Financial Services and Markets Act 2000, section 56

Prohibition orders

Part V Performance of Regulated Activities

[F319 (1)The FCA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by—

(a)an authorised person,

(b)a person who is an exempt person in relation to that activity, or

(c)a person to whom, as a result of Part 20, the general prohibition does not apply in relation to that activity.

(1A)The PRA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by—

(a)a PRA-authorised person, or

(b)a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.F319]

(2) [F320 A “prohibition order” is an order F320] prohibiting the individual from performing a specified function, any function falling within a specified description or any function.

(3)A prohibition order may relate to—

(a)a specified regulated activity, any regulated activity falling within a specified description or all regulated activities;

[F321 (b)all persons falling within subsection (3A) or a particular paragraph of that subsection or all persons within a specified class of person falling within a particular paragraph of that subsection.F321]

[F322 (3A)A person falls within this subsection if the person is—

(a)an authorised person,

(b)an exempt person, or

(c)a person to whom, as a result of Part 20, the general prohibition does not apply in relation to a regulated activity.F322]

(4)An individual who performs or agrees to perform a function in breach of a prohibition order is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(5)In proceedings for an offence under subsection (4) it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(6)[F323 A person falling within subsection (3A)F323] must take reasonable care to ensure that no function of his, in relation to the carrying on of a regulated activity, is performed by a person who is prohibited from performing that function by a prohibition order.

(7)[F324 The regulator that has made a prohibition orderF324] may, on the application of the individual named in [F325the orderF325] , vary or revoke it.

[F326 (7A)If—

(a)the FCA proposes to vary or revoke a prohibition order, and

(b)as a result of the proposed variation or revocation, an individual—

(i)will no longer be prohibited from performing a function of interest to the PRA, or

(ii)will be prohibited from performing such a function,

the FCA must consult the PRA before varying or revoking the order.

(7B)A function is of interest to the PRA if it is performed in relation to a regulated activity carried on by—

(a)a PRA-authorised person, or

(b)a person who is an exempt person in relation to a PRA-regulated activity carried on by the person.

(7C)The PRA must consult the FCA before varying or revoking a prohibition order.F326]

[F327 (7D)If—

(a)the FCA proposes to vary or revoke a prohibition order which makes provision in relation to a recognised body, and

(b)the FCA is not the appropriate regulator in relation to recognised bodies of that type,

the FCA must consult the appropriate regulator.

(7E)If the PRA proposes to vary or revoke a prohibition order which makes provision in relation to a recognised body, the PRA must consult the appropriate regulator in relation to recognised bodies of that type.F327]

F328 (8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F329 (9) “Specified” means specified in the prohibition order. F329]

[F329 (9)In this section—

  • “the appropriate regulator”, in relation to a recognised body, has the meaning given by section 285A;

  • “recognised body” has the meaning given by section 313;

  • “specified” means specified in the prohibition order. F329]

Read section 56 in the full Act → Definitions (12) Cases (24)

Definitions used in section 56

the FCA

(2) The Financial Conduct Authority is in this Act referred to as “the FCA”.

Defined in s.1A(2) · see it in the full Act

“the FCA” means the Financial Conduct Authority;

Defined in s.417(1) · see it in the full Act
functions

(4) Neither section 2AB(3)(d) nor the definition of “functions” in paragraph 1 applies for the purposes of sub-paragraph (2).

Defined in Sch.1ZB para.31(4) · see it in the full Act

(2A) The functions referred to in sub-paragraph (1)(a) include functions of the FCA under the Competition Act 1998 or the Enterprise Act 2002 as a result of Part 16A of this Act ; but this sub-paragraph is not to be regarded as limiting the effect of the definition of “functions” in paragraph 1.

Defined in Sch.1ZA para.23(2A) · see it in the full Act

(4) Neither section 1A(6)(d) nor the definition of “functions” in paragraph 1 applies for the purposes of sub-paragraph (2).

Defined in Sch.1ZA para.23(4) · see it in the full Act
regulated activity

“regulated activity” has the meaning given in section 22;

Defined in s.417(1) · see it in the full Act
authorised person

“authorised person” has the meaning given in section 31(2);

Defined in s.417(1) · see it in the full Act

(2) In this Act “authorised person” means a person who is authorised for the purposes of this Act.

Defined in s.31(2) · see it in the full Act
exempt person

“exempt person”, in relation to a regulated activity, means a person who is exempt from the general prohibition in relation to that activity as a result of an exemption order made under section 38(1) or as a result of section 39(1) or ... 285 ;

Defined in s.417(1) · see it in the full Act
general prohibition

“general prohibition” has the meaning given in section 19(2);

Defined in s.417(1) · see it in the full Act
the PRA

“the PRA” means the Prudential Regulation Authority;

Defined in s.417(1) · see it in the full Act
PRA-authorised person

(5) In this Act “PRA-authorised person” means an authorised person who has permission—

(a)given under Part 4A, or

(b)resulting from any other provision of this Act,

Defined in s.2B(5) · see it in the full Act

“PRA-authorised person” has the meaning given in section 2B(5);

Defined in s.417(1) · see it in the full Act
PRA-regulated activity

“PRA-regulated activity” has the meaning given in section 22A;

Defined in s.417(1) · see it in the full Act
Specified

(5) “Specified” means specified in an order made by the Treasury.

