Final Notice
On , the Financial Conduct Authority issued a Final Notice to MC Motor Sales Ltd
FINAL NOTICE
ACTION
1. By an application dated 12 October 2022 (“the Application”), MC Motor Sales Ltd
(“MCMS”) applied under section 55A of the Act for Part 4A permission to carry on the
regulated activities of:
a. Limited permission credit broking;
b. Debt adjusting, limited to the relevant credit activity;
c. Debt counselling, limited to the relevant credit activity; and
d. Agreeing to carry on a regulated activity.
2. The Application was completed by the provision of further information on 20 January
2023.
3. For the reasons listed below, the Authority has refused the Application.
SUMMARY OF REASONS
4. By its Warning Notice the Authority gave notice that it proposed to refuse the
Application and that MCMS was entitled to make representations to the Authority about
that proposed action. No representations were received.
5. Following submission of the Application, MCMS failed to respond to any of the
Authority’s requests for information considered by the Authority to be necessary to
allow the Application to be determined until after the Authority issued a letter advising
MCMS that if the information was not provided, it would be recommended to the
Authority’s Executive Decision Maker that the Application be refused. This calls into
question whether the Authority would, if the Application were granted, receive
adequate information from MCMS, in a timely matter or at all to enable the Authority
to determine whether MCMS is complying with the requirements and standards under
the regulatory system.
6. In the course of considering the Application, the Authority became aware of information
regarding MCMS’ proposed candidate to hold the SMF 29 Limited Scope Function (“SMF
29”), Mr Chand Ali, who previously held the SMF 29 at Firm A. While Mr Ali held the
SMF 29 at Firm A, Firm A did not submit its CCR007 regulatory return until it had
received a letter from the Authority informing it that it had been referred to the
Authority’s Enforcement Division. Additionally, Mr Ali failed to promptly notify the
Authority that the firm had ceased trading. In view of Mr Ali being the sole person
performing senior management functions at MCMS, the Authority is concerned that
these previous failures to comply with requirements of the regulatory system raises
concerns regarding the adequacy of MCMS’ non-financial resources, and whether
MCMS will be managed in such a way as to ensure its affairs will be conducted in a
sound and prudent manner.
7. The Authority also has concerns regarding the adequacy of MCMS’ Complaints Policy
and Compliance Monitoring Plan submitted as part of its Application. In particular, the
Authority is concerned that these documents are not sufficiently detailed to
demonstrate that MCMS understands the regulatory obligations it would be subject to
if it were authorised. In view of Mr Ali’s conduct while performing the SMF 29 at Firm
A, the Authority is concerned that neither the Compliance Monitoring Plan nor the
Complaints Policy detail MCMS’ regulatory reporting obligations. As such the Authority
cannot be satisfied that MCMS has in place an adequate system of internal control, or
that MCMS is ready, willing and organised to comply with the requirements and
standards of the regulatory system.
8. The Authority, therefore, cannot ensure that MCMS will satisfy, and continue to satisfy:
a. threshold condition 2C (Effective Supervision);
b. threshold condition 2D (Appropriate Resources); and
c. threshold condition 2E (Suitability).
9. A Decision Notice was issued to MC Motor Sales Ltd confirming the Authority’s decision
to refuse the Application. No representations were received.
DEFINITIONS
10. The definitions below are used in this Final Notice.
“the Act” means the Financial Services and Markets Act 2000.
“Additional Information” means the additional information regarding the Application
first requested by the Authority on 14 November 2022 (as set out in paragraph 13
below).
“the Application” means the application referred to in paragraph 1 above.
“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct Authority.
“Compliance Monitoring Plan” means the document titled “Compliance Monitoring
Plan” provided by MCMS in support of the Application.
“Complaints Policy” means the document titled “Complaints Procedure” provided
by MCMS in support of the Application.
“DISP” means the Dispute Resolution section of the Authority’s handbook.
“the Executive Decision Maker” means the member of the Authority’s staff acting
under executive procedures as described in Chapter 4 of the Decision Procedure
and Penalties Manual in the Authority’s Handbook.
“Financial Information” means the financial information relating to MCMS first
requested by the Authority on 7 November 2022 (as set out in paragraph 12 below).
“MCMS” means MC Motor Sales Ltd.
“the Tribunal” means the Upper Tribunal (Tax & Chancery Chamber).
“SMF” means Senior Management Function.
“SMF 29” means the SMF 29 Limited Scope Function.
“SUP” means the Supervision section of the Authority’s handbook.
FACTS AND MATTERS
11. MCMS was incorporated in England on 2 October 2019. Mr Chand Ali is one of two
directors at MCMS. In its Application, MCMS named Mr Ali as its proposed candidate to
hold the SMF 29 at MCMS.
12. The Application, to which this Final Notice relates, was submitted on 12 October 2022.
Engagement with the Authority
13. Following an initial assessment of the Application, the Authority emailed MCMS on 7
November 2022 to request its financial information as this had not been submitted
with the Application. The email requested MCMS provide its financial information by
completing the appropriate template from a number of options provided (i.e. based on
its legal status and size). The relevant template for MCMS requested a range of
information relating to MCMS’ finances, including financial forecasts (“Financial
Information”). The Authority requested that the Financial Information was provided by
no later than 14 November 2022. MCMS failed to respond.
14. On 14 November 2022, the Authority emailed MCMS again to request the Financial
Information requested on 7 November 2022, as well as some additional information
relating to the Application (“Additional Information”). MCMS was asked to provide all
of the information requested by no later than 21 November 2022. MCMS failed to
respond.
15. On 28 November 2022, as no response had been received from MCMS, the Authority
telephoned MCMS but was unable to speak with the relevant individual at MCMS. On
the same day, the Authority emailed MCMS to request that its Financial Information
and Additional Information be provided by 2 December 2022. MCMS failed to respond.
16. On 22 December 2022, having still not received any response from MCMS to any of
the requests for information set out in paragraphs 12 to 14 above, the Authority sent
a letter to MCMS informing it that if the information was not provided to the Authority
within 10 working days, the Authority would recommend to the Executive Decision
Maker that the Application be refused. No response was received by the Authority
during this period.
17. On 4 January 2023, the Authority contacted MCMS by telephone and advised MCMS
that it had not yet received any response to its letter of 22 December 2022, or any of
its previous requests for information. MCMS advised the Authority that it had, in fact,
sent the information requested and that if the Authority had not received it, MCMS
would re-send it. However, the Authority did not receive any communication from
MCMS following this call.
18. On 11 January 2023, the Authority contacted MCMS again by telephone. During this
call, the Authority informed MCMS that it had still not received any response to its
previous requests for information. MCMS once again informed the Authority that it had
previously sent the information requested by the Authority. On this call, the Authority
stated it would email MCMS following the call and MCMS agreed to respond to the
Authority’s email.
