PERG 2.7 Activities: a broad outline

The following paragraphs describe the various specified activities. The exclusions relating to activities are dealt with in PERG 2.8 and PERG 2.9.

Whether or not accepting deposits is a regulated activity depends on the use to which the money is put. The activity is caught if money received by way of deposit is lent to others or if any other activity of the person accepting the deposit is financed wholly (or to a material extent) out of the capital of, or interest on, money received by way of deposit.

See PERG 2.6.4A G for a description of those persons to whom this specified activity applies.10

The activities of effecting a contract of insurance or carrying out a contract of insurance are separate regulated activities, each requiring authorisation. But this only applies where they are carried on by a person who is acting as principal. This means that the activities of agents, such as loss adjusters, will not constitute this regulated activity. The activities of some agents may, however, be regulated as insurance mediation activities (see PERG 5 (Guidance on insurance mediation activities)).

In addition, certain other activities carried on in relation to rights under contracts of insurance are regulated activities. These are where the activity is carried on in relation to:

1. (1)

   life policies, where the regulated activities concerned are:

   1. (a)

      dealing in investments as principal (see PERG 2.7.5 G);

   2. (b)

      managing investments (see PERG 2.7.8 G);

   3. (c)

      safeguarding and administering investments (see PERG 2.7.9 G); and

   4. (d)

      agreeing to carry on any of those activities (see PERG 2.7.21 G); and

2. (2)

   rights under any contract of insurance, where the regulated activities concerned are:

   1. (a)

      dealing in investments as agent (see PERG 2.7.5 G);

   2. (b)

      arranging (bringing about) deals in investments and making arrangements with a view to transactions in investments (see PERG 2.7.7A G);

   3. (c)

      assisting in the administration and performance of a contract of insurance (see PERG 2.7.8A G);

   4. (d)

      advising on investments (see PERG 2.7.15 G); and

   5. (e)

      agreeing to carry on any of those activities (see PERG 2.7.21 G).

PERG 5

(Insurance mediation

activities) has more guidance on these regulated activities where they are insurance mediation activities.

In relation to securities or life policies (or rights or interests in either), dealing as principal is only a regulated activity if certain conditions are satisfied (see PERG 2.8.4G (1)).

Both the activities of dealing in investments as principal and dealing in investments as agent are defined in terms of 'buying, selling, subscribing for or underwriting' certain investments. These investments are:

1. (1)

   for dealing in investments as principal, securities or contractually based investments (except rights under a funeral plan contract); and

2. (2)

   for dealing in investments as agent, securities and relevant investments (except rights under a funeral plan contract).

Because of the different nature of the specified investments in relation to which these activities are carried on, 'buying' and 'selling' are defined terms that have an extended meaning. For example, some of the specified investments listed in PERG 2.6 are particular things that can be bought and sold in the ordinary meaning of the words. Others fall outside the ordinary meaning of 'buy' and 'sell' because their transfer involves an assumption of a potential liability under a bilateral contract (contracts for differences are an example of this). To deal with the possible range of circumstances, 'buying' is defined in the Regulated Activities Order to include acquiring for valuable consideration. 'Selling' is defined to include disposing for valuable consideration and 'disposing' is itself given a specified meaning that covers a range of possible transactions according to the nature of the investment being transferred (including, for example, surrendering a life insurance contract).

11The RAO and the auction regulation together generate three broad categories of person in relation to bidding for emissions allowances on an auction platform:

1. (1)

   The first category consists of an investment firm to which MiFID applies and a BCD credit institution where either firm is bidding on behalf of its clients for emissions auction products or bidding on its own account for emissions auction products that are financial instruments. This category also consists of a person that is exempt from MiFID under article 2(1)(i) where it is bidding on behalf of a client of its main business or bidding on its own account (further information on the article 2(1)(i) exemption from MiFID is in PERG 13.5, Q44). A person in this category is entitled to bid on an auction platform but requires permission from the FCA for bidding in emissions auctions to do so.

2. (2)

   The second category consists of an investment firm to which MiFID applies and a BCD credit institution where either is bidding on its own account for two day emissions spot. This category also consists of operators or aircraft operators bidding on their own account as well as group entities or business groupings of those operators or public bodies or state-owned entities of Member States that control any of those operators (as set out in article 18 of the auction regulation). A person or entity in this category is entitled to bid on an auction platform but does not require permission from the FCA to do so as a result of an exclusion from the regulated activity of bidding in emissions auctions in article 24B of the RAO.

3. (3)

   The third category consists of all other persons. The auction regulation prevents an auction platform from granting these persons admission to bid. A person in this category is not entitled to bid on an auction platform and the FCA is not able to grant such a person permission to do so.

11A person may fall into both the first and the second category. For example, a person might be both exempt from MiFID under article 2(1)(i) (within the first category) and be a group entity of an operator (within the second category). In this case, that person does not require permission for activities that cause that person to fall into the second category because those activities are excluded from the activity of bidding in emissions auctions.

11Article 24A(2) of the RAO provides that bidding in emissions auctions does not form part of any other regulated activity and so, although in the FCA's view this activity broadly equates to the regulated activities of dealing in investments as principal, dealing in investments as agent, arranging (bringing about) deals in investments or making arrangements with a view to transactions in investments, a person seeking to carry on this activity will only require permission for bidding in emissions auctions to do so.

