1This chapter applies to anyone involved in publishing periodicals, or in providing news services or broadcasts, who gives (or proposes to give) advice about securities, relevant investments or regulated mortgage contracts and who wishes to determine whether he will be carrying on the regulated activities of advising on investments or advising on regulated mortgage contracts.2

The purpose of this chapter is to provide guidance on:

1. (1)

   when a person involved in publishing periodicals, or in providing news services or broadcasts, requires authorisation to carry on the regulated activities of advising on investments or advising on regulated mortgage contracts (see AUTH 7.3 (Does the activity require authorisation)); and2

2. (2)

   if he does, whether he qualifies for the exclusion from those activities that applies to a periodical publication, a regularly updated news or information service or a television or radio service (see AUTH 7.4 (Does the article 54 exclusion apply));2

3. (3)

   if he does, whether his circumstances are an appropriate case for a certificate given by the FSA as conclusive evidence that he does qualify (see AUTH 7.5 When is it appropriate to apply for a certificate));

4. (4)

   how to apply for a certificate (see AUTH 7.6.1 G to AUTH 7.6.5 G); and

5. (5)

   how the FSA will use its power to give certificates (see AUTH 7.6.6 G to AUTH 7.6.10 G).

This guidance is issued under section 157 of the Act. The guidance represents the FSA's views and does not bind the courts, for example in relation to an action for damages brought by a private person for breach of a rule (see section 150 of the Act (Actions for damages)), or in relation to the enforceability of a contract where there has been a breach of section 19 (The general prohibition) of the Act (see section 26 of the Act (Enforceability of agreements)). Although the guidance does not bind the courts, it may be of persuasive effect for a court considering whether it would be just and equitable to allow a contract to be enforced (see section 28(3) of the Act). Anyone reading this guidance should refer to the Act and to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (the Regulated Activities Order) to find out the precise scope and effect of any particular provision referred to in the guidance and should consider seeking legal advice if doubt remains. If a person acts in accordance with the guidance in the circumstances contemplated by it, then the FSA will proceed on the footing that the person has complied with the aspects of the requirement to which the guidance relates.

Advice is excluded by article 54 of the Regulated Activities Order from the regulated activities of advising on investments and advising on regulated mortgage contracts if:1

1. (1)

   the advice is given in a publication or service that is in one of three formats (see AUTH 7.4.3 G and AUTH 7.4.4 G); and

2. (2)

   the principal purpose of the particular format is neither to give certain advice nor to lead to (or enable) certain transactions to be carried out (see AUTH 7.4.5 G and AUTH 7.4.10 G).1

If a person would, but for the exclusion, be carrying on the regulated activities of advising on investments or advising on regulated mortgage contracts, or both, and will be doing so as a business in the United Kingdom (see AUTH 7.3), he may wish to apply to the FSA for a certificate that the exclusion applies (see AUTH 7.6). However, a person does not need a certificate to get the benefit of the exclusion. In many cases it will be clear that the exclusion in article 54 applies and a certificate is not called for. A certificate may be appropriate, however, where the exclusion appears to apply but there may be an element of doubt. The granting of a certificate would remove any such doubt.1

Certificates given under paragraph 25 of Schedule 1 to the Financial Services Act 1986 (Exclusion for periodical publications giving investment advice) do not have effect after 1 December 2001. Holders of such certificates must consider their position under the terms of the new exclusion. If a person considers that a certificate might be appropriate, a new application must be made.

Under article 53 of the Regulated Activities Order (Advising on investments), advising a person is a specified kind of activity if :1

1. (1)

   the advice is given to the person in his capacity as an investor or potential investor, or in his capacity as agent for an investor or a potential investor; and

2. (2)

   it is advice on the merits of his doing any of the following (whether as principal or agent) :

   1. (a)

      buying, selling, subscribing for or underwriting a particular investment which is a security or a relevant investment; or 1

   2. (b)

      exercising any right conferred by such an investment to buy, sell, subscribe for or underwrite such an investment.

