FIRST SUPERVISORY NOTICE

Address:
141 Highbury Hill
London
N5 1TB

1
ACTION

1.1
For the reasons given in this First Supervisory Notice, and pursuant to sections
55J(2)(a)(ii) of the Act, the Authority has decided to vary with immediate effect
the Part 4A permission granted to Semantic by removing the following regulated
activities:

1)
Secondary credit broking; and

2)
Agreeing to carry on a regulated activity.

1.2
The effect of the Variation is that Semantic no longer has permission to conduct
any regulated activities.

2
REASONS FOR ACTION

2.1
The Authority has concluded, on the basis of the facts and matters described
below that, that it is appropriate to exercise its power under sections 55J(1)(a)
and (c) of the Act to vary Semantic’s permission because it is failing, or is likely
to fail, to satisfy the Suitability Threshold Condition and to advance the

1

Authority’s consumer protection objectives (section 1C of the Act).

2.2
The Authority has identified serious concerns relating to Semantic in that its
conduct appears to demonstrate that it is not fit and proper and poses a
significant risk of harm to consumers. Specifically:

1)
Semantic appears to be linked to firms that the Authority has taken
regulatory action against, either through the imposition of requirements or
variation of permissions to stop them conducting regulated activities,
including:

a)
Sentor to whom the Authority issued a First Supervisory Notice on 8
September 2021 for facilitating investments in companies that the
Authority has warned about for engaging in unauthorised business.
Information filed on Companies House records that the directors of
Semantic and Sentor have a linked history through a previous
company.

b)
Grosvenor to whom the Authority issued a First Supervisory Notice
on 30 November 2021 due to its apparent links to firms that the
Authority has warned about for undertaking unauthorised business,
and for providing misleading information about its controllers and
intended business at authorisation. Information filed on Companies
House records that Semantic and Grosvenor share two common
shareholders, and both firms used similar wording to describe their
business models to the Authority.

c)
Renaissance to whom the Authority issued a First Supervisory Notice
on 7 December 2021 due to its apparent connections to firms that
may not be fit and proper, and for failing to provide accurate
information about its controllers and intended business at
authorisation. Information filed on Companies House records that
Semantic and Renaissance share a common shareholder, and both
firms
mirrored
Grosvenor
in
providing
substantially
similar

explanations of their business activities to the Authority.

d)
Falcon and Thestral to whom the Authority issued First Supervisory
Notices on 28 January 2022 owing to their apparent association with
firms that have been the subject of regulatory action, and for failing
to deal with the Authority in an open and cooperative way.
Information filed on Companies House records that the same director
of Falcon and Thestral is a current shareholder in Semantic and has
further links to the directors of Semantic and Sentor through a
previous company. The Financial Services Register also records that
Semantic and Falcon use the same contact number.

Given Falcon’s apparent links to these firms, which also appear to share
further connections, there are serious concerns that Semantic may be
seeking to misuse its regulated status as a credit broker to take advantage
of consumers.

2)
Semantic is failing to deal with the Authority in an open and cooperative
way or comply with the Authority’s requirements:

a)
Semantic has potentially misled the Authority in response to an initial
information requirement issued under section 165 of the Act.
Explanations about its links to other firms and claims that its business

2

has been cloned by another company are not supported by other
information.

b)
The Authority is unclear on the identity of Semantic’s director.
Semantic has failed to respond to the Authority’s requests to provide
proof of identity for its director.

c)
Semantic has not submitted any regulatory reports on its credit
broking business since it became authorised. In particular, four
reports are overdue.

d)
Semantic has failed to respond to three information requirements
issued under section 165 of the Act requiring clarity on its previous
responses and further information regarding its links to other firms
and business activities. Semantic has also not answered or returned
any calls from the Authority.

2.3
The Authority considers that Semantic is failing, or is likely to fail, to satisfy the
Suitability Threshold Condition (paragraph 2E of Schedule 6 to the Act) because
of its apparent connections to firms that have been the subject of regulatory
actions (as summarised at 2.2.(1)), and potential breach of Principle 11
(Relations with regulators) of the Authority’s Principles for Businesses (as
summarised at 2.2(2)). The Authority considers that Variation of Semantic’s
permission with immediate effect is desirable to protect consumers.