19. On 11 January 2023, following the Authority’s call and email earlier that same day,
MCMS provided the Financial Information originally requested on 7 November 2022.
However, MCMS failed to provide the Additional Information initially requested on 14
November 2022. The Financial Information provided referred to MCMS receiving
income from unregulated financial services activities. The Authority was not aware that
MCMS carried out such activities and was concerned that the information provided may
not be correct.
20. Accordingly, on 11 January 2023 the Authority responded by email requesting that
MCMS review and resubmit its Financial Information and provide a response to the
Additional Information first requested on 14 November 2022. MCMS was given a
deadline of 16 January 2023 by which to respond.
21. On 16 January 2023, MCMS resubmitted its Financial Information and provided a
response in relation to the Additional Information requested. The resubmitted Financial
Information confirmed that it did not, in fact, carry out any unregulated financial
services activities. Further, the financial projections provided by MCMS were only
provided for 1 year post-authorisation, rather than the 3 years requested by the
Authority.
22. On 17 January 2023, the Authority emailed MCMS to request it resubmit its Financial
Information and provide 3 years of financial projections post-authorisation as required
by the relevant template provided to MCMS on 7 November 2022. A deadline of 20
January 2023 was provided.
23. On 20 January 2023, MCMS provided the required Financial Information in its entirety
some two months after the information had first been requested.
Concerns regarding Mr Ali’s previous conduct
24. The Authority’s assessment of the Application included a review of Mr Chand Ali’s
previous appointment as the SMF 29 of Firm A. Mr Ali was previously a director of Firm
A and held the SMF 29 at this firm until its authorisation was cancelled. Firm A had
limited permission for credit broking activity.
25. Under SUP 16.12.4R and 16.12.29CR, the Authority requires regulated firms with a
limited permission for credit broking to annually submit a CCR007 return providing
information, including numbers of complaints, within a particular period. Firm A failed
to submit this return by 15 January 2020 (i.e. its deadline for submitting the return)
and so on 3 February 2020, 6 March 2020 and 24 March 2020, the Authority emailed
the firm reminding it that the return was overdue for submission. The Authority also
telephoned Firm A and followed up the call with an email on 15 September 2020
requesting that the firm submit the return. On 5 November 2020, as the return had
still not been submitted, the Authority sent a letter to Firm A to inform the firm that it
had been referred to the Authority’s Enforcement Division and provided a final
opportunity to submit the return otherwise the Authority would seek to cancel its
permissions. Following this letter, Firm A did submit the return.
26. In addition to Firm A being referred to the Authority’s Enforcement Division due to non-
compliance with its reporting obligations, it also failed to inform the Authority that it
had ceased trading on 31 March 2022. The Authority was not informed of this until 7
October 2022 when the firm applied to cancel its permissions.
27. As the holder of the SMF 29 at Firm A, Mr Ali had a duty to take reasonable steps to
ensure that the business of the firm for which he was responsible was controlled
effectively and that it complied with the relevant requirements and standards of the
regulatory system.
28. These previous failures by Firm A to provide information to the Authority whilst Mr Ali
held the SMF 29, along with MCMS’ failure to provide information in a timely manner
to the Authority, raises concerns regarding whether MCMS would, were it to be
authorised, comply with requirements imposed by, and requests made by, the
Authority and whether its business would be managed in a sound and prudent manner.
29. The Authority does not carry out day-to-day supervision of small firms such as Firm A
and MCMS. Therefore, it is vital that firms update the Authority with any material
changes and submit reports and returns when requested as if firms do not do so, the
Authority’s ability to ensure that the interests of consumers are protected is severely
prejudiced.
Concerns regarding MCMS’ policies
30. In support of the Application, MCMS provided its Complaints Policy and Compliance
31. The Authority has the following concerns regarding the adequacy of these policies:
a. The Complaints Policy does not explain or provide detail for how MCMS will comply
with rules in DISP 1.5 in relation to the sending of a ‘summary resolution
communication’ to complainants. For example, it does not include the process for
issuing this communication, or provide an example of the communication it would
send. Therefore, the Policy does not demonstrate that a ‘summary resolution
communication’ would inform complainants that they may have the option to
refer a complaint to the Financial Ombudsman Service if they are dissatisfied with
MCMS’ resolution, which is a requirement under DISP 1.5.4R(2);
b. The Compliance Monitoring Plan and the Complaints Policy omit MCMS’ regulatory
reporting requirements. For example, there is no reference to the CCR007 return,
which is required to be submitted by limited permission firms on an annual basis
under SUP 16.12.4R and SUP 16.12.29CR. The CCR007 return requests key data
from a firm including, but not limited to, the number of complaints received in
the relevant period. The omission of MCMS’ regulatory reporting requirements
from its policies is of particular concern given the SMF 29 applicant’s previous
conduct at Firm A, in which the firm was referred to the Authority’s Enforcement
Division due to its failure to submit the CCR007 return; and
c. The Compliance Monitoring Plan lacks information on how MCMS will monitor risks
that are most relevant to firms with limited permission for credit broking. For
example, it does not detail how the Firm will monitor risks in relation to the
recommendation of products that are unsuitable for customers or the treatment
of vulnerable customers.
IMPACT ON THE THRESHOLD CONDITIONS
The regulatory provisions relevant to this Final Notice are referred to in Annex A.
32. In light of the facts and matters set out above and for the reasons set out below, the
Authority cannot ensure that, if the Application was granted, MCMS would satisfy, and
continue to satisfy the following threshold conditions.
Threshold condition 2C: Effective Supervision
33. A firm must be capable of being effectively supervised by the Authority having regard
to all the circumstances. Factors that the Authority will take into account in assessing
threshold condition 2C include whether it is likely the Authority will receive adequate
information from the firm, to enable it to be determine whether the firm is complying
with the requirements and standards of the regulatory system (COND 2.3.3G(1)).
34. The Authority is not satisfied that MCMS is capable of being effectively supervised by
the Authority. In particular:
a. On a number of occasions, MCMS failed to respond to the Authority’s requests for
information that were necessary for the Authority to assess its Application by the
deadlines given and only began engaging with the Authority after a letter had
been sent to MCMS, advising that if the information was not provided the
Application would be recommended for refusal. MCMS’ failure to respond to the
Authority’s repeated requests for information calls into question whether MCMS
is ready, willing and organised to comply with the requirements and standards
under the regulatory system. It also raises concerns that MCMS would not deal
with the Authority in an open and cooperative manner if it were authorised.
b. The conduct of Mr Ali while performing the SMF 29 at Firm A raises further
concerns regarding whether the Authority is likely to receive adequate
information from MCMS. Firm A was referred to the Authority’s Enforcement
Division due to a failure to submit its regulatory return, CCR007, (despite several
communications sent by the Authority informing it that it was required to do so).
