AUTH 1.2 Introduction
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The Financial Services and Markets Act 2000 (the Act) is the UK legislation under which bodies corporate, partnerships, individuals and unincorporated associations are permitted by the FSA to carry on various financial activities which are subject to regulation (referred to as regulated activities).
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The activities which are regulated activities are specified in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (the Regulated Activities Order): for example, accepting deposits, managing investments, effecting contracts of insurance, dealing in investments as agent. In general terms, a regulated activity is an activity, specified in the Order, carried on in relation to one or more of the investments specified in the Order. AUTH 2 gives further guidance on regulated activities and specified investments.
In order to carry on a regulated activity in the United Kingdom, or even "purport to do so", section 19 of the Act (The general prohibition) provides that a person must be either authorised under the Act (an authorised person) or exempt from its provisions (an exempt person). In this context, a "person" includes both a legal person, for example a body corporate, and a natural person, that is, an individual.
Exempt persons are persons falling within the following groups:
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a person, or class of persons, specified in secondary legislation; for example, the Bank of England is specified in the Financial Services and Markets Act 2000 (Exemption) Order 2001 (the Exemption Order);
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a recognised investment exchange or a recognised clearing house (for more information on being a recognised body see REC).
Further information on exempt persons is given in AUTH 2.10 (Persons carrying on regulated activities who do not need authorisation).2
Members of the Society of Lloyd's are not required to obtain authorisation to carry out certain insurance market activities unless so directed by the FSA (see AUTH 2.10.9 G). In addition, certain professional firms (solicitors, accountants and actuaries) are allowed under Part XX of the Act (Provision of Financial Services by Members of the Professions) to carry on certain regulated activities without authorisation subject to their complying with specified conditions (see AUTH 2.10.12 G and PROF).
Before any person carries on in the United Kingdom, by way of business, activities that are regulated activities, it will generally need to be an authorised person (see AUTH 2.2). There are two main kinds of authorised person under the Act: a person who is authorised because it has a Part IV permission (see AUTH 1.2.5 G (2)) and a person which qualifies for authorisation (see AUTH 1.2.5 G (1)). It is important that a person considering carrying on a regulated activity in the United Kingdom determines which type of authorisation is required.
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A person from another EEA State which is authorised in its Home State may be entitled to establish a branch in, or provide cross border services into, the United Kingdom under the Single Market Directives, the Treaty or the UCITS Directive (this is often known as passporting). The process by which that person can qualify for authorisation under Schedules 3, 4 and 5 to the Act is described in AUTH 5.
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Other persons wishing to carry on regulated activities in the United Kingdom must obtain permission from the FSA under Part IV of the Act (this is known as Part IV permission). Such persons will become authorised persons if the FSA gives them permission. AUTH 1.6 outlines the process of applying for Part IV permission, the formal elements are described in more detail in AUTH 3. At the same time, the applicant will need to apply for certain persons to become approved persons (see AUTH 6).
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Electronic commerce activities, other than insurance business falling within the scope of the Insurance Directives, carried on by an incoming ECA provider are excluded from being regulated activities. The provider does not require authorisation if it does not carry on any other regulated activities in the United Kingdom (see AUTH 2.9.18 G).
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An outgoing ECA provider providing electronic commerce activities that are regulated activities from an establishment in the United Kingdom is regarded as carrying on such activities in the United Kingdom regardless of whether they are provided to an EEA ECA recipient or a UK ECA recipient (see AUTH 2.4.3 G (5)). The provider should be authorised before it starts providing the services.
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ECO sets out rules and guidance that apply to both incoming and outgoing ECA providers.31