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Timeline guidanceThe purpose of this chapter is to provide guidance:
to unauthorised persons who wish to find out whether they need to be authorised and, if so, what regulated activities their permission needs to include; and
to authorised persons who may have questions about the scope of their existing permission.
Under section 23 of the Act (Contravention of the general prohibition or section 20 (1) or (1A)5), a person commits a criminal offence if he carries on activities in breach of the general prohibition in section 19 of the Act (The general prohibition) . An authorised person also commits a criminal offence if he carries on a credit-related regulated activity in the UK, or purports to do so, otherwise than in accordance with his permission (unless the person is an appointed representative carrying on the activity in circumstances where, as a result of section 39 (1D) of the Act, sections 20(1) and (1A) and 23(1A) of the Act do not apply). For these purposes, entering into a regulated credit agreement as lender, exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement and debt collecting are credit-related regulated activities, except in so far as the activity relates to an agreement under which the obligation of the borrower to repay is secured on land5. Although a person who commits the criminal offence is subject to a maximum of two years imprisonment and an unlimited fine, it is a defence for a person to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.
25A regulated credit agreement that is made by an authorised person who does not have permission to do so, in contravention of section 20 of the Act, could be unenforceable against the borrower (see section 26A of the Act).
Another consequence of a breach of the general prohibition is that certain agreements could be unenforceable (see sections 26 to 29 of the Act). This applies to agreements entered into by persons who are in breach of the general prohibition. It also applies to any agreement entered into by an authorised person if the agreement is made as a result of the activities of a person who is in breach of the general prohibition.
Any person who is concerned that his proposed activities may require authorisation will need to consider the following questions (these questions are a summary of the issues to be considered and have been reproduced, in slightly fuller form in the decision tree in PERG 2 Annex 1 G):
Will I be carrying on my activities by way of business (see PERG 2.3)?
Will I be managing the assets of an occupational pension scheme (see PERG 2.3.2G (3))?
If the answer is 'Yes' to (1) or (2), will my activities relate to6specified investments (see PERG 2.6)?
664Are my activities specified for the purposes of section 22(1)(b) of the Act (and, accordingly, when carried on by way of business, are a regulated activity when carried on in relation to property of any kind) or6 related to a specified benchmark (see PERG 2.5.1A G)?6
5Are my activities related to information about a person's financial standing (see PERG 2.7.20K G)?
If the answer is ‘Yes’ to (3)4, (3A) or (3B)5, will my activities be, or include, regulated activities (see PERG 2.7)?
45If so, will I be carrying them on in the United Kingdom (see PERG 2.4)?
If so, will my activities be excluded (see PERG 2.8 and PERG 2.9)?
If not, will I be exempt (see PERG 2.10.5 G to PERG 2.10.8 G)?
If not, am I allowed to carry on regulated activities without authorisation (see PERG 2.10.9 G to PERG 2.10.16 G)?
If not, do I benefit from the few provisions of the Act that authorise me without a permission under Part 4A of the Act (seePERG 2.10.10 G3(Members of Lloyds)2)?
23If not, what is the scope of the Part 4A permission that I need to seek (see PERG 2 Annex 2 G)?
2The process of applying for Part 4A permission is available on the FCA website Apply for authorisation: www.fca.org.uk/firms/authorisation/apply-authorisation2. But a list of the activities for which permission may be given is annexed to this chapter (see PERG 2 Annex 2 G). You may find this helpful in providing an overview of the activities that are regulated. The list is included here because, with some exceptions, the investments and activities for which permission may be given are the same as the investments and activities specified in the Regulated Activities Order. This creates a few additional categories for which permission must be sought.
2Under 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 element by including or excluding certain things. They have exercised this power (see the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177), as amended from time to time)12. The result is that the business element differs depending on the activity in question. This in part reflects certain differences in the nature of the activities:
3 5 5 5 3The activity of accepting deposits will not be regarded as carried on by way of business by a person if he does not hold himself out as accepting deposits on a day-to-day basis and if the deposits he accepts are accepted only on particular occasions. In determining whether deposits are accepted only on particular occasions, the frequency of the occasions and any distinguishing characteristics must be taken into account.
Except as stated in PERG 2.3.2G (2A) and PERG 2.3.2G (3), the business element is not to be regarded as satisfied for any of the following12regulated activities unless a person carries on the business of engaging in one or more of them:12
1011regulated activities carried on in relation to securities or contractually based investments;12
regulated activities carried on in relation to ‘any property’12
the regulated activities listed in PERG 2.7.2-BG (Accepting deposits and other regulated activities applying to deposits) so far as they relate to structured deposits; 12
the regulated activities of advising on P2P agreements, advising on a home finance transaction and arranging a home finance transaction.12
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.12
A person who carries on an insurance distribution activity13 will not be regarded as doing so by way of business unless that activity is taken up or pursued13 for remuneration. PERG 2.3.3 G gives guidance on the factors that are relevant to the meaning of 'by way of business' in section 22 of the Act. PERG 5.4 (The business test) gives further guidance on the business element as applied to insurance distribution activity13.
A person managing assets on a discretionary basis while acting as trustee6 of an occupational pension scheme may in certain circumstances be regarded as acting by way of business even if he would not, in the ordinary meaning of the phrase, be regarded as doing so. The Financial Services and Markets Act (Carrying on Regulated Activities by Way of Business) Order 2001 (as amended) contains some exceptions from this (see article 4).
6A person who enters into a regulated sale and rent back agreement as SRB agreement provider is to be regarded as carrying on that activity by way of business except where that person is a related party in relation to the SRB agreement seller.3
5If a not-for-profit body is carrying on debt adjusting, debt counselling or providing credit information services (or agreeing to carry on a regulated activity so far as relevant to any of those activities), it is to be regarded as doing so by way of business. It is immaterial whether the not-for-profit body also carries on other activities. This change to the business element does not apply, however, if the not-for-profit body carries on that activity only on an occasional basis.
15No provision in relation to the business element is made in respect of not-for-profit bodies carrying on regulated claims management activity; but article 89O of the Regulated Activities Order provides an exclusion for such bodies (see PERG 2.8.14DG(2)).
The business element for all other regulated activities is that the activities are carried on by way of business. This applies to the activities of effecting or carrying out contracts of insurance, certain activities relating to the Lloyd's market, entering as provider into a funeral plan contract,2entering into a home finance transaction or administering a home finance transaction, operating a dormant account fund,7credit-related regulated activities (subject to the modification for not-for-profit bodies in (3B))9 and operating an electronic system in relation to lending7.21
215759Whether or not an activity is carried on by way of business is ultimately a question of judgement that takes account of several factors (none of which is likely to be conclusive). These include the degree of continuity, the existence of a commercial element, the scale of the activity and the proportion which the activity bears to other activities carried on by the same person but which are not regulated. The nature of the particular regulated activity that is carried on will also be relevant to the factual analysis.
4A person carrying out the activity of administering a specified benchmark or providing information in relation to a specified benchmark will always be carrying out these activities by way of business.
14A person carrying out the activity of administering a benchmark will always be carrying out that activity by way of business.
