AUTH 2.10 Persons carrying on regulated activities who do not need authorisation

There are various provisions that disapply the general prohibition from specific persons in relation to the carrying on by them of particular regulated activities. There is, however, no general provision for persons to apply for an exemption.

Persons may be exempted from the general prohibition in relation to one or more particular regulated activities. The extent of any exemption may also be limited to specified circumstances (such as where another person who is authorised and has relevant permission has accepted responsibility for the regulated activities in question) or subject to specified conditions (such as a requirement that the activity is not carried on for pecuniary gain).

The Act provides that appointed representatives (see AUTH 2.10.5 G), recognised investment exchanges and recognised clearing houses (see AUTH 2.10.6 G) and certain other persons exempt under miscellaneous provisions (see AUTH 2.10.7 G) are exempt persons. Members of Lloyd's and members of the professions are not 'exempt persons' as such, but the general prohibition in section 19 of the Act only applies to them in certain circumstances. The distinction is significant in relation to various provisions (such as those in the Regulated Activities Order) that apply only to transactions and other activities that involve exempt persons.

Appointed representatives and the persons exempt under miscellaneous provisions cannot be exempt in relation to some regulated activities and authorised in relation to others. If a person is already authorised, and proposes to carry on additional regulated activities in respect of which he would otherwise be exempt as an appointed representative or under miscellaneous provisions, he must seek an extension to his existing permission to cover those additional activities. A person in either of these categories who would otherwise be exempt in relation to particular activities will, if he becomes authorised, no longer be able to rely on the exemption.

A person is exempt if he is an appointed representative of an authorised person. See SUP 12 (Appointed representatives). But where an appointed representative carries on insurance mediation or reinsurance mediation he will not be exempt unless he is included on the register kept by the FSA under article 93 of the Regulated Activities Order (Duty to maintain a record of unauthorised persons carrying on insurance mediation activities) (see AUTH App 5.13 (Appointed representatives).1

Investment exchanges and clearing houses can apply for recognition under Part XVIII of the Act (Recognised investment exchanges and clearing houses). See REC.

Various named persons are exempted by Order made by the Treasury under section 38 of the Act from the need to obtain authorisation. Some of the exemptions are subject to restrictions as to the circumstances in which they apply. For example, a person is only exempt when acting in a particular capacity or for particular purposes.

The exemptions apply so as to confer exemption on persons from the general prohibition in respect of four distinct categories of regulated activities.

1. (1)

   The first category is carrying on any regulated activity, apart from effecting or carrying out contracts of insurance (or agreeing to do so). Exempt persons here are generally supranational bodies of which the United Kingdom or another EEA State is a member.

2. (2)

   The second category is the regulated activity of accepting deposits . Exempt persons here include municipal banks, local authorities, charities and industrial and provident societies.

3. (3)

   The third category is carrying on any of those regulated activities relating to securities or relevant investments or to 'any property' (or agreeing to do so). Exempt persons here include persons whose activities are subject to a certain degree of control or oversight by the Government.1

4. (4)

   The fourth category is carrying on one or more specified regulated activities (or agreeing to do so). Exempt persons here cover a range of different persons.

Several activities carried on in connection with business at Lloyd's are regulated activities in respect of which authorisation must be obtained. These include the regulated activities of advising on syndicate participation at Lloyd's or managing the underwriting capacity of Lloyd's syndicate as a managing agent at Lloyd's or arranging (bringing about) deals in investments or making arrangements with a view to transactions in investments for another in relation to such participation or underwriting capacity.

But under section 316 of the Act (Direction by the FSA) the general prohibition does not apply to a person who is a member of the Society of Lloyd's unless the FSA has made a direction that it should apply. The general prohibition is disapplied in relation to any regulated activity carried on by a member relating to contracts of insurance written at Lloyd's. Directions can be made by the FSA in relation to individual members or the members of the Society of Lloyd's taken together. Alternatively, instead of being required to obtain authorisation, a member of the Society of Lloyd's may, as a result of a direction under section 316 of the Act, become subject to specific provisions of the Act even though he is not an authorised person.

A person who ceased to be an underwriting member at any time on or after 24 December 1996 may, without authorisation, carry out contracts of insurance he has underwritten at Lloyd's. But this is subject to any requirements or rules that the FSA may impose under sections 320 to 322 of the Act (Former underwriting members).

The general prohibition does not in certain circumstances apply to a person providing professional services that are supervised and regulated by a professional body designated by the Treasury under section 326 of the Act (Designation of professional bodies) (see PROF). Certain of the exclusions from regulated activities outlined in AUTH 2.8 and AUTH 2.9 will be relevant to members of designated professional bodies. The regime outlined below applies only where no exclusion applies and a person will be carrying on a regulated activity.

Such a person may carry on regulated activities if the conditions outlined below are met, that is the person:

1. (1)

   is not affected by an order or direction made by the FSA under section 328 or 329 of the Act (Directions and orders in relation to the general prohibition) which has the effect of re-imposing the general prohibition in any particular case.

2. (2)

   is, or is controlled by, a member of a profession.

3. (3)

   does not receive any pecuniary reward or other advantage from the regulated activities which is given to him by any person other than his client (or if he does, he must account to his client for it).

4. (4)

   provides any service in the course of carrying on the regulated activities in a manner which is incidental to the provision of professional services.

5. (5)

   carries on only those regulated activities which are permitted by the rules of the professional body or in respect of which they are an exempt person.

6. (6)

   is not an authorised person.

The regulated activities that may be carried on in this way are restricted by an Order made by the Treasury under section 327(6) of the Act (Exemption from the general prohibition). Accordingly, under that section, a person may not by way of business carry on any of the following activities without authorisation:

1. (1)

   accepting deposits;

2. (2)

   effecting or carrying out contracts of insurance;

3. (3)

   dealing in investments as principal;

4. (4)

   establishing, operating or winding up a collective investment scheme;

5. (5)

   establishing, operating or winding up a stakeholder pension scheme;

6. (6)

   managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's;

7. (7)

   entering as provider into funeral plan contracts;

8. (8)

   agreeing to do certain of the above activities.1

In addition, there are restrictions on carrying on (or agreeing to carry on) certain other regulated activities. These relate to managing investments, advising on investments or regulated mortgage contracts, advising on syndicate participation at Lloyd's and entering into a regulated mortgage contract or administering a regulated mortgage contract.1

A person carrying on regulated activities under the regime for members of the professions will be subject to rules made by the professional body designated by the Treasury. Such bodies are obliged to make rules governing the carrying on by their members of those regulated activities that they are able to carry on without authorisation under the Act. Where such a person is carrying on insurance mediation or reinsurance mediation, he must also be included on the register kept by the FSA under article 93 of the Regulated Activities Order (Duty to maintain a record of unauthorised persons carrying on insurance mediation activities) (see AUTH App 5.10 (Exemptions)).1