This manual applies to:

1. (1)

   a person which is considering carrying on activities in the United Kingdom which may fall within the scope of the Act and is seeking guidance on whether it needs to be an authorised person;

2. (2)

   a person which seeks to become an authorised person under the Act and which is, or is considering, applying to the FSA for Part IV permission to carry on regulated activities in the United Kingdom;

3. (3)

   an EEA firm, a Treaty firm or a UCITS qualifier that wishes to establish a branch or provide cross-border services into the United Kingdom using EEA rights, Treaty rights or UCITS Directive rights, or apply for a top-up permission;

4. (4)

   a candidate for approval under Part V of the Act, but only in respect of AUTH 6 (Approved persons), which is of general relevance; and

   3
5. (5)

   persons generally.

The purpose of:

1. (1)

   authorisation is to allow only persons which satisfy the necessary conditions (relating, for example, to adequate resources and suitability - see COND) to engage in a regulated activity; and

2. (2)

   approval of persons (generally individuals) is to seek to ensure that only fit and proper persons perform controlled functions in the financial services industry.

The purpose of this manual is to give guidance about:

1. (1)

   the circumstances in which authorisation is required, or exempt person status is available, including guidance on the activities which are regulated under the Act and the exclusions which are available; see PERG 22 (Authorisation and regulated activities);

   2
2. (2)

   the procedures by which a person can apply for, or obtain, permission under the Act to carry on these regulated activities and become an authorised person and any fees payable; see AUTH 3 (Applications for Part IV permission), FEES 3 (Application, Notification and Vetting Fees)4 and AUTH 5 (Qualifying for authorisation under the Act).

   4
3. (3)

   the procedures by which a person seeking to become an authorised person can obtain approval for persons to perform controlled functions under the approved persons regime; see AUTH 6 (Approved persons); and

4. (4)

   the FSA's powers in relation to authorisation and how it will use them (see AUTH 3 and AUTH 5).31

1. (1)

   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).

2. (2)

   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. PERG 24 gives further guidance on regulated activities and specified investments.

   4

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:

1. (1)

   an appointed representative;

2. (2)

   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);

3. (3)

   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 PERG 2.10G4 (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 PERG 2.10.9G4). 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 PERG 2.10.12G4 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 PERG 2.24). 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.

1. (1)

   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.

2. (2)

   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).

1. (1)

   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 PERG 2.9.18G4).

   4
2. (2)

   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 PERG 2.4.3G(5)4). The provider should be authorised before it starts providing the services.

   4
3. (3)

   ECO sets out rules and guidance that apply to both incoming and outgoing ECA providers.31

1. (1)

   The Authorisation manual (AUTH), the Supervision manual (SUP), the Enforcement manual (ENF) and the Decision making manual (DEC) form the Regulatory Processes part of the Handbook.

2. (2)

   AUTH sets out the relationships between the FSA and applicants for Part IV permission and persons wishing to exercise EEA rights, Treaty rights or UCITS Directive rights. SUP sets out the relationship between the FSA and authorised persons (referred to in the Handbook as firms). As a general rule, material that is of continuing relevance after authorisation is in SUP.

3. (3)

   ENF describes the FSA's enforcement powers under the Act and sets out its policies for using these powers.

4. (4)

   DEC is principally concerned with, and sets out, the FSA's decision making procedures for decisions that involve the giving of statutory notices.

The procedures for applying for Part IV permission, for approval of a person under section 59 of the Act and for qualifying for authorisation under Schedules 3, 4 and 5 to the Act are derived from the Act. AUTH gives guidance on the Act and the FSA's procedures. It also contains directions to applicants on the manner of making applications (see AUTH 3.9.3 D and AUTH 6.3.2 G) and rules on fees (see AUTH 4 (Authorisation fees)).1

1. (1)

   A Reader's Guide gives an introduction to the Handbook and is a key navigational aid for Handbook users. The guide explains the format, layout and workings of the Handbook, including the status and definitions of its components such as directions, rules and guidance.

   6
2. (2)

   We recommend that readers consult this Guide before or while reading AUTH.

   6

1. (1)

   The Act, and the secondary legislation made under the Act, is complex. Although AUTH gives guidance to those considering or seeking authorisation, it does not aim to be exhaustive.