1Under Article 53A of the Regulated Activities Order (Advising on regulated mortgage contracts), advising a person is a specified kind of activity if:

1. (1)

   the advice is given to the person in his capacity as a borrower or potential borrower; and

2. (2)

   it is advice on the merits of his doing any of the following:

   1. (a)

      entering into a particular regulated mortgage contract; or

   2. (b)

      varying the terms of a regulated mortgage contract entered into by him after mortgage day in such a way as to vary his obligations under that contract.

Articles 53 and 53A of the Regulated Activities Order contain a number of elements, all of which must be present before a person will require authorisation. For guidance on whether a person is carrying on these regulated activities, see AUTH App 1 (Financial promotion and related activities) and AUTH App 4 (Guidance on regulated activities connected with mortgages).1

Under section 22 of the Act (Regulated activities), for an activity to be a regulated activity it must be carried on 'by way of business'. There is power in the Act for the Treasury to change the meaning of the business test by including or excluding certain things. It has exercised this power (see the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI No 2001/1177) (the Business Order). This has been amended by Article 18 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2003 (SI No 2003/1476) as explained in AUTH 7.3.3A G. 1

The result of the amendments made to the meaning of the business test in section 22 of the Act is that the test differs depending on the activity in question. Where the regulated activities of advising on investments and advising on regulated mortgage contracts are concerned, the business test is not to be regarded as satisfied unless a person carries on the business of engaging in those activities. This is a narrower test than that of carrying on regulated activities by way of business (as required by section 22 of the Act), as it requires the regulated activities to represent the carrying on of a business in their own right. Where the advice relates to a contract of insurance, the business test is not be regarded as satisfied unless the person carrying on the activity of giving the advice is taking up or pursuing the activity for remuneration. AUTH 2.3 (The Business element) and AUTH 2.4 (Link between activities and the United Kingdom) together with AUTH App 5.4 (The business test) provide further detail on this.1

In the FSA's view, for a person to be carrying on the business of advising on investments or advising on regulated mortgage contracts he will usually need to be doing so with a degree of regularity and for commercial purposes - that is to say, he will normally be expecting to gain some kind of a direct or indirect financial benefit. But, in the FSA's view it is not necessarily the case that advice provided free of charge will not amount to a business. Advice is often given 'free' by a journalist or presenter, or in a publication or website, in the sense that no charge is made or commission received. For example, a newspaper may reply to readers' letters to generate goodwill or to generate a supply of further material that it can publish or a website that is 'free' to the user will be sponsored or paid for by advertising. In such cases, if advice on securities, relevant investments or regulated mortgage contracts is given, then in the FSA's view the business of advising on investments or advising on regulated mortgage contracts is being carried on. In addition, non-commercial motives may be relevant in determining whether a person can be said to be carrying on the business of giving advice. For example, an investigative journal or journalist may occasionally feel that it is necessary to warn investors against the purchase of a particular investment because there are suspicions of fraud in connection with that investment. The FSA takes the view that, in such circumstances, the journal or journalist would not be regarded as carrying on the business of advising on investments or advising on regulated mortgage contracts as he would be acting to prevent crime rather than in the carrying on of a business.1

Advice given in periodicals published from an establishment in the United Kingdom is regarded by the FSA as given in the United Kingdom. A similar approach is taken to advice given in, or by way of, a service provided from such an establishment.

In other circumstances, advice issued remotely may still be given in the United Kingdom. For example, the FSA considers that advice is given in the United Kingdom if :

1. (1)

   it is contained in a non-UK periodical that is posted in hard copy to persons in the United Kingdom;

2. (2)

   it is contained in a non-UK periodical (or given in or by way of a service) which is made available electronically to such persons.

But even if advice is given in the United Kingdom, the general prohibition will not be contravened if the giving of advice does not amount to the carrying on, in the United Kingdom, of the business of advising on investments or advising on regulated mortgage contracts. Also, the general prohibition will not be contravened if the exclusion for overseas persons in article 72 of the Regulated Activities Order (Overseas persons) applies. That exclusion applies in relation to the giving of advice on securities or relevant investments by an overseas person as a result of a 'legitimate approach' (defined in article 72(7)). In many cases where publications or services are provided from outside the United Kingdom it is likely that they will fall within the terms of this exclusion. For example, this will exclude any advice in a publication or service from being a regulated activity if it is given in response to an approach that has not been solicited in any way. It should be noted, however, that the exclusions in Article 72 only apply to the regulated activity of advising on regulated mortgage contracts where both the lender and the borrower are outside the United Kingdom. The effect of this is that, where the principal purpose of an overseas periodical publication is to offer advice on securities or relevant investments and regulated mortgage contracts, the exclusion for an overseas person who provides advice to persons in the United Kingdom as a result of a legitimate approach will not apply to the advice concerning regulated mortgage contracts.1

