Supervisory Notice
_______________________________________________________________
FIRST SUPERVISORY NOTICE
_______________________________________________________________
To:
Binance Markets Limited
Reference Number:
688849
Address:
The Gridiron Building
1 Pancras Square
King’s Cross
London
N1C 4AG
Date:
25 June 2021
1
ACTION
1.1
For the reasons given in this First Supervisory Notice, and pursuant to section
55L(3)(a) of the Financial Services and Markets Act 2000 (“the Act”), the Financial
Conduct Authority (“the FCA”) has decided to impose the following requirements
(“the Requirements”) on Binance Markets Limited (“the Firm”).
1)
The Firm must not, without the prior written consent of the FCA, carry out any
regulated activities for which it has Part 4A permission with immediate effect.
2)
By close of business on 30 June 2021, the Firm must display, in a prominent
place on the website www.binance.com and any other communication channels
or social media, including but not limited to, the Binance mobile and desktop
applications a notice stating:
“The Financial Conduct Authority in the United Kingdom has asked us to
issue the following statement. In the interests of clarity we are happy to do
so.
Binance.com is a platform providing various products and services to global
customers. Some of these products and services are regulated outside the
UK, while others are not. Binance Markets Limited is a UK based company
which has not yet carried out any business.
BINANCE MARKETS LIMITED IS NOT PERMITTED TO UNDERTAKE ANY
REGULATED ACTIVITY IN THE UK.
Due to the imposition of requirements by the FCA, Binance Markets Limited
is not currently permitted to undertake any regulated activities without the
prior written consent of the FCA. (No other entity in the Binance Group holds
any form of UK authorisation, registration or license to conduct regulated
activity in the UK). Such authorisation, registration or license is not required
for unregulated activities.
As a result, the imposition of the FCA’s requirements does not change any
arrangements with users that use the products or services provided through
www.binance.com. Accordingly, as requested by the FCA, Binance Markets
Limited will obtain the FCA’s prior consent before launching business and
carrying on any regulated activities”.
3)
The Firm will remove, or where this is not practicable, give instructions for the
removal of any advertising and financial promotions it currently has live, in
whatever form they take by close of business on 30 June 2021.
4)
The Firm must provide written confirmation of the steps it has taken to meet
the requirements set out at 1.1(2) and 1.1(3) to the FCA by close of business
on 30 June 2021.
5)
The Firm must secure and preserve all records and/or information (physical or
electronic) relating to all UK consumers from its systems in their original form,
or in a copy proved to be identical to the material source. These must be
retained in a form and at a location within the United Kingdom, to be notified
to the FCA in writing by 2 July 2021, such that they can be provided to the
FCA, or to a person named by the FCA, promptly on its request.
1.2
These Requirements will remain in force unless and until varied or cancelled by the
FCA (either on the application of the Firm or of the FCA’s own volition).
2
REASONS FOR ACTION
Summary
2.1
The FCA has concluded, on the basis of the facts and matters described below that,
in respect of the Firm, it is necessary to exercise its power under section 55L(3)(a)
of the Act to impose the Requirements on the Firm because:
i.
it has failed, during a period of at least 12 months, to carry on a
regulated activity to which the Part 4A permission relates;
ii.
it is failing, or is likely to fail, to satisfy the Effective Supervision
Threshold Condition; and
iii.
it is desirable in order to advance the FCA’s operational objective of
securing an appropriate degree of protection for consumers.
2.2
The Firm, which was previously known as EddieUK, is an authorised investment
firm, authorised since 13 April 2018. The Firm has been part of the Binance Group
3
(“the Group”) since its acquisition by Binance Capital Management Ltd in May 2020.
The Firm submitted its Change in Control notification to the FCA on 27 April 2020;
the FCA approved the Change in Control on 29 May 2020. The permissions held by
EddieUK were retained by the Firm following the Change in Control.
2.3
The Group is the world’s largest global crypto exchange: 24 hour spot trading
volumes for binance.com are estimated to be between $11 billion and $38 billion
during June 2021, with 316 cryptoassets supported across 1138 trading pairs. For
the same period (under the Binance Futures brand) 24 hour derivatives volumes
are estimated as being between $43 billion and $129 billion, with open interest
between $5.3 billion and $6.7 billion.
