PERG 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 PERG 2.10.5 G), recognised investment exchanges and recognised clearing houses (see PERG 2.10.6 G) and certain other persons exempt under miscellaneous provisions (see PERG 2.10.7 G) are exempt persons (although in certain circumstances, an appointed representative may not be an exempt person, but may have a limited permission to carry on certain credit-related regulated activities)5. Members of Lloyds 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.

With one exception, a5 person is exempt if they are7 an appointed representative of an authorised person. In some circumstances, however, a person may be an appointed representative and not be exempt, if the person has a limited permission for certain credit-related regulated activities.5 See SUP 12 (Appointed representatives). But where an appointed representative carries on insurance distribution or reinsurance distribution, that person7 will not be exempt unless they are7 included on the register kept by the FCA under article 93 of the Regulated Activities Order (Duty to maintain a record of unauthorised persons carrying on insurance distribution7 activities) (see PERG 5.13 (Appointed representatives)).

Investment exchanges and clearing houses can apply for recognition under Part XVIII of the Act (Recognised investment exchanges and clearing houses). Auction platforms can apply for recognition under the RAP Regulations.3 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 (the Exemption Order). 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.

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 Lloyds 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 a regulator) the general prohibition does not apply to a person who is a member of the Society of Lloyds unless the FCA or PRA 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 Lloyds. Directions can be made by the FCA or PRA in relation to individual members or the members of the Society of Lloyds 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 Lloyds. But this is subject to any requirements or rules that the PRA 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 PERG 2.8 and PERG 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 FCA 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; and

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) (the Non-Exempt Activities Order). 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. (3A)

   [deleted]8

   4
5. (3B)

   managing a UK UCITS9;

   6
6. (3C)

   acting as trustee or depositary of a UK UCITS89;

   6
7. (3D)

   managing an AIF;6

8. (3E)

   acting as trustee or depositary of an AIF;6

9. (4)

   establishing, operating or winding up a collective investment scheme;

10. (5)

    establishing, operating or winding up a stakeholder pension scheme or a personal pension scheme1;

11. (6)

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

12. (7)

    entering as provider into funeral plan contracts;

13. (7A)

    carrying out a funeral plan contract as provider;10

14. (8)

    agreeing to do certain of the above activities.

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, advising on a home finance transaction,2 advising on syndicate participation at Lloyd's, entering into a home finance transaction or administering a home finance transaction.2

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 distribution or reinsurance distribution, that person7 must also be included on the register kept by the FCA under article 93 of the Regulated Activities Order (Duty to maintain a record of unauthorised persons carrying on insurance distribution7 activities) (see PERG 5.10 (Exemptions)).