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;

“DEPP” means the Decision Procedure and Penalties Manual in Authority’s online
handbook of rules and guidance (as in force from time to time);

“Fabcourt” means Fabcourt Developments Limited;

“Falcon” means Falcon Financial Solutions Ltd;

“Grosvenor” means Grosvenor Associates Ltd;

“Handbook” means the Authority’s online handbook of rules and guidance (as in
force from time to time);

“Part 4A permission” means permission to conduct regulated activities, granted
by the Authority under Part 4A of the Act;

“Renaissance” means Renaissance Advisory Ltd;

“Sentor” means Sentor Solutions Commercial Ltd;

“SMF” means senior management function;

“Texmoore” means Texmoore Limited;

“Thestral” means Thestral Financial Services Ltd;

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“Threshold Conditions” are the minimum requirements that firms need to meet in
order to be authorised and to continue carrying on regulated activities as set out
in Schedule 6 to the Act;

“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber); and

“Variation” means the variation of Semantic’s Part 4A permission set out in
paragraph 1.1. above.

4
FACTS AND MATTERS

4.1
Semantic was incorporated on 2 July 2019. It was authorised on 18 May 2020
as a limited permission credit broker with secondary broking permission.
Semantic is not permitted to hold client money.

4.2
Semantic has one approved person, Alim Inayat Hooda, who holds the SMF29
limited scope function. According to Companies House records he is the sole
director and significant controller of Semantic.

Failings and risks identified

Semantic’s links to other firms

4.3
Semantic and its director appear to have connections to firms that the Authority
has taken regulatory action against. These firms were authorised as limited
permission credit brokers, except one which was registered as a small payment
institution. The Authority has either imposed requirements or varied the
permissions of these firms to stop them conducting regulated activities.

Links to Sentor

4.4
The Authority issued a First Supervisory Notice to Sentor on 8 September 2021
for:

1)
Facilitating consumer investments in Texmoore and Fabcourt, companies
that the Authority has warned about for engaging in unauthorised business.
Sentor provided investment services beyond its scope of permission and
misled consumers about its regulated status.

2)
Failing to comply with requirements imposed by the Authority. Sentor
provided misleading information about its involvement with Texmoore and
Fabcourt and failed to respond to the Authority’s further communications.

4.5
The directors of Semantic and Sentor have a linked history through a previous
company. According to Companies House records, Sentor’s director was
associated with Firm A from 6 February 2020 as a director until 10 March 2020
and a significant controller until 23 March 2020. Semantic’s director became a
significant controller of Firm A on 12 February 2020, when Sentor’s director was
also recorded as still being involved with Firm A.

Links to Grosvenor

4.6
The Authority issued a First Supervisory Notice to Grosvenor on 30 November
2021 due to:

1)
Its apparent links to firms that may not be fit and proper and which the
Authority has warned about for undertaking unauthorised business,
including Texmoore and Fabcourt.

2)
Failing to engage with the Authority in an open and cooperative way.
Grosvenor provided misleading information about its controllers and
intended business at authorisation and failed to respond to the Authority’s
information requirements.

4.7
Information filed on Companies House records that Semantic and Grosvenor
share two common shareholders. On 15 January 2021, Semantic filed on
Companies House a confirmation statement. This lists Individual A and Individual
B as shareholders of Semantic as at that date. Grosvenor’s confirmation
statement filed with Companies House on 24 May 2021 also lists Individual A
and Individual B as shareholders as at that date.

4.8
On 8 June 2021, Semantic provided the Authority with an overview of how it
uses its credit broking permission. Semantic stated that it offers “ICT consulting
to sole traders and SME companies… We offer services to help them with their
ICT infrastructure across sites…All of this requires some investment in
technology and this it is often preferable for clients to spread their payments
over time and obtain credit”. Similar wording was previously used by Grosvenor
in an email to the Authority on 24 February 2021 to describe its business model.

Links to Renaissance

4.9
The Authority issued a First Supervisory Notice to Renaissance on 7 December
2021 due to:

1)
Its apparent connections to firms that may not be fit and proper and which
the Authority has taken regulatory action against, including Grosvenor.

2)
Failing to deal with the Authority in an open and cooperative manner.
Renaissance provided inaccurate information about its controllers and
intended business at authorisation and did not respond to the Authority’s
communications seeking clarity on its business activities.