[not used]

There are ten93 arranging activities that are regulated activities under the Regulated Activities Order. These are:

1. (1)

   arranging (bringing about) deals in investments which are securities, relevant investments or the underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate (article 25(1));

2. (2)

   making arrangements with a view to transactions in investments which are securities, relevant investments or the underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate (article 25(2));

3. (3)

   arranging (bringing about) regulated mortgage contracts, which includes arranging for another person to vary the terms of a regulated mortgage contract entered into by him as borrower 3after1 31 October 2004 (article 25A(1));

   13
4. (4)

   making arrangements with a view to regulated mortgage contracts (article 25A(2));3

   3
5. (5)

   arranging (bringing about) a home reversion plan, which includes arranging for another person to vary the terms of a home reversion plan entered into by him as the original reversion provider (and not merely as a person to whom the rights or obligations or the interest in land may be transferred) or as reversion occupier on or after 6 April 2007 (article 25B(1));3

6. (6)

   making arrangements with a view to a home reversion plan (article 25B(2));3

7. (7)

   arranging (bringing about) a home purchase plan, which includes arranging for another person to vary the terms of a home purchase plan entered into by him as home purchaser on or after 6 April 2007 (article 25C(1)); 3

   9
8. (8)

   making arrangements with a view to a home purchase plan (article 25C(2));93

9. (9)

   arranging (bringing about) a regulated sale and rent back agreement, which includes arranging for another person (A) to vary the terms of a regulated sale and rent back agreement entered into on or after 1 July 2009 by A as agreement seller or agreement provider, in such a way as to vary As obligations under that agreement (article 25E(1)); and9

10. (10)

    making arrangements with a view to a regulated sale and rent back agreement (article 25E(2)).9

The activity of arranging (bringing about) deals in investments is aimed at arrangements that would have the direct effect that a particular transaction is concluded (that is, arrangements that bring it about). The activity of making arrangements with a view to transactions in investments is concerned with arrangements of an ongoing nature whose purpose is to facilitate the entering into of transactions by other parties. This activity has a potentially broad scope and typically applies in one of two scenarios. These are where a person provides arrangements 9of some kind:8

1. (1)

   to enable or assist investors to deal with or through a particular firm (such as the arrangements made by introducers); or8

2. (2)

   to facilitate the entering into of transactions directly by the parties (such as multilateral trading facilities of any kind other than those excluded under article 25(3) of the Regulated Activities Order, exchanges, clearing houses and service companies (for example, persons who provide communication facilities for the routing of orders or the negotiation of transactions)).8

8It is of note, however, that the regulated activity of making arrangements with a view to transactions in investments is not limited to arrangements that are participated in by investors. It is also not necessary that both the buyer and the seller under the transaction that is being arranged should participate in the arrangements. So, arrangements may come within the activity if they are participated in only by product companies with a view to their issuing investments. A person may be carrying on this regulated activity even if he is only providing part of the facilities for bringing about a transaction.

8It is also the FCA's view that certain arrangements may come within the activity even though the parties may have already committed to the transaction using other arrangements. This would typically apply to a clearing house whose clearing and settlement facilities may be seen to be made with a view to the members of the clearing house, as participants in its arrangements, entering into transactions (usually through an investment exchange) which must be cleared through the clearing house to be completed. The clearing house is providing an essential part of the market infrastructure that is necessary to support trading activities. The same principle applies outside the markets context. So for example if a company that wishes to raise capital from private investors tells the potential investors, in order to increase their confidence, that all aspects of paying for and issuing shares will be handled by a particular firm, that firm may come within article 25(2) when it provides those services.

8In the FCA's view, it is generally the case that providers of back office administration services do not carry out the regulated activity of making arrangements with a view to transactions in investments. This is based essentially on the fact that providers of back office administration services aim to assist a broker firm to deal with the aftermath of transactions it has entered into on behalf of its clients. The broker firm has assumed full responsibility to its clients for completing their transactions, thus enabling the view to be taken that the firm to whom it outsources functions is making arrangements to assist the broker to complete transactions rather than with a view to the broker entering into trades as agent for its clients. The provider of back office services does not carry out the regulated activity of making arrangements with a view to transactions in investments because the transaction has already been entered into by the time of its involvement.

1. (1)

   8The scope of article 25(2) of the Regulated Activities Order (the subject of PERG 2.7.7B G) was considered by the High Court in the case of Watersheds Limited v. David Da Costa and Paul Gentlemen. The judgement suggests that the activity of introducing does not itself constitute a regulated activity for the purposes of article 25(2) of the Regulated Activities Order. The FCA has considered whether the judgement necessitates any change to the views expressed in PERG 2.7.7B G and elsewhere in PERG. It appears to the FCA that the judgement should be considered in the light of the case to which it relates.

2. (2)

   Also, the court does not seem to have had the benefit of a relevant argument. The Regulated Activities Order provides an exclusion which has the effect of removing certain arrangements for making introductions from the scope of article 25(2) of the Regulated Activities Order. This exclusions can be found in article 33 of the Regulated Activities Order (guidance on this can be found in PERG 8.33 and PERG 5.6.17 G to PERG 5.6.21 G). This exclusions would not be necessary if all introductions were outside the scope of article 25(2) of the Regulated Activities Order. Support for this can also be found in the fact that article 25A(2) is very similar to article 25(2) and there is an exclusion from it for certain introductions. The exclusion is in article 33A of the Regulated Activities Order and guidance on it can be found in PERG 4.5.10 G and the following paragraphs. For these reasons, the FCA remains of the view that article 25(2) of the Regulated Activities Order includes certain types of arrangements for making introductions whilst recognising that the judgement in the Watersheds case introduces an element of doubt.

8In determining whether particular arrangements fall within the scope of Article 25(2) of the Regulated Activities Order, it may be necessary to consider the purpose of the arrangements. Further guidance on this can be found in PERG 8.32.3G. Although this guidance is in relation to the activities of publishers, broadcasters, website operators and telephone marketing services, the principle is not limited to those activities.

8In the FCA's view, a mere passive display of literature advertising investments would not amount to the article 25(2) activity. Further guidance on this point can be found in PERG 5.6.4 G. Although this guidance is in relation to contracts of insurance, the principle is not limited to them.