2.4
In May 2021, the Firm confirmed to the FCA that it had not engaged in any regulated
activities since the Change in Control application was approved (i.e since 29 May
2020). It further stated that it intended to offer regulated activities to its customers
once it had decided upon its business plan and strategy. As at 23 June 2021, the
Authority has not received from the Firm – or been notified by the Firm of – a final
(or final draft) business plan and strategy. It therefore appears to the FCA that the
Firm is not currently carrying out regulated activities, and that it has not done so
for over 12 months.
2.5
During 2021, Supervision has issued two formal information requirements, one
under the Money Laundering, Terrorist Financing and Transfer of Funds
(Information on the Payer) Regulations 2017 (the “MLRs”) and one under the Act.
The FCA considers that Firm’s responses have been incomplete and have included
direct refusals to provide information. These include failures to:
i.
provide details about how the business and Group are organised;
ii.
explain what routes UK consumers could use to purchase products; and
iii.
identify the legal entity behind the website www.binance.com.
2.6
Based upon the Firm’s engagement to date, the FCA considers that the Firm is not
capable of being effectively supervised. This is of particular concern in the context
of the Firm’s membership of a global Group which offers complex and high-risk
financial products, which pose a significant risk to consumers.
2.7
The Authority considers that the Requirements should take immediate effect.
3
DEFINITIONS
3.1
The definitions below are used in this First Supervisory Notice:
“the Act” means the Financial Services and Markets Act 2000;
“the Authority” means the Financial Conduct Authority;
“the Firm” means Binance Markets Limited;
“the Group” means the Binance Group, of which Binance Markets Limited is part;
“Handbook” means the Authority’s online handbook of rules and guidance (as in force
from time to time);
“KID” means Key Investor Document;
“MLRs” means the Money Laundering, Terrorist Financing and Transfer of Funds
(Information on the Payer) Regulations 2017;
“Request 1” means the FCA’s request for information to the Firm under regulation
57(3) of the MLRs, made on 15 April 2021, to which the Firm responded on 6 May
2021;
“Request 2” means the FCA’s request for information to the Firm under s165 of the
Act, made on 17 May 2021, to which the Firm responded on 25 May 2021;
“Requirements” means the terms imposed on the Firm by this First Supervisory
Notice as outline in section 1 above; and
“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).
4
FACTS AND MATTERS
Background
4.1
The Firm is an authorised investment firm. It has been authorised since 13 April
2018. It has permission to conduct the following activities:
i.
Advising on investments (except on Pension Transfers and Pension Opt
Outs);
ii.
Arranging (bringing about) deals in investments;
iii.
Arranging safeguarding and administration of investments;
iv.
Dealing in investments as principal;
v.
Making arrangements with a view to transactions in investments; and
vi.
Agreeing to carry on a regulated activity.
4.2
The Firm has permission to hold client money but does not hold any client money.
4.3
The Firm legally changed its name to Binance Markets Limited on 10 June 2020,
and registered a trading name of Binance.UK with Companies House and the FCA.
The CEO and founder of Binance Holdings Ltd is Ultimate Beneficial Owner of all
Binance entities, including the Firm. The Firm currently does not have any approved
persons, although Authorisations has received applications to nominate individuals
to the SMF3 (Executive Director), SMF16 (Compliance Oversight Function) and
SMF17 (Money Laundering Reporting Officer) roles.
4.4
In June 2020 the Firm submitted an application under regulation 57 of the MLRs to
be registered as a cryptoasset business. The firm intended to launch a UK based
cryptoasset exchange with the trading name Binance.UK offering retail and business
customers the ability to exchange fiat to cryptoassets, cryptoassets to fiat and
cryptoassets for other cryptoassets.
4.5
Following discussions between the Authority and the Firm, the Firm signed an
undertaking that it would not offer any cryptoasset activities unless and until either
it was registered or the Authority informed the Firm that it could avail itself of the
transitional provisions in the MLRs.
