Checklist: Preparing an application to vary a Part 4A permission at the request of a firm (UK)

Introduction

This checklist will assist in-house counsel, private practice lawyers and risk compliance teams advising authorised persons (firms) when considering whether an application to vary a Part 4A permission under the Financial Services and Markets Act 2000 (as amended) (FSMA) is necessary. It outlines the steps involved in preparing to apply to the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) to vary a Part 4A permission.

This checklist addresses the following steps:

1. Pre-application procedural checks
2. Key considerations when submitting the application
3. Timing and outcome of the application

The checklist is presented as a list of requirements that you can check off as they are addressed. There are explanatory notes to assist with drafting and which correspond with each step in the checklist.

This checklist can be used in conjunction with the following How-to guides: Introduction to the UK financial services regulators, The general prohibition – beware the consequences of breach and Checklists: Preparing an application to the FCA or the PRA for a Part 4A permission and Preparing an application to cancel a Part 4A permission at the request of a firm.

Step 1 – Pre-application procedural checks

Step 2 – Key considerations when submitting the application

Step 3 – Timing and outcome of the application

Explanatory notes

Legal framework

A person granted a Part 4A permission is authorised by the FCA or the PRA to carry on one or more regulated activities in the UK.

Applications to obtain a Part 4A permission may be made by a person capable of authorisation, individuals, bodies corporate, partnerships and unincorporated associations (section 55A(1), FSMA) (referred to as ‘firm' in this checklist).

Permissions are given in respect of regulated activities which are defined at section 22 (supplemented by Schedule 2), FSMA; the specified activities and investments are set out in the Financial Services Markets Act 2000 (Regulated Activities) Order 2001 (as amended) (RAO).

If the firm has a Part 4A permission, its regulated activities are listed in its scope of permission notice and on the Financial Services Register.

Variation of permission

A Part 4A permission can be varied in one of two ways:

• at the request of a firm; or
• under the regulator’s own-initiative power.

At the request of a firm

A firm may apply to vary its Part 4A permission to:

• allow it to carry on further regulated activities;
• remove a regulated activity from its current permission;
• vary the description of its regulated activities (including by the removal or variation of any limitations).

Application to vary

An authorised firm can apply to the relevant regulator (ie, the FCA or the PRA) for a variation of its Part 4A permission (VoP). A firm cannot start the regulated activities until the application is approved; otherwise, it risks enforcement action being taken against it. Firms should also consider the requirements of the FCA’s Consumer Duty and how the firm will act to consistently deliver good outcomes to retail customers. Applicants for VoP are likely to be asked for a copy of their implementation plan and any supporting evidence. Variation can involve the regulator adding or removing regulated activities to which the permissions relate or varying the description of the regulated activities. The relevant FSMA provisions are:

• section 55H, for variations by the FCA at the request of the authorised person
• section 55I, for variations by the PRA at the request of the authorised person

Rules and guidance relating to the variation of a firm’s Part 4A permission are set out in SUP 6.

Regulator’s own initiative power

The FCA or the PRA may decide to vary a firm’s Part 4A permission or impose, vary or cancel a requirement on its own initiative (section 55J, FSMA). This checklist does not cover this regulatory power.

Step 1 – Pre-application procedural checks

1.1 Have you reviewed the scope of your current permission?

It is only possible for a firm to vary a permission when it has a permission in the first place.

Where a firm is considering adding a new product to its range or undertaking a new type of regulated activity, it will need to review the current scope of its Part 4A permission in the Financial Services Register.

Your firm’s scope of permission should accurately reflect the regulated activities that you currently carry out, and if it does not, you may need a VoP.

1.2 Have you checked whether statutory restrictions apply to the regulated activities you want to add?

Before preparing a VoP, you need to check whether there are any statutory restrictions that do not allow combinations of certain types of regulated activity, particularly for insurance business or undertakings for the collective investment in transferable securities (UCITS) managers. A firm should discuss its plans with its appropriate supervisory contact. For example, the PRA will not grant a VoP to allow a friendly society to carry on reinsurance business as this is not permitted under the Friendly Societies Act 1974 (see the FCA Handbook, SUP 6.3.5G).

1.3 Does your application involve making significant changes to your business?

SUP 6.3.20G provides examples of applications involving significant changes. These are cases where the relevant regulator may consider that granting an application for a VoP would cause a significant change in the firm’s business or risk profile. In these circumstances, you may be required to complete a more detailed application as directed by the regulator.