Defined in s.22(5) · see it in the full Act
regulator

“regulator” has the meaning given in section 3A(2);

Defined in s.417(1) · see it in the full Act
appropriate regulator

(11) The FCA is the “appropriate regulator” in the case of a contravention of any other requirement , other than a case falling within paragraph 26 of Schedule 17A .

Defined in s.380(11) · see it in the full Act

Cases considering section 56 (24)

The Financial Conduct Authority v Thomas Seiler & Anor

[2024] EWCA Civ 852 · 30 July 2024

The judgment applies section 56 as the statutory source of the Authority’s power to make prohibition orders against individuals who are not fit and proper to perform regulated functions. (see paras [3]; [10]) The judgment applies section 56(1) in describing the Authority’s power to prohibit an individual from performing functions relating to regulated activities. (see para [10]) The judgment confirms that performing a function in breach of a prohibition order is a criminal offence carrying a fine on summary conviction. (see para [11])

The Financial Conduct Authority v Hobbs

[2013] EWCA Civ 918 · 29 July 2013

The provision empowered the Authority to prohibit a person who was not fit and proper from performing functions relating to regulated activity. Whether a prohibition order remained appropriate was remitted to the Tribunal (see paras [9]; [39]–[40]).

Davies & Ors v Financial Services Authority

[2003] EWCA Civ 1128 · 30 July 2003Interprets

The prohibition power may be used where past misconduct indicates that an individual is not fit and proper and prohibition would provide future public protection. Its use is not barred by expiry of the disciplinary time limit or by the individual's professed lack of intention to undertake regulated work (see paras [22]-[23]; [28]).

4 more judgments, and what each says about section 56, are in the case-law panel in the full Act.

Explanatory note

134.This section enables the Authority to make an order prohibiting any individual whom it considers is not fit and proper to perform functions in connection with regulated activities.  A prohibition may relate to all functions in relation to any regulated activities carried on by all authorised (or exempt) persons or it can specify the kind of functions, activities or authorised (or exempt) persons to which it relates.  A prohibition order may be varied or revoked.

135.Subsection (4) makes it an offence for an individual not to comply with a prohibition order.  The maximum penalty for this offence is a fine at level 5 on the standard scale (currently £5,000).  There is, however, a defence under subsection (5) for a person who can show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

136.Subsection (6) imposes an obligation on an authorised person to take reasonable care not to engage individuals who have been disqualified under this section from performing relevant functions.  Failure to comply with this requirement could trigger the use of the Authority’s powers to amend the authorised person’s permission or discipline the firm.  It also potentially gives rise to a cause of action under section 71 from a private person who suffers a loss as a consequence of the breach.

137.Subsection (8) enables a prohibition order to be issued preventing an individual from performing functions in relation to a regulated activity carried on by an exempt person or a person to whom section 327(1) applies, that is by members of a profession or persons controlled or managed by members of a profession, who benefit from the exemption from the general prohibition under Part XX.

All the explanatory notes for the Act

Amendments and notes

16 notes from legislation.gov.uk

Amendments

  1. F319S. 56(1)(1A) substituted for s. 56(1) (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(2), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  2. F320Words in s. 56(2) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(3), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  3. F321S. 56(3)(b) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(4), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  4. F322S. 56(3A) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(5), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  5. F323Words in s. 56(6) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(6), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  6. F324Words in s. 56(7) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(7)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  7. F325Words in s. 56(7) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(7)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  8. F326S. 56(7A)-(7C) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 13(8), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  9. F327S. 56(7D)(7E) inserted (29.6.2023 for specified purposes) by Financial Services and Markets Act 2023 (c. 29), s. 86(1)(e), Sch. 10 para. 3(2) text inserted for certain specified purposes only, see the commentary.
  10. F328S. 56(8) omitted (1.4.2013) by virtue of Financial Services Act 2012 (c. 21), ss. 13(9), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  11. F329S. 56(9) substituted (29.6.2023 for specified purposes) by Financial Services and Markets Act 2023 (c. 29), s. 86(1)(e), Sch. 10 para. 3(3) text substituted for certain specified purposes only, see the commentary. Note: in some cases two versions of the measure may be present: the original version and substituted version.

Modifications

  1. C218S. 56 amended (temp. from 3.9.2001 to 1.12.2001) by S.I. 2001/2659, arts. 1(2), 3(3); S.I. 2001/3538, art. 2(1)
  2. C219Ss. 56, 60 modified (temp.) (8.4.2002) by The Financial Services and Markets Act 2000 (Permission and Applications) (Credit Unions etc.) Order 2002 (S.I. 2002/704), art. 7
  3. C220Ss. 56-58 applied (with modifications) (31.12.2011) by The Financial Services and Markets Act 2000 (Permissions, Transitional Provisions and Consequential Amendments) (Northern Ireland Credit Unions) Order 2011 (S.I. 2011/2832), art. 8
  4. C221S. 56(7) extended (1.12.2001) by S.I. 2001/3592, arts. 1(2), 55(5) (with art. 23(2))

Commencement

  1. I5S. 56 wholly in force at 1.12.2001; s. 56 not in force at Royal Assent see s. 431(2); s. 56 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 56 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)