5Another aspect of the general prohibition is that an employee will not breach the general prohibition by carrying on a regulated activity on behalf of his employer. The reason for that is that it is the employer who is carrying on that activity. The employee is simply carrying on the employer's business.
5This principle potentially also applies to agents and others who assist another to carry on that other's business. That does not mean however that agents and other such persons can never carry on a regulated activity. Apart from anything else it is clear that some regulated activities are meant to be carried on by such persons, such as dealing in investments as agent.
5In the FCA's view the following factors are relevant in deciding whether a person (referred to in this paragraph as "an individual") is to be treated as carrying on his own business (in which case he may require authorisation unless an exemption or exclusion is available) or whether he is carrying on the business of the person for whom he works (in which case he will not require authorisation). In this paragraph, the person for whom the individual works is referred to as the principal firm.
The degree of control the principal firm has over the individual (the greater the control the more likely it is that the general prohibition does not apply). This takes into account the power of deciding the tasks to be carried out, the way in which the tasks are to be done, the means to be employed in doing them and the time when and the place where they are to be done. For example, at one end of the spectrum the individual may merely agree to achieve an end result without that end result being specified in detail. At the other end of the spectrum, the individual may be controlled in every detail of how things are to be done.
The degree to which the individual is integrated into the principal firm's business (the greater the integration the more likely it is that the general prohibition does not apply). One may look at how much the individual is subject to the managerial procedures of the principal firm in relation to such matters as quality of work and performance.
The degree to which the individual takes on the financial risks and rewards of an independent business (the more the individual takes on such risks the more likely it is that the general prohibition applies8). For example, one might take into account whether the individual provides his own equipment; whether he hires his own helpers; what degree of financial risk he takes; what degree of responsibility for investment and management he has; whether and how far he has an opportunity of profiting from sound management in the performance of his task.
8For example, if the individual is tasked with finding customers it may be relevant whether he is paid a commission for each customer gained. However, commission is not a particularly strong factor as many conventional employees are paid by commission.
The degree to which the individual deals with the principal firm's customers in his own name (if the individual deals with customers in his own name that points towards the general prohibition applying). For example, it may be relevant whether the individual receives monies from the principal firm's customers into a bank account in the individual's name.
The degree to which the services supplied by the individual to the principal firm are ones that the individual supplies to other clients as well. If the individual supplies services to more than one clients11, it is very likely that the individual is in the business of providing those services generally and that, as a result, he is carrying on his own business and hence needs authorisation or an exemption from the general prohibition.
Whether the individual is a natural person. It is unlikely that a company or a partnership will fall outside the general prohibition on the grounds in PERG 2.3.6 G.
5In practice, a person is only likely to fall outside the general prohibition on the grounds that he is not carrying on his own business if he is an employee or performing a role very similar to an employee.
5Even though working for more than one firm is likely to mean that the person will not be able to rely on the grounds in PERG 2.3.6 G to escape the general prohibition (see PERG 2.3.7G (6)), that will not always be the case. In particular, say that a person is acting as an employee of one firm (Firm A) and as a self-employed agent of another firm (Firm B). In his capacity as an employee of Firm A, the person would not be carrying on his own business. Thus, the general prohibition does not apply in relation to his work for Firm A. If the only firm for which that person acts on a self-employed basis is Firm B, he could still fall outside the general prohibition in relation to Firm B too. The situation would be different if he was providing services to, or on behalf of, more than one client firm on a self-employed basis as under such circumstances he would be likely to be carrying on his own business.
5One example in the consumer credit industry of how the factors in PERG 2.3.7 G might apply can be found in the home collected credit sector. Home collected credit firms supply small, short-term, unsecured loans direct to customers in their homes. It is common practice in this sector for some of the larger firms, in particular, to deal with their customers via self-employed agents. Self-employed agents are not paid a salary by an employer. These agents call on customers in their homes to provide loans and/or collect repayments due on loans, on behalf of the home collected credit providers they represent, and they receive commission on the repayments they collect. Agents of home collected credit firms may:
5Although the overall relationship between a home collected credit provider (the principal firm) and a person providing the services described in PERG 2.3.10 G (the individual) will need to be taken into account, meeting the following criteria is likely to mean that the individual is carrying on the business of the principal firm (as its agent) and not his own, meaning that the individual does not require authorisation or to be exempt:
the principal firm appoints the individual as an agent;
the individual only works for one principal firm;
the principal firm has a permission from the FCA for every activity the individual is carrying on for which the principal firm would need permission if it was carrying on the activity itself;
the contract sets out effective measures for the principal firm to control the individual;
(in the case of collecting debts) receipt of repayment by the individual is treated as receipt by the principal firm so that the debtor is not disadvantaged if the individual becomes insolvent before the money is passed to the principal firm;
the principal firm accepts full responsibility for the conduct of the individual when the individual is acting on the principal firm's behalf in the course of its business; and
the individual makes clear to customers that it is representing a principal firm as its agent and the name of that principal firm.
Section 19 of the Act (The general prohibition) provides that the requirement to be authorised under the Act only applies in relation to activities that are carried on 'in the United Kingdom'. In many cases, it will be quite straightforward to identify where an activity is carried on. But when there is a cross-border element, for example because a client is outside the United Kingdom or because some other element of the activity happens outside the United Kingdom, the question may arise as to where the activity is carried on.
Even with a cross-border element a person may still be carrying on an activity 'in the United Kingdom'. For example, a person who is situated in the United Kingdom and who is safeguarding and administering investments will be carrying on activities in the United Kingdom even though his client may be overseas.
Section 418 of the Act (Carrying on regulated activities in the United Kingdom) takes this one step further. It extends the meaning that 'in the United Kingdom' would ordinarily have by setting out 7additional cases. The Act states that, in these 7cases, a person who is carrying on a regulated activity but who would not otherwise be regarded as carrying on the activity in the United Kingdom is, for the purposes of the Act, to be regarded as carrying on the activity in the United Kingdom.
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The 7case is where a regulated activity is carried on by a UK-based person and the day-to-day management of the activity is the responsibility of an establishment in the United Kingdom.
The 7case is where a regulated activity is carried on by a person who is not based in the United Kingdom but is carried on from an establishment in the United Kingdom. This might occur when each of the stages that make up a regulated activity (such as managing investments) takes place in different countries. For example, a person's management is in country A, the assets are held by a nominee in country B, all transactions take place in country B or country C but all decisions about what to do with the investments are taken from an office in the United Kingdom. Given that the investments are held, and all dealings in them take place, outside the United Kingdom there may otherwise be a question as to where the regulated activity of managing investments is taking place. For the purposes of the Act, it is carried on in the United Kingdom.
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1A person who is based outside the United Kingdom but who sets up an establishment in the United Kingdom must therefore consider the following matters. First, he must not, unless he is authorised, carry on regulated activities in the United Kingdom. Second, unless he is authorised, the day-to-day management of the carrying on of the regulated activity must not be the responsibility of the UK establishment. This may, for example, affect those UK establishments that in the context of deposit-taking activities were, before the commencement of the Act, treated as representative offices of overseas institutions. Such institutions will need to seek authorisation if the responsibility for the day-to-day management of the accepting of deposits by them outside the United Kingdom is nevertheless effectively that of their UK establishment. Third, such a person will need to ensure that he does not contravene other provisions of the Act that apply to persons who are not authorised. These include the controls on financial promotion (section 21 of the Act (Financial promotion)), and on giving the impression that a person is authorised (section 24).
