Supervisory Notice
FIRST SUPERVISORY NOTICE
To:
Equifund Limited
Of:
Union House
6569 Shepherds Bush Green
London
W12 8TX
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 decided to vary the permission granted to
Equifund Limited (“Equifund”) pursuant to Part IV of the Act (“Equifund’s Part IV
permission”), by removing all of its regulated activities with immediate effect.
Accordingly, Equifund’s Part IV permission no longer includes the regulated activities
of:
(a)
Advising on investments (except on Pension Transfers and Pension Opt Outs);
(b)
Advising on regulated mortgage contracts;
(c)
Agreeing to carry on a regulated activity;
(d)
Arranging (bringing about) deals in investments;
(e)
Arranging (bringing about) regulated mortgage contracts;
(f)
Assisting in the administration and performance of a contract of insurance;
Page 2 of 7
(g)
Dealing in investments as agent;
(h)
Making arrangements with a view to regulated mortgage contracts; and
(i)
Making arrangements with a view to transactions in investments.
2.
The FSA has further decided to vary Equifund’s Part IV permission by imposing the
following requirements, pursuant to section 43 of the Act, namely that Equifund must:
(a)
within 14 days notify in writing all clients for its regulated activities that it does
not have Professional Indemnity Insurance (“PII”) and that it is no longer
permitted by the FSA to carry on regulated activities; and
(b)
within 14 days provide the FSA with a copy of the written notification sent to all
clients for its regulated activities pursuant to (a) above, together with a list of all
clients to whom such notification has been sent.
REASONS FOR ACTION
3.
The FSA has concluded, on the basis of the facts and matters described below, that
Equifund is failing to satisfy the threshold conditions set out in Schedule 6 to the Act
(the "Threshold Conditions"). In the opinion of the FSA, Equifund’s resources are not
adequate in relation to the regulated activities it has had permission to carry on.
4.
The FSA also 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
immediate effect.
FACTS AND MATTERS RELIED ON
5.
Equifund has been authorised by the FSA since 31 October 2004 to carry on regulated
home finance business and from 14 January 2005 it was also permitted to conduct
insurance mediation business.
6.
Equifund has failed to maintain PII, despite having had a reasonable opportunity to do
so.
FAILINGS
7.
The regulatory provisions relevant to this First Supervisory Notice are set out in the
Annex.
8.
From the facts and matters described above the FSA, having regard to its regulatory
objectives, has reached the following conclusions:
• by failing to satisfy the FSA that it has effected compliant PII, Equifund is failing
to make adequate provision in respect of its liabilities, including contingent and
future liabilities, in breach of Principle 4 of the Principles for Businesses. That
failing is material in relation to the regulated activities for which it has had
permission and Equifund is therefore failing to satisfy Threshold Condition 4
(Adequate resources);
Page 3 of 7
• the risk of loss or other adverse effect on consumers by Equifund’s failing, which
is a material breach of a requirement imposed on it by the FSA’s rules, causes the
FSA to have very serious concern about Equifund such that the exercise of the
FSA’s owninitiative power to vary Equifund’s Part IV permission with
immediate effect is an appropriate and reasonable response to those concerns;
• it is desirable to exercise the FSA’s own initiative power to vary Equifund’s Part
IV permission with immediate effect to meet its regulatory objectives, and
specifically in relation to Equifund, the objective of the protection of consumers;
and
• specifically, the variation of Equifund’s Part IV permission should take immediate
effect to address the FSA’s serious concern that claims for which Equifund is
uninsured might arise from new business.
PROCEDURAL MATTERS
Decision Maker
9.
The decision which gave rise to the obligation to give this First Supervisory Notice was
made by the Acting Chairman of the Regulatory Decisions Committee.
10.
This First Supervisory Notice is given to Equifund under section 53(4) and in
accordance with section 53(5) of the Act, and is being served on Equifund at its place
of business as last notified to the FSA. The following statutory rights are important.
The Tribunal
11.
Equifund 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 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, Equifund has 28 days from the date on which this First
Supervisory Notice is given to Equifund to refer the matter to the Tribunal.
12.
A reference to the Tribunal can be made by way of a reference notice (Form FTC3)
signed by Equifund 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).
13.
Further details are contained in “Making a Reference to the UPPER TRIBUNAL (Tax
and Chancery Chamber)” which is available from the Tribunal website:
14.
Equifund 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
Page 4 of 7
reference notice should be sent to Kathryn Willis at the FSA, 25 The North Colonnade,
Canary Wharf, London E14 5HS.
Representations
15.
Equifund has the right to make written and oral representations to the FSA (whether or
not it refers this matter to the Tribunal). If Equifund wishes to make written
representations it must do so by 15 March 2012 or such later date as may be permitted
by the FSA. Written representations should be made to the Regulatory Decisions
Committee and sent to Lee Turner, 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 Equifund
wishes to make oral representations, it should inform the FSA of its intention to do so
by 21 February 2012. If Equifund does not notify the FSA by 21 February 2012, it will
not, other than in exceptional circumstances, be able to make oral representations.
16.
Equifund should 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
17.
