Recognised Auction Platforms

Part

REC Recognised Investment Exchanges and Recognised Clearing Houses

Chapter

Recognised Auction Platforms

Printed on: 06/07/2024

Rulebook at: 01/11/2012

REC 2A

Recognised Auction Platforms

REC 2A.1

Introduction

22/12/2011

REC 2A.1.1

This chapter applies to an RAP or to a UK RIE applying to become an RAP. Regulation 2 of the RAP regulations provides that an entity must have UK RIE status before it can apply for RAP status.

22/12/2011

REC 2A.1.2

The RAP recognition requirements must be satisfied by an RAP applicant for recognition to be granted. These requirements apply both on initial recognition and throughout the period that RAP status is held. Therefore, the term RAP in the guidance should be understood to also refer to an applicant where appropriate and where not otherwise stated.

22/12/2011

REC 2A.1.3

The RAP regulations apply modified provisions of the Act to an RAP. For example, an RAP is an exempt person in respect of its business as an auction platform due to the application of section 285 of the Act as modified by the the RAP regulations. Similarly, section 293 of the Act is applied and modified by the RAP regulations to provide for notification rules and notification requirements in relation to RAPs.

22/12/2011

REC 2A.2

Method of satisfying the RAP recognition requirements

22/12/2011

REC 2A.2.1

Recognised Auction Platforms Regulations, regulation 13

(1)

In considering whether [an RAP] or applicant satisfies the [RAP recognition requirements], the [FSA] may-

(a)

treat compliance by the [RAP] or applicant with the [recognition requirements or MiFID implementing requirements] applying to it as a [UK RIE] as conclusive evidence that the [RAP] or applicant satisfies any equivalent [RAP recognition requirements] applying to it under these [RAP regulations], taking into account any arrangements that would be necessary to meet the [RAP recognition requirements], and

(b)

take into account all relevant circumstances including the constitution of the person concerned.

(2)

Without prejudice to the generality of paragraph (1), [an RAP] or applicant may satisfy [RAP recognition requirements] by making arrangements for functions to be performed on its behalf by any other person.

(3)

Where [an RAP] or applicant makes arrangements of the kind mentioned in paragraph (2), the arrangements do not affect the responsibility imposed by these [RAP regulations] on the [RAP] or applicant to satisfy the [RAP recognition requirements], but it is in addition [an RAP recognition requirement] applying to the [RAP] or applicant that the person who performs (or is to perform) the functions is a fit and proper person who is able and willing to perform them.

22/12/2011

REC 2A.2.2

The FSA will request information from an RAP or RAP applicant in order to determine whether it meets the RAP recognition requirements.

22/12/2011

REC 2A.3

Guidance on RAP recognition requirements

22/12/2011

REC 2A.3.1

In assessing compliance with the RAP recognition requirements, the FSA will have regard to relevant guidance in REC 2 on the equivalent requirements set out in the Recognition Requirement Regulations. The FSA may also take into account compliance by the RAP or RAP applicant with the recognition requirements (see REC 2A.2.1 UK). The FSA will not make a separate assessment of compliance with the recognition requirements during the course of examining an application to become an RAP or as part of its ongoing supervision of an RAP, unless there is a specific reason to do so.

22/12/2011

REC 2A.3.2

The guidance in relation to the recognition requirements in the sections of REC 2 listed in Column A of the table below applies to an RAP in relation to the equivalent RAP recognition requirements listed in Column C and (if shown) with the modifications in Column B.

Table: Guidance on RAP recognition requirements

Column A
REC 2 guidance which applies to an RAP

Column B
Modification to REC 2 guidance for an RAP

Column C
Relevant RAP recognition requirement

REC 2.2.2 G to REC 2.2.7 G (Relevant circumstances and Outsourcing)

Reg 13

REC 2.3.3 G to REC 2.3.9 G (Financial resources)

Reg 14

REC 2.4.3 G to REC 2.4.6 G (Suitability)

In addition to the matters set out in REC 2.4.3 G to REC 2.4.6 G, the FSA will have regard to whether a key individual has been allocated responsibility for overseeing the auction platform of the UK recognised body.

Reg 15

REC 2.5.3 G to REC 2.5.20 G (Systems and controls and conflicts) and REC 2.5A (Guidance on Public Interest Disclosure Act: Whistleblowing)

Reg 16 and 17(2)(f)

REC 2.6.26 G to REC 2.6.34 G (Safeguards for investors)

Reg 17

REC 2.7.3 G to REC 2.7.4 G (Access to facilities)

The FSA shall have regard to whether an RAP provides access to bid at auctions only to those persons eligible to bid under article 18 of the auction regulation.

Reg 17(2)(a) and 20

REC 2.8.3 G to REC 2.8.4 G (Settlement and clearing services)

Reg 17(2)(d) and 21

REC 2.9.3 G to REC 2.9.4 G (Transaction recording)

Reg 17(2)(e)

REC 2.10.3 G to REC 2.10.4 G (Financial crime and market abuse)

Reg 17(2)(g)

REC 2.11.3 G to REC 2.11.4 G (Custody)

REC 2.11.4 G is replaced with the following for an RAP:

Where an RAP arranges for other persons to provide services for the safeguarding and administration services of assets belonging to users of its facilities, it will also need to satisfy the RAP recognition requirement in regulation 17(2)(h) of the RAP regulations (see REC 2A.2.1 UK).