A person based outside the United Kingdom may also be carrying on activities in the United Kingdom even if he does not have a place of business maintained by him in the United Kingdom (for example, by means of the internet or other telecommunications system or by occasional visits). In that case, it will be relevant to consider whether what he is doing satisfies the business test as it applies in relation to the activities in question. In addition, he may be able to rely on the exclusions from certain regulated activities that apply in relation to overseas persons (see PERG 2.9.15 G).
4Whether a credit agreement or consumer hire agreement is subject to the law of a country outside the United Kingdom is immaterial to whether an activity is credit broking, see PERG 2.7.7E G.
6The requirement to be authorised to carry on the regulated activity of administering a benchmark gives effect to the authorisation and registration regime under article 34 of the benchmarks regulation.
Article 34 only requires a person to be authorised or registered in the UK7if that person is located in the UK.
Accordingly, the FCA considers that where a person (P) administers a benchmark in the UK but P is not located in the UK:
P does not carry on the regulated activity of administering a benchmark from an establishment maintained by P in the UK for the purposes of section 418 of the Act; and
P would not otherwise be regarded as carrying on that regulated activity in the UK.
Located is defined in the Glossary and has the same meaning as it does in the benchmarks regulation.
1Under section 22(1B) of the Act, a claims management activity specified in the Regulated Activities Order is only a regulated activity if it is carried on by way of business in Great Britain.
1Article 89F(3) of the Regulated Activities Order provides that a person is to be treated as carrying on a regulated claims management activity when either or both of the conditions in (2) and (3) are met.
The condition in this paragraph is that the activity is carried on by a person who is:
a natural person who is ordinarily resident in Great Britain; or
a person, other than a natural person, who is constituted under the law of a part of Great Britain.
The condition in this paragraph is that the activity is carried on in respect of a claimant or potential claimant who is:
a natural person who is ordinarily resident in Great Britain; or
a person, other than a natural person, who is constituted under the law of a part of Great Britain.
1Ordinary residence is to be determined for these purposes by reference to the Statutory Residence Test set out in Schedule 45 to the Finance Act 2013:
1Accordingly, the following list gives examples of activity which would be regulated claims management activity if carried on by way of business and where no exemption or exclusion applies:
a sole trader in England and Wales advising a natural person who is ordinarily resident in Northern Ireland in relation to a financial services or financial product claim;
a company incorporated in Northern Ireland advising a natural person who is ordinarily resident in Scotland in relation to a personal injury claim;
a company incorporated in France advising a natural person who is ordinarily resident in England in relation to a financial services or financial product claim;
a company incorporated in Scotland investigating a personal injury claim for a natural person who is ordinarily resident in Germany; and
a company incorporated in India seeking out details of claimants with personal injury claims who are ordinarily resident in Great Britain.
In addition to the requirements as to the business test and the link to the United Kingdom, two other essential elements must be present before a person needs authorisation under the Act. The first is that the investments must come within the scope of the system of regulation under the Act (see PERG 2.6). The second is that the activities, carried on in relation to those specified investments, are regulated under the Act (see PERG 2.7). Both investments and activities are defined in the Regulated Activities Order made by the Treasury under section 22 of the Act.
5The following regulated activities may be carried on in relation to property of any kind:
establishing, operating and winding up a collective investment scheme;
establishing, operating and winding up a stakeholder pension scheme;
establishing, operating and winding up a personal pension scheme;
managing dormant account funds (including the investment of such funds).
3The regulated activity9 of administering a benchmark does9 not require the involvement of a specified investment in any way.
4The activities of providing credit information services and providing credit references are not required to relate to a specified investment to be regulated activities, but rather relate to information about a person's financial standing.
The Regulated Activities Order contains exclusions. Exclusions may exist in relation to both the element of investment and the element of activity. Each should therefore be checked carefully. The exclusions that relate to specified investments are considered in PERG 2.6, together with the outline of the specified investments. The exclusions that relate to activities are considered separately from the outline of activities (see PERG 2.8 and PERG 2.9).
The application of certain of the exclusions considered in PERG 2.8 (Exclusions applicable to certain regulated activities) and PERG 2.9 (Regulated activities: exclusions applicable to certain circumstances) is modified in relation to persons who are subject to the UK provisions which implemented10MiFID2, the IDD8 and the MCD.6 The reasons for this and the consequences of it are explained in PERG 2.5.4 G for MiFID, PERG 5 (Guidance on insurance distribution activities) for the IDD,8 and PERG 4.10A for the MCD.6for
2 6 2 2 6 6 6 610Certain2persons subject to the requirements of the UK provisions which implemented10MiFID2 must be brought within the scope of regulation under the Act. A core element of MiFID is the concept of investment firm.2 An investment firm is any person whose regular occupation or2 business is2 the provision of one or more2investment services to third parties or the performance of one or more investment activities on a professional basis.2 An investment firm is not subject to the UK provisions which implemented10MiFID requirements if it falls within one or more of the exemptions in Part 1 of Schedule 3 of the Regulated Activities Order10. Further information about these exemptions is contained in PERG 13.5. To the extent that an investment firm falls within one of these exemptions, it will not be a MiFID investment firm. Where a firm is not a MiFID investment firm because one or more of the exemptions in Part 1 of Schedule 3 of the Regulated Activities Order10 apply, it may still be carrying on regulated activities and therefore require authorisation unless it is an exempt person.2
2 2 2 2 2 2 2 2 2Prior to IP completion day12, the10UK exercised part of7 the optional exemption in article 3 of MiFID. This is now set out in regulation 8 of the MiFI Regulations10. Further information about this exemption is contained in Q48 to 53 in PERG 13.5. 7The investment services to which regulation 8 of the MiFI Regulation applies10 (namely reception and transmission of orders and investment advice in relation to either transferable securities or units in collective investment undertakings) correspond to regulated activities (see PERG 13 Annex 2 Tables 1 and 2).
2For persons who are MiFID2investment firms, the activities that must be caught by the Regulated Activities Order are those that are caught by the UK provisions which implemented10MiFID2. To achieve this result, some of the exclusions in the Order (that will apply to persons who are not caught by MiFID2) have been made unavailable to MiFID2investment firms when they provide or perform investment services and activities. A "MiFID investment firm", for these purposes, includes credit institutions to which the UK provisions which implemented10MiFID applies (see PERG 13, Q5 and 9); collective portfolio management investment firms5 providing the services of portfolio management and personal recommendations in relation to financial instruments or the ancillary service of safekeeping and administration in relation to units5of collective investment undertakings; and AIFM investment firms providing the ancillary service of reception and transmission of orders in relation to financial instruments.5 The same exclusions are also unavailable to third country investment firms when they provide investment services and activities2. Article 4(4) of the Regulated Activities Order (Specified activities: general) lists a number of exclusions that must be disregarded. These relate to the exclusions concerned with:
2 2 5 5the absence of holding out (see PERG 2.8.4G (1));
transactions or arrangements with or through certain persons (see PERG 2.8.4G (2), PERG 2.8.5G (1) and PERG 2.8.6G (4));
issuing own securities (see PERG 2.8.4G(4));7
risk management (see PERG 2.8.4G (5) and PERG 2.8.5G (2));
arranging for the issue of your own securities PERG 2.8.6AG(11);7
persons acting under powers of attorney (see PERG 2.8.7 G);
2professions or businesses not involving regulated activities (see PERG 2.9.5 G);
sale of goods (see PERG 2.9.7 G);
groups and joint enterprises (see PERG 2.9.9 G);
1sale of a body corporate (see PERG 2.9.11 G); and1
1business angel-led enterprise capital funds (see PERG 2.9.20 G to PERG 2.9.22 G).