4.6
In addition, since 30 June 2020, the Firm has been subject to a voluntary application
for the imposition of a requirement to the Authority. This includes that the Firm
must cease marketing any reference to EddieUK / Binance / BinanceUK being an
FCA regulated platform for buying and trading cryptocurrencies. This requirement
was applied for and put in place following concerns identified by Supervision that
the Firm may have been incorrectly advertising itself as being FCA authorised to
offer cryptoassets. The Firm subsequently rectified the relevant advertising.
4.7
In October 2020 the FCA banned the sale of crypto derivatives to UK retail
customers. During the time that the FCA was considering the Firm’s MLRs
registration application, the FCA became aware that products that appear to be
retail OTC derivatives, crypto derivatives, futures or perpetuals were being
marketed or sold via the website binance.com. There appeared to be no barrier to
a customer based in the UK purchasing these products via the binance.com website.
Failings and risks identified
Failing to carry out any regulated activity for a period of at least 12 months
4.8
In January 2021, the FCA reminded firms of their obligation to review regulatory
permissions regularly to ensure that they are up to date and to remove permissions
when not required. This statement also reminded firms of the need to notify the
FCA of material changes and to make necessary changes in a timely way. The FCA
has said that stated that incorrect or outdated permissions increase the risk of harm
to consumers.
4.9
The Firm’s Change in Control application was approved on 29 May 2020. The FCA
has concluded, based on information provided by the Firm, that since this
application, the Firm has failed to use any of its regulatory permissions:
i.
On 28 April 2021, the Firm was asked to “provide an explanation of the
regulated activities that have been conducted by the firm since the
Change in Control application was approved” (i.e. since 29 May 2020).
The Firm responded to this question on 6 May 2021; in its reply it stated:
“The firm has not engaged in any regulated activities since the change
in control application was approved (we understand the cryptoasset loan
referred to above did also not involve a regulated activity). We have not
provided any advice to any customers and are not selling any regulated
securities to customers at the present time.”
ii.
The Firm further stated that it intended to offer regulated activities to
its customers “[o]nce we have decided upon our overall business plan
and strategy in this area”.
iii.
As at 23 June 2021, the FCA has not received from the Firm – or been
notified by the Firm of – a final (or final draft) business plan and
strategy.
Effective Supervision
4.10 The FCA considers that the Firm is failing to satisfy the effective supervision
Threshold Condition. The FCA also considers that the Firm may have breached
section 165(2) of the Act (which is an offence for the purpose of section 177 of the
Act) and Principle 11 of the FCA’s Principles for Businesses.
4.11 Specifically, during 2021 the FCA sent two information requirements to the Firm.
The FCA considers that the Firm’s responses to some questions amounted to a
refusal to supply information, and that the Firm has failed to respond adequately
to the FCA’s information requirements. The Firm’s responses included:
i.
Refusal to answer questions about wider global business model:
Requests 1 and 2 both asked the Firm to provide trading names and
functions for all Group entities globally. The Firm failed to provide these
in response to either request.
In response to Request 1 the Firm stated: “[S]ome of the FCA’s
questions relate to the overall Binance group arrangements and certain
corporate information relating to the Binance group. We do not consider
these questions to be appropriate, or in any way relevant, to BML’s
application. Other than the Binance entities disclosed above, other
entities in the Binance group have no involvement whatsoever with BML
and the UK business.” In response to Request 2, the Firm failed to
identify the legal entity behind the website www.binance.com;
ii.
Refusal and/or inability to provide information about wider products
offered via Binance.com: in both requests the FCA asked the Firm to
identify all the legal entities with which a UK customer enters a
relationship when they use the Binance.com crypto exchange for
specified activities, for both retail and business customers.
In response to Request 1, the Firm replied that the website is operated
from outside the UK and does not fall within the territorial scope of the
MLRs, and stated “The legal entities in the Binance group that trade
through Binance.com are not involved with any activities that take place
by BML. We therefore do not consider this question to be appropriate,
or in any way relevant, to BML’s application.”