Further guidance on the arranging activities as they relate to home finance transactions and contracts of insurance is in PERG 4.5 (Arranging regulated mortgage contracts), PERG 14.3 and PERG 14.4 (Guidance on home reversion and home purchase activities)3 and PERG 5.6 (The regulated activities: arranging deals in, and making arrangements with a view to transactions in, contracts of insurance) respectively.

5Guidance on the MiFID investment service of operating a multilateral trading facility is given in PERG 13, Q24. So far as the regulated activity of operating a multilateral trading facility is concerned, this does not comprise the activities of dealing in investments as agent, dealing in investments as principal, or arranging deals in investments. Where a firm carries on one or more of these activities in addition to operating a multilateral trading facility, these are separate regulated activities for which it requires permission.

15There are six activities that fall within credit broking. These are:

1. (1)

   effecting an introduction of an individual who wishes to enter into a credit agreement to another person, with a view to that person entering as lender into a credit agreement by way of business;

2. (2)

   effecting an introduction of an individual who wishes to enter into a consumer hire agreement to another person, with a view to that person entering as owner into a consumer hire agreement by way of business (except where the exemption relating to the supply of essential services would apply to the consumer hire agreement, see PERG 2.7.19O G);

3. (3)

   effecting an introduction of an individual who wishes to enter into a credit agreement or a consumer hire agreement to a person who carries on an activity in (1) or (2) by way of business;

4. (4)

   presenting or offering an agreement which would (if entered into) be a credit agreement;

5. (5)

   assisting an individual by undertaking preparatory work with a view to that person entering into a credit agreement;

6. (6)

   entering into a credit agreement on behalf of a lender.

15An activity is not credit broking within PERG 2.7.7EG (1), PERG 2.7.7EG (4), PERG 2.7.7EG (5) or PERG 2.7.7EG (6) if the exemption relating to the number of repayments to be made would apply to the credit agreement, see PERG 2.7.19G G.

15An activity is also not credit broking within PERG 2.7.7EG (1) to PERG 2.7.7EG (6) in so far as the activity is operating an electronic system in relation to lending, see PERG 2.7.7H G.

1. (1)

   15This activity is aimed at what are sometimes referred to as peer-to-peer lending platforms. A person ("A") will be operating an electronic system in relation to lending if he operates an electronic system which enables him to facilitate persons ("B" and "C") becoming the lender and borrower under an article 36H agreement.

2. (2)

   To be caught, all of the following conditions must be met:

   1. (a)

      the electronic system operated by A must be capable of determining which agreements should be made available to each of B and C (whether in accordance with general instructions provided to A by B or C or otherwise);

   2. (b)

      A, or another person (“X”) acting under an arrangement with A or at A’s direction, undertakes to:

      1. (i)

         receive payments in respect of interest and capital due under the article 36H agreement from C; and

      2. (ii)

         make payments in respect of interest and capital due under the article 36H agreement to B; and

   3. (c)

      A, or another person ("X") acting under an arrangement with A or at A's direction, undertakes to perform, or A undertakes to appoint or direct another person to perform either or both of the following activities:

      1. (i)

         taking steps to procure the payment of a debt under the article 36H agreement;

      2. (ii)

         exercising or enforcing rights under the article 36H agreement on behalf of B.

3. (3)

   For the purposes of (2)(b):

   1. (a)

      an agreement by A to appoint X to perform the activities is to be treated as an undertaking by A; and

   2. (b)

      it is immaterial that:

      1. (i)

         payments may be subject to conditions;

      2. (ii)

         A, or X, may be entitled to retain a portion or the entirety of any payment received from C.

4. (4)

   An article 36H agreement is an agreement by which one person provides another person with credit and either:

   1. (a)

      the lender is an individual; or

   2. (b)

      the borrower is an individual; and

      1. (i)

         the amount of credit provided is less than or equal to £25,000; or

      2. (ii)

         the agreement is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower. If the agreement includes a declaration by the borrower that it is entered into by the borrower wholly or predominantly for business purposes, this may create a presumption that this is the case (see PERG 2.7.19D G).

5. (5)

   An agreement may be an article 36H agreement and not a credit agreement, for example if it is an agreement by which an individual provides credit to a company. An agreement may, equally, be both an article 36H agreement for the purposes of operating an electronic system in relation to lending and a credit agreement for the purposes of other credit-related regulated activities if it is within the relevant definitions.

6. (6)

   It is immaterial whether the lender is carrying on a regulated activity.

7. (7)

   The following activities are also caught by operating an electronic system in relation to lending if carried on by the operator in the course of, or in connection with, the activity in (1):

   1. (a)

      presenting or offering article 36H agreements to B and C with a view to B becoming the lender under the article 36H agreement and C becoming the borrower under the article 36H agreement;

   2. (b)

      furnishing information relevant to the financial standing of a person to assist a potential lender to determine whether to provide credit to that person under an article 36H agreement;

   3. (c)

      taking steps to procure the payment of a debt due under an article 36H agreement;

   4. (d)

      performing duties, or exercising or enforcing rights under an article 36H agreement on behalf of the lender;

   5. (e)

      ascertaining whether a credit information agency holds information relevant to the financial standing of an individual;

   6. (f)

      ascertaining the contents of such information;

   7. (g)

      securing the correction of, the omission of anything from, or the making of any other kind of modification of, such information; or

   8. (h)

      securing that a credit information agency which holds such information stops holding the information, or does not provide it to any other person.

The regulated activity of managing investments includes several elements.

1. (1)

   First, a person must exercise discretion. Non-discretionary portfolio management (where the manager buys and sells, as principal or agent, on the instructions of some other person) is not caught by this activity, although it may be caught by a different regulated activity such as the activity of dealing in investments as principal or dealing in investments as agent. The discretion must be exercised in relation to the composition of the portfolio under management and not in relation to some other function (such as proxy voting) carried on by the manager.

2. (2)

   Second, the property that is managed must belong beneficially to another person. This excludes from the regulated activity the management by a person of his own property. But discretionary management of assets by a person acting in his capacity as trustee will be caught even though he is the legal owner of the assets.