Additionally, Mr Ali failed to promptly notify the Authority that Firm A had ceased
trading. The Authority’s concerns regarding Mr Ali’s conduct in failing to ensure
Firm A submitted its CCR007 return are compounded by the fact that neither
MCMS’ Compliance Monitoring Plan or Complaints Policy detailed its regulatory
reporting obligations, which raises further concerns that if MCMS were to be
authorised, the Authority would not be kept adequately informed of important
information in relation to MCMS’ regulated activities.
35. The Authority, therefore, considers it cannot be satisfied that it would receive adequate
information from MCMS, in a timely matter or at all, to enable it to determine whether
MCMS is complying with the requirements and standards under the regulatory system
for which the Authority is responsible. Accordingly, the Authority cannot ensure that
MCMS will satisfy, and continue to satisfy, threshold condition 2C.
Threshold condition 2D: Appropriate Resources
36. A firm’s resources must be appropriate in relation to the regulated activities it carries
on or seeks to carry on. Non-financial resources of a person includes any systems,
controls, plans or policies that the person maintains, and the human resources that
the person has available (Paragraph 1A of Schedule 6 of the Act). Paragraph 2D(4) of
Schedule 6 of the Act sets out that the matters which are relevant in determining
whether a firm has appropriate non-financial resources include the skills and
experience of those who manage a firm’s affairs, and whether a firm’s non-financial
resources are sufficient to enable a firm to comply with requirements imposed or likely
to be imposed on a firm by the Authority in the exercise of its functions.
37. The Authority is not satisfied that MCMS’ non-financial resources will be appropriate in
relation to the regulated activities it seeks to carry on. In particular:
a. The Complaints Policy and Compliance Monitoring Plan, which were provided in
support of the Application, are not sufficiently detailed to demonstrate that MCMS
understands the regulatory obligations MCMS would be subject to if it were
authorised, or that it has the required systems and controls in place to comply
with them.
b. MCMS’s repeated failure to respond to several of the Authority’s information
requests within reasonable deadlines provided by the Authority raises concerns
that MCMS does not have adequate human resources to be able to comply with
future requests made, or requirements imposed, by the Authority.
c. The previous conduct of MCMS’s proposed SMF 29 candidate, Mr Chand Ali, while
performing the SMF 29 at Firm A as set out above raises concerns regarding the
skills and experience of those who manage MCMS’ affairs.
The Authority therefore considers it cannot ensure that MCMS will satisfy, and continue to
satisfy, threshold condition 2D.
Threshold condition 2E: Suitability
38. A firm must be a fit and proper person having regard to all the circumstances, including
whether it has complied and is complying with requests relating to the provision of
information to, or requirements imposed by, the Authority, and whether its business
is being, or is to be, managed in such a way as to ensure that its affairs will be
conducted in a sound and prudent manner. Examples of the kind of particular
considerations to which the FCA may have regard when assessing whether a firm will
satisfy, and continue to satisfy, this threshold condition include whether a firm is open
and cooperative in all its dealings with the Authority and whether it has an adequate
system of internal control to comply with the requirements and standards for which
the Authority is responsible under the regulatory system (COND 2.5.6G).
39. MCMS has not satisfied the Authority that it is a fit and proper person having regard
to all the circumstances.
40. The Authority cannot be satisfied that MCMS has in place an adequate system of
internal control due to the concerns with the adequacy of its Complaints Policy and
Compliance Monitoring Plan. Further, in light of the Authority’s concerns regarding the
previous conduct of MCMS’ SMF 29 applicant whilst performing the role of SMF 29 at
Firm A, the Authority cannot be satisfied that MCMS’ business will be managed in such
a way as to ensure its affairs will be conducted in a sound and prudent manner, or that
MCMS is ready, willing and organised to comply with the requirements and standards
of the regulatory system. The Authority therefore considers it cannot ensure MCMS
will satisfy, and continue to satisfy, threshold condition 2E.
41. On the basis of the facts and matters described above, the Authority cannot ensure
that MCMS will satisfy, and continue to satisfy, the threshold conditions in relation to
all of the regulated activities for which MCMS would have permission if the Application
was granted and accordingly the Authority has decided to refuse the Application.
PROCEDURAL MATTERS
42. This Final Notice is given under section 390 of the Act.
43. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information
about the matter to which this Notice relates. Under those provisions, the Authority
must publish such information about the matter to which this Notice relates as the
Authority considers appropriate. The information may be published in such manner as
the Authority considers appropriate. However, the Authority may not publish
information if such publication would, in the opinion of the Authority, be unfair to you
or prejudicial to the interests of consumers or detrimental to the stability of the UK
financial system.
44. The Authority intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.
Jason Sullivan
Executive Decision Maker
ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS FINAL NOTICE
1. Section 55A(1) of the Act provides for an application for permission to carry on one
or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.
2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing
or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the person
has or will have permission, the threshold conditions for which that regulator is
responsible.
3. The threshold conditions that relate to the current application are set out in Part 2
of Schedule 6 to the Act. In brief, the threshold conditions relate to:
(1)
Threshold condition 2C: Effective supervision
(2)
Threshold condition 2D: Appropriate resources
(3)
Threshold condition 2E: Suitability
Relevant provisions of the Authority’s Handbook
Threshold Conditions - COND
4. In exercising its powers in relation to the granting of a Part 4A permission, the
Authority has regard to guidance published in the Authority’s Handbook, including
the part entitled ‘Threshold Conditions’ (“COND”). Provisions relevant to the
consideration of the current application include those set out below.
General guidance
5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the
Authority will consider whether a firm is ready, willing and organised to comply on
a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.
6. COND 1.3.3AG provides that, in determining the weight to be given to any relevant
matter, the Authority will consider its significance in relation to the regulated
activities for which the firm has, or will have, permission, in the context of its ability
to supervise the firm adequately, having regard to the Authority’s statutory
objectives. In this context, a series of matters may be significant when taken
together, even though each of them in isolation might not give serious cause for
concern.
7. COND 1.3.3BG provides that, in determining whether the firm will satisfy, and
continue to satisfy, the FCA threshold conditions, the FCA will have regard to all
relevant matters, whether arising in the United Kingdom or elsewhere.
8. COND 1.3.3CG provides that, when assessing the FCA threshold conditions, the
FCA may have regard to any person appearing to be, or likely to be, in a relevant
relationship with the firm, in accordance with section 55R of the Act (Persons
connected with an applicant). For example, a firm's controllers, its directors or
partners, other persons with close links to the firm (see COND 2.3), and other
persons that exert influence on the firm which might pose a risk to the firm's
satisfaction of the FCA threshold conditions, would be in a relevant relationship with
the firm.