Reg 17(2)(h)

REC 2.12.11 G to REC 2.12.12 G (Availability of relevant information)

REC 2.12.11 G to REC 2.12.12 G are replaced with the following for an RAP:

REC 2.12.11 G

In determining whether appropriate arrangements have been made to make relevant information available to persons engaged in dealing in emissions auction products the FSA may have regard to:

(1) the extent to which auction bidders are able to obtain information in a timely fashion about the terms of those emissions auction products and the terms on which they will be auctioned, either through accepted channels for dissemination of information or through other regularly and widely accessible communication media;

(2) what restrictions, if any, there are on the dissemination of relevant information to auction bidders; and

(3) whether relevant information is, or can be, kept to restricted groups of persons in such a way as to facilitate or encourage market abuse.

REC 2.12.12 G

An RAP does not need to maintain its own arrangements for providing information on the terms of emissions auction products to auction bidders where it has made adequate arrangements for other persons to do so on its behalf or there are other effective and reliable arrangements for this purpose.

Reg 17(2)(c)

REC 2.13.3 G to REC 2.13.6 G (Promotion and maintenance of standards)

Reg 18

REC 2.14.3 G to REC 2.14.6 G (Rules and consultation)

Reg 19

REC 2.15.3 G to REC 2.15.6 G (Discipline)

Reg 22

REC 2.16.3 G to REC 2.16.4 G (Complaints)

Reg 23

27/07/2012

REC 2A.4

Power and procedure for RAP penalties and censures

01/11/2012

REC 2A.4.1

Under regulation 5A (Power to impose civil penalties) of the RAP Regulations, where the FSA considers that an RAP has contravened any requirement in articles 19, 20(7), 21(1) or (2), or 54 of the auction regulation, the FSA has the power to impose a civil penalty on that RAP.

01/11/2012

REC 2A.4.2

Where the FSA is entitled to impose a penalty on an RAP, it may instead publish a statement censuring it.

01/11/2012

REC 2A.4.3

The provisions of the auction regulation referred to in REC 2A.4.1 G are directly applicable to an RAP and require it to, in summary:

(1) only grant admission to bid to applicants that comply with the conditions set out in article 19 of the auction regulation, including the prerequisite that the applicants are eligible to bid in accordance with article 18 of the auction regulation;
(2) require an applicant for admission to bid to ensure that its clients, and the clients of its clients, are able to comply with information requirements, interviews, investigations and verifications carried out or required by the RAP;
(3) refuse to grant admission to bid, or revoke or suspend that admission, to any person:

(a) that is not, or is no longer, eligible to bid (under article 18 of the auction regulation); does not meet, or no longer meets, the requirements of articles 18, 19 or 20 of the auction regulation; or is wilfully or repeatedly in breach of the auction regulation, the terms and conditions of its admission to bid or other related instructions or agreements; or
(b) where the RAP suspects the person is involved with money laundering, terrorist financing, criminal activity or market abuse, provided that such refusal, revocation or suspension is unlikely to frustrate efforts by the competent national authorities under the auction regulation to pursue or apprehend the perpetrators of those activities; and

(4) monitor the relationship with bidders admitted to bid in its auctions.

01/11/2012

REC 2A.4.4

The power in regulation 5A of the RAP Regulations to impose a civil penalty or publish a statement adds to the FSA's other supervisory powers in relation to RAPs (see REC 4) and its power to impose penalties on an RAP under the Money Laundering Regulations. The FSA will use this power under the RAP Regulations where it is appropriate to do so and with regard to the relevant factors listed in DEPP 6.2.1 G. In deciding between a civil penalty or a public statement, the FSA will also have regard to the relevant factors listed in DEPP 6.4.

01/11/2012

REC 2A.4.5

The FSA will notify the subject of the investigation that it has appointed officers to carry out an investigation under either or both the RAP Regulations or the Money Laundering Regulations and the reasons for the appointment, unless notification is likely to prejudice the investigation or otherwise result in it being frustrated. The FSA expects to carry out a scoping visit early on in the enforcement process in most cases.

01/11/2012

REC 2A.4.6

Where the FSA uses the power to impose a penalty, it will be for an amount that is effective, proportionate and dissuasive and with regard to relevant factors listed in DEPP 6.5 to DEPP 6.5D in determining the appropriate level of financial penalty.

01/11/2012

REC 2A.4.7

The FSA will also have regard to whether the person followed any of the FSA's guidance and will not take action under regulation 5A where there are reasonable grounds for it to be satisfied that the person took all reasonable steps and exercised all due diligence to ensure that the requirement was complied with.

01/11/2012

REC 2A.4.8

When the FSA proposes or decides to take action against an RAP in exercise of its power in regulation 5A of the RAP Regulations, it must give the RAP a warning notice or a decision notice respectively. Those notices must state the amount of the penalty or set out the terms of the statement, as applicable. On receiving a warning notice, the RAP has a right to make representations on the FSA's proposed decision.

01/11/2012

REC 2A.4.9

Where the FSA is proposing or deciding to publish a statement censuring an RAP or impose a penalty on the RAP under regulation 5A of the RAP Regulations, the FSA's decision maker will be the RDC. This is to ensure that the FSA's power to censure or impose a penalty on an RAP has the same layer of separation in the decision making process, and is exercised consistently with, similar penalty and censure powers of the FSA under other legislation. The RDC will make its decisions following the procedure set out in DEPP 3.2 or, where appropriate, DEPP 3.3. An RAP that receives a decision notice under regulation 5A of the RAP Regulations may refer the matter to the Tribunal.

01/11/2012

REC 2A.4.10

Sections 393 and 394 of the Act apply to notices referred to in this section. See DEPP 2.4 (Third party rights and access to FSA material).

01/11/2012

REC 2A.4.11

As with cases under the Act, the FSA may settle or mediate appropriate cases to assist it to exercise its functions in the most efficient and economic way. The settlement discount scheme set out in DEPP 6.7 applies to penalties imposed under the RAP Regulations.

01/11/2012

REC 2A.4.12

The FSA will apply the approach to publicity that it has outlined in EG 6.

01/11/2012