3. (3)

   Third, the property that is managed must consist of (or include) securities or contractually based investments. Alternatively, discretionary management will generally be caught if it is possible that the property could consist of or include such securities or investments. This is the case even if there never has been any investment in securities or contractually based investments, as long as there have been representations that there would be.

The activity of assisting in the administration and performance of a contract of insurance is a regulated activity that is identified in the Insurance Mediation Directive. Further guidance on this activity is in PERG 5.7 (The regulated activities: assisting in the administration and performance of a contract of insurance).

15This activity comprises:

1. (1)

   negotiating with the lender or owner, on behalf of the borrower or hirer, terms for the discharge of a debt;

2. (2)

   taking over, in return for payments by the borrower or hirer, that person's obligation to discharge a debt; or

3. (3)

   any similar activity concerned with the liquidation of a debt;

when carried on in relation to debts due under a credit agreement or consumer hire agreement.

15Giving advice to a borrower about the liquidation of a debt due under a credit agreement is a regulated activity. Giving advice to a hirer about the liquidation of a debt due under a consumer hire agreement is a regulated activity. See PERG 17 for further guidance on debt-counselling.

1. (1)

   15Taking steps to procure the payment of a debt due under a credit agreement or a consumer hire agreement is a regulated activity.

2. (2)

   Taking steps to procure the payment of a debt due under an article 36H agreement (see PERG 2.7.7HG (3)) which has been entered into with the facilitation of an operator of an electronic system in relation to lending is also a regulated activity.

3. (3)

   The activity is not a regulated activity in so far as the activity is operating an electronic system in relation to lending (article 36H of the Regulated Activities Order) see PERG 2.7.7H G.

1. (1)

   15Taking steps to perform duties or to exercise or to enforce rights under a credit agreement or a consumer hire agreement on behalf of the lender or owner is a regulated activity.

2. (2)

   Taking steps to perform duties or to exercise or to enforce rights under an article 36H agreement (see PERG 2.7.7HG (3)) which has been entered into with the facilitation of an operator of an electronic system in relation to lending is also a regulated activity.

3. (3)

   In so far as the activity is operating an electronic system in relation to lending (article 36H of the Regulated Activities Order, see PERG 2.7.7H G) or debt-collecting (article 39F of the Regulated Activities Order) it is not also debt administration.

The activity of safeguarding and administering investments belonging to another is regulated, as is providing a service under which a person undertakes to arrange on a continuing basis for others actually to carry out the safeguarding and administering. In each case, both the elements of safeguarding and administering must be present before a person will be said to carry on the activity.

1. (1)

   Safeguarding is acting as custodian of the property, for example, holding any documents evidencing the investments such as the share certificate (although it is worth noting that there is express provision that an uncertificated investment may be safeguarded and administered).

2. (2)

   Administration covers services provided to the owner or manager of the property, such as settlement of sale transactions relating to an investment, dealing with income arising from the investment and carrying out corporate actions such as voting. The nature of administration services must be such that the custodian has no discretion (otherwise he is likely to be caught by the regulated activity of managing investments (see PERG 2.7.8 G)).

The property that is safeguarded and administered must belong beneficially to another person. It must consist of (or include) securities or contractually based investments. Alternatively, safeguarding and administration will generally be caught if it is possible that the property could consist of (or include) such securities or investments. This is the case even if the property in question has never consisted of (or included) such securities or investments, as long as there have been representations that it would do.

The regulated activities relating to sending dematerialised instructions relate to the operation of the system for electronic transfer of title to securities or contractually based investments. This is the CREST settlement14 system maintained under the Uncertificated Securities Regulations 2001 (SI 2001/3755) (and currently operated by Euroclear UK & Ireland Limited14 ). Sending instructions on behalf of another is a regulated activity, as is causing such instructions to be sent if the person causing the sending is a system-participant, as defined in those Regulations. A system-participant is the person who has the computer and network connection to CREST.

16There are five regulated activities associated with UCITS, AIFs and collective investment schemes:

1. (1)

   managing a UCITS;

2. (2)

   acting as trustee or depositary of a UCITS;

3. (3)

   managing an AIF;

4. (4)

   acting as trustee or depositary of an AIF; and

5. (5)

   establishing, operating and winding up a collective investment scheme.

16The activity of managing a UCITS is derived from the UCITS Directive. A person will manage a UCITS where they carry on collective portfolio management of a UCITS. A UCITS is a type of collective investment scheme which is authorised by a competent authority in an EEA State as meeting the requirements under the UCITS Directive.

16A person will carry on the activity of acting as trustee or depositary of a UCITS if they act as:

1. (1)

   trustee of an authorised unit trust scheme; or

2. (2)

   depositary of an investment company with variable capital or an authorised contractual scheme;

where, in either case, the scheme or company is a UCITS.

16PERG 16 provides guidance on the activities of managing an AIF (see PERG 16.3) and acting as trustee or depositary of an AIF (see PERG 16.4).

16Most collective investment schemes will also be either a UCITS or an AIF (although not all AIFs are collective investment schemes). As a result, there is a potential overlap between the activity of establishing, operating and winding up a collective investment scheme and the activities of managing a UCITS and managing an AIF. However, there are exclusions in the RAO which considerably reduce the overlap (see PERG 2.8.10G (2) and PERG 16.5).

16An open-ended investment company will, once it is authorised under regulations made under section 262 of the Act, become an authorised person in its own right under Schedule 5 to the Act (Persons concerned in Collective Investment Schemes). Under ordinary principles, a company operates itself and an authorised open-ended investment company will be operating the collective investment scheme constituted by the company. It is not required to go through a separate process of authorisation as a person because it has already undergone the process of product authorisation.

16Operators, trustees or depositaries of UCITS established in other EEA States are also authorised persons under Schedule 5 of the Act if those schemes are recognised schemes for the purposes of section 264 of the Act.