The IDD was in part10 implemented through various amendments to the Regulated Activities Order. These included10 article 4(4A) (Specified activities: general) which precluded10 a person who, for remuneration, takes up or pursues insurance distribution or reinsurance distribution,8 in relation to a risk or commitment situated in an EEA State from making use of certain exclusions. Post IP completion day12, this provision has been amended to refer to a risk or commitment situated in the United Kingdom.10 In other cases, some of the exclusions provided in relation to particular regulated activities are unavailable where the activity involves a contract of insurance. This is explained in more detail in PERG 5(Guidance on insurance distribution8 activities).
87Some specified investments are defined so that certain products only come within that specified investment when a person is providing services under certain 10legislation in relation to that product.
7When PERG 2.5.7G applies, the product is only treated as falling within the definition of the specified investment concerned if (in relation to that product):
one of the following persons:
a MiFID investment firm; or
a CRD credit institution; or
a credit institution that would qualify to be a CRD credit institution if its registered or head office were in the United Kingdom10;
provides or performs investment services and/or activities on a professional basis; or
a UCITS investment firm is providing certain investment services and/or activities under the UK provisions which implemented10 article 6.3 of the UCITS Directive (provision of services in addition to UCITS management); or
a market operator (or someone who would be a market operator if it was based in the United Kingdom10) is providing the investment services and/or activities of operating a multilateral trading facility or organised trading facility (these activities are described in Q24 and Q24A in PERG 13.3); or
an AIFM investment firm is providing services under the UK provisions which implemented10 article 6.4 of the AIFMD (provision of services in addition to AIF management).
7 PERG 2.5.7G only applies to the following specified investments:
an emission allowance (see PERG 2.6.19DG for more details);
an option (see PERG 2.6.20G for more details);
a future (see PERG 2.6.22AG for more details);
a credit derivative treated as a contract for differences (see PERG 2.6.23G for more details); and
a binary or fixed outcomes derivative treated as a contract for differences (see PERG 2.6.24AG for more details, which also explains that in certain circumstances PERG 2.5.7G does not apply to this product).
7When deciding whether a person is a MiFID investment firm or a third country investment firm for the purposes of PERG 2.5.8G(1), it is necessary to take into account the services that that person is providing in relation to the product concerned.
For example, say that a UKperson does business in an option product to which PERG 2.5.7G applies. When deciding whether that product is a regulated option, it is not necessary for that person already to be:
a MiFID investment firm; or
authorised under the Act;
because of its other activities.
Therefore, when deciding whether the UKperson in (2) is a MiFID investment firm and whether it needs to be authorised under the Act, it is necessary to take into account all the business it does, including business in that option product.
The following paragraphs describe the various specified investments, taking due account of any exclusion that applies.
A deposit is defined in article 5(2) of the Regulated Activities Order. This focuses on a sum of money paid by one person to another on terms that it will be repaid when a specified event occurs (for example, a demand is made).
Certain transactions are excluded. The definition of deposit itself excludes money paid in connection with certain transactions such as advance payments for the provision of goods or services and sums paid to secure the performance of a contract. The circumstances in which payments are excluded from the definition itself are exhaustively stated in article 5(3) of the Regulated Activities Order (Accepting deposits). In addition, there is a separate exclusion in article 9 of the Order (Sums received in consideration for the issue of debt securities) and another in article 9A (Sums received in exchange for electronic money). PERG 3A Q4 contains guidance7 on the exclusion relating to electronic money.
7In addition, several separate exclusions focus on the identity of the person paying the money or the person receiving it (or both).
Payments by certain persons are excluded if they are made by specified persons (such as local authorities or national, or supranational, bodies) or by persons acting in the course of a business consisting wholly or partly of lending money.
Exclusions apply for sums paid between certain persons who are linked in a specified way (such as group companies or close relatives).
Exclusions apply to sums received by persons acting for specified purposes. This covers sums received by a practising solicitor acting in the course of his profession or by authorised or exempt persons carrying on one of a specified range of regulated activities and acting within the scope of their permission or exemption.
16A structured deposit is a kind of deposit.
A structured deposit is a deposit which is fully repayable at maturity on terms under which interest or a premium will be paid or is at risk, according to a formula involving factors such as:
an index or combination of indices; or
a financial instrument or combination of financial instruments; or
a commodity or combination of commodities or other physical or non-physical non-fungible assets; or;22
a foreign exchange rate or combination of foreign exchange rates.
A variable rate deposit whose return is directly linked to an interest rate index such as SONIA (whether or not adjusted)22 is not a structured deposit under paragraph (2)(a).
(3) applies whether or not the interest is predetermined and whether it is fixed or variable.
16The reason why there is a definition of a structured deposit is that there are a number of regulated activities that apply to structured deposits that do not apply to other kinds of deposit. See PERG 2.7.2-BG for a list.
16Although the definition of a structured deposit specifically requires that the principal amount be fully repayable, that does not imply that this feature only applies to structured deposits. In the FCA’s view, capital certainty is a feature of any kind of deposit.
Electronic money is specified as an investment in article 74A of the Regulated Activities Order, but only when issued by:7
7a full credit institution, a credit union or a municipal bank; or
a person deemed to have been granted authorisation under regulation 74 of the Electronic Money Regulations; or a person who falls within regulation 76(1) of the Electronic Money Regulations (see PERG 3A, Q30 and 31).
The authorisation and registration requirements for any other person intending to issue electronic money are governed by the Electronic Money Regulations. Guidance on these regulations is available in PERG 3A.7
Contract of insurance is defined to include certain things that might not be considered a contract of insurance at common law. Examples of such additions include capital redemption contracts or contracts to pay annuities on human life. Detailed guidance on identifying a contract of insurance is in PERG 6 (Guidance on the Identification of Contracts of Insurance).
There are two main sorts of contracts of insurance. These are general insurance contracts and long-term insurance contracts. The Regulated Activities Order provides that, in certain specified circumstances, a contract is to be treated as a long-term insurance contract notwithstanding that it contains supplementary provisions that might also be regarded as relating to a general insurance contract (see article 3(3)).
The Regulated Activities Order uses two further terms in relation to contracts of insurance to identify those contracts under which rights are treated as contractually based investments.