2. (2)

   References have been made to relevant provisions in the Act or secondary legislation. However, since reproducing an entire statutory provision would sometimes require a lengthy quotation, or considerable further explanation, many provisions of the Act, or secondary legislation made under the Act, are summarised. For the precise details of the legislation, readers of the manual should, therefore, refer to the Act and the secondary legislation itself, as well as the manual.

3. (3)

   The Act and the Explanatory Notes are available from the Stationery Office (the Act, ISBN 0-10-540800-X, £21.70; and the Explanatory Notes, ISBN 0-10-560800-9, £14.50). Secondary legislation made by the Treasury under the Act can be obtained from the Stationery Office or can be accessed through the Treasury's website (www.hm-treasury.gov.uk).

Guidance on the Act or secondary legislation made under the Act represents the FSA's view and does not bind the Courts. In the event of any discrepancy between the manual and the Act or that secondary legislation, the provisions of the Act or the secondary legislation prevail. It remains each person's responsibility to ensure that, at all times, his activities comply with the Act and with other relevant provisions (including general requirements such as company law or consumer credit) and to take all necessary steps to satisfy himself of this, including where necessary by seeking his own legal advice.

AUTH uses words and phrases that have specific meanings in the Handbook or in legislation; these may be different from, or more precise than, their usual dictionary meanings. Defined terms used in the text of the Handbook are shown in italics. For the meanings of defined terms used in AUTH, see the Glossary (either the extracts at the end of AUTH or the consolidated Glossary). It is essential that readers refer to these definitions.

AUTH 1.3.9 G summarises AUTH and parts of PERG3. Readers should note that in a cross-reference, as explained in Chapter 66 of the Reader's Guide, the code letters of the manual or sourcebook immediately precede the chapter number. For example, AUTH 1 is the first chapter of the Authorisation manual.

The FSA is keen to encourage an interactive authorisation process. With this in mind, AUTH gives specific contact points in the FSA from which an applicant can get help with questions about its application. To help readers, the contact points are listed at AUTH 1.9.2 G.

1. (1)

   Under the Act, there is a single process for applications for Part IV permission. However, the amount of detailed information that an applicant will have to submit as part of its application will be related to the risks posed to the FSA's regulatory objectives by the regulated activities and any unregulated activities that the applicant intends to carry on. Thus the information requested will depend on, and be proportional to, the nature of the application.

2. (2)

   This proportionality is reflected in the design of the application pack. Although all applicants have to complete certain standard sections, other sections of the pack are specific to certain types of business such as insurance business. In completing the relevant sections of the pack, the level of detailed information an applicant will be required to provide varies according to the nature of the application. Thus, for example, the FSA will require an applicant which seeks to carry on low-risk designated investment business activities to submit, among other things, a business plan and other information which is proportional and relevant to the applicant's size and the scope of its proposed business.

1. (1)

   To gain, and retain, the status of an authorised person, an applicant must satisfy and continue to satisfy certain minimum requirements, laid down in the Act. These are known as threshold conditions and further guidance is given in AUTH 3.8 and COND.

2. (2)

   The FSA will assess each application against the threshold conditions. During this assessment, the FSA may require further information from applicants to address any concerns. If an applicant can satisfy the threshold conditions in part only, the FSA may impose a limitation or a requirement on the Part IV permission applied for to enable the applicant to satisfy the threshold conditions.

1. (1)

   An applicant for Part IV permission will be expected to demonstrate to the FSA that it is ready, willing and organised to comply, and continue to comply, with the regulatory obligations that are relevant to the regulated activities it seeks Part IV permission to carry on.

2. (2)

   To do this, an applicant will need to familiarise itself with the relevant Principles, other rules and guidance that apply to the regulated activities it proposes to carry on. AUTH is designed as a guide, but it cannot alone equip applicants with all the detail of the regulatory obligations for a proposed business. Such detail is in the other parts of the Handbook.

1. (1)

   Alongside the assessment of the threshold conditions, described in AUTH 1.4.2 G (2), the FSA will operate its risk assessment process. This process enables the FSA to be proportional in its procedures, both in terms of the information which it seeks from an applicant and in the allocation of its own resources. The outcome of this process will help determine the relationship the FSA will seek to have with the applicant if it gives it Part IV permission.