Threshold Condition 2C: Effective supervision
9. COND 2.3.3G states that, when the FCA is assessing threshold condition 2C, factors
which the FCA will take into consideration include, among other things, whether:
(1) it is likely that the FCA will receive adequate information from the firm, and
those persons with whom the firm has close links, to enable it to determine
whether the firm is complying with the requirements and standards under
the regulatory system for which the FCA is responsible and to identify and
assess the impact on its statutory objectives; this will include consideration
of whether the firm is ready, willing and organised to comply with Principle
11 (Relations with regulators and the rules in SUP on the provision of
information to the FCA;
(2) the structure and geographical spread of the firm, the group to which it
belongs and other persons with whom the firm has close links, might hinder
the provision of adequate and reliable flows of information to the FCA;
factors which may hinder these flows include the fact there may be branches
or connected companies in territories which supervise companies to a
different standard or territories with laws which restrict the free flow of
information, although the FCA will consider the totality of information
available from all sources; and
(3) in respect of a firm not carrying on, or seeking to carry on, a PRA-regulated
activity, it is possible to assess with confidence the overall financial position
of the group at any particular time; factors which may make this difficult
include lack of audited consolidated accounts for a group, if companies in
the same group as the firm have different financial years and accounting
dates and if they do not share common auditors.
Threshold condition 2D: Appropriate Resources
10. COND 2.4.2G(2) states that the FCA will interpret the term 'appropriate' as
meaning sufficient in terms of quantity, quality and availability, and 'resources' as
including all financial resources (though only in the case of firms not carrying on,
or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against liabilities,
holdings of or access to cash and other liquid assets, human resources and effective
means by which to manage risks.
11. COND 2.4.2G(3) states that high level systems and control requirements are in
SYSC. The FCA will consider whether the firm is ready, willing and organised to
comply with these and other applicable systems and controls requirements when
assessing if it has appropriate non-financial resources for the purpose of threshold
condition 2D.
12. COND2.4.2G(4) states that detailed financial resources requirements are in the
relevant section of the Prudential Standards part of the FCA Handbook, including
specific provisions for particular types of regulated activity. The FCA will consider
whether firms (other than firms carrying on, or seeking to carry on, PRA-regulated
activities) are ready, willing and organised to comply with these requirements when
assessing if they have appropriate financial resources for the purposes of threshold
condition 2D.
13. COND 2.4.4G states that, when assessing whether a firm has appropriate
resources, the Authority will have regard to matters including:
“Whether the firm has taken reasonable steps to identify and measure any risks of
regulatory concern that it may encounter in conducting its business (see COND
2.4.6 G) and has installed appropriate systems and controls and appointed
appropriate human resources to measure them prudently at all times. For
a Solvency II firm, the PRA Rulebook: Solvency II firms: Conditions Governing
Business and Solvency II Regulation (EU) 2015/35 of 10 October 2014 also contain
systems and control requirements on these matters and the FCA will take these
into account.”
Threshold condition 2E: Suitability
14. COND 2.5.1A states that A must be a fit and proper person having regard to all the
circumstances, including-
(a) A’s connection with any person;
(b) the nature (including the complexity) of any regulated activity that A carries
on or seeks to carry on;
(c) the need to ensure that A’s affairs are conducted in an appropriate manner,
having regard in particular to the interests of consumers and the integrity
of the UK financial system;
(d) whether A has complied and is complying with requirements imposed by the
FCA in the exercise of its functions, or requests made by the FCA, relating
to the provision of information to the FCA and, where A has so complied or
is so complying, the manner of that compliance;
(e) whether those who manage A’s affairs have adequate skills and experience
and act with probity;
(f) whether A’s business is being, or is to be, managed in such a way as to
ensure that its affairs will be conducted in a sound and prudent manner;
and
(g) the need to minimise the extent to which it is possible for the business
carried on by A, or to be carried on by A, to be used for a purpose connected
with financial crime.
15. COND 2.5.2G(2) states that the FCA will also take into consideration anything that
could influence a firm's continuing ability to satisfy threshold condition 2E.
Examples include the firm's position within a UK or international group, information
provided by overseas regulators about the firm, and the firm's plans to seek to vary
its Part 4A permission to carry on additional regulated activities once it has been
granted that permission.
16. COND 2.5.3G(1) states that the emphasis of threshold condition 2E is on the
suitability of the firm itself. The suitability of each person who performs a controlled
function will be assessed by the FCA and/or the PRA, as appropriate, under the
approved persons regime (see SUP 10 (Approved persons) and FIT). In certain
circumstances, however, the FCA may consider that the firm is not suitable because
of doubts over the individual or collective suitability of persons connected with the
firm.
17. COND 2.5.4G(2) states that examples of the kind of general considerations to which
the FCA may have regard when assessing whether a firm will satisfy, and continue
to satisfy, threshold condition 2E include, but are not limited to, whether the firm:
(a) conducts, or will conduct, its business with integrity and in compliance with
proper standards;
(b) has, or will have, a competent and prudent management; and
(c) can demonstrate that it conducts, or will conduct, its affairs with the
exercise of due skill, care and diligence.
18.COND 2.5.6G provides that examples of the kind of particular considerations to
which the FCA may have regard when assessing whether a firm will satisfy, and
continue to satisfy, this threshold condition include, but are not limited to, whether:
(a) the firm has been open and co-operative in all its dealings with the FCA and
any other regulatory body (see Principle 11 (Relations with regulators)) and
is ready, willing and organised to comply with the requirements and
standards under the regulatory system (such as the detailed requirements
of SYSC and, in relation to a firm not carrying on, or seeking to carry on,
a PRA-regulated activity only, the Prudential Standards part of the FCA
Handbook)in
addition
to other
legal,
regulatory
and
professional
obligations;
(b) the relevant requirements and standards will depend on the circumstances
of
each
case,
including
the regulated
activities which
the firm has permission, or is seeking permission, to carry on;
(c) the firm has made arrangements to put in place an adequate system of
internal control to comply with the requirements and standards for which
the FCA is responsible under the regulatory system;
(d) the firm has been the subject of, or connected to the subject of, any existing
or
previous
investigation
or
enforcement
proceedings
by
the FCA, the Society of Lloyd's or by other regulatory authorities (including
the
FCA's
predecessors), clearing
houses or
exchanges, professional
bodies or government bodies or agencies; the FCA will, however, take both
the nature of the firm's involvement in, and the outcome of, any
investigation or enforcement proceedings into account in determining
whether it is a relevant matter
(e) the governing body of the firm is made up of individuals with an appropriate
range of skills and experience to understand, operate and manage the
firm's regulated activities;
(f) those persons who
perform controlled
functions under
certain
arrangements
entered
into
by
the firm or
its
contractors
(including appointed representatives or, where applicable, tied agents) act
with due skill, care and diligence in carrying out their controlled
function (see APER 4.2 (Statement of Principle 2) or COCON 2.1.2R or
managing the business for which they are responsible (see APER
4.7 (Statement of Principle 7) or COCON 2.2.2R, as applicable);
(g) the firm has taken reasonable care to ensure that robust information and
reporting systems have been developed, tested and properly installed.