The regulated activities carried on in relation to pension schemes2 are establishing, operating or winding up a stakeholder pension scheme and establishing, operating or winding up a personal pension scheme.2 The identity of the operator of such a pension scheme depends on the facts. However, the scheme administrator will usually be the operator of the scheme either on its own or jointly with the scheme trustees. More detailed guidance on the scope of this activity is in PERG 12(Q4).2

This activity covers advice in the form of a recommendation given to a retail consumer. The recommendation must relate to a stakeholder product and certain conditions must be met. These conditions are based on the need for the adviser to make an assessment of the consumer's needs based on the answers that the consumer provides to a series of pre-scripted questions. A fuller description of the activity is given in PERG 2.7.14B G and explains what is meant by "retail customer". This activity is separate to the regulated activity of advising on investments (see PERG 2.7.15 G (Advising on investments)). The existence of this separate advising activity does not prevent a person from giving advice on stakeholder products in circumstances that do not satisfy the conditions set out in PERG 2.7.14B G. But such advice is likely to amount to advising on investments unless the stakeholder product is a deposit. Neither does the existence of the activity prevent a person from selling stakeholder products in any other manner provided the person has the appropriate permission.

A person ('P') carries on the regulated activity of providing basic advice on a stakeholder product when:

1. (1)

   P gives the advice:

   1. (a)

      to a person ('C') who does not receive the advice in the course of a business that he carries on; and

   2. (b)

      in the course of a business that P carries on;

2. (2)

   the advice is on the merits of C opening or buying a stakeholder product;

3. (3)

   the following conditions are met:

   1. (a)

      P asks C questions to enable P to assess whether a stakeholder product is appropriate for C;

   2. (b)

      if P, relying solely on the information provided by C in response to the questions referred to in (a), assesses that a stakeholder product is appropriate for C, P:

      1. (i)

         describes that product to C; and

      2. (ii)

         gives a recommendation of that product to C; and

4. (4)

   C has indicated to P that he has understood the description and recommendation referred to in (3)(b).

The regulated activity of advising on investments under article 53 of the Regulated Activities Order applies to advice on securities or relevant investments. It does not, for example, include giving advice about deposits, or about things that are not specified investments for the purposes of the Regulated Activities Order (such as interests under the trusts of an occupational pension scheme). Giving advice on certain other specified investments is, however, regulated under other parts of the Regulated Activities Order (see PERG 2.7.16A G and PERG 2.7.17G (2). Giving a person generic advice about specified investments (for example, invest in Japan rather than Europe) is not a regulated activity nor is giving information as opposed to advice (for example, listings or company news). However, the context in which something is communicated may affect its character; for example, if a person gives information on share price against the background that, when he does so, that will be a good time to sell, then this will constitute advising on investments.

The advice must also be given to someone who holds specified investments or is a prospective investor (including trustees, nominees or discretionary fund managers). This requirement excludes advice given to a person who receives it in another capacity. An example of this might be a tax professional to whom advice is given to inform the practice of his profession or advice given to an employer for the purposes of setting up a group personal pension scheme. Further guidance on the meaning of advising on investments is in PERG 8.24 (Advising on investments).

In certain circumstances, the activity of advising on investments can also amount to providing basic advice on a stakeholder product (see PERG 2.7.14A G (Providing basic advice on stakeholder products)).

Under article 53A of the Regulated Activities Order, giving advice to a person in his capacity as borrower or potential borrower is a regulated activity if it is advice on the merits of the person:

1. (1)

   entering into a particular regulated mortgage contract; or

2. (2)

   varying the terms of a regulated mortgage contract.

Advice on varying terms as referred to in (2) comes within article 53A only where the borrower entered into the regulated mortgage contract on or after 31 October 2004 and the variation varies the borrower's obligations under the contract. Further guidance on the scope of the regulated activity under article 53A is in PERG 4.6 (Advising on regulated mortgage contracts).

3Under article 53B of the Regulated Activities Order, giving advice to a person in his capacity as reversion occupier or reversion provider is a regulated activity if it is advice on the merits of the person:

1. (1)

   entering into a particular home reversion plan; or

2. (2)

   varying the terms of a home reversion plan.

Advice on varying terms as referred to in (2) only comes within article 53B where the plan was entered into by the person on or after 6 April 2007 and the variation varies his obligations under the plan. Where a person is entering into the plan as reversion provider purely as a result of rights or obligations, or the interest in land, being transferred to him, advice given to him on the merits of the transaction is only regulated where the plan was originally entered into on or after 6 April 2007. Further guidance on the scope of the regulated activity under article 53B is in PERG 14.3 (Guidance on home reversion and home purchase activities).

3Under article 53C of the Regulated Activities Order, giving advice to a person in his capacity as home purchaser is a regulated activity if it is advice on the merits of the person:

1. (1)

   entering into a particular home purchase plan; or

2. (2)

   varying the terms of a home purchase plan.

Advice on varying terms as referred to in (2) only comes within article 53C where the plan is entered into by the person on or after 6 April 2007 and the variation varies the person's obligations under the plan. Further guidance on the scope of the regulated activity under article 53C is in PERG 14.4 (Guidance on home reversion and home purchase activities).

9Under article 53D of the Regulated Activities Order giving advice to a person in his capacity as an SRB agreement seller or an SRB agreement provider is a regulated activity if it is advice on the merits of the person:

1. (1)

   entering into a particular regulated sale and rent back agreement; or

2. (2)

   varying the terms of a regulated sale and rent back agreement.

Advice on varying terms as referred to in (2) only comes within article 53D where the agreement is entered into by the person on or after 1 July 2009 and the variation varies the person's obligations under the agreement. Further guidance on the scope of the regulated activity under article 53D is in PERG 14.4A (Activities relating to regulated sale and rent back agreements).