If a person is carrying on the business of advising on investments in the United Kingdom, he will not require authorisation if:

1. (1)

   he is able to rely on an exclusion; in addition to the exclusions already mentioned (in articles 54 and 72 of the Regulated Activities Order), other exclusions that may be relevant are in Chapter XVII of Part II of the Regulated Activities Order; or

2. (2)

   he is an exempt person (see AUTH 2.11 (What to do Now?)); since persons are exempt only in relation to specified regulated activities, his exemption must apply to the regulated activity of advising on investments.

Many people may be involved in the production of a periodical publication, news service or broadcast. But if the regulated activity of advising on investments is being carried on so that authorisation is required, the FSA's view is that the person carrying on the activity (and who will require authorisation) is the person whose business it is to have the editorial control over the content. In the case of a periodical publication, this will often be the proprietor. But particular circumstances may vary so that the responsibility for content and editorial control rests with a freelance journalist rather than with the proprietor. In such cases it may well be that the journalist may properly be viewed as carrying on his own business, using the periodical publication as the vehicle for doing so - in which case it is likely to be the journalist alone who needs the authorisation.

Similar principles apply to news services and broadcasts.

The exclusion applies to advice given in one of the following formats:

1. (1)

   advice in writing or other legible form which is contained in a newspaper, journal, magazine, or other periodical publication;

2. (2)

   advice in writing or other legible form which is given by way of a service comprising regularly updated news or information;

3. (3)

   advice given in any service consisting of the broadcast or transmission of a television or radio programme.

But the exclusion applies only if the principal purpose of the publication or service is not: 1

1. (1)

   to advise on securities or relevant investments or regulated mortgage contracts: or1

2. (2)

   to lead or enable persons to:1

   1. (a)

      buy, sell, subscribe for or underwrite securities or relevant investments; or (as the case may be)1

   2. (b)

      to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by the persons to whom the advice is given as borrower.1

1. (1)

   There are two specified formats for advice appearing in writing or other legible form.

2. (2)

   The first is that of a newspaper, journal, magazine or other periodical publication. For these purposes it does not matter what form the periodical publication takes as long as it can be read. This will include, for example, a newspaper appearing as a hard copy or electronically on a website. It will also include any periodical published on an intranet site.

3. (3)

   The second is that of a regularly updated news or information service. As with periodical publications, it does not matter how the service is accessed by, or delivered to, the user as long as it can be read. This will include, for example, a service provided through teletext, a fax retrieval system or a website (including websites that are used through handheld devices). The fact that it must be a 'regularly updated' service means that the provision of up-to-date news or information must be a primary feature of the service (for example, where it is likely to be of commercial value to the recipient). But, in the FSA's view, a news or information 'service' is not restricted to the giving of only news or information since this would not generally constitute the regulated activity of advising on investments (see AUTH App 1 (Advice or information)) or advising on regulated mortgage contracts (see AUTH App 4.6.10 G (Advice or information)). So the exclusion applies to services providing material in addition to news or information, such as comment or advice.1

The third specified format is for advice in any service consisting of the broadcast or transmission of television or radio programmes. This will encompass the transmission through cable of interactive television programmes. In the FSA's view, 'service' in this context goes beyond any particular series of programmes broadcast or transmitted through a given medium. It refers instead to the administrative system (usually aimed at a particular audience) through which a range of different programmes is provided, for example any particular TV or radio channel. In the FSA's view, it is unlikely that a TV or radio service will have one of the principal purposes that would prevent its being able to rely on the exclusion unless the complete service is designed to focus on financial or investment matters.