The first term is 'qualifying contracts of insurance' (referred to as life policies in the Handbook). This identifies those long-term insurance contracts under which rights are treated as contractually based investments. This term does not cover long-term insurance contracts which are contracts of reinsurance or, if specified conditions are met, contracts under which benefits are payable only on death or incapacity.
The second term is 'relevant investments'. This term applies to:
contractually based investments, which includes rights under life policies, and rights to or interests in such investments under article 89 of the Regulated Activities Order (Rights to or interests in investments); and
rights under contracts of insurance other than life policies (but not rights to or interests in such rights).
This term is used in connection with the treatment, under various parts of the Regulated Activities Order, of persons carrying on insurance distribution activities17 (see further PERG 5 (Guidance on insurance distribution activities)17).
Certain arrangements in relation to funeral plans are specifically excluded from being contracts of insurance if they would otherwise be so. The exclusion applies to arrangements that fall within the definition of a funeral plan contract (see PERG 2.6.26 G) as well as arrangements that are excluded from the regulated activity of entering as provider into funeral plan contracts (see PERG 2.8.14 G).
Shares are defined in the Regulated Activities Order as shares or stock in a wide range of entities; that is, any body corporate wherever incorporated and unincorporated bodies formed under the law of a country other than the United Kingdom. They include deferred shares issued by building societies as well as transferable shares in industrial and provident societies, credit unions and equivalent EEA bodies. These shares are transferable and negotiable in a way similar to other shares or stock and are treated as such for the purposes of defining regulated activities. They are specifically mentioned as being within the specified investment category of shares because other types of share issued by these mutual bodies are not transferable and are expressly excluded (see PERG 2.6.10 G).
The following are excluded from the specified investment category of shares. Shares or stock in all open-ended investment companies are excluded from being treated in this particular category (but see PERG 2.6.17 G). Exclusions from this category also apply to shares or stock in the share capital of certain mutuals or in equivalent EEA bodies. This takes out building society or credit union accounts and non-transferable shares in industrial and provident societies. These may nevertheless be specified investments in another category (such as deposits in the case of building society accounts).
Two categories of specified investments relating to debt instruments are dealt with under this heading. They broadly split into private debt and public sector debt.
The first category of 'instruments creating or acknowledging indebtedness' (defined in article 77 of the Regulated Activities Order and referred to in the Handbook as debentures) expressly refers to a range of instruments such as debentures, bonds and loan stock and contains a catch-all reference to 'any other instrument creating or acknowledging indebtedness.'
The second category (defined in article 78 of the Regulated Activities Order and referred to in the Handbook as government and public securities) refers to loan stock, bonds and other instruments creating or acknowledging indebtedness which are issued by or on behalf of any government, the assemblies for Scotland, Wales or Northern Ireland, a local authority or an international organisation.
An instrument cannot fall within both categories of specified investments relating to debt instruments. 'Instrument' is defined to include any record whether or not in the form of a document (see article 3(1) of the Regulated Activities Order).
6Alternative finance investment bonds (defined in article 77A of the Regulated Activities Order and referred to in the Handbook as alternative debentures) are a form of Sharia compliant bond (known as sukuk in the plural or sakk in the singular) which are intended to be regulated in an equivalent manner to conventional debt securities, where appropriate. Sukuk arrangements allow assets to be held for the benefit of investors in certificates issued by a company. The benefits may include the payment of a return that is economically equivalent to interest and redemption of the certificates out of the proceeds from the disposal of the assets. Alternative debentures are not limited to those wishing to issue Sharia compliant sukuk.
The arrangements which grant rights under alternative debentures are similar to the tax definition of arrangements relating to alternative finance investment bonds at section 48A of the Finance Act 2005 (see www.opsi.gov.uk/acts/acts2007/ukpga_20070011_en_5#pt3-pb9-l1g53). However the purposes of the two provisions are not the same. One of the objectives of the FCA under the Act is consumer protection. Accordingly, secondary legislation made under the Act, like article 77A of the Regulated Activities Order, is likely to be interpreted by the FCA with consumer protection in mind. This may mean that whilst the arrangements described at section 48A of the Finance Act 2005 and those described at article 77A of the Regulated Activities Order are similar, they are likely to be construed differently by the courts. PERG 2.6.11FG and PERG 2.6.11GG explain the consumer protection features in the definition of alternative debentures in more detail.
The arrangements which grant rights under an alternative debenture arise where:
the arrangements provide for a person (the bond-holder) to pay a sum of money (the capital) to another (the bond-issuer);
the arrangements identify assets, or a class of assets, which the bond-issuer will acquire for the purpose of generating income or gains directly or indirectly (the bond assets);
the arrangements specify a period at the end of which they cease to have effect (the bond term);
the bond-issuer undertakes under the arrangements:
to make a repayment in respect 8of the capital (the redemption payment) to the bond-holder during or at the end of the bond term (whether or not in instalments); and
to pay to the bond-holder other payments on one or more occasions during or at the end of the bond term (the additional payments);
the amount of the additional payments does not exceed an amount which would, at the time at which the bond is issued, be a reasonable commercial return on a loan of the 8capital; and
the arrangements are a security admitted to:
an official list; or
trading on a regulated market or on a recognised investment exchange.
Different types of alternative debentures are permitted so that, for example:
the assets of the arrangement may be acquired before or after it commences;
the bond-holder may (but need not) be entitled under the arrangements to terminate them, or participate in terminating them before the end of the bond term;
the return may be fixed, floating or determined in some other way;
the amount of the redemption payment may (but need not) be subject to reduction in the event of a fall in the value of the bond assets or in the rate of income generated by them.
As these arrangements might amount to a collective investment scheme (see PERG 9.4.2 GG for a broad description) a consequential amendment to the Financial Services and Markets Act 2000 (Collective Investment Scheme) Order 2001 (SI 2001/1062) has been made so that, like conventional bonds, alternative debentures are excluded from the definition of collective investment scheme.
The range of instruments that are caught by the alternative debenture definition have been tightly circumscribed to ensure that only those arrangements that grant, in substance, debt-like returns are captured. This is because arrangements giving rights under an alternative debenture cannot amount to a collective investment scheme (see PERG 2.6.11EG). If other types of investments were covered by the alternative debenture definition this could have the effect of undermining the regime for regulating collective investment schemes, which is primarily aimed at protecting the consumer from investing in unsuitable products. For example, under section 238 of the Act (Restrictions on promotion) an authorised person cannot communicate an invitation or inducement to participate in an unregulated collective investment scheme.
The condition set out at PERG 2.6.11CG (6) is also intended to protect consumers. This provides that alternative debentures must be listed on an official list or traded on a regulated market or recognised investment exchange. This is because there is a risk that alternative debentures could lead to regulatory arbitrage (i.e. the risk that the exclusion from being classified as a collective investment scheme is exploited by instruments not intended to be excluded). Mandatory listing is aimed at ensuring an enhanced level of transparency, reducing the likelihood of regulatory arbitrage.