ACTION
1. By an application dated 12 October 2022 (“the Application”), MC Motor Sales Ltd
(“MCMS”) applied under section 55A of the Act for Part 4A permission to carry on the
regulated activities of:
a. Limited permission credit broking;
b. Debt adjusting, limited to the relevant credit activity;
c. Debt counselling, limited to the relevant credit activity; and
d. Agreeing to carry on a regulated activity.
2. The Application was completed by the provision of further information on 20 January
2023.
3. For the reasons listed below, the Authority has refused the Application.
SUMMARY OF REASONS
4. By its Warning Notice the Authority gave notice that it proposed to refuse the
Application and that MCMS was entitled to make representations to the Authority about
that proposed action. No representations were received.
5. Following submission of the Application, MCMS failed to respond to any of the
Authority’s requests for information considered by the Authority to be necessary to
allow the Application to be determined until after the Authority issued a letter advising
MCMS that if the information was not provided, it would be recommended to the
Authority’s Executive Decision Maker that the Application be refused. This calls into
question whether the Authority would, if the Application were granted, receive
adequate information from MCMS, in a timely matter or at all to enable the Authority
to determine whether MCMS is complying with the requirements and standards under
the regulatory system.
6. In the course of considering the Application, the Authority became aware of information
regarding MCMS’ proposed candidate to hold the SMF 29 Limited Scope Function (“SMF
29”), Mr Chand Ali, who previously held the SMF 29 at Firm A. While Mr Ali held the
SMF 29 at Firm A, Firm A did not submit its CCR007 regulatory return until it had
received a letter from the Authority informing it that it had been referred to the
Authority’s Enforcement Division. Additionally, Mr Ali failed to promptly notify the
Authority that the firm had ceased trading. In view of Mr Ali being the sole person
performing senior management functions at MCMS, the Authority is concerned that
these previous failures to comply with requirements of the regulatory system raises
concerns regarding the adequacy of MCMS’ non-financial resources, and whether
MCMS will be managed in such a way as to ensure its affairs will be conducted in a
sound and prudent manner.
7. The Authority also has concerns regarding the adequacy of MCMS’ Complaints Policy
and Compliance Monitoring Plan submitted as part of its Application. In particular, the
Authority is concerned that these documents are not sufficiently detailed to
demonstrate that MCMS understands the regulatory obligations it would be subject to
if it were authorised. In view of Mr Ali’s conduct while performing the SMF 29 at Firm
A, the Authority is concerned that neither the Compliance Monitoring Plan nor the
Complaints Policy detail MCMS’ regulatory reporting obligations. As such the Authority
cannot be satisfied that MCMS has in place an adequate system of internal control, or
that MCMS is ready, willing and organised to comply with the requirements and
standards of the regulatory system.
8. The Authority, therefore, cannot ensure that MCMS will satisfy, and continue to satisfy:
a. threshold condition 2C (Effective Supervision);
b. threshold condition 2D (Appropriate Resources); and
c. threshold condition 2E (Suitability).
9. A Decision Notice was issued to MC Motor Sales Ltd confirming the Authority’s decision
to refuse the Application. No representations were received.
DEFINITIONS
10. The definitions below are used in this Final Notice.
“the Act” means the Financial Services and Markets Act 2000.
“Additional Information” means the additional information regarding the Application
first requested by the Authority on 14 November 2022 (as set out in paragraph 13
below).
“the Application” means the application referred to in paragraph 1 above.
“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct Authority.
“Compliance Monitoring Plan” means the document titled “Compliance Monitoring
Plan” provided by MCMS in support of the Application.
“Complaints Policy” means the document titled “Complaints Procedure” provided
by MCMS in support of the Application.
“DISP” means the Dispute Resolution section of the Authority’s handbook.
“the Executive Decision Maker” means the member of the Authority’s staff acting
under executive procedures as described in Chapter 4 of the Decision Procedure
and Penalties Manual in the Authority’s Handbook.
“Financial Information” means the financial information relating to MCMS first
requested by the Authority on 7 November 2022 (as set out in paragraph 12 below).
“MCMS” means MC Motor Sales Ltd.
“the Tribunal” means the Upper Tribunal (Tax & Chancery Chamber).
“SMF” means Senior Management Function.
“SMF 29” means the SMF 29 Limited Scope Function.
“SUP” means the Supervision section of the Authority’s handbook.
FACTS AND MATTERS
11. MCMS was incorporated in England on 2 October 2019. Mr Chand Ali is one of two
directors at MCMS. In its Application, MCMS named Mr Ali as its proposed candidate to
hold the SMF 29 at MCMS.
12. The Application, to which this Final Notice relates, was submitted on 12 October 2022.
Engagement with the Authority
13. Following an initial assessment of the Application, the Authority emailed MCMS on 7
November 2022 to request its financial information as this had not been submitted
with the Application. The email requested MCMS provide its financial information by
completing the appropriate template from a number of options provided (i.e. based on
its legal status and size). The relevant template for MCMS requested a range of
information relating to MCMS’ finances, including financial forecasts (“Financial
Information”). The Authority requested that the Financial Information was provided by
no later than 14 November 2022. MCMS failed to respond.
14. On 14 November 2022, the Authority emailed MCMS again to request the Financial
Information requested on 7 November 2022, as well as some additional information
relating to the Application (“Additional Information”). MCMS was asked to provide all
of the information requested by no later than 21 November 2022. MCMS failed to
respond.
15. On 28 November 2022, as no response had been received from MCMS, the Authority
telephoned MCMS but was unable to speak with the relevant individual at MCMS. On
the same day, the Authority emailed MCMS to request that its Financial Information
and Additional Information be provided by 2 December 2022. MCMS failed to respond.
16. On 22 December 2022, having still not received any response from MCMS to any of
the requests for information set out in paragraphs 12 to 14 above, the Authority sent
a letter to MCMS informing it that if the information was not provided to the Authority
within 10 working days, the Authority would recommend to the Executive Decision
Maker that the Application be refused. No response was received by the Authority
during this period.
17. On 4 January 2023, the Authority contacted MCMS by telephone and advised MCMS
that it had not yet received any response to its letter of 22 December 2022, or any of
its previous requests for information. MCMS advised the Authority that it had, in fact,
sent the information requested and that if the Authority had not received it, MCMS
would re-send it. However, the Authority did not receive any communication from
MCMS following this call.
18. On 11 January 2023, the Authority contacted MCMS again by telephone. During this
call, the Authority informed MCMS that it had still not received any response to its
previous requests for information. MCMS once again informed the Authority that it had
previously sent the information requested by the Authority. On this call, the Authority
stated it would email MCMS following the call and MCMS agreed to respond to the
Authority’s email.
19. On 11 January 2023, following the Authority’s call and email earlier that same day,
MCMS provided the Financial Information originally requested on 7 November 2022.