The exclusion applies only if the principal purpose of the publication or service is not:1

1. (1)

   to give advice on securities, relevant investments or regulated mortgage contracts (see AUTH 7.3.1 G) or;1

2. (2)

   to lead or enable persons to:1

   1. (a)

      buy, sell, subscribe for or underwrite securities or relevant investments; or1

   2. (b)

      to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by persons to whom the advice is given as borrower.1

References to leading or enabling persons to do the things mentioned in (a) or (b) are abbreviated in AUTH 7.4.9 G and AUTH 7.4.11 G as leading or enabling persons 'to engage in a relevant transaction'.1

Any assessment of the principal purpose of a periodical publication, news service or broadcast needs to be carried out against the background that:

1. (1)

   they all share the characteristic of being available over a sustained period and, within that period, appearing from time to time with a different content;

2. (2)

   the same periodical publication will have many different editions;

3. (3)

   the regular updating of the news or information service will produce differences in the material provided, comparing the content of the service as it appears at any one time with its content as it appears at any other; and

4. (4)

   the programmes in a TV or radio service are bound to have a different content from each other.

To address this feature of variation in content, article 54 requires that the principal purpose of a publication or service is to be assessed by looking at the publication or service taken as a whole and including any advertisements or other promotional material contained in it. This requirement of an overall assessment of purpose or purposes goes beyond the content of any particular example of the publication or service (such as a particular edition or programme). It fixes instead on the characteristic content of the publication or service looked at over time. This judgment depends on the overall impression of content. One way of approaching this is to consider what an average consumer of a publication or service might expect to find when making a decision whether to buy a particular edition or to use the service.

Looking at the first disqualifying purpose set out in the exclusion, all the matters relevant to whether the regulated activities of advising on investments or advising on regulated mortgage contracts are being carried on must be taken into account (see AUTH App 1 Advising on investments). If the principal purpose of a publication or service is to give to persons, in their capacity as investors (or potential investors) or as borrowers (as the case may be), advice as referred to in AUTH 7.4.5 G (1), then the publication or service will not be able to benefit from this exclusion. 1

For the second disqualifying purpose, the focus switches to assessing whether the principal purpose of a publication or service is to lead a person to engage in a relevant transaction or enable him to do so. This disqualifying purpose is an alternative to the first. So it extends to material not covered by the first. In this respect :

1. (1)

   material in a publication or service that invites or seeks to procure persons to engage in a relevant transaction can be said to "lead" to those transactions even if it would not constitute the regulated activity of advising on investments or advising on regulated mortgage contracts; this includes, for example, material that consists of generic buy or sell recommendations, corporate brochures or invitations to invest in particular products or with a particular broker or fund manager; and1

2. (2)

   material enables persons to engage in a relevant transaction if it facilitates the transactions, for example by giving a user the forms that enable him to carry out relevant transactions; so this limb of the second disqualifying purpose would apply to the material providing an online dealing facility on an interactive website or to facilities for on-screen dealing through digital television.

In the FSA's view, material will not lead or enable a person to engage in a relevant transaction where the material is intended merely to raise people's awareness of matters relating to securities, relevant investments or regulated mortgage contracts.1

The test for determining the principal purpose of any publication that appears on a website, or of any news or information service on a website, is no different from any other medium. An overall view will need to be taken of all the contents of the publication or service, including any features such as chatrooms, advertisements or other promotional material.

In the context of the second disqualifying purpose, whether or not the presence of a hypertext link to another website indicates that the purposes of a publication or service include leading to relevant transactions (or enabling them to be entered into) will depend on all the circumstances. It will, in particular, be necessary to consider the form of the link and the content of the destination website. In the FSA's view, the presence on a host publication or service of a hypertext link which is only the name or logo of another website is unlikely itself to indicate that a purpose of the host website is to lead to relevant transactions (or enable them to be entered into). But if more sophisticated links, such as banners or changeable text, contain promotional material inviting or seeking to procure persons to enter into relevant transactions, those links will have to be weighed in the balance in determining the principal purpose of the publication or service hosting the link. The same applies if the host publication or service hosting the link itself contains material inviting persons to activate the link with a view to entering into relevant transactions.

In reaching a view of the principal purpose of the publication or service as a whole, all the material that falls within either the first or second disqualifying purpose must be considered together.