2. (2)

   The process will include assessing the risks posed by the applicant against a number of probability and impact factors. The probability factors relate to the likelihood of an event happening, and the impact factors indicate the scale and significance of the problem if it occurred. For further details of the process see SUP 1.3 (The FSA's risk based approach to supervision). The FSA intends to communicate the outcome of its risk assessment to the firm (see SUP 1.3.10 G).

The requirements and standards of the regulatory system, with which an authorised person must comply, vary depending on both the nature of the firm and the regulated activities it has permission to carry on. As part of preparing an application for Part IV permission, an applicant will need to familiarise itself with the rules, regulations and standards that would apply to the business it proposes to carry on. An applicant will then have to demonstrate how it proposes to comply, for example, with the high level systems and controls requirements in SYSC and, where relevant, the applicable rules in COB. EEA firms, Treaty firms or UCITS qualifiers which qualify for authorisation should also familiarise themselves with the relevant regulatory obligations before carrying on regulated activities in the United Kingdom.

1. (1)

   An EEA firm will be informed of any relevant regulatory obligations (known as applicable provisions) by the FSA or, in the case of an EEA firm which is an insurer, its Home State regulator, as part of the process of qualifying for authorisation.

2. (2)

   An applicant for Part IV permission should consult the notes to the application pack. They cross-refer to relevant parts of the Handbook, and this will help applicants to respond to certain questions.

As a general guide, all applicants for Part IV permission should be familiar with the threshold conditions (COND) and the Principles for Businesses (PRIN) in the High Level Standards part of the Handbook. To complete an application for Part IV permission, an applicant will also need to have regard to the following matters:

1. (1)

   Prudential requirements:

   1. (a)

      the high level requirement for adequate resources, which is applicable to all firms, described in COND; and

   2. (b)

      the detailed prudential requirements in the Interim Prudential Sourcebooks (collectively referred to as IPRU) and in the Integrated Prudential Sourcebook (PRU)5 in the Business Standards part of the Handbook. 5In addition to PRU There are five interim 5sourcebooks that apply, respectively, to banks (IPRU(BANK)), building societies (IPRU(BSOC)), friendly societies (IPRU(FSOC)), insurance companies (IPRU(INS)) and investment business firms (IPRU(INV)). Guidance is given to applicants in AUTH 3 Annex 2 on determining which prudential category, and which sourcebook of IPRU, or section of PRU5 will apply.

   An applicant will need to confirm that it will have adequate resources in place to meet the applicable requirements.

2. (2)

   Systems, controls and internal arrangements:

   1. (a)

      the high level requirement for all firms to maintain adequate resources (including systems and human resources) described in COND and the high level standards for all firms in Senior management arrangements, systems and controls (SYSC); and

   2. (b)

      the detailed requirements, many of which are regulated activity specific, in the sourcebooks in the Business Standards part of the Handbook; for example, in IPRU, PRU, 5the Training and Competence sourcebook (TC), the Money Laundering sourcebook (ML)7 and Conduct of Business sourcebook (COB); and the reporting requirements for firms in SUP 16 (Reporting requirements) and SUP 17 (Transaction reporting).

   Before the FSA gives a Part IV permission, an applicant will need to confirm that it will have the necessary systems and controls in place.

3. (3)

   Approved persons:

   1. (a)

      the high level standards contained in the Fit and Proper test for approved persons (FIT) and the Statements of Principle and Code of Practice for Approved Persons (APER); and

   2. (b)

      the detailed rules about controlled functions and other matters in SUP 10 (Approved persons).

   An applicant will need to identify the persons that will require approval from the FSA in conjunction with its application for permission. This approval is required before a person may perform a controlled function.

4. (4)

   Other regulatory obligations:

   1. (a)

      the detailed regulatory obligations that apply to certain types of firm or regulated activity in COB, ICOB, 4MCOB, CASS, the Market Conduct sourcebook (MAR) and SUP;1

   2. (b)

      the obligations in Dispute resolution: Complaints (DISP) and Compensation (COMP); and

   3. (c)

      the specialist sourcebooks included in the Handbook such as, for example, those for collective investment schemes, exempt professional firms and the market at Lloyd's.32

The formal procedures for applying for Part IV permission are described in AUTH 3. The application process is, however, interactive and includes discussions and, in some circumstances, an initial meeting with a potential applicant before it submits a completed application form. This section, therefore, outlines how the application process is likely to proceed in practice.

