AUTH 2.2 Introduction

Under section 23 of the Act (Contravention of the general prohibition), a person commits a criminal offence if he carries on activities in breach of the general prohibition in section 19 of the Act (The general prohibition) (see AUTH 1.2.2 G). Although a person who commits the criminal offence is subject to a maximum of two years imprisonment and an unlimited fine, it is a defence for a person to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

Another consequence of a breach of the general prohibition is that certain agreements could be unenforceable (see sections 26 to 29 of the Act). This applies to agreements entered into by persons who are in breach of the general prohibition. It also applies to any agreement entered into by an authorised person if the agreement is made as a result of the activities of a person who is in breach of the general prohibition.

Any person who is concerned that his proposed activities may require authorisation will need to consider the following questions (these questions are a summary of the issues to be considered and have been reproduced, in slightly fuller form in the decision tree in AUTH 2 Annex 1 G):

1. (1)

   Will I be carrying on my activities by way of business (see AUTH 2.3)?

2. (2)

   Will I be managing the assets of an occupational pension scheme (see AUTH 2.3.2 G (3))?

3. (3)

   If the answer is 'Yes' to (1) or (2), will my activities involve specified investments in any way (see AUTH 2.6)?

4. (4)

   If so, will my activities be, or include, regulated activities (see AUTH 2.7)?

5. (5)

   If so, will I be carrying them on in the United Kingdom (see AUTH 2.4)?

6. (6)

   If so, will my activities be excluded (see AUTH 2.8 and AUTH 2.9)?

7. (7)

   If not, will I be exempt (see AUTH 2.10.5 G to AUTH 2.10.8 G)?

8. (8)

   If not, am I allowed to carry on regulated activities without authorisation (see AUTH 2.10.9 G to AUTH 2.10.16 G)?

9. (9)

   If not, do I benefit from the few provisions of the Act that authorise me without a permission under Part IV of the Act (see AUTH 1.2.4 G)?

10. (10)

    If not, what is the scope of the Part IV permission that I need to seek from the FSA (see AUTH 2 Annex 2 G and AUTH 3)?

The rest of this chapter provides a high level guide through the questions set out in AUTH 2.2.3 G. It aims to give an overall picture but in doing so it necessarily relies on the reader referring to statutory provisions to fill in the detail (which can be extensive).

The process of applying for Part IV permission is described in AUTH 3. But a list of the activities for which permission may be given is annexed to this chapter (see AUTH 2 Annex 2 G). You may find this helpful in providing an overview of the activities that are regulated. The list is included here because, with some exceptions, the investments and activities for which permission may be given are the same as the investments and activities specified in the Regulated Activities Order. The exceptions (which are explained in AUTH 3.4 and AUTH 3.5) involve distinctions being drawn within each of several activities and investments so specified. This creates a few additional categories for which permission must be sought.