However, MCMS failed to provide the Additional Information initially requested on 14
November 2022. The Financial Information provided referred to MCMS receiving
income from unregulated financial services activities. The Authority was not aware that
MCMS carried out such activities and was concerned that the information provided may
not be correct.
20. Accordingly, on 11 January 2023 the Authority responded by email requesting that
MCMS review and resubmit its Financial Information and provide a response to the
Additional Information first requested on 14 November 2022. MCMS was given a
deadline of 16 January 2023 by which to respond.
21. On 16 January 2023, MCMS resubmitted its Financial Information and provided a
response in relation to the Additional Information requested. The resubmitted Financial
Information confirmed that it did not, in fact, carry out any unregulated financial
services activities. Further, the financial projections provided by MCMS were only
provided for 1 year post-authorisation, rather than the 3 years requested by the
Authority.
22. On 17 January 2023, the Authority emailed MCMS to request it resubmit its Financial
Information and provide 3 years of financial projections post-authorisation as required
by the relevant template provided to MCMS on 7 November 2022. A deadline of 20
January 2023 was provided.
23. On 20 January 2023, MCMS provided the required Financial Information in its entirety
some two months after the information had first been requested.
Concerns regarding Mr Ali’s previous conduct
24. The Authority’s assessment of the Application included a review of Mr Chand Ali’s
previous appointment as the SMF 29 of Firm A. Mr Ali was previously a director of Firm
A and held the SMF 29 at this firm until its authorisation was cancelled. Firm A had
limited permission for credit broking activity.
25. Under SUP 16.12.4R and 16.12.29CR, the Authority requires regulated firms with a
limited permission for credit broking to annually submit a CCR007 return providing
information, including numbers of complaints, within a particular period. Firm A failed
to submit this return by 15 January 2020 (i.e. its deadline for submitting the return)
and so on 3 February 2020, 6 March 2020 and 24 March 2020, the Authority emailed
the firm reminding it that the return was overdue for submission. The Authority also
telephoned Firm A and followed up the call with an email on 15 September 2020
requesting that the firm submit the return. On 5 November 2020, as the return had
still not been submitted, the Authority sent a letter to Firm A to inform the firm that it
had been referred to the Authority’s Enforcement Division and provided a final
opportunity to submit the return otherwise the Authority would seek to cancel its
permissions. Following this letter, Firm A did submit the return.
26. In addition to Firm A being referred to the Authority’s Enforcement Division due to non-
compliance with its reporting obligations, it also failed to inform the Authority that it
had ceased trading on 31 March 2022. The Authority was not informed of this until 7
October 2022 when the firm applied to cancel its permissions.
27. As the holder of the SMF 29 at Firm A, Mr Ali had a duty to take reasonable steps to
ensure that the business of the firm for which he was responsible was controlled
effectively and that it complied with the relevant requirements and standards of the
regulatory system.
28. These previous failures by Firm A to provide information to the Authority whilst Mr Ali
held the SMF 29, along with MCMS’ failure to provide information in a timely manner
to the Authority, raises concerns regarding whether MCMS would, were it to be
authorised, comply with requirements imposed by, and requests made by, the
Authority and whether its business would be managed in a sound and prudent manner.
29. The Authority does not carry out day-to-day supervision of small firms such as Firm A
and MCMS. Therefore, it is vital that firms update the Authority with any material
changes and submit reports and returns when requested as if firms do not do so, the
Authority’s ability to ensure that the interests of consumers are protected is severely
prejudiced.
Concerns regarding MCMS’ policies
30. In support of the Application, MCMS provided its Complaints Policy and Compliance
31. The Authority has the following concerns regarding the adequacy of these policies:
a. The Complaints Policy does not explain or provide detail for how MCMS will comply
with rules in DISP 1.5 in relation to the sending of a ‘summary resolution
communication’ to complainants. For example, it does not include the process for
issuing this communication, or provide an example of the communication it would
send. Therefore, the Policy does not demonstrate that a ‘summary resolution
communication’ would inform complainants that they may have the option to
refer a complaint to the Financial Ombudsman Service if they are dissatisfied with
MCMS’ resolution, which is a requirement under DISP 1.5.4R(2);
b. The Compliance Monitoring Plan and the Complaints Policy omit MCMS’ regulatory
reporting requirements. For example, there is no reference to the CCR007 return,
which is required to be submitted by limited permission firms on an annual basis
under SUP 16.12.4R and SUP 16.12.29CR. The CCR007 return requests key data
from a firm including, but not limited to, the number of complaints received in
the relevant period. The omission of MCMS’ regulatory reporting requirements
from its policies is of particular concern given the SMF 29 applicant’s previous
conduct at Firm A, in which the firm was referred to the Authority’s Enforcement
Division due to its failure to submit the CCR007 return; and
c. The Compliance Monitoring Plan lacks information on how MCMS will monitor risks
that are most relevant to firms with limited permission for credit broking. For
example, it does not detail how the Firm will monitor risks in relation to the
recommendation of products that are unsuitable for customers or the treatment
of vulnerable customers.
IMPACT ON THE THRESHOLD CONDITIONS
The regulatory provisions relevant to this Final Notice are referred to in Annex A.
32. In light of the facts and matters set out above and for the reasons set out below, the
Authority cannot ensure that, if the Application was granted, MCMS would satisfy, and
continue to satisfy the following threshold conditions.
Threshold condition 2C: Effective Supervision
33. A firm must be capable of being effectively supervised by the Authority having regard
to all the circumstances. Factors that the Authority will take into account in assessing
threshold condition 2C include whether it is likely the Authority will receive adequate
information from the firm, to enable it to be determine whether the firm is complying
with the requirements and standards of the regulatory system (COND 2.3.3G(1)).
34. The Authority is not satisfied that MCMS is capable of being effectively supervised by
the Authority. In particular:
a. On a number of occasions, MCMS failed to respond to the Authority’s requests for
information that were necessary for the Authority to assess its Application by the
deadlines given and only began engaging with the Authority after a letter had
been sent to MCMS, advising that if the information was not provided the
Application would be recommended for refusal. MCMS’ failure to respond to the
Authority’s repeated requests for information calls into question whether MCMS
is ready, willing and organised to comply with the requirements and standards
under the regulatory system. It also raises concerns that MCMS would not deal
with the Authority in an open and cooperative manner if it were authorised.
b. The conduct of Mr Ali while performing the SMF 29 at Firm A raises further
concerns regarding whether the Authority is likely to receive adequate
information from MCMS. Firm A was referred to the Authority’s Enforcement
Division due to a failure to submit its regulatory return, CCR007, (despite several
communications sent by the Authority informing it that it was required to do so).