The main provision within the definition of alternative debenture arrangements that seeks to ensure that only instruments that display the characteristics of a debt security can be alternative debentures is set out at PERG 2.6.11CG (5). It provides that the amount of additional payments under the arrangements must not exceed an amount which would, at the time the bond is issued, be a reasonable commercial return on a loan of capital. Where the return is not fixed at the outset, it is the maximum possible amount of the additional payments that must be considered in deciding this question. The following example demonstrates how this condition should be approached.
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Example ABC Ltd is a property development company. It wishes to increase its portfolio on a short-term basis. It issues 5-year sukuk to investors and uses the proceeds to buy the head lease of a commercial property. The rental income from the lease is distributed to investors in proportion to their holdings without a cap on the level of return. After 5 years, the head lease is sold on at a profit and the proceeds shared between investors. In this example, the investors participate directly in the success or failure of the underlying property business. The sakk is not really in the nature of a debt instrument. It is unlikely to be an alternative debenture as:
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If, in the above example, investors returns were capped at 500 per sakk per year, then this is the amount that must be considered in deciding whether the return exceeds a reasonable commercial return on a loan, even where the amounts actually received turn out to be far lower.
In applying the reasonable commercial return test, the sakk should be compared to a hypothetical loan to the issuer on similar terms and carrying similar risks. For example, a conventional security convertible into shares will normally carry a lower rate of interest because the conversion right has a value. The return on an exchangeable or convertible sakk should be measured against the return on an equivalent exchangeable or convertible debt security.
The risk to investors in sukuk may vary slightly from that of a conventional bond in some instances. This may be due to the fact that sukuk holders only have recourse to the bond assets or some other structural feature which results in the risk profile being higher. In such instances it may be justifiable for the rate of return to be slightly higher than that of a conventional loan.
As with any financial instrument, the pricing of sukuk will depend on the issuers view of the market at the time of issue and reasonable commercial return may vary depending on the issuer and the economic circumstances prevalent at the time of issue.
Certain instruments are excluded from both of the6 categories of specified investments referred to in PERG 2.6.11 G6. These include trade bills, specified banking documents (such as cheques and banknotes though not bills of exchange accepted by a banker) and contracts of insurance. There is a further exclusion from this category of specified investment dealing with public debt for National Savings deposits and products. However, for the purposes of article 78 of the Financial Services and Markets Act (Regulated Activities) Order 2001, this exclusion does not apply to instruments that meet the requirements of PERG 2.6.11CG (1)to (5).6
6The category of specified investment of instruments giving entitlements to investments (referred to in the Handbook as warrants) covers warrants and other instruments which confer an entitlement to subscribe for shares, alternative debentures, 6debentures and government and public securities. This is one of several categories of specified investments that are expressed in terms of the rights they confer in relation to other categories of specified investment. The rights conferred must be rights to 'subscribe' for the relevant investments. This means that they are rights to acquire the investments directly from the issuer of the investments and by way of the issue of new investments (rather than by purchasing investments that have already been issued).
To keep clear distinctions between the different specified investment categories, instruments giving entitlements to investments are not to be regarded as options, futures or contracts for differences.
The specified investment category of certificates representing certain securities covers certificates or other instruments which confer rights in relation to shares and debt securities. It includes depositary receipts.
There is an exclusion for any instrument that would otherwise fall within the specified investment category of units in a collective investment scheme. But the exclusion does not apply where the underlying investments covered by the certificate are issued by the same (non-public sector) issuer or constitute a single issue of public sector debt (such as a single issue of gilts). Certificates or other instruments conferring rights in respect of investments in these two cases continue to be treated as certificates representing certain securities.
The specified investment category of units in a collective investment scheme includes units in a unit trust scheme or authorised contractual scheme10, shares in open-ended investment companies and rights in respect of most limited partnerships and all limited partnership schemes10. Shares in or securities of an open-ended investment company are treated differently from shares in other companies. They are excluded from the specified investment category of shares. This does not mean that they are not investments but simply that they are uniformly treated in the same way as units in other forms of collective investment scheme. The effect is that an open-ended investment company will, in issuing its shares, be subject to the restrictions on promotion of collective investment schemes in section 238 of the Act (rather than to restrictions that apply to other forms of body corporate). For exclusions from the restrictions on the provisions of collective investment schemes, see the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (SI 2001/1060). Guidance on the meaning of open-ended investment company is in PERG 9 (Meaning of open-ended investment company).
1There are no exclusions in the Regulated Activities Order for this specified investment category. This is because 'collective investment scheme' is defined in section 235 of the Act (Collective investment schemes) for the purposes of the Act generally. But there is a separate power to provide for exemptions from that definition and the Treasury have exercised it (see the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (SI 2001/1062). The result is that units in certain arrangements are excluded from being collective investment schemes (for example, closed-ended bodies corporate, franchise arrangements, timeshare schemes).
Three 13 types of investment are specified here:
2 132rights under a stakeholder pension scheme;
132rights under a personal pension scheme; and13
13rights or interests under a pension scheme which provides safeguarded benefits.13
2A stakeholder pension scheme is defined in section 1 of the Welfare Reform and Pensions Act 1999. Regulations made under that section set out detailed rules under which such schemes will operate (see the Stakeholder Pension Scheme Regulations 2000). Schemes must be registered with The Pensions Regulator.
2A personal pension scheme is, broadly speaking, a pension scheme which is not an occupational pension scheme or a stakeholder pension scheme. That is, a scheme or arrangement that is comprised in one or more instruments or agreements, having or capable of having effect so as to provide benefits to or in respect of people:
13Under section 48(8) of the Pension Schemes Act 2015 safeguarded benefits means benefits other than:
money purchase benefits (defined in section 181 of the Pension Schemes Act 1993 and section 176 of the Pension Schemes (Northern Ireland) Act 1993); and
cash balance benefits (defined in section 75 of the Pension Schemes Act 2015).
Rights under stakeholder pension schemes and personal pension schemes are specified investments for the purposes of the entire Regulated Activities Order.13
Rights or interests under a pension scheme which provides safeguarded benefits as defined by section 48(8) of the Pension Schemes Act 2015 are only specified investments for the purposes of article 53E (Advising on conversion or transfer of pension benefits) and not in relation to any other regulated activity.13
There are no exclusions in the Order.13
9This specified investment comprises emissions allowances that are auctioned as financial instruments or two-day emissions spots (together, emissions auction products).
20There are two specified investments relating to the scheme for emission allowance trading within the UK:
20the first kind comprises emission allowances that are auctioned as financial instruments or two-day emissions spots (together, emissions auction products); and
20the second kind is an emission allowance itself subject to (2)).
An emission allowance is only a specified investment18if PERG 2.5.7G (Wider definition of certain specified investments when carrying on some kinds of MiFID20 business) applies.
16An emission allowance can also be the underlying for an option, future or contract for differences. 16
20The emissions auction product specified investment relates only to the regulated activity of bidding in emissions auctions (whereby a bid is received, transmitted and submitted on an auction platform) and captures the two forms of allowance products that may be auctioned under regulation 4(2) of the UK auctioning regulations or the EU auction regulation: a two-day spot or a five-day future.
18 9 1620See PERG 2.7.6DG for more about:
20how the RAO deals with the overlap between emission allowances and emissions auction products; and
20whether these products are a security, a contractually based investment or a relevant investment.