The persons who directly benefit from the exclusion will be the persons who would otherwise require authorisation (see AUTH 7.3.9 G), that is, the person whose business it is to have editorial control over the content of the publication or service. The exclusion will apply regardless of the legal form of the person giving the advice so, for example, it will extend to advice given by a company through its employees.1

To decide whether the exclusion in article 54 applies, three assessments need to be made :

1. (1)

   first, an assessment whether the vehicle for giving the advice is a newspaper, journal, magazine or other periodical publication, a service comprising regularly updated news or information or a service consisting of the broadcast or transmission of television or radio programmes;

2. (2)

   second, an assessment of the purpose or purposes of any particular publication or service; and

3. (3)

   third, an assessment of the relative significance of each purpose compared with any others.

Because opinions may differ in circumstances close to the borderline, giving rise to doubt as to whether or not the exclusion applies, the Regulated Activities Order makes provision for a certification process. The purpose of this process is not to provide certification for every publication or service to which the exclusion in article 54 applies.

In many cases it will be clear whether or not a publication or service benefits from the exclusion. A publication or service may provide reports on such a wide range of matters that it is not possible to say that it has any purpose other than to provide coverage of a wide range of matters. Alternatively, it may be clear that the principal purpose of a publication or service is something other than those specified in the article 54 exclusion. Examples of cases where, in the FSA's view, the exclusion is capable of applying include :

1. (1)

   national or local newspapers providing the normal range of non-financial news and coverage of other matters (such as sports, arts and leisure) and which simply contain financial journalism (such as reports on particular investments or markets) as one element of their all-round coverage;

2. (2)

   weekly or monthly journals aimed at a particular subject (such as computing or sport) but which have some coverage of, or promotional material relating to, investments and financial matters;

3. (3)

   websites which provide financial news or information;

4. (4)

   closed user group communication systems specialising in financial or investment matters; and

5. (5)

   television or radio channels dedicated to consumer affairs which devote a small number of programmes to financial planning.

It is only where there are grounds to think that there is a significant doubt as to the principal purpose of a publication or service that the question of whether or not to apply to the FSA for a certificate under article 54 of the Regulated Activities Order is expected to arise. For example, this may happen where a publication or service has several significant purposes and one of them is a disqualifying purpose referred to in the exclusion in article 54. It may on occasion be difficult to assess the relative importance of the purposes compared with each other, particularly given that over time there will be a variation in the content of the publication or service. In such cases, an application for a certificate would be appropriate.

A person considering applying for a certificate should, before sending in any application, contact the Enquiries and Applications Department (Authorisation Enquiries team) of the FSA to discuss whether a certificate may be appropriate.1

1. (1)

   An application should be made by the proprietor of the relevant publication or service using a form which can be obtained from the Enquiries and Applications Department (Authorisation Enquiries team) of the FSA. The form asks for general information about the applicant and gives guidance notes on completion and other details of how the FSA can help.1

2. (2)

   An applicant will be asked to state his own view of the principal purpose of the publication or service. This should include an explanation why the applicant believes that he qualifies for the exclusion and why he believes that a certificate may be called for.

3. (3)

   The applicant will be asked to define the extent of the publication or service for which he is seeking a certificate.

4. (4)

   The applicant will be asked to supply material to demonstrate the content of the publication or service or, in the case of a new publication or service, its proposed content. For an existing publication or service, past samples should be supplied in the form most appropriate to the medium for which certification is sought. The samples should be chosen on the basis that they are representative of the publication or service as a whole and as it appears from time to time. The applicant will be asked to justify the selection of the particular samples as being representative. For a new publication or service, samples of proposed content should be supplied. These should be as comprehensive as possible.

5. (5)

   The applicant will be asked to supply material to demonstrate that the principal purpose is not liable to change over the foreseeable future. This may, for example, include business plans, a statement of editorial policy and marketing literature.

6. (6)

   The application must be accompanied by the application fee (see AUTH 7.6.5 G).

After an application is sent in, the FSA may, on occasion, need to obtain additional information from the applicant or elsewhere to enable it to process the application.