Certain activities carried on in connection with business at Lloyds will be regulated. In addition to those already mentioned (arranging deals in the underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate), there are three other regulated activities as follows.

1. (1)

   Managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's is a regulated activity. 'Managing agent' is defined in article 3(1) of the Regulated Activities Order.

2. (2)

   Advising on syndicate participation at Lloyd's, that is advising a person to become, or continue or cease to be, a member of a particular syndicate is also caught. Giving advice about syndicate participation (such as how members should use their capital within the market and arrange their syndicate participation) is a separate regulated activity to that of providing advice in relation to securities and contractually based investments (see PERG 2.7.15 G). Appropriate permission will be needed.

3. (3)

   Arranging deals in contracts of insurance written at Lloyd's is also a regulated activity for the Society of Lloyd's itself.

Entering as provider into a funeral plan contract is a regulated activity. The 'provider' is the person to whom the pre-payments are made and who undertakes to provide, or secure the provision of, the funeral at some future point. He may be the funeral director or a third party who arranges for another person to provide the funeral. Certain types of funeral plan contract are excluded (see PERG 2.8.14 G).

In addition, other activities carried on in relation to rights under certain funeral plan contracts are regulated (see PERG 2.7.5 G to PERG 2.7.11 G and PERG 2.7.15 G and PERG 2.7.16 G). This is because such rights are classified as contractually based investments.

1. (1)

   15Entering into a regulated credit agreement as lender is a regulated activity.

2. (2)

   It is also a regulated activity for the lender or another person to exercise, or to have the right to exercise, the lender's rights and duties under a regulated credit agreement.

15A credit agreement is not a regulated credit agreement for the purposes of PERG 2.7.19A G if it is an exempt agreement17. PERG 2.7.19C G to PERG 2.7.19J G describe the categories of exempt agreement.

15A credit agreement is an exempt agreement17 in the following cases:

1. (1)

   if it is a regulated mortgage contract or a home purchase plan;

2. (2)

   if:

   1. (a)

      the lender provides the borrower with credit exceeding £25,000; and

   2. (b)

      the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower;

3. (3)

   if:

   1. (a)

      the lender provides the borrower with credit of £25,000 or less; and

   2. (b)

      the agreement is entered into by the borrower wholly for the purposes of a business carried on, or intended to be carried on, by the borrower; and

   3. (c)

      the agreement is a green deal plan;

4. (4)

   if it is made in connection with trade in goods or services:

   1. (a)

      between the United Kingdom and a country outside the United Kingdom; or

   2. (b)

      within a country outside the United Kingdom; or,

   3. (c)

      between countries outside the United Kingdom; and

   the credit is provided to the borrower in the course of a business carried on by the borrower.

15If a credit agreement includes a declaration which:

1. (1)

   is made by the borrower;

2. (2)

   provides that the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower; and

3. (3)

   complies with the rules in CONC App 1.4;

the credit agreement is to be presumed to have been entered into by the borrower wholly or predominantly for business purposes. This presumption does not apply, however, if the lender or any person who has acted on behalf of the lender knows or has reasonable cause to suspect that the agreement is not entered into by the borrower wholly or predominantly for business purposes. This also applies to the exemption in PERG 2.7.19CG (3), as if the word "predominantly" were omitted.

15A credit agreement is an exempt agreement17 if, at the time it is entered into:

1. (1)

   any sums due under it are secured by a legal or equitable mortgage on land; and

2. (2)

   less than 40% of the land is used, or is intended to be used, as or in connection with a dwelling:

   1. (a)

      by the borrower or a related person of the borrower; or

   2. (b)

      in the case of credit provided to trustees, by an individual who is a beneficiary of the trust or a related person of a beneficiary

3. (3)

   For these purposes, a person is related to a borrower or a beneficiary of a trust if they are a spouse or civil partner, or a parent, brother, sister, child, grandparent or grandchild of the borrower or beneficiary or if their relationship with the borrower or beneficiary has the characteristics of the relationship between husband and wife.

4. (4)

   This exemption is intended to mirror the definition of regulated mortgage contract so that buy-to-let loans (that are not secured by a legal mortgage on the borrower's or a related person's residence) are not regulated either as regulated mortgage contracts or as regulated credit agreements.

15A credit agreement is an exempt agreement17 in the following cases:

1. (1)

   if the credit agreement is a relevant credit agreement relating to the purchase of land and the lender is a local authority;

2. (2)

   if the credit agreement is a relevant credit agreement relating to the purchase of land specified in CONC App 1.3 and the lender is a person or within a class of persons specified in CONC App 1.3;

3. (3)

   if the credit agreement is secured by a legal or equitable mortgage on land, that land is used or is intended to be used as, or in connection with, a dwelling and the lender is a housing authority; or

4. (4)

   If the lender is an investment firm or a credit institution , and the agreement is entered into for the purpose of allowing the borrower to carry out a transaction relating to one or more financial instruments.

15A credit agreement is also an exempt agreement in the following cases:

1. (1)

   if (subject to PERG 2.7.19H G):

   1. (a)

      the agreement is a borrower-lender-supplier agreement for fixed-sum credit;

   2. (b)

      the number of payments to be made by the borrower is not more than four;

   3. (c)

      those payments are required to be made within a period of 12 months or less (beginning on the date of the agreement); and

   4. (d)

      the credit is:

      1. (i)

         secured on land; or

      2. (ii)

         provided without interest or other charges;

2. (2)

   if (subject to PERG 2.7.19H G):

   1. (a)

      the agreement is a borrower-lender-supplier agreement for running-account credit;

   2. (b)

      the borrower is to make payments in relation to specified periods which must be, unless the agreement is secured on land, of three months or less;

   3. (c)

      the number of payments to be made by the borrower in repayment of the whole amount of credit provided in each period is not more than one; and

   4. (d)

      the credit is:

      1. (i)

         secured on land; or

      2. (ii)

         provided without interest or other significant charges;