Examples of types of significant changes include, but are not limited to:

• carrying out new regulated activities such as accepting deposits;
• extending a firm’s insurance business to new classes of specified investment;
• removing a requirement preventing a firm holding or controlling client money.

If you wish to make a significant change to your business, or you are unsure whether the changes being proposed are significant, you should speak to your supervisory contact at the relevant regulator. They can assist you with the type of forms needed and advise whether any third-party reports will need to be provided.

1.4 Have you considered whether you need specialised legal or compliance advice?

Where your application is more complex and involves significant changes to your original business model, or even if you are unsure of the best approach to take, or how to approach the VoP with the regulator – it is not uncommon to consider obtaining specialist legal or compliance advice to assist and guide you through the application process (budget permitting).

1.5 Should you set up a meeting with the regulator?

A meeting provides an opportunity to discuss the application directly and consider whether any other additional forms or supporting documentation will be required (eg, whether you need to update your regulatory business plan or discuss the impact of a change in the senior management functions (SMF)). If the proposed variation is a substantial change to the firm’s business model (such as adding deposit-taking as a new activity) a pre-application meeting may be advantageous for both the firm and the regulators. A firm is advised to include as much detail as possible with its application (including any additional information arising from the pre-application meeting with the regulator) - see SUP 6.3.17G.  If a firm intends to permanently cease certain regulated activities it must promptly notify the regulator in accordance with its obligations under PRIN 11.

Where the firm must discharge obligations to its customers or policyholders before it can cease carrying on a particular regulated activity, discussions with the FCA or the PRA are particularly advised. This may be the case, for example, where the firm is an insurer or a bank wishing to cease carrying on activities for which it has a Part 4A permission. It will usually be necessary to wind down the business over a long-term period, which is normally more than six months (see SUP 6.2.8G and SUP 6 Annex 4). 

1.6 Which regulator should you submit your application to?

Part 4A permissions are granted either by the FCA or the PRA. When submitting the VoP application, it is important to determine which regulator the firm should apply to.

1.6.1 FCA-only regulated firms

Firms that are FCA-only regulated are known as solo-regulated firms. Such firms should submit VoP applications to the FCA, unless they are applying to add PRA-regulated activities; in which case, they must apply to the PRA. The PRA must consult and obtain the consent of the FCA before varying a Part 4A permission (section 55I(3), FSMA).

Examples of PRA-regulated activities include, among others:

• effecting contracts of insurance (article 10(1), RAO);
• carrying out contracts of insurance (article 10(2), RAO);
• accepting deposits (article 5, RAO); 
• managing the underwriting capacity of a Lloyd’s syndicate as a managing agent at Lloyd’s) (article 57, RAO). 

(See the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013, which specifies a list of PRA-regulated activities under the RAO).

The FCA must consult the PRA where a VoP application is from an authorised firm which is a member of a group that includes a PRA-authorised firm (section 55H, FSMA). 

1.6.2 Dual-regulated firms

Where the authorised firm is a dual-regulated firm (ie, the PRA acts as prudential regulator and the FCA acts as conduct regulator) that wishes to vary its regulated activities, an application for a VoP should be made to the PRA, in which case the PRA must consult with the FCA before consenting to the variation.  Detailed guidance on the variation of permission application is set out on the PRA webpage.

1.6.3 Applications to deal in investments as principal

An investment firm applying to deal in investments as principal should initially apply to the FCA for authorisation. The FCA will involve the PRA in the determination of the application, if it considers it necessary to do so. See PRA Variation of Permission FAQs.

1.6.4 Change of status

If a regulated firm wishes to change its legal status (eg, from a partnership to a limited company), it must apply to the regulator for authorisation for the new legal entity. The firm should contact its supervisory contact at the regulator to discuss how best to proceed.

Step 2 – Key considerations when submitting the application

You must complete and submit your VoP using the Connect system. This online system is owned and maintained by the FCA, but all applications will be directed to the appropriate regulator. Credit unions applications may be treated differently and you are advised to speak to your regulatory contact. 

Firms are advised to let the regulator know in advance if they are trying to operate within a tight deadline or by a particular date and clearly set out the reasons for making the variation when making the application. 

2.1 Have you provided the regulator with all the required information?

The full form and content of the information to be provided will vary depending on the scale of the variation in the context of the firm and the nature, risk profile and complexity of the variation.  Firms must continue to satisfy the threshold conditions in relation to all the regulated activities for which the firm has or will have Part 4A permission after the variation.  See SUP 6.3.28AG. 