In response to Request 2, the Firm disclosed uncertainty about whether
certain products were offered to retail and/or business customers via
the binance.com website and about routes that customers within the UK
could use to purchase specific products. The Firm failed to identify the
legal entity (or entities) with which a UK customer would enter a
relationship
when
using
the
binance.com
website
for
certain
transactions.
iii.
Failure to answer questions about Binance Stock Tokens: In response to
Request 1, the Firm failed to provide clarification on the legal or
regulatory status of this product, the Firm’s assessment of its standing
as regards the UK regulatory perimeter the FCA’s request for the
prospectus for the product. The Firm has provided the FCA with a copy
of the KID for the product but this does not enable the FCA to answer
its outstanding questions. The FCA does not consider it appropriate for
an FCA-authorised Firm to respond to the Authority’s questions by
referring the FCA to a third party. The same question was asked in
Request 2, and the Firm responded with additional information on
Binance Stock Tokens.
5
CONCLUSION
5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in the
Annex.
Analysis of failings and risks
7
5.2
The FCA has concluded, in light of the matters set out above, that the Firm has
failed to carry on a regulated activity for a period of over 12 months, and further
that it is failing or likely to fail to satisfy the effective supervision Threshold
Conditions. In particular, the FCA considers that, as a result of the Firm’s
inadequate responses to Requests 1 and 2, that it is not likely to receive adequate
information from the Firm and those persons with whom the Firm has close links to
enable the FCA to determine whether the Firm is complying with the FCA’s
regulatory requirements and to identify and assess the Firm’s impact on the FCA’s
statutory objectives.
5.3
In reaching this view, the FCA has considered the Firm’s apparent failure to comply
with Principle 11 of the Principles for Businesses (COND 2.3.3G(1)) in respect of
Request 2. The FCA has also had regard to the complex structure and extensive
geographical spread of the Firm’s group and – having regard to the nature of the
Firm’s replies to Requests 1 and 2 – that this appears to be hindering the provision
of adequate and reliable information to the FCA (COND 2.3.3G(2)).
5.4
The FCA considers that it is necessary to exercise its own-initiative power under
section 55L(3)(a) of the Act by imposing the Requirements to stop the Firm
conducting regulated activities in order to protect the interests of consumers.
5.5
The Authority considers that the Requirements are a proportionate and appropriate
means to address the current and immediate risks, and are desirable in order to
advance the Authority’s operational objective of consumer protection.
Timing and duration of the Requirements
5.6
It is necessary to impose the Requirements on an urgent basis given the
seriousness of the risks and the need to protect consumers.
5.7
The Authority considers that it is necessary for these Requirements to remain in
force unless and until varied or cancelled by the FCA (either on the application of
the Firm or of the FCA’s own volition).
6
PROCEDURAL MATTERS
Decision-maker
6.1
The decision which gave rise to the obligation to give this First Supervisory Notice
was made by an Authority staff member under executive procedures.
6.2
This First Supervisory Notice is given under section 55Y(4) and in accordance with
section 55Y(5) of the Act.
6.3
The following statutory rights are important.
Representations
6.4
The Firm has the right to make written and oral representations to the Authority
(whether or not it refers this matter to the Tribunal). The deadline notifying the
Authority that the Firm wishes to make oral representations and for providing
written representations is 13 July 2021 or such later date as may be permitted by
the Authority. The address for doing so is:
Regulatory Transactions Committees Secretariat
Corporate Governance Division
The Financial Conduct Authority
12 Endeavour Square
London
E20 1JN
Email: RTCSecretariatMailbox@fca.org.uk
6.5
The Authority must be informed in writing of any intention to make oral
representations by 20 July 2021. If the Authority is not notified by this date, the
Firm will not, other than in exceptional circumstances, be able to make oral
representations.
The Tribunal
6.6
The Firm has the right to refer the matter to which this First Supervisory Notice
relates to the Tribunal. The Tax and Chancery Chamber is part of the Tribunal
which, amongst other things, hears references arising from decisions of the
Authority. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, the Firm has 28 days from the date on which this First
Supervisory Notice is given to it to refer the matter to the Tribunal.