Additionally, Mr Ali failed to promptly notify the Authority that Firm A had ceased
trading. The Authority’s concerns regarding Mr Ali’s conduct in failing to ensure
Firm A submitted its CCR007 return are compounded by the fact that neither
MCMS’ Compliance Monitoring Plan or Complaints Policy detailed its regulatory
reporting obligations, which raises further concerns that if MCMS were to be
authorised, the Authority would not be kept adequately informed of important
information in relation to MCMS’ regulated activities.
35. The Authority, therefore, considers it cannot be satisfied that it would receive adequate
information from MCMS, in a timely matter or at all, to enable it to determine whether
MCMS is complying with the requirements and standards under the regulatory system
for which the Authority is responsible. Accordingly, the Authority cannot ensure that
MCMS will satisfy, and continue to satisfy, threshold condition 2C.
Threshold condition 2D: Appropriate Resources
36. A firm’s resources must be appropriate in relation to the regulated activities it carries
on or seeks to carry on. Non-financial resources of a person includes any systems,
controls, plans or policies that the person maintains, and the human resources that
the person has available (Paragraph 1A of Schedule 6 of the Act). Paragraph 2D(4) of
Schedule 6 of the Act sets out that the matters which are relevant in determining
whether a firm has appropriate non-financial resources include the skills and
experience of those who manage a firm’s affairs, and whether a firm’s non-financial
resources are sufficient to enable a firm to comply with requirements imposed or likely
to be imposed on a firm by the Authority in the exercise of its functions.
37. The Authority is not satisfied that MCMS’ non-financial resources will be appropriate in
relation to the regulated activities it seeks to carry on. In particular:
a. The Complaints Policy and Compliance Monitoring Plan, which were provided in
support of the Application, are not sufficiently detailed to demonstrate that MCMS
understands the regulatory obligations MCMS would be subject to if it were
authorised, or that it has the required systems and controls in place to comply
with them.
b. MCMS’s repeated failure to respond to several of the Authority’s information
requests within reasonable deadlines provided by the Authority raises concerns
that MCMS does not have adequate human resources to be able to comply with
future requests made, or requirements imposed, by the Authority.
c. The previous conduct of MCMS’s proposed SMF 29 candidate, Mr Chand Ali, while
performing the SMF 29 at Firm A as set out above raises concerns regarding the
skills and experience of those who manage MCMS’ affairs.
The Authority therefore considers it cannot ensure that MCMS will satisfy, and continue to
satisfy, threshold condition 2D.
Threshold condition 2E: Suitability
38. A firm must be a fit and proper person having regard to all the circumstances, including
whether it has complied and is complying with requests relating to the provision of
information to, or requirements imposed by, the Authority, and whether its business
is being, or is to be, managed in such a way as to ensure that its affairs will be
conducted in a sound and prudent manner. Examples of the kind of particular
considerations to which the FCA may have regard when assessing whether a firm will
satisfy, and continue to satisfy, this threshold condition include whether a firm is open
and cooperative in all its dealings with the Authority and whether it has an adequate
system of internal control to comply with the requirements and standards for which
the Authority is responsible under the regulatory system (COND 2.5.6G).
39. MCMS has not satisfied the Authority that it is a fit and proper person having regard
to all the circumstances.
40. The Authority cannot be satisfied that MCMS has in place an adequate system of
internal control due to the concerns with the adequacy of its Complaints Policy and
Compliance Monitoring Plan. Further, in light of the Authority’s concerns regarding the
previous conduct of MCMS’ SMF 29 applicant whilst performing the role of SMF 29 at
Firm A, the Authority cannot be satisfied that MCMS’ business will be managed in such
a way as to ensure its affairs will be conducted in a sound and prudent manner, or that
MCMS is ready, willing and organised to comply with the requirements and standards
of the regulatory system. The Authority therefore considers it cannot ensure MCMS
will satisfy, and continue to satisfy, threshold condition 2E.
41. On the basis of the facts and matters described above, the Authority cannot ensure
that MCMS will satisfy, and continue to satisfy, the threshold conditions in relation to
all of the regulated activities for which MCMS would have permission if the Application
was granted and accordingly the Authority has decided to refuse the Application.
PROCEDURAL MATTERS
42. This Final Notice is given under section 390 of the Act.
43. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information
about the matter to which this Notice relates. Under those provisions, the Authority
must publish such information about the matter to which this Notice relates as the
Authority considers appropriate. The information may be published in such manner as
the Authority considers appropriate. However, the Authority may not publish
information if such publication would, in the opinion of the Authority, be unfair to you
or prejudicial to the interests of consumers or detrimental to the stability of the UK
financial system.
44. The Authority intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.
Jason Sullivan
Executive Decision Maker
ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS FINAL NOTICE
1. Section 55A(1) of the Act provides for an application for permission to carry on one
or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.
2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing
or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the person
has or will have permission, the threshold conditions for which that regulator is
responsible.
3. The threshold conditions that relate to the current application are set out in Part 2
of Schedule 6 to the Act. In brief, the threshold conditions relate to:
(1)
Threshold condition 2C: Effective supervision
(2)
Threshold condition 2D: Appropriate resources
(3)
Threshold condition 2E: Suitability
Relevant provisions of the Authority’s Handbook
Threshold Conditions - COND
4. In exercising its powers in relation to the granting of a Part 4A permission, the
Authority has regard to guidance published in the Authority’s Handbook, including
the part entitled ‘Threshold Conditions’ (“COND”). Provisions relevant to the
consideration of the current application include those set out below.
General guidance
5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the
Authority will consider whether a firm is ready, willing and organised to comply on
a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.
6. COND 1.3.3AG provides that, in determining the weight to be given to any relevant
matter, the Authority will consider its significance in relation to the regulated
activities for which the firm has, or will have, permission, in the context of its ability
to supervise the firm adequately, having regard to the Authority’s statutory
objectives. In this context, a series of matters may be significant when taken
together, even though each of them in isolation might not give serious cause for
concern.
7. COND 1.3.3BG provides that, in determining whether the firm will satisfy, and
continue to satisfy, the FCA threshold conditions, the FCA will have regard to all
relevant matters, whether arising in the United Kingdom or elsewhere.
8. COND 1.3.3CG provides that, when assessing the FCA threshold conditions, the
FCA may have regard to any person appearing to be, or likely to be, in a relevant
relationship with the firm, in accordance with section 55R of the Act (Persons
connected with an applicant). For example, a firm's controllers, its directors or
partners, other persons with close links to the firm (see COND 2.3), and other
persons that exert influence on the firm which might pose a risk to the firm's
satisfaction of the FCA threshold conditions, would be in a relevant relationship with
the firm.