4.10
Information filed on Companies House shows that Semantic and Renaissance
share a common shareholder. On 15 January 2021, Semantic filed on Companies
House a confirmation statement. This lists Individual C as a shareholder of
Semantic as at that date. Renaissance’s confirmation statement filed with
Companies House on 24 May 2021 also lists Individual C as a shareholder as at
that date.

4.11
On 15 March 2021, Renaissance provided the Authority with an explanation of
its business activities. The description offered was substantially similar to that
given by Semantic, as well as Grosvenor. A comparison of the information
provided by Semantic, Grosvenor and Renaissance shows that of the 179 words
used to describe Semantic’s business model, 154 of these words were identical
to that previously used by Grosvenor and Renaissance.

Links to Falcon and Thestral

4.12
The Authority First Supervisory Notices to Falcon and Thestral on 28 January
2022 due to:

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3)
Their apparent links to firms that may not be fit and proper and which
appear to share further connections, including Sentor, Grosvenor and
Renaissance.

4)
Failing to comply with regulatory requirements and deal with the Authority
in an open and cooperative manner.

4.13
Information filed on Companies House shows that the director Falcon and
Thestral is connected to Semantic. On 15 January 2021, Semantic filed on
Companies House a confirmation statement. This lists the director of Falcon and
Thestral as a shareholder of Semantic as at that date.

4.14
Semantic’s director also appears to be connected to the director of Falcon and
Thestral through a previous company. According to Companies House records,
the director of Falcon and Thestral was associated with Firm A as a director until
22 February 2020 and as a significant controller between 1 March 2020 and 19
June 2020. Semantic’s director became a significant controller of Firm A on 12
February 2020, when the director of Falcon and Thestral was also recorded as
still being involved with Firm A. Further, Companies House records indicate that
the directors of Semantic, Sentor and Falcon and Thestral were all significant
controllers of Firm A during the same overlapping period.

4.15
On 7 June 2021, the Authority wrote to Semantic under section 165 of the Act
to require information about its connections to Firm A, including with the
directors of Sentor and Falcon and Thestral. Semantic responded on 8 June 2021,
stating that its director became involved with Firm A in June 2020 after
Semantic’s authorisation application to the Authority. Semantic also denied
having any knowledge of the directors of Sentor and Falcon and Thestral or that
they had any involvement in Semantic. Semantic failed to mention that its
director became a significant controller of Firm A on 12 February 2020 before
Semantic became authorised on 18 May 2020, or that the director of Falcon and
Thestral has been a shareholder of Semantic since 15 January 2021.

4.16
The Financial Service Register entries for Semantic and Falcon also show that
both firms have provided the same contact number.

Semantic’s response to the Authority’s initial information requirement

Report from Semantic about being cloned

4.17
On 7 May 2021, Semantic informed the Authority that it had received an email
and a letter from two consumers who had apparently been offered payment
services for investments in bonds by individuals claiming to be from Semantic.
It also stated that the consumers had been corresponding through an email
address that does not belong to the firm. Semantic indicated it was concerned
that its business has been impersonated and cloned by another company.

4.18
On 7 June 2021, the Authority wrote to Semantic under section 165 of the Act
seeking further details about its report that its business has been cloned and to
obtain copies of any correspondence it had with the consumers about their
dealings with the cloned company. Semantic responded on 8 June 2021,
providing pdf versions of purported email exchanges between the consumers
and the cloned company.

4.19
The emails that Semantic provided contained some discrepancies in that
embedded links in the messages did not correspond with the displayed
information. In particular, the emails appeared to have been altered to change

6

their displayed email addresses before they were provided to the Authority. To
verify the origin of the emails, the Authority sought to obtain copies of the
original emails allegedly forwarded by the consumers to Semantic. However,
Semantic indicated it was unable to provide the emails in the requested format.

Identity of Semantic’s director

4.20
In the application form for individual approval, the Authority specifically asks
candidates to provide details of any directorships held in the last 10 years.
Semantic’s director disclosed only his directorship with Semantic in response to
this question in his individual approval application dated 21 April 2020. However,
according to Companies House records, he was previously a director of Firm B
until 8 February 2020.