6.7
A reference to the Tribunal can be made by way of a reference notice (Form FTC3)
signed by or on behalf of the Firm and filed with a copy of this First Supervisory
Notice. The Tribunal’s contact details are: The Upper Tribunal, Tax and Chancery
Chamber, 5th Floor, Rolls Building, Fetter Lane, London EC4A 1NL (telephone: 020
7612 9730; email: uttc@hmcts.gsi.gov.uk).
6.8
Further information on the Tribunal, including guidance and the relevant forms to
complete, can be found on the HM Courts and Tribunal Service website:
http://www.justice.gov.uk/forms/hmcts/tax-and-chancery-upper-tribunal
6.9
The Firm should note that a copy of the reference notice (Form FTC3) must also be
sent to the Authority at the same time as a reference is filed with the Tribunal. A
copy of the reference notice should be sent to the Financial Conduct Authority, 12
Endeavour Square, London, E20 1JN.
Confidentiality and publicity
6.10 The Firm 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 legal advice on its contents).
6.11 The Firm should note that section 391(5) of the Act requires the Authority, when
the First Supervisory Notice takes effect, to publish such information about the
matter to which the notice relates as it considers appropriate.
Authority contacts
6.12 Any questions regarding the procedures of the Regulatory Transactions Committee
should be directed to the Regulatory Transactions Committees Secretariat by email:
RTCSecretariat@fca.org.uk).
Annex
RELEVANT STATUTORY PROVISIONS
1.
The Authority’s operational objectives established in section 1B of the Act include
securing an appropriate degree of protection for consumers, and protecting and
enhancing the integrity of the UK financial system.
2.
Section 55L of the Act allows the Authority to impose a new requirement on an
authorised person if it appears to the Authority that the authorised person is failing,
or likely to fail to satisfy the Threshold Conditions (section 55L(2)(a)), or if it appears
to the Authority that the authorised person has failed, during a period of 12 months,
to carry on a regulated activity to which its Part 4A permission relates (section
55L(2)(b), or it is desirable to exercise the power in order to advance one or more
of the Authority’s operational objectives (section 55L(2)(c)).
3.
Section 55N of the Act allows a requirement to be imposed under section 55L of the
Act so as to require the person concerned to take specified action (section
55N(1)(a)), or to refrain from taking specified action (section 55N(1)(b)).
4.
Section 55Y(3) of the Act allows a requirement to take effect immediately (or on a
specified date) if the Authority, having regard to the ground on which it is exercising
its own-initiative power, reasonably considers that it is necessary for the requirement
to take effect immediately (or on that date).
5.
Section 165 of the Act provides that:
(1)The FCA may, by notice in writing given to an authorised person, require him—
(a)to provide specified information or information of a specified description; or
(b)to produce specified documents or documents of a specified description.
(2)The information or documents must be provided or produced—
(a)before the end of such reasonable period as may be specified; and
(b)at such place as may be specified.
(4)This section applies only to
(a)) information and documents reasonably required in connection with the
exercise by the FCA of functions conferred on it by or under this Act […]
(5) The FCA may require any information provided under this section to be
provided in such form as it may reasonably require.
(8)“Authorised person” includes a person who was at any time an authorised
person but who has ceased to be an authorised person.
6.
Section 177 of the Act provides that:
(1) If a person other than the investigator (“the defaulter”) fails to comply with a
requirement imposed on him under this Part the person imposing the requirement
may certify that fact in writing to the court.
(2)If the court is satisfied that the defaulter failed without reasonable excuse to
comply with the requirement, it may deal with the defaulter (and in the case of a
body corporate, any director or other officer) as if he were in contempt […].
(4)A person who, in purported compliance with a requirement imposed on him
under this Part—
(a)provides information which he knows to be false or misleading in a material
particular, or
(b)recklessly provides information which is false or misleading in a material
particular,
is guilty of an offence.