3. (3)

   if:

   1. (a)

      the agreement is a borrower-lender-supplier agreement financing the purchase of land;

   2. (b)

      the number of payments to be made by the borrower is not more than four; and

   3. (c)

      the credit is:

      1. (i)

         secured on land; or

      2. (ii)

         provided without interest or other charges;

4. (4)

   if:

   1. (a)

      the agreement is a borrower-lender-supplier agreement for fixed-sum credit;

   2. (b)

      the credit is to finance a premium under a contract of insurance relating to land or anything on land (for example, house or contents insurance);

   3. (c)

      the lender is the lender under a credit agreement secured by a legal or equitable mortgage on that land;

   4. (d)

      the credit is to be repaid within the period (which must be 12 months or less) to which the premium relates;

   5. (e)

      in the case of an agreement secured on land, there is no charge forming part of the total charge for credit under the agreement (see CONC App 1) other than interest at a rate not exceeding the rate of interest payable under the mortgage loan in (c);

   6. (f)

      in the case of an agreement which is not secured on land, the credit is provided without interest or other charges; and

   7. (g)

      the number of payments to be made by the borrower is not more than 12;

5. (5)

   if:

   1. (a)

      the agreement is a borrower-lender-supplier agreement for fixed-sum credit;

   2. (b)

      the lender is the lender under a credit agreement secured by a legal or equitable mortgage on land;

   3. (c)

      the agreement is to finance a premium under a life insurance policy that meets certain conditions;

   4. (d)

      in the case of an agreement secured on land, there is no charge forming part of the total charge for credit under the agreement (see CONC App 1) other than interest at a rate not exceeding the rate of interest payable under the mortgage loan in (b);

   5. (e)

      in the case of an agreement which is not secured on land, the credit is provided without interest or other charges; and

   6. (f)

      the number of payments to be made by the borrower is not more than 12.

15The exemptions in PERG 2.7.19GG (1) and PERG 2.7.19GG (2) do not apply to:

1. (1)

   credit agreements financing the purchase of land;

2. (2)

   conditional sale agreements or hire-purchase agreements; or

3. (3)

   credit agreements secured by a pledge (other than a pledge of documents of title or of bearer bonds).

15A credit agreement is also an exempt agreement17 in the following cases:

1. (1)

   if it is a borrower-lender agreement, the lender is a credit union and the rate of the total charge for credit (see CONC App 1) does not exceed 42.6 per

   cent;

2. (2)

   if (subject to (5) and (6)):

   1. (a)

      it is a borrower-lender agreement;

   2. (b)

      it is offered to a particular class of individual and not offered to the public generally;

   3. (c)

      it provides that the only charge included in the total charge for credit (see CONC App 1) is interest; and

   4. (d)

      interest under the agreement may not, at any time, be more than the sum of one per cent and the highest of the base rates published by the banks in (4) on the date 28 days before the date on which the interest is charged;

3. (3)

   if (subject to (5) and (6)):

   1. (a)

      it is a borrower-lender agreement;

   2. (b)

      it is an agreement of a kind offered to a particular class of individual and not offered to the public generally;

   3. (c)

      it does not provide for or permit an increase in the rate or amount of any item which is included in the total charge for credit (see CONC App 1); and

   4. (d)

      the total charge for credit under the agreement is not more than the sum of one per cent and the highest of the base rates published by the banks in (4) on the date 28 days before the date on which the charge is imposed;

4. (4)

   the banks (referred to in (3)(d)) are:

   1. (a)

      the Bank of England;

   2. (b)

      Bank of Scotland;

   3. (c)

      Barclays Bank plc;

   4. (d)

      Clydesdale Bank plc;

   5. (e)

      Co-operative Bank Public Limited Company;

   6. (f)

      Coutts & Co;

   7. (g)

      National Westminster Bank Public Limited Company;

   8. (h)

      the Royal Bank of Scotland plc;

5. (5)

   the exemptions in (2) and (3) do not apply, however, if the total amount to be repaid by the borrower may vary according to a formula which is specified in the agreement and which has effect by reference to movements in the level of any index or other factor;

6. (6)

   unless the agreement:

   1. (a)

      is secured on land; or

   2. (b)

      is offered by a lender who is an employer to a borrower as an incident of employment with the lender;

   the exemptions in (2) and (3) apply only if:

   1. (c)

      the agreement is offered under an enactment with a general interest purpose; and

   2. (d)

      the terms on which the credit is provided are more favourable to the borrower than those prevailing on the market, either because the rate of interest is lower than that prevailing on the market or because the rate of interest is no higher than that prevailing on the market, but the other terms on which credit is provided are more favourable to the borrower.

15A credit agreement is an exempt agreement17 if:

1. (1)

   the borrower is an individual;

2. (2)

   the agreement is either secured on land or for credit which exceeds £60,260;

3. (3)

   the agreement includes a declaration, made by the borrower which provides that the borrower agrees to forgo the protection and remedies that would be available to the borrower if the agreement were a regulated credit agreement, which complies with CONC App 1.4;

4. (4)

   a statement has been made in relation to the income or assets of the borrower which complies with CONC App 1.4; and

5. (5)

   the connection between that statement and the credit agreement complies with CONC App 1.4; and

6. (6)

   a copy of that statement was provided to the lender before the agreement was entered into.

1. (1)

   15Entering into a regulated consumer hire agreement as owner is a regulated activity.

2. (2)

   It is also a regulated activity for the owner or another person to exercise, or to have the right to exercise, the owner's rights and duties under a regulated consumer hire agreement.

15A consumer hire agreement is not a regulated consumer hire agreement for the purposes of PERG 2.7.19K G if it is an exempt agreement17. PERG 2.7.19M G to PERG 2.7.19P G describe the categories of exempt agreement17.

15A consumer hire agreement is an exempt agreement17 if the hirer is required by the agreement to make payments exceeding £25,000, and the agreement is entered into by the hirer wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the hirer.