4.21
On 7 June 2021, the Authority wrote to Semantic under section 165 of the Act
seeking details about Firm B and its director’s role with the company. Semantic
responded on 8 June 2021, claiming that it had never heard of Firm B and had
contacted Companies House to remove its director from the records as he had
been listed unknowingly. Semantic’s director is no longer listed as a current or
former director on Companies House records for Firm B.

4.22
Given the indication that the identity of Semantic’s director might have been
misused, the Authority has sought to verify that he is a genuine individual. In
the Authority’s emails on 24 February 2022, 3 March 2022 and 10 March 2022,
Semantic was asked to provide its availability for a video meeting, as well as
proof of identity for its director in the form of:

1)
A current photo identification (such as a passport or driving licence).

2)
A selfie taken after receipt of the emails or later with a hand-held written
note with the date on which the photo was taken.

4.23
The Authority remains unclear on the identity of Semantic’s director. Semantic
has failed to respond to the Authority’s requests for a video meeting and to
provide proof of identity for its director. The Authority has also attempted to
contact Semantic’s director on six occasions using two different contact numbers
but has been unable to reach him. The Authority has been unable to see or speak
to Semantic’s director directly to verify his identity.

Semantic’s business activities

4.24
Although Semantic was authorised as a limited permission credit broker with
secondary broking permission, the Authority is unclear about the actual nature
of Semantic’s current business activities.

4.25
On 7 June 2021, the Authority wrote to Semantic under section 165 of the Act
to require it to explain its business model and the amount of regulated income
it generated in the past 12 months. Semantic responded on 8 June 2021,
indicating that it used its credit broking permission in connection with ICT
consulting services and had generated £12,731 from regulated activities.
However, the Authority has found no evidence to support Semantic’s assertion
that it offers ICT consulting services.

4.26
Semantic is also obliged to submit two regulatory reports in September each
year relating to the period ending 31 July which require consumer credit data to
be included. The reports for the period ended 31 July 2020 and 31 July 2021 are
now overdue. As such, the Authority has no information on the number of

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transactions or revenue generated by Semantic from its credit related activities.

Further information requirements to Semantic

4.27
On 24 February 2022, the Authority sent Semantic an information requirement
under section 165 of the Act with a response deadline of 2 March 2022. This was
sent to Semantic’s postal address as recorded on the Financial Services Register.
The accompanying email also asked Semantic to provide its availability for a
video meeting on 1, 2 or 3 March 2022. No response was received.

4.28
On 3 March 2022, the Authority sent Semantic a second follow up information
requirement under section 165 of the Act. This stated that the Authority had not
received a response to the previous information requirement and was requiring
the same information again. The Authority also drew attention to the
consequences of failure to reply without reasonable excuse and set a response
deadline of 9 March 2022. This was sent to Semantic’s postal address. The
accompanying email also requested Semantic to confirm its availability for a
video meeting on 8, 9 or 10 March 2022. No response was received.

4.29
On 10 March 2022, the Authority sent a third follow up information requirement
under section 165 of the Act. This letter repeated that the Authority had not
received a response to the previous two information requirements and was
requiring the same information again. It reiterated the consequence of failure to
comply and set a response deadline of 16 March 2022. This was sent to
Semantic’s postal address. The accompanying email also requested Semantic to
confirm its availability for a video meeting on 15, 16 or 17 March 2022. No
response was received.

4.30
The Authority has attempted to call Semantic on six occasions on the contact
number listed on the Financial Services Register for the firm and the mobile
number given for its director, twice on 2 March 2022, twice on 3 March 2022 and
twice on 8 March 2022. On two occasions, the Authority received a response on
the contact number listed for Semantic that indicated it was a wrong number.
On the second occasion, the individual who answered the phone stated that the
number was currently in use by a school. The number listed for Semantic’s
director did not connect and registered as unavailable.

4.31
In addition, the Authority has asked Semantic to provide its availability to attend
a video meeting on three occasions. Semantic did not respond to these requests.

5
CONCLUSION

5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in
the Annex.