(5)A person guilty of an offence under subsection (3) or (4) is liable—
(a)on summary conviction, to imprisonment for a term not exceeding six months or
a fine not exceeding the statutory maximum, or both;
(b)on conviction on indictment, to imprisonment for a term not exceeding two
years or a fine, or both.
(7)In this section—
“court” means—
(a) the High Court;
[…]
“investigator appointed by the FCA” means an investigator appointed by the FCA
under section 167, 168 or 169;
“officer of the FCA” means an officer authorised by the FCA for the purposes of
section 165(3).
7.
Section 391 of the Act provides that:
“[…]
(5) When a supervisory notice takes effect, the Authority must publish such
information about the matter to which the notice relates as it considers
appropriate.
(6) But the Authority may not publish information under this section if in its
opinion, publication of the information would, be unfair to the person with
respect to whom the action was taken or proposed to be taken [or]
prejudicial to the interests of consumers or detrimental to the stability of the
UK financial system.
(7) Information is to be published under this section in such manner as
the Authority considers appropriate.”
RELEVANT REGULATORY PROVISIONS
The Principles
8.
Principle 11: A firm must deal with its regulators in an open and cooperative way,
and must disclose to the FCA appropriately anything relating to the firm of which
that regulator would reasonably expect notice.
Threshold Conditions: Effective Supervision
9.
COND 2.3.1 Effective Supervision:
(1) A must be capable of being effectively supervised by the FCA having regard to all
the circumstances including-
(a) the nature (including the complexity) of the regulated activities that A carries
on or seeks to carry on;
(b) the complexity of any products that A provides or will provide in carrying on
those activities;
(c) the way in which A’s business is organised;
(d) if A is a member of a group, whether membership of the group is likely to
prevent the FCA’s effective supervision of A;
(e)whether A is subject to consolidated supervision required under any of the
relevant directives;
(f) if A has close links with another person (“CL”)-
(i) the nature of the relationship between A and CL;
(ii) whether those links are or that relationship is likely to prevent the FCA’s
effective supervision of A; and
(iii) if CL is subject to the laws, regulations or administrative provisions of a
territory which is not the UK (“the foreign provisions”), whether those foreign
provisions, or any deficiency in their enforcement, would prevent the FCA’s
effective supervision of A.
(2) A has close links with CL if-
(a) CL is a parent undertaking of A;
(b) CL is a subsidiary undertaking of A;
(c) CL is a parent undertaking of a subsidiary undertaking of A;
(d) CL is a subsidiary undertaking of a parent undertaking of A;
(e) CL owns or controls 20% or more of the voting rights or capital of A; or
(f) A owns or controls 20% or more of the voting rights or capital of CL.
The Enforcement Guide
10.
The Authority's approach in relation to its own-initiative powers is set out in Chapter
8 of the Enforcement Guide (EG), certain provisions of which are summarised below.
11.
EG 8.1.1 reflects the provisions of section 55L of the Act by stating that the Authority
may use its own-initiative power to impose requirements on an authorised person
where, amongst other factors, the person is failing or is likely to fail to satisfy the
threshold conditions for which the Authority is responsible (EG 8.1.1(1)), or it is
desirable to exercise the power in order to advance one or more of its operational
objectives (EG 8.1.1(3)).
12.
EG 8.2.1 states that when the Authority considers how it should deal with a concern
about a firm, it will have regard to its statutory objectives and the range of regulatory
tools that are available to it. It will also have regard to the principle that a restriction
imposed on a firm should be proportionate to the objectives the Authority is seeking
to achieve (EG 8.2.1(2)).
13.
EG 8.2.3 states that in the course of its supervision and monitoring of a firm or as
part of an enforcement action, the Authority may make it clear that it expects the
firm to take certain steps to meet regulatory requirements. In the vast majority of
cases the Authority will seek to agree with a firm those steps the firm must take to
address the Authority’s concerns. However, where the Authority considers it
appropriate to do so, it will exercise its formal powers under section 55L of the Act
to impose a requirement to ensure such requirements are met. This may include
where, amongst other factors, the Authority has serious concerns about a firm, or
about the way its business is being or has been conducted (EG 8.2.3(1)), or is
concerned that the consequences of a firm not taking the desired steps may be
serious (EG 8.2.3(2)).