20Some other points about emission allowances are:
9 16 18Emission allowance16 means an allowance as defined in article 3(a) of Directive 2003/87/EC or created under article 18 of the trading scheme order 2020. These provisions provide20 that an allowance is an allowance to emit one tonne of carbon dioxide equivalent during a specified period, only valid for the purpose of meeting the requirements of Directive 2003/87/EC or the trading scheme order 202020 and only transferable in accordance with the provisions of that directive or order20 (emission allowance16).
1620A two-day spot is defined by reference to article 3(3) of the EU auction regulation or regulation 2 of the UK auctioning regulations. These provisions provide that a two-day spot is an allowance auctioned for delivery at an agreed date no later than the second trading day from the day of the auction (two-day emissions spot).
1820A financial instrument is defined as any instrument listed in Part 1 of Schedule 2 to the Regulated Activities Order.
181620The distinction between emission allowances that are auctioned as financial instruments and those auctioned as two-day spots is no longer relevant as all emissions auction products are financial instruments.
1816The specified investment category of options comprises:4
4 44options to acquire or dispose of securities or contractually based investments, currency and certain precious metals and options to acquire or dispose of such options. Options to buy or sell other types of commodity will only fall within this specified investment category if they are options to buy or sellfutures, or options to buy or sellcontracts for differences, which are based on other commodities. But options to buy or sell other types of commodity may be contracts for differences (see PERG 2.6.23 G);
4options to acquire or dispose of other property and falling within paragraphs 5, 6, 7 or 10 of Part 1 of Schedule 2 to the Regulated Activities Order18 (see article 83(2) of the Regulated Activities Order and PERG 13, Q33A16 to Q34 for guidance about these instruments), but only where they are options to which PERG 2.5.7G (Wider definition of certain specified investments when carrying on some kinds of MiFID18 business) applies16; and
164options to acquire or dispose of an option to which (2) applies, but only where PERG 2.5.7G applies (see16article 83(1)(e) of the Regulated Activities Order)16.
4It follows therefore that options not falling within PERG 2.6.20G (1), for example physically settled options on non-precious metals, such as copper options, will not be options unless they meet the conditions in PERG 2.6.20G (2). Moreover, where the option in question is one to which PERG 2.6.20G (2) applies, it will be an option only in relation to the services referred to in PERG 2.5.8G16, provided by that person. The same applies in the case of options falling within PERG 2.6.20G (3), for example an option on a physically settled copper option traded on a regulated market.
The key issue in determining whether something is an investment in this category for the purposes of the Regulated Activities Order is whether the contract is made for investment purposes rather than commercial purposes. Contracts which are made for commercial purposes are excluded from this specified investment category and the Regulated Activities Order contains several tests as to when that is, or is not, the case (some are conclusive, others only indicative).
4As with options, there is an additional category of instruments which are futures only in limited circumstances16. These are contracts as described in PERG 2.6.21 G:
that would not be regarded as having been entered into for investment purposes because they fail one of the tests mentioned in PERG 2.6.22 G;
that:16
fall within paragraph 4 of Part 1 of Schedule 2 to the Regulated Activities Order18 and relate to currencies (see PERG 13, Q31A to Q31S for guidance about these derivatives); or16
fall within paragraphs 5, 6, 7 or 10 of Part 1 of Schedule 2 to the Regulated Activities Order18 (see PERG 13, Q33A to Q34 for guidance about these derivatives); and16
to which PERG 2.5.7G (Wider definition of certain specified investments when carrying on some kinds of MiFID18 business) applies16.
4See article 84(1A)-(1D) of the Regulated Activities Order
The specified investment category of contracts for differences covers:
44rights under contracts for differences;
4rights under other contracts whose purpose or pretended purpose is to secure a profit or avoid a loss by reference to fluctuations in certain factors; and
4derivative contracts for the transfer of credit risk16 (not within (1) or (2)) falling within paragraph 8 or 9 of Part 1 of Schedule 2 to the Regulated Activities Order18 (see PERG 13, Q31 for guidance about these instruments), but only where PERG 2.5.7G (Wider definition of certain specified investments when carrying on some kinds of MiFID18 business) applies16.
1616The factors mentioned in (2) include the value or price of property of any description or an index or any 'other factor designated in the contract'. This catches a wide range of factors.4
4All contracts in this category are cash-settled instruments (as opposed to being settled by way of delivering something other than cash). Many would be unenforceable as gaming contracts were it not for section 412 of the Act (Gaming contracts). Examples of instruments that count as specified investments under this category are spread bets and interest rate swaps.
There are a number of exclusions. These include a case where the parties intend that the profit is to be secured or the loss to be avoided by taking delivery of property. This avoids overlap with the specified investment categories of options and futures. Also excluded are index-linked deposits and rights under certain contracts connected with the National Savings Bank or National Savings products. There is also provision to ensure that the specified investment category of contracts for differences does not include rights under life policies.
16A binary or other fixed outcomes bet is also treated as contract for differences. This is defined as something that meets the following conditions:
it is a derivative contract of a binary or other fixed outcomes nature;
it is not covered by PERG 2.6.23G(1) or (2);
it is settled in cash;
it is a financial instrument that falls within paragraphs 4, 5, 6, 7 or 10 of Part 1 of Schedule 2 to the Regulated Activities Order18 (see PERG 13, Q31A to Q34 for guidance about these instruments); and
one of the following requirements is met:
PERG 2.5.7G (Wider definition of certain specified investments when carrying on some kinds of MiFID18 business) applies; or
a person is making arrangements with a view to transactions in investments in relation to it.
A product is binary (see PERG 2.6.24AG(1) (a)) only if the payout is all or nothing. That is, the overall result will be that one party will pay the other a fixed sum. It is a sort of fixed odds bet.
The main example of a binary product is a binary or digital option.
A simple example is a contract between X and Y under which:
at the start, X pays Y a fixed sum (equivalent to the stake in a bet);
if shares in ABC PLC close above £5.20 per share at close of trading five days later, Y pays X a fixed sum (a multiple of X’s original stake), the result being that Y pays X a fixed sum in net terms;
if shares in ABC PLC close at or below £5.20 per share at close of trading five days later, X gets nothing, the result being that X pays Y a fixed sum.
A simple binary sporting bet is not a contract for differences as:
it is not covered by MiFID and so it does not meet the condition in PERG 2.6.24AG(1)(d); and
it does not come under any other part of the definition of a contract for differences.
A product that that has fixed outcomes but is not binary (see PERG 2.6.24AG(1)(a)):
is like a binary product in that there are fixed number of possible payouts and they are all known in advance; but
differs from a binary contract in that the number of possible payouts is three or more rather than just two.
A simple example of a contract in (6) (although it may not be common in practice) is a contract between X and Y under which:
at the start, X pays Y a fixed sum (equivalent to the stake in a bet);
if shares in ABC PLC close above £5.20 per share at close of trading five days later and (c) does not apply, Y pays X a fixed sum (a multiple of X’s original stake), the result being that Y pays X a fixed sum in net terms;
if shares in ABC PLC close above £5.20 per share at close of trading five days later and the market as a whole rises by more than ten percent, Y pays X a fixed sum that is:
a multiple of X’s original stake; but
a different (and usually smaller) multiple from the one in (b);
the result being that Y pays X a fixed sum in net terms;
if shares in ABC PLC close at or below £5.20 per share at close of trading five days later, X gets nothing, the result being that X pays Y a fixed sum.
