragraph 4(1) of Schedule 6 to the Act sets out Threshold Condition 4, which states:

“The resources of the person concerned must, in the opinion of the Authority,
be adequate in relation to the regulated activities that he seeks to carry on, or
carries on.”


RELEVANT HANDBOOK PROVISIONS

6.
In exercising its power to vary a Part IV permission, the FSA must have regard to

relevant provisions in the FSA Handbook of Rules and Guidance (the "Handbook").

The main provisions relevant to the action specified above are set out below.

7.
Principle 4 (Financial prudence) as set out in the FSA’s Principles for Businesses (the
“Principles”) in the Handbook requires that a firm maintain adequate financial
resources.

Relevant Rules and Guidance

8. FSA Rule CRED 8.3.1R in the Credit Unions Sourcebook in the Handbook
(“CRED”)states:

“A version 1 credit union must at all times maintain a positive amount of
capital.”


9. The guidance in CRED 8.3.3G states that:


“CRED 8.3.1R implements the principle that every pound saved by a
depositor with a credit union should always be worth at least a pound.”


10.
CRED 5.2.4G allows the FSA to vary a credit union’s Part IV permission on its own
initiative if it appears that the credit union is failing, or is likely to fail, to satisfy the
Threshold Conditions.

Guidance concerning the relevant Threshold Condition

11.
Guidance on Threshold Condition 4 (Adequate Resources) is set out in Chapter 2.4 of
the Part of the Handbook entitled Threshold Conditions (“COND”).

12.
COND 2.4.1UK reproduces the relevant statutory provision that the resources of the
person concerned must, in the opinion of the FSA, be adequate in relation to the
regulated activities that he seeks to carry on, or carries on.

13.
COND 2.4.2G(2) in giving guidance on the interpretation of “adequate resources”,
defines the term “adequate” as meaning sufficient in terms of quantity, quality and
availability, and “resources” as including all financial resources, non-financial
resources and means of managing its resources, capital, provisions against liabilities,
holdings of or access to cash and other liquid assets.

14.
COND 2.4.4G(3) requires the FSA only to take into account relevant matters which are
material in relation to the regulated activities for which the authorised person has
permission.

OTHER RELEVANT REGULATORY PROVISIONS

15.
The FSA’s policy in relation to the use of its enforcement powers is set out in the
Enforcement Guide (“EG”).

The FSA’s policy for exercising the own-initiative power under section 45 of the Act
to vary a Part IV permission – EG 8

16.
EG 8.1B provides that the FSA will have regard to its regulatory objectives and the
range of regulatory tools that are available to it, when it considers how it should deal
with a concern about a firm.

7

17.
EG 8.5 provides that the circumstances in which the FSA will consider varying a
firm’s Part IV permission include those where the FSA has serious concerns about the
firm or about the way its business is being or has been conducted.

18.
EG 8.5(1)(a) specifies that the circumstances in which the FSA will consider
exercising its own-initiative power include where a firm’s financial resources appear
to be inadequate for the scale or type of regulated activity it is carrying on.

19.
EG 8.9 includes among the factors which will determine whether the urgent exercise
of the FSA’s own-initiative power is an appropriate response, the extent of any loss or
risk of loss or other adverse effect on consumers and the steps the authorised person
has taken or is taking to address the issue.