PERG 10.4A The application of EU Directives
1Q41A. Are pension scheme trustees and administration service providers likely to be subject to authorisation under the Investment Services Directive or subject to the Capital Adequacy Directive?
This is possible, but in many instances it is likely that pension scheme trustees and service providers will either not be providing an investment service for the purposes of, or otherwise be exempt under article 2.2 of, the Investment Services Directive. The following table expands on this in broad terms.
As for the Capital Adequacy Directive, this will only apply to persons who are ISD investment firms or BCD credit institutions.
Activity |
Potential ISD investment service? |
Potential application of ISD or of an ISD article 2.2 exemption? |
Dealing in scheme assets as trustee |
Dealing in investments for own account |
ISD will not apply provided the trustees are either not acting by way of business or otherwise are not holding themselves out as persons who provide a dealing service to third parties. This is because the trustees would not be regarded as providing an investment service to third parties on a professional basis Where the pension scheme is a collective investment undertaking, the trustee should be exempt under article 2.2(h) as depositary of the scheme |
Issuing rights under a stakeholder or personal1 pension scheme to members |
None - the rights are not ISD investments |
ISD does not apply |
Pension scheme service provider: a. dealing in scheme assets as agent for the trustees b. arranging deals in scheme assets |
a. Executing orders other than for own account b. Receiving and transmitting orders |
ISD will potentially apply where the investments are ISD financial instruments (such as shares, debt securities or units) However, many pension schemes will be employee participation schemes, the administration of which is exempt under article 2.2(d) Where the service provider is providing services exclusively for the benefit of a corporate trustee who is a member of its group, the exemption in article 2.2(b) should apply. Where the activity is receiving and transmitting orders, the intermediaries exemption in article 2.2(g)may apply Where the pension scheme is a collective investment undertaking, the scheme administrator may be exempt under article 2.2(h) as manager of the scheme |
Managing the assets of the scheme |
Investment management |
ISD will not apply to trustees provided they are either not acting by way of business or otherwise are not holding themselves out as, or additionally remunerated for, providing investment management services. This is because the trustees would not be regarded as providing an investment service to third parties on a professional basis Also, where the pension scheme is a collective investment undertaking, the scheme administrator may, and the trustee will, be exempt under article 2.2(h) in respect of anything they do in the capacity of manager or depositary of the scheme respectively |
Safeguarding and administering the scheme assets |
None |
Safekeeping and administration of investments is an ISD non-coreservice |
Establishing, operating or winding up a stakeholder or personal1 pension scheme |
None |
ISD does not apply |
Advising trustees or members or prospective members |
Investment advice |
Investment advice is an ISD non-core service |
Q41B. Will the implementation of the Markets in Financial Instruments Directive be likely to affect the current position of pension scheme trustees and administration service providers under the Investment Services Directive and the Capital Adequacy Directive?
This is unlikely to be the case. The position under the Markets in Financial Instruments Directive should not be materially different to the position under the Investment Services Directive (or, as a result, the Capital Adequacy Directive) as regards the usual activities of pension scheme trustees and administration service providers. The one possible exception to this concerns investment advice which will become an investment service for the first time under the Markets in Financial Instruments Directive. This will not apply to advice given to scheme members about their rights under the scheme as those rights will not be financial instruments for the purposes of the Directive. But the Directive will apply to advice in the form of a recommendation to scheme trustees or members about their buying or selling a particular financial instrument for the purposes of the scheme. Financial instruments will include shares, debt securities and units in a collective investment scheme but not life policies or deposits. This will be subject to the possible availability of an exemption in article 2.1 of the Directive.
Draft guidance on the changes in regulatory scope that will be caused by the implementation of the Markets in Financial Instruments Directive and its effect on the application of the Capital Adequacy Directive was issued as Annex 5 to Consultation Paper 06/9 (Organisation systems and controls) and will, in due course, form Chapter 13 to PERG.
Q41C. As a professional trustee of a pension scheme, am I affected by the implementation of the Insurance Mediation Directive?
No. A pension scheme trustee may perform tasks on behalf of the other trustees (such as signing proposal forms or giving dealing instructions to insurers or brokers or notifying claims on the death of a scheme member). But he will not be providing an insurance mediation service to them. This is because, under the policy, he will share equal rights and equal responsibility with his co-trustees and so may be regarded as acting solely in the capacity of policyholder rather than intermediary. Also, the pension scheme trustee will not be providing an insurance
mediation
service on behalf of the members as the members will not be policyholders.
Q41D. As a pension scheme administration service provider, am I affected by the implementation of the
Insurance Mediation Directive?
You may be. Detailed guidance about the potential effect of the Insurance Mediation Directive on the normal activities of administration service providers is in Q31 to Q41 and the table in Annex 3.