It is important to give accurate and complete information and disclose all relevant information, to avoid criminal law implications. Any deviation from the truth may increase the time taken to assess your application and may call into question your suitability to be authorised.  See Checklist: Preparing an application to the FCA or the PRA for a Part 4A permission.

Examples of the type of questions and information required, as set out in SUP 6.3.25G, include:

When determining whether to grant an application, the relevant regulator may request further information, including reports from third parties such as the firm's auditors, and may require meetings with, and visits to, the firm. The relevant regulator may also require a statement from members of the firm's governing body confirming, to the best of their knowledge, the completeness and accuracy of the information supplied. 

2.2 Have you checked which fee applies to you?

No fee is charged where there is a reduction in the scope of permissions and no other additions. Otherwise, the fee will depend on the change of scope to your firm’s regulated business and whether, for example, you are now categorised in a different fee block (ie, categorised according to regulated activity undertaken). The VoP could also impact the annual periodic fee that you pay to the regulator. If in doubt, check this with your case officer.

The FCA acts as a collection agent for both the FCA and the PRA, and an application will only be deemed valid once both the VoP application form and the full application fee (if payable) have been received. The fee is non-refundable. Further details on the appropriate methods of payment are available on the FCA website.

FCA:

• FCA Handbook, FEES 3 Annex 1A, to find the charge for each category and Chapter 3 of the Fees Manual;
• FCA, Pricing categories for application fees;
• FCA Handbook, FEES 4 Annex 1A for information about the fee blocks.

PRA: 

• See Regulatory Transaction Fees in the PRA Rulebook.

Note, fees may be subject to change in the future. 

2.3 Are you ready to submit your application via Connect?

Firms must complete and submit their VoP to either regulator using the ‘Connect’ system. This is the online system administered by the FCA. Applications regarding credit unions may be treated differently and you are therefore advised to speak to your case officer regarding whether to submit via Connect or via paper application form. A credit union wishing to make an application must apply to the PRA using the form on its website. 

After a firm submits a VoP, it will be assigned a case officer or supervisor (from the relevant regulator) who will contact the firm within 10 business days. 

For dual-regulated firms (PRA-and FCA-authorised firms) and FCA-authorised firms that wish to add a PRA-regulated activity, the PRA will lead on the VoP application.

For FCA-authorised firms that wish to add, remove or vary their permission in respect of an FCA-regulated activity, the FCA will lead on the VoP application. 

If at any time during the authorisation process the applicant wishes to withdraw its application, it may do so in writing. The application fee is non-refundable.

Step 3 – Timing and outcome of the application

3.1 How long does it take for the regulator to decide?

All VoP applications must be determined by the relevant regulator within six months from the date of receiving the completed application. Where an application is incomplete (eg, documents missing), it must be determined within 12 months from initial receipt of the incomplete application. More complex applications generally take longer to process, although the FCA publishes standard times on its website setting out how long the application process is expected to take.  Where more information is required, the regulator may ask the firm to provide clarifications.

3.2 How do you know if the application has been successful?

If the application is granted, the firm will receive a written notice from the regulator. A notice given by the PRA will also state that the FCA has given its consent (section 55V(7), FSMA).

A firm seeking a VoP to add categories of regulated activities, if successful, should be mindful of the need to commence new activities within 12 months of the application being approved. It should also bear this in mind when project planning and submitting an application (SUP 6.3.6G).

3.3 What happens if the application is not successful?

The PRA and the FCA may refuse to vary a Part 4A permission, and in the case of a PRA-authorised firm, the FCA can refuse to give its consent to a variation or impose limitations on the nature of the variation, if in either case it is in the interests of statutory objectives to do so. See How-to guide: Introduction to the UK financial services regulators.

The regulator will forewarn you and let you know if it is going to:

• reject or refuse your application;
• impose other requirements;
• make other changes that you’ve not agreed to.

See DEPP 2.5.3G. It will inform you about the procedure to follow and how you can appeal (eg, appeal to the Upper Tribunal) against any decision taken. 

Additional resources

Variation of permission:

FCA webpage 
PRA webpage

Related Lexology Pro content

How-to guides:

Introduction to the UK financial services regulators 
The general prohibition – beware the consequences of breach 
The FCA’s Consumer Duty: putting the needs of customers first 

Checklists:

Preparing an application to the FCA or the PRA for a Part 4A permission 
Preparing an application to cancel a Part 4A permission at the request of a firm 
Embedding the Consumer Duty: practical considerations 

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