For more information concerning this matter generally, Equifund should contact
Kathryn Willis at the FSA (direct line: 020 7066 2098 / fax: 020 7066 2099).
18.
If Equifund has any questions regarding the procedures of the Regulatory Decisions
Committee, it should contact Lee Turner (direct line: 020 7066 2810/ fax: 020 7066
2811).
Andrew Long
Acting Chairman, Regulatory Decisions Committee
Page 5 of 7
ANNEX TO THE FIRST SUPERVISORY NOTICE ISSUED BY THE FINANCIAL
SERVICES AUTHORITY TO EQUIFUND LIMITED ON 8 FEBRUARY 2012
RELEVANT STATUTORY PROVISIONS
1.
The FSA’s regulatory objectives established in section 2(2) of the Act include the
protection of consumers.
2.
The FSA is authorised by section 45 of the Act to exercise the following powers:
• to vary an authorised person’s permission where it appears to the FSA that
such person is failing to satisfy the Threshold Conditions;
• to vary an authorised person’s permission where it is desirable to do so to meet
any of its regulatory objectives;
• to vary such a permission by removing a regulated activity from those for
which the permission is given; and
• 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 53(3) of the Act allows such a variation to take effect immediately if the FSA
reasonably considers that it is necessary for the variation to take effect immediately.
4.
Paragraph 4(1) of Schedule 6 to the Act sets out Threshold Condition 4 which states
that:
“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
5.
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.
Relevant Principle
6.
Principle 4 (Financial prudence) of the FSA’s Principles for Businesses (the
“Principles”) requires a firm to maintain adequate financial resources.
Relevant Rule
7.
FSA Rule MIPRU 3.2.1R in the Prudential Sourcebook for Mortgage and Home
Finance Firms, and Insurance Intermediaries (“MIPRU”) which forms part of the
Handbook, requires that:
Page 6 of 7
“A firm must take out and maintain professional indemnity insurance that is at
least equal to the requirements in this section from:
(1) an insurance undertaking which is authorised to transact professional
indemnity insurance in the EEA; or
(2) a person of equivalent status in:
(a) a Zone A country;
(b) the Channel Islands, Gibraltar, Bermuda or the Isle of Man.”
Guidance concerning the relevant Threshold Condition
8.
Guidance on Threshold Condition 4 is set out in Chapter 2.4 of the Part of the
Handbook entitled Threshold Conditions (“COND”).
Guidance concerning Threshold Condition 4: Adequate resources (paragraph 4,
Schedule 6 to the Act)
9.
COND 2.4.1UK(1) reproduces the relevant statutory provision that the resources of the
person must, in the opinion of the FSA, be adequate in relation to the regulated
activities that he seeks to carry on, or carries on.
10.
COND 2.4.1UK(2)(b)(i) permits the FSA, when forming its opinion as to whether the
resources of an authorised person are adequate in relation to the regulated activities that
he carries on, to have regard to the provision he makes in respect of liabilities
(including contingent and future liabilities).
11.
COND 2.4.4G(3) states that the FSA only takes into account relevant matters which are
material in relation to the regulated activities for which the authorised person has
permission.
OTHER RELEVANT REGULATORY PROVISIONS
12.
The FSA's policy in relation to its enforcement powers is set out in the Enforcement
Guide (EG), certain provisions of which are summarised below.
13.
EG 8.1(1) reflects the provisions of section 45 of the Act that the FSA may use its
owninitiative power to vary or cancel the permission of an authorised firm where a
firm is failing or is likely to fail to satisfy the Threshold Conditions.
Varying a firm’s Part IV permission on the FSA’s owninitiative
14.
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.
15.
EG 8.3 provides that the FSA will exercise its formal powers under section 45 of the
Act, where the FSA considers it is appropriate to ensure a firm meets its regulatory
requirements. EG 8.3(1) specifies that the FSA may consider it appropriate to exercise
its powers where it has serious concerns about a firm or the way its business is being or
has been conducted.
Page 7 of 7
16.
EG 8.5(1)(a) specifies that the FSA will consider exercising its owninitiative power
where a firm’s financial resources appear inadequate, for example, where it has failed
to maintain PII.
Use of the owninitiative power in urgent cases
17.
EG 8.6 states that the FSA may impose a variation of permission so that it takes effect
immediately or on a specified date if it reasonably considers it necessary for the
variation to take effect immediately (or on the date specified), having regard to the
ground on which it is exercising its owninitiative power.
18.
EG 8.7 provides the circumstances in which the FSA will consider exercising its own
initiative power as a matter of urgency, including where the information available to it
indicates serious concerns about the firm or its business that need to be addressed
immediately (EG 8.7(1)).
19.
EG 8.8 provides a list of situations which will give rise to such serious concerns.
Specifically, EG 8.8(1) includes where information indicates significant loss, risk of
loss or other adverse effects for consumers, where action is necessary to protect their
interests.
20.
EG 8.9 sets out the factors which will determine whether the urgent exercise of the
FSA’s owninitiative power is an appropriate response to serious concerns, including
the extent of any risk of consumer loss or other adverse effect on consumers (EG
8.9(1)).