1. (1)

   Although the FSA does not require all applicants to appoint professional advisers to help with the application process, reports from professionals will be required in respect of some applications for Part IV permission (see AUTH 3.9.16 G and AUTH 3.9.17 G).

2. (2)

   In addition, a potential applicant should consider at an early stage whether, given the nature of the proposed business it is seeking to carry on and its own experience, it is appropriate to seek professional advice in connection with its application. For example, an applicant may need to seek professional advice from lawyers, auditors or reporting accountants, consultants, actuaries or its professional body, before making a formal application to the FSA.

3. (3)

   SUP 9 (Individual guidance) describes how a person may apply to the FSA for individual guidance which relates to its own particular circumstances or plans. Applicants should note, in particular, SUP 9.2.5 G, which states that the FSA will expect a person to have taken reasonable steps to research and analyse a topic before approaching the FSA for individual guidance. SUP 9.2.5 G also cautions that the FSA should not be viewed as a first port of call, except where only the FSA can give guidance.

Before beginning discussions with the FSA, an applicant for Part IV permission should have completed its business planning to determine what activities it proposes to undertake and the resources it will need to do so.

1. (1)

   An applicant should also have determined and established the appropriate legal entity through which the proposed activities are to be conducted - that is, whether it wishes to trade on its own account, or establish:

   1. (a)

      a body corporate - for example, a limited company, which can be public or private and limited by shares or by guarantee, or a friendly society; or

   2. (b)

      a partnership; or

   3. (c)

      an unincorporated association; or

   4. (d)

      a UK branch.

2. (2)

   A limited liability partnership (regardless of the jurisdiction of incorporation) is a body corporate and does not fall within the definition of partnership, except in relation to SUP 10 (Approved persons). Most limited liability partners will be either directors or senior managers, but this will depend on the constitution of the limited liability partnership.

The legal status of an insurer and an applicant which seeks to carry on the regulated activity of accepting deposits is specified by threshold condition 1 (Legal status) (see COND 2.1).

The first stage in the application process is to establish whether the proposed business will carry on regulated activities requiring permission under Part IV of the Act (Permission to carry on regulated activities). PERG 22 gives a high-level guide to the activities that are regulated under the Act and those that are excluded (but this is not a substitute for consulting the legislation itself); further queries may be referred to the FSA's Authorisation Enquiries team (see AUTH 1.9.2 G).

Once an applicant has determined that it needs to apply for Part IV permission, it should begin to gather the information needed for the formal application. At this stage, applicants are encouraged to begin discussion with the FSA's Enquiries and Applications Department (Applications team) about their plans and the application (see AUTH 1.9).1

The FSA's application pack (that is, the set of forms for an application for Part IV permission, and the notes for their completion) and approved persons forms are available from the FSA website or by contacting the Enquiries and Applications Department (Applications team) (see AUTH 1.9.2 G).1

Among other things, the applicant will need to:

1. (1)

   determine the precise scope of the permission it wishes to apply for; this should include the regulated activities (the specified activities and the specified investments in respect of which the activities are carried on: see PERG 2 Annex 2G2) and any limitations and requirements the applicant wishes to apply for to refine the scope of the regulated activities; an example includes a limitation on the types of client it wishes to carry on business with or a requirement not to hold or control client money;

   2
2. (2)

   determine whether it needs to apply to the Society of Lloyd's for admission to the register of underwriting agents or to any other bodies; the timing of these applications should be included in the applicant's plans;

3. (3)

   determine which prudential category (and, if relevant, sub-category) will apply, and therefore its minimum regulatory financial requirements;

4. (4)

   determine the rules in the Handbook which will apply to the activities it proposes to carry on, and take all reasonable steps to ensure that it is ready, willing and organised to comply with those rules;

5. (5)

   determine the systems and controls necessary both to support its activities and to comply with the relevant rules, and have plans to implement and test these systems before the FSA determines its application;

6. (6)

   prepare a business plan setting out the planned activities (and related risks), budget and resources (human, systems and capital);

7. (7)

   determine which persons will fall under the FSA's approved persons regime and apply for the necessary approval; and

8. (8)

   obtain any auditors' or reporting accountants' reports that are required to support its application or have been requested by the FSA; the auditors or other professionals should be involved early in the process to ensure that the planned work on the application will be sufficient to enable them to provide any opinions required.