Threshold Condition 2C: Effective supervision
9. COND 2.3.3G states that, when the FCA is assessing threshold condition 2C, factors
which the FCA will take into consideration include, among other things, whether:
(1) it is likely that the FCA will receive adequate information from the firm, and
those persons with whom the firm has close links, to enable it to determine
whether the firm is complying with the requirements and standards under
the regulatory system for which the FCA is responsible and to identify and
assess the impact on its statutory objectives; this will include consideration
of whether the firm is ready, willing and organised to comply with Principle
11 (Relations with regulators and the rules in SUP on the provision of
information to the FCA;
(2) the structure and geographical spread of the firm, the group to which it
belongs and other persons with whom the firm has close links, might hinder
the provision of adequate and reliable flows of information to the FCA;
factors which may hinder these flows include the fact there may be branches
or connected companies in territories which supervise companies to a
different standard or territories with laws which restrict the free flow of
information, although the FCA will consider the totality of information
available from all sources; and
(3) in respect of a firm not carrying on, or seeking to carry on, a PRA-regulated
activity, it is possible to assess with confidence the overall financial position
of the group at any particular time; factors which may make this difficult
include lack of audited consolidated accounts for a group, if companies in
the same group as the firm have different financial years and accounting
dates and if they do not share common auditors.
Threshold condition 2D: Appropriate Resources
10. COND 2.4.2G(2) states that the FCA will interpret the term 'appropriate' as
meaning sufficient in terms of quantity, quality and availability, and 'resources' as
including all financial resources (though only in the case of firms not carrying on,
or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against liabilities,
holdings of or access to cash and other liquid assets, human resources and effective
means by which to manage risks.
11. COND 2.4.2G(3) states that high level systems and control requirements are in
SYSC. The FCA will consider whether the firm is ready, willing and organised to
comply with these and other applicable systems and controls requirements when
assessing if it has appropriate non-financial resources for the purpose of threshold
condition 2D.
12. COND2.4.2G(4) states that detailed financial resources requirements are in the
relevant section of the Prudential Standards part of the FCA Handbook, including
specific provisions for particular types of regulated activity. The FCA will consider
whether firms (other than firms carrying on, or seeking to carry on, PRA-regulated
activities) are ready, willing and organised to comply with these requirements when
assessing if they have appropriate financial resources for the purposes of threshold
condition 2D.
13. COND 2.4.4G states that, when assessing whether a firm has appropriate
resources, the Authority will have regard to matters including:
“Whether the firm has taken reasonable steps to identify and measure any risks of
regulatory concern that it may encounter in conducting its business (see COND
2.4.6 G) and has installed appropriate systems and controls and appointed
appropriate human resources to measure them prudently at all times. For
a Solvency II firm, the PRA Rulebook: Solvency II firms: Conditions Governing
Business and Solvency II Regulation (EU) 2015/35 of 10 October 2014 also contain
systems and control requirements on these matters and the FCA will take these
into account.”
Threshold condition 2E: Suitability
14. COND 2.5.1A states that A must be a fit and proper person having regard to all the
circumstances, including-
(a) A’s connection with any person;
(b) the nature (including the complexity) of any regulated activity that A carries
on or seeks to carry on;
(c) the need to ensure that A’s affairs are conducted in an appropriate manner,
having regard in particular to the interests of consumers and the integrity
of the UK financial system;
(d) whether A has complied and is complying with requirements imposed by the
FCA in the exercise of its functions, or requests made by the FCA, relating
to the provision of information to the FCA and, where A has so complied or
is so complying, the manner of that compliance;
(e) whether those who manage A’s affairs have adequate skills and experience
and act with probity;
(f) whether A’s business is being, or is to be, managed in such a way as to
ensure that its affairs will be conducted in a sound and prudent manner;
and
(g) the need to minimise the extent to which it is possible for the business
carried on by A, or to be carried on by A, to be used for a purpose connected
with financial crime.
15. COND 2.5.2G(2) states that the FCA will also take into consideration anything that
could influence a firm's continuing ability to satisfy threshold condition 2E.
Examples include the firm's position within a UK or international group, information
provided by overseas regulators about the firm, and the firm's plans to seek to vary
its Part 4A permission to carry on additional regulated activities once it has been
granted that permission.
16. COND 2.5.3G(1) states that the emphasis of threshold condition 2E is on the
suitability of the firm itself. The suitability of each person who performs a controlled
function will be assessed by the FCA and/or the PRA, as appropriate, under the
approved persons regime (see SUP 10 (Approved persons) and FIT). In certain
circumstances, however, the FCA may consider that the firm is not suitable because
of doubts over the individual or collective suitability of persons connected with the
firm.
17. COND 2.5.4G(2) states that examples of the kind of general considerations to which
the FCA may have regard when assessing whether a firm will satisfy, and continue
to satisfy, threshold condition 2E include, but are not limited to, whether the firm:
(a) conducts, or will conduct, its business with integrity and in compliance with
proper standards;
(b) has, or will have, a competent and prudent management; and
(c) can demonstrate that it conducts, or will conduct, its affairs with the
exercise of due skill, care and diligence.
18.COND 2.5.6G provides that examples of the kind of particular considerations to
which the FCA may have regard when assessing whether a firm will satisfy, and
continue to satisfy, this threshold condition include, but are not limited to, whether:
(a) the firm has been open and co-operative in all its dealings with the FCA and
any other regulatory body (see Principle 11 (Relations with regulators)) and
is ready, willing and organised to comply with the requirements and
standards under the regulatory system (such as the detailed requirements
of SYSC and, in relation to a firm not carrying on, or seeking to carry on,
a PRA-regulated activity only, the Prudential Standards part of the FCA
Handbook)in
addition
to other
legal,
regulatory
and
professional
obligations;
(b) the relevant requirements and standards will depend on the circumstances
of
each
case,
including
the regulated
activities which
the firm has permission, or is seeking permission, to carry on;
(c) the firm has made arrangements to put in place an adequate system of
internal control to comply with the requirements and standards for which
the FCA is responsible under the regulatory system;
(d) the firm has been the subject of, or connected to the subject of, any existing
or
previous
investigation
or
enforcement
proceedings
by
the FCA, the Society of Lloyd's or by other regulatory authorities (including
the
FCA's
predecessors), clearing
houses or
exchanges, professional
bodies or government bodies or agencies; the FCA will, however, take both
the nature of the firm's involvement in, and the outcome of, any
investigation or enforcement proceedings into account in determining
whether it is a relevant matter
(e) the governing body of the firm is made up of individuals with an appropriate
range of skills and experience to understand, operate and manage the
firm's regulated activities;
(f) those persons who
perform controlled
functions under
certain
arrangements
entered
into
by
the firm or
its
contractors
(including appointed representatives or, where applicable, tied agents) act
with due skill, care and diligence in carrying out their controlled
function (see APER 4.2 (Statement of Principle 2) or COCON 2.1.2R or
managing the business for which they are responsible (see APER
4.7 (Statement of Principle 7) or COCON 2.2.2R, as applicable);
(g) the firm has taken reasonable care to ensure that robust information and
reporting systems have been developed, tested and properly installed.