Analysis of failings and risks

Failure to comply with the Threshold Conditions

5.2
The Authority has serious concerns about Semantic’s compliance with the
Threshold Conditions. The Authority considers that Semantic is failing, or is likely
to fail, to satisfy the Suitability Threshold Condition because:

1)
Semantic appears to have connections to at least five firms that may not
be fit and proper:

a)
Information filed on Companies House records that the directors of

Semantic and Sentor have a linked history through a previous
company.

b)
Information filed on Companies House records that Semantic and
Grosvenor share two common shareholders, and both firms used
similar wording to describe their business models to the Authority.

c)
Information filed on Companies House records that Semantic and
Renaissance share a common shareholder, and both firms mirrored
Grosvenor in providing substantially similar explanations of their
business activities to the Authority.

d)
Information filed on Companies House records that the same director
of Falcon and Thestral is a current shareholder in Semantic and has
further links to the directors of Semantic and Sentor through a
previous company. The Financial Services Register also records that
Semantic and Falcon use the same contact number.

2)
Semantic is not engaging with the Authority in an open and cooperative
manner or complying with the Authority’s requirements in potential breach
of Principle 11 (Relations with regulators):

a)
It has provided potentially misleading information to the Authority
about its links to other firms and in support of claims that its business
has been cloned by another company.

b)
It has failed to respond to the Authority’s repeated requests to
provide proof of identity for its director.

c)
It has failed to submit four regulatory reports on its credit broking
business since it became authorised.

d)
It has failed to respond to three further information requirements
issued under section 165 of the Act seeking clarity on its previous
responses and further information regarding its links to other firms
and business activities.

5.3
As a result of these matters, it appears to the Authority that Semantic:

1)
Is connected to firms that have been the subject of regulatory action (sub-
paragraph (a) of paragraph 2E of Schedule 6 to the Act).

2)
Has not complied, and is not complying, with requirements imposed by the
Authority in the exercise of its functions relating to the provision of
information (sub-paragraph (d) of paragraph 2E of Schedule 6 to the Act).

The Authority’s operational objective of consumer protection

5.4
The Authority’s operational objective of consumer protection requires the
Authority to ensure an appropriate degree of protection for consumers (section
1C(1) of the Act). Semantic may be part of a network of firms that obtained
authorisation for credit broking but have been conducting, or intending to
conduct, investment activities beyond the scope of their permission which could
expose consumers to the risk of significant loss.

5.5
Semantic has apparent links to Sentor, Grosvenor, Renaissance, Falcon and
Thestral. In particular, Sentor has been the subject of regulatory action for

engaging in investment activities without relevant permissions and misleading
consumers about the extent of its regulated status.

5.6
In addition, Semantic appears to have misled the Authority about its links to the
firms and over claims that its business has been cloned by another company,
and it has failed to engage with the Authority to provide information to confirm
the identity of its director and to clarify its business activities. Semantic’s actions
to date cast serious doubts on its ability and willingness to observe regulatory
requirements and demonstrate that it poses a significant risk of harm to
consumers.

5.7
On the basis of the facts and matters set out, it appears to the Authority that it
is desirable to exercise the power under section 55J(1)(c)(i) of the Act in order
to advance the consumer protection objective.

Timing and duration of the Variation

5.8
The Authority considers it is necessary to impose the Variation to take immediate
effect given the seriousness of the risks and the need to protect consumers. The
Authority has identified the following concerns:

1)
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 (EG 8.3.3(3)).

2)
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 (EG 8.3.3(4)).

5.9
The Authority will consider the full circumstances of each case when it decides
whether an urgent variation is appropriate. The Authority has identified the
following relevant factors:

1)
The nature and extent of any false or inaccurate information provided by
the firm (EG 8.3.4(3)).

2)
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 (EG 8.3.4(4)).

3)
The impact that use of the Authority’s own-initiative powers will have on
the firm’s business and on its customers (EG 8.3.4(9)).

5.10
The Authority considers that it is necessary for the Variation to remain in place
indefinitely.

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 according
to DEPP 2.3.7G and DEPP 4.1.7G.

6.2
This First Supervisory Notice is given to Semantic 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
Semantic has the right to make written representations to the Authority
(whether or not it refers this matter to the Tribunal). Semantic may also request
to make oral representations but the Authority will only consider this in
exceptional circumstances according to DEPP 2.3.1AG. The deadline for providing
written representations and notifying the Authority that Semantic wishes to
make oral representations is 14 April 2022 or such later date as may be
permitted by the Authority. Any notification or representations should be sent to
David Watkins (david.watkins@fca.org.uk) and the SPC Decision Making
Secretariat (SPCDecisionMakingSecretariat@fca.org.uk).