1. (1)

   It is in the interests of the applicant and the FSA that the application pack, when submitted, should be fully completed and address any areas of potential regulatory concern.

2. (2)

   If an applicant's plans are complex (for example, if they include insurance business, accepting deposits or certain types of designated investment business), high risk or innovative (for example, if they raise new or unusual issues), then the FSA would expect to be in discussion with the applicant while the applicant is developing the material needed for the formal application.

3. (3)

   Where appropriate - for example in an application for Part IV permission including insurance business or accepting deposits - FSA staff may, by agreement with the applicant, arrange a pre-application meeting or discuss aspects of the applicant's draft business plan or other relevant documents while the application is being prepared. This will help the FSA develop its knowledge of the applicant and the proposed business.

In addition, all applicants are encouraged to take the opportunity to discuss particular issues with the FSA as they arise, with a view to tackling them before submitting the completed application pack. Applicants are also advised to review the application pack before submission and check that they have provided adequate responses to all questions (that is, responses appropriate to the scope and scale of their activities and the risks they may pose to consumers).

After receiving the application pack, the FSA will begin its formal process of consideration. The FSA Applications and Individual Approvals teams will review the application pack and approved persons regime forms respectively. During this process, the FSA may ask for additional information and is likely to meet the applicant's management and visit its premises before determining the application. 1

An applicant for Part IV permission, an EEA firm or Treaty firm which is seeking to carry on designated investment business may wish to consider appointing an appointed representative if they become authorised.

1. (1)

   An appointed representative is a person who, as a result of satisfying conditions in section 39 of the Act (Exemption of appointed representatives) is an exempt person in respect of certain business which it carries on for an authorised person. The Act states that a person who is an authorised person cannot also be an appointed representative.

2. (2)

   The business for which an appointed representative may be exempt is specified in the Appointed Representatives Regulations. The business which an appointed representative carries on for a firm must fall within the scope of the firm's own permission.

3. (3)

   SUP 12 (Appointed representatives) contains guidance on the conditions in the Act, the Appointed Representatives Regulations and the FSA's rules and guidance which apply to a firm which is appointed or has appointed an appointed representative. An applicant for Part IV permission can notify the FSA of the persons it wishes to appoint as appointed representatives in the application pack.1

It will not always be clear to a person whether or not its prospective business activities will be such that it requires authorisation. The FSA has established an Authorisation Enquiries team to help in such cases.

The Authorisation Enquiries team gives assistance by:

1. (1)

   producing guidance for persons who wish to find out whether they need to be authorised (see PERG 22);

   2
2. (2)

   publishing guidance about areas where persons may have difficulty deciding whether or not authorisation or exemption is needed (this is included in AUTH App X [to be added at later date]); and

3. (3)

   responding to oral and written enquiries from applicants, prospective applicants, EEA firms, Treaty firms or prospective UCITS qualifiers (or their professional advisers) about their particular position under the Act.

The Authorisation Enquiries team also handles enquiries about financial promotions. Under the Act, the communication of a financial promotion by an unauthorised person is prohibited, unless its contents have been approved by an authorised person, or an exemption applies.

As well as being included as an appendix to AUTH, copies of all current guidance issued by Authorisation Enquiries are available separately from the FSA website at www.fsa.gov.uk or through the FSA's Publications Enquiries department on 020 7066 3298. The Authorisation Enquiries team will be pleased to clarify or discuss any aspects of the guidance in more detail. Enquiries about the scope of the Act may be made to the Authorisation Enquiries helpline by telephone on 020 7066 0082 or by e-mail to authorisationenquiries@fsa.gov.uk.1

The FSA will review its guidance from time to time and may need to amend or withdraw published or written guidance in the light of changing circumstances, developing business practices, or case law. For the status of guidance issued by the FSA, see Chapter 6 of 3the Reader's Guide.

To find out where next to look in the Authorisation manual, see AUTH 1 Annex 1 G. To find out who to contact at the FSA see AUTH 1.9.2 G.