15As in the case of a credit agreement (see PERG 2.7.19D G), if a consumer hire agreement includes a declaration which:

1. (1)

   is made by the hirer;

2. (2)

   provides that the agreement is entered into by the hirer wholly or predominantly for business purposes; and

3. (3)

   complies with CONC App 1.4;

the consumer hire agreement is to be presumed to have been entered into by the hirer for business purposes. This presumption does not apply, however, if the owner or any person who has acted on behalf of the owner knows, or has reasonable cause to suspect, that the agreement is not entered into by the hirer for business purposes.

15A consumer hire agreement is an exempt agreement17 if the owner is a body corporate which supplies gas, electricity or water under an enactment and the subject of the agreement is a meter or metering equipment which is used in connection with that purpose.

15This exemption is substantially the same as the one for credit agreements in PERG 2.7.19J G.

Entering into as lender, and administering, a regulated mortgage contract are regulated activities under article 61 of the Regulated Activities Order (Regulated mortgage contracts). Guidance on these regulated activities is in PERG 4.7 (Entering into a regulated mortgage contract) and PERG 4.8 (Administering a regulated mortgage contract).

3Entering into a home reversion plan and administering a home reversion plan are regulated activities under article 63B of the Regulated Activities Order (Regulated home reversion plans). Guidance on these regulated activities is in PERG 14.3 (Guidance on home reversion and home purchase activities).

3Entering into a home purchase plan and administering a home purchase plan are regulated activities under article 63F of the Regulated Activities Order (Regulated home purchase plans). Guidance on these regulated activities is in PERG 14.4 (Guidance on home reversion and home purchase activities).

9Entering into a regulated sale and rent back agreement as an agreement provider and administering a regulated sale and rent back agreement are regulated activities under Article 63J of the Regulated Activities Order (Regulated sale and rent back agreements). Guidance on these regulated activities is in PERG 14.4A (Activities relating to regulated sale and rent back agreements).

There are two regulated activities associated with the activities of a dormant account fund operator under the Dormant Bank and Building Society Accounts Act 2008:

1. (1)

   the meeting of repayment claims; and

2. (2)

   managing dormant account funds (including the investment of such funds).

There are two regulated activities associated with specified benchmarks

1. (1)

   providing information in relation to a specified benchmark; and

2. (2)

   administering a specified benchmark

12A person will be providing information in relation to a specified benchmark where information or an expression of opinion necessary to determine a specified benchmark is provided to, or for the purposes of passing to, a benchmark administrator so he can administer a specified benchmark.

12We expect that only firms which are members of a benchmark submission panel will carry out the activity of providing information in relation to a specified benchmark.

12A person is not providing information in relation to a specified benchmark where the information he is providing:

1. (1)

   consists solely of factual data obtained from a publicly available source; or

2. (2)

   is compiled by a subscription service for purposes other than in connection with the determination of a specified benchmark and is provided to a benchmark administrator only in the administrator's capacity as a subscriber to the service.

12The activity of administering a specified benchmark comprises:

1. (1)

   administering the arrangements for determining the benchmark;

2. (2)

   collecting, analysing or processing information or expressions of opinion provided for the purpose of determining a specified benchmark; or

3. (3)

   determining a specified benchmark through the application of a formula or other method of calculation to the information or expressions of opinion provided for that purpose.

12For the avoidance of doubt, a firm who is a benchmark submitter is not expected to be carrying out the activities mentioned in PERG 2.7.20HG (2) if it collects, analyses or processes information or expressions of opinion for the purposes of making its own submissions.

12Specified benchmarks are listed in Schedule 5 to the Regulated Activities Order; currently the only specified benchmark is the London Interbank Offered Rate (LIBOR).

1. (1)

   15Taking any of the steps in (2) on behalf of an individual is a regulated activity.

2. (2)

   This activity catches steps taken with a view to:

   1. (a)

      ascertaining whether a credit information agency holds information relevant to the financial standing of an individual;

   2. (b)

      ascertaining the contents of such information;

   3. (c)

      securing the correction of, the omission of anything from, or the making of, any other kind of modification of, such information; or

   4. (d)

      securing that a credit information agency which holds such information stops holding the information or does not provide it to any other person.

3. (3)

   Giving advice to an individual in relation to the taking of any of the steps in PERG 2.7.20KG (2)(a) to PERG 2.7.20KG (2)(d)17 is also a regulated activity.

4. (4)

   A credit information agency that takes any of the steps in PERG 2.7.20KG (2)(a) to PERG 2.7.20KG (2)(d)17 in relation to information held by that agency does not provide credit information services.

5. (5)

   In so far as taking any of the steps in PERG 2.7.20KG (2)(a) to PERG 2.7.20KG (2)(d)17 is the activity of operating an electronic system in relation to lending, then it is not also providing credit information services.

1. (1)

   15Furnishing of persons with information relevant to the financial standing of individuals is a regulated activity if the person has collected the information for that purpose.

2. (2)

   A person requires authorisation for this activity only if its business primarily consists of the activities in (1).

3. (3)

   This activity does not include an activity in so far as it is operating an electronic system in relation to lending.

Agreeing to carry on most regulated activities is itself a regulated activity. But this is not the case if the underlying activities to which the agreement relates are those of accepting deposits, issuing electronic money,10 effecting or carrying out contracts of insurance, operating a multilateral trading facility, managing dormant account funds, the meeting of repayment claims75, managing a UCITS, acting as depositary or trustee of a UCITS, managing an AIF, acting as trustee or depositary of an AIF, establishing, operating or winding up a collective investment scheme, establishing, operating or winding up a stakeholder pension scheme or establishing, operating or winding up a personal pension scheme16. A person will need to make sure that he has appropriate authorisation at the stage of agreement and before he actually carries on the underlying activity (such as the dealing or arranging).