The Tribunal

6.5
Semantic 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, Semantic has 28 days from the date on which this First
Supervisory Notice is given to it to refer the matter to the Tribunal.

6.6
A reference to the Tribunal can be made by way of a reference notice (Form
FTC3) signed by or on behalf of Semantic 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).

6.7
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

6.8
Semantic 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
David Watkins

(david.watkins@fca.org.uk)
and
the
SPC
Decision
Making
Secretariat

(SPCDecisionMakingSecretariat@fca.org.uk).

Confidentiality and publicity

6.9
Semantic 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).

6.10
Semantic 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

6.11
For more information concerning this matter generally, contact David Watkins
(david.watkins@fca.org.uk).

6.12
Any questions regarding the executive procedures decision-making process
should
be
directed
to
the
SPC
Decision
Making
Secretariat

(SPCDecisionMakingSecretariat@fca.org.uk).

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 (section 1C).

2.
Section 55J of the Act allows the Authority to vary the Part 4A permission of 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 55J(1)(a)), or it is
desirable to exercise the power in order to advance one or more of the Authority’s
operational objectives (section 55J(1)(c)(i)). This power is referred to as the
Authority’s own-initiative power.

3.
Section 55Y(3) of the Act allows a variation of permission imposed under the own-
initiative power to take effect immediately (or on a specified date) only 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 variation to take effect
immediately (or on that date).

4.
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)
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 was proposed to be taken),
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.”

5.
The Threshold conditions represent the minimum standards which a firm is required
to satisfy, and continue to satisfy, in order to be given and to retain a Part 4A
permission. They are set out in Part 1B of Schedule 6 to the Act.

6.
The Suitability Threshold Condition in paragraph 2E of Schedule 6 to the Act stated
that:

“A must be a fit and proper person having regard to all the circumstances, including-

(a)
A’s connection with any person.

(d)
Whether A 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 A has so
complied or is complying, the manner of that compliance.”

RELEVANT REGULATORY PROVISIONS

The Principles for Businesses

7.
The Principles for Business (PRIN) are a general statement of the fundamental
obligations of firms under the regulatory system. PRIN 1.1.2R provides that they
derive their authority from the Authority’s rule-making powers as set out in the Act
and reflect the statutory objectives. The Principles are set out at PRIN 2.1.1.

8.
Principle 11 (Relations with regulators) is of particular relevance. This provides that
a firm must deal with its regulators in an open and cooperative way and must disclose
to the Authority appropriately anything relating to the firm of which that regulator
would reasonably expect notice.

The Threshold Conditions

9.
The section of the Handbook entitled Threshold Conditions (COND) gives guidance
on the Threshold Conditions. COND 1.2.3G provides that the Authority may exercise
its own-initiative powers under either section 55J or section 55L of the Act if, among
other things, a firm is failing to satisfy any of the Threshold Conditions or is likely to
do so.

10.
COND 2.5.1AUK reflects the provisions of the Act (Paragraph 2E of Schedule 6) to
the effect that a firm must be a fit and proper person having regard to all the
circumstances. These include the firm’s connection with any person (COND
2.5.1AUK(1)(a) and whether the firm has complied and is complying with the
Authority’s requirements (COND 2.5.1AUK(1)(d).

11.
COND 2.5.4G(2) provides examples of the kind of general considerations the
Authority may have regard when assessing whether a firm will satisfy, and continue
to satisfy, the Suitability Threshold Condition. These include, but are not limited to,
whether the firm conducts its business with integrity and in compliance with proper
standards, has a competent and prudent management, and can demonstrate that it
conducts its affairs with the exercise of due skill, care and diligence.

The Enforcement Guide

12.
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.

13.
EG 8.1.1 reflects the provisions of section 55J of the Act by stating that the Authority
may use its own-initiative power to vary an authorised person’s Part 4A permission
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)).

14.
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)).

15.
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 55J of the Act
to vary a firm’s permission 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)).

16.
EG 8.3.1 states that the Authority 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 own-initiative powers.

17.
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.

18.
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; and 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.

19.
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: the nature
and extent of any false or inaccurate information provided by the firm (EG 8.3.4(3);
and 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 the breach (EG 8.3.4(4).

20.
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.