14.
EG 8.3.1 states that the Authority may impose a requirement so that it takes effect
immediately or on a specified date if it reasonably considers it necessary for the
requirement to take effect immediately (or on the date specified), having regard to
the ground on which it is exercising its own-initiative powers.
15.
EG 8.3.2 states that the Authority will consider exercising its own-initiative power as
a matter of urgency where: 1) the information available to it indicates serious
concerns about the firm or its business that need to be addressed immediately; and
2) circumstances indicate that it is appropriate to use statutory powers immediately
to require and/or prohibit certain actions by the firm in order to ensure the firm
addresses these concerns.
16.
EG 8.3.3 states that it is not possible to provide an exhaustive list of the situations
that will give rise to such serious concerns, but they are likely to include one or more
of four listed characteristics, these include: 1) information indicating significant loss,
risk of loss or other adverse effects for consumers, where action is necessary to
protect their interests; 2) information indicating that a firm’s conduct has put it at
risk of being used for the purposes of financial crime, or of being otherwise involved
in crime; 3) evidence that the firm has submitted to the Authority inaccurate or
misleading information so that the Authority becomes seriously concerned about the
firm’s ability to meet its regulatory obligations; 4) circumstances suggesting a
serious problem within a firm or with a firm’s controllers that calls into question the
firm’s ability to continue to meet the threshold conditions.
17.
EG 8.3.4 states that the Authority will consider the full circumstances of each case
when it decides whether an imposition of a requirement is appropriate and sets out
a non-exhaustive list of factors the Authority may consider, these include:
(3) The nature and extent of any false or inaccurate information provided by
the firm. Whether false or inaccurate information warrants the FCA’s urgent
exercise of its own-initiative powers will depend on matters such as:
(a) the impact of the information on the FCA’s view of the firm's compliance
with the regulatory requirements to which it is subject, the firm's suitability to
conduct regulated activities, or the likelihood that the firm's business may be
being used in connection with financial crime;
(b) whether the information appears to have been provided in an attempt
knowingly to mislead the FCA, rather than through inadvertence;
(c) whether the matters to which false or inaccurate information relates
indicate there is a risk to customer assets or to the other interests of
the firm's actual or potential customers.
(4) The seriousness of any suspected breach of the requirements of the
legislation or the rules and the steps that need to be taken to correct that
breach.
(6) The risk that the firm's business may be used or has been used to
facilitate financial crime, including money laundering. The information available
to the FCA, including information supplied by other law enforcement agencies,
may suggest the firm is being used for, or is itself involved in, financial crime.
Where this appears to be the case, and the firm appears to be failing to meet
the threshold
conditions or
has
put
its customers' interests
at
risk,
the FCA’s urgent use of its own-initiative powers may well be appropriate.
(7) The risk that the firm's conduct or business presents to the financial
system and to confidence in the financial system.
(8) The firm’s conduct. The FCA will take into account:
(a) whether the firm identified the issue (and if so whether this was by
chance or as a result of the firm’s normal controls and monitoring);
(b) whether the firm brought the issue promptly to the FCA’s attention;
(c) the firm’s past history, management ethos and compliance culture;
(d) steps that the firm has taken or is taking to address the issue.
(9) The impact that use of the FCA’s own-initiative powers will have on
the firm's business and on its customers. The FCA will take into account the
(sometimes significant) impact that a variation of permission may have on
a firm's business and on its customers' interests, including the effect of variation
on the firm's reputation and on market confidence. The FCA will need to be
satisfied that the impact of any use of the own-initiative power is likely to be
proportionate to the concerns being addressed, in the context of the overall aim
of achieving its statutory objectives.
18.
EG 8.3.4(9) includes the impact that use of the Authority’s own-initiative powers will
have on the firm's business and on its customers. The Authority will need to be
satisfied that the impact of any use of the own-initiative power is likely to be
proportionate to the concerns being addressed, in the context of the overall aim of
achieving its statutory objectives.