The Act does not specify a time limit for processing the application but the FSA intends to deal with an application as quickly as possible. The more complete and relevant the information provided by an applicant, the more quickly a decision can be expected. But on occasion it may be necessary to allow time in which the FSA can monitor the content of the service. This might happen where, for example, a service is in a form that makes record keeping difficult (such as a large website with a number of hypertext links).

The fee for an application for a certificate under article 54 of the Regulated Activities Order is ???2,000 (see AUTH 4 Annex 1).

The FSA will consider any application for a certificate on its merits.

Before it gives a certificate, the FSA must be satisfied that the principal purpose of the publication or service is neither of the purposes referred to in the exclusion (see AUTH 7.4.5 G). If there is insufficient evidence, a certificate cannot be given.

The FSA will form an overall view as to the purpose (or purposes) underlying the publication or service. It will then determine whether the principal purpose is neither of those referred to in article 54 of the Regulated Activities Order. Because the possible range of subject matter covered by different publications or services is very wide it is not possible to apply standard tests. The FSA will form a judgment as to the overall impression created by the publication or service. For example, the proportion of advice, compared with other material in the publication or service, will be relevant in determining the principal purpose of the publication or service. But this will not necessarily be conclusive one way or the other. The purpose of a publication or service may still be to give advice even if only a small proportion of the space is devoted to advice as such. This might happen if, for example, a publication were marketed primarily on the basis that it contains advice on investments.

In reaching a view, the FSA will take into account both editorial and promotional material in the publication or service. It will also have regard to the stated purpose of the publication or service and to any other material relevant to its purpose.

Other factors relevant to an assessment of purpose or content of the publication or service may vary depending on the nature of the publication or service. For example, if a service is provided by a website, consideration of the content of the publication or service will take account of hypertext links and other features such as e-mail addresses, bulletin boards and chat rooms.

If the FSA decides to grant the application it will issue a certificate. The certificate will normally be granted for an indefinite period. It will state what it is that the FSA considers constitutes the periodical or service in relation to which the FSA is satisfied that the exclusion in article 54 of the Regulated Activities Order applies. In many cases this will be self-evident. But it may sometimes be necessary to include further details in the certificate indicating what the certificate covers. For example, in the case of a large website, a distinct publication or service may form part of the website. In such a case a certificate may be given for that part only.

An application may be refused on the grounds that the FSA is not satisfied that the principal purpose of the publication or service is neither of those mentioned in article 54(1)(a) or (b) of the Regulated Activities Order (see AUTH 7.4.5 G). An application may also be refused on the grounds that the FSA considers that the vehicle through which advice is to be given is not a newspaper, journal, magazine or other periodical publication, a regularly updated news or information service or a service consisting of the broadcast or transmission of television or radio programmes. Where an application is refused, the FSA will issue a notice which will give a statement of the reasons for the refusal in that case. If the application is refused, the applicant, if he is an unauthorised person, will need to consider whether it is appropriate to continue to publish the periodical or provide the service without authorisation or exemption.

If a certificate is granted then, until it is revoked, it is conclusive evidence that the exclusion under article 54 of the Regulated Activities Order applies. A person to whom a certificate is given should notify the FSA of any significant changes to the purpose or nature of the content of the relevant publication or service. The FSA will need to keep the content of the publication or service in question under review.

An annual fee of £1,000 will be charged to meet the costs of ongoing monitoring (see SUP 20 Annex 3).2

The FSA may revoke a certificate at the request of its holder or on the FSA's own initiative if the FSA considers that it is no longer justified. If the FSA revokes a certificate on its own initiative, it would normally expect to give advance notice to the holder of the certificate together with a statement of the reasons for the proposed revocation, and give the holder of the certificate an opportunity to make representations. Where a certificate is revoked, the holder of the certificate, if he is an unauthorised person, will need to consider whether it is appropriate to continue to publish the periodical or provide the service without authorisation or exemption.

The fact of a person holding a certificate granted under article 54(3) is information which may be of relevance to other persons (including investors or potential investors). For this reason, the FSA considers it appropriate that details of certificates granted under article 54(3) should be included in a list on the public record which the FSA is required to maintain under section 347 of the Act (The record of authorised persons, etc).

For further information contact the Enquiries and Applications Department (Authorisation Enquiries team) at the FSA (see AUTH 1.9.2 G).1