16Any derivative under MiFID will be an option, future or contract for differences where PERG 2.5.7G (Wider definition of certain specified investments when carrying on some kinds of EU business) applies.
So for example the following contract between X and Y would be a contract for differences.
At the start, X pays Y a fixed sum (equivalent to a stake in a bet).
If the ABC index closes above 6,500 when the contract expires, Y pays X a fixed sum being the stake and an additional pay out (determined on the opening of the contract), the result of the contract being that Y pays X a fixed sum.
If the ABC index closes below 6,500 when the contract expires, X gets nothing (and pays Y the stake paid when X opened the contract), the result of the contract being that X pays Y a fixed sum.
If the ABC index was trading at 6,500 when the contract was opened and closes at 6,500 when the contract expires, Y pays X a fixed sum (being a proportion of the amount paid by X to Y on opening of the contract), the result of the contract being that X pays Y a fixed sum.
Two types of specified investment are relevant. These are the underwriting capacity of a Lloyd's syndicate and a person's membership of a Lloyd's syndicate. There are no exclusions from these specified investment categories.
Rights under a funeral plan contract are the rights to a funeral obtained by a person who pays for the funeral before the death of the person whose funeral it will be.
In accordance with article 61(3)(a) of the Regulated Activities Order, a regulated mortgage contract is a contract which, at the time it is entered into, satisfies the following conditions:
the contract is one where the lender provides credit to an individual or trustees (the "borrower");
the obligation of the borrower to repay is secured by a mortgage on land:18
1212in relation to a contract entered into before IP completion day19, means land in the United Kingdom or, if the contract was entered into on or or after 21 March 2016, within the territory of an EEA state;18
in relation to a contract entered into on or after IP completion day19, means land in the United Kingdom; and18
at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling.
12Detailed guidance on this is set out in PERG 4.4 (Guidance on regulated activities connected with mortgages). However, generally, the definition of regulated mortgage contract does not include certain loans to commercial borrowers, second charge loans by a credit union, exempt consumer buy-to-let mortgage contracts (see PERG 4.4.31G)14and second charge bridging loans (see PERG 4.4.1-A G).12
3In accordance with article 63B(3)(a) of the Regulated Activities Order, a home reversion plan is an arrangement under which, at the time it is entered into:
a person (the "reversion purchaser") buys all or part of a qualifying interest in land (other than timeshare accommodation) in the United Kingdom from an individual or trustees (the "reversion occupier");
the reversion occupier (or, where trustees are concerned, an individual who is a beneficiary of the trust), or a related person of either, is entitled, and intends, to use at least 40% of that land as or in connection with a dwelling; and
the entitlement to occupy ends on the occurrence of any one or more of the following events:
Detailed guidance on this is set out in PERG 14.3 (Guidance on home reversion and home purchase activities).
3In accordance with article 63F(3)(a) of the Regulated Activities Order, a home purchase plan is an arrangement under which, at the time it is entered into:
a person (the "home purchase provider") buys a qualifying interest in land or an undivided share of a qualifying interest in land (other than timeshare accommodation) in the United Kingdom;
where an undivided share of a qualifying interest is bought, the interest is held on trust for the home purchase provider and the individual or trustee as beneficial tenants in common;
an individual or trustees (the "home purchaser") is obliged to buy the interest bought by the home purchase provider over the course of or at the end of a specified period; and
the home purchaser (or, where trustees are concerned, by an individual who is a beneficiary of the trust), or a related person of either, is entitled, and intends, to use at least 40% of that land as or in connection with a dwelling.
Detailed guidance on this is set out in PERG 14.4 (Guidance on home reversion and home purchase activities).
5In accordance with Article 63J(3)(a) of the Regulated Activities Order, a regulated sale and rent back agreement is an arrangement under which, at the time it is entered into:
a person (the SRB agreement provider) buys all or part of the qualifying interest in land (other than timeshare accommodation) in the United Kingdom from an individual or trustees (the agreement seller); and
the agreement seller (if he is an individual) or an individual who is the beneficiary of the trust (if the agreement seller is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling, and intends to do so;
but excluding any arrangement that is a regulated home reversion plan.
Detailed guidance on this is set out in PERG 14.4A (Activities relating to regulated sale and rent back agreements).
Rights to, or interests in, all the specified investments in PERG 2.6 (except rights to, or interests in, rights under a home finance transaction3) are themselves treated as specified investments. The effect is that, in most cases, an activity carried on in relation to rights or interests derived from any of those investments is also a regulated activity if the activity would be regulated if carried on in relation to the investment itself. The exception is where the rights or interests relate to a pure protection contract or a general insurance contract.
3There are several things that are not covered by this category (other than rights to, or interests in, rights under a mortgage contract). Anything that is covered by any other specified investment category is excluded, as are interests under the trusts of an occupational pension scheme. Finally, where a contract is excluded from the scope of the regulated activity of entering as provider into a funeral plan contract (see PERG 2.8.14 G), then rights to, or interests in, the contracts of insurance or interests under the trusts, to which the contracts relate are also excluded from this specified investment category.
11In accordance with article 60B (3) of the Regulated Activities Order, a credit agreement is an agreement between an individual ("A") and any other person ("B") under which B provides A with credit of any amount. In accordance with article 36H (10) of the Regulated Activities Order, rights under an article 36H agreement are also specified investments. The definition of an article 36H agreement is set out in PERG 2.7.7H G. In addition and in accordance with article 53(5) of the Regulated Activities Order, rights under a ‘relevant article 36H agreement’ (within the meaning of that Order) are also specified investments.15
11In accordance with article 60N(3) of the Regulated Activities Order, a consumer hire agreement is an agreement between a person ("the owner") and an individual ("the hirer") for the bailment or, in Scotland, the hiring, of goods to the hirer which:
is not a hire-purchase agreement; and
is capable of subsisting for more than three months.
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.
26In general, accepting deposits is the only regulated activity that applies to deposits, except for those regulated activities that can apply to property or assets that are not specified investments. However, structured deposits are an exception to this.
26The following regulated activities apply to deposits that are structured deposits in addition to the regulated activity of accepting deposits:
26The activities in PERG 2.7.2-BG may be carried out by the person accepting the structured deposit or another person. However the activities in PERG 2.7.2-BG(1) to (3) are unlikely to be relevant to the person accepting the structured deposit because:
the dealing activity in PERG 2.7.2-BG(1) only applies to an agent; and
the exclusion described in PERG 2.8.6AG(3) (arranging transactions to which the arranger is to be a party) may apply to the activities in PERG 2.7.2-BG(2) and (3).
See PERG 2.6.4A G for a description of those persons to whom this specified activity applies.10
10The 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 distribution activities28 (see PERG 5 (Guidance on insurance distribution28 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:
life policies, where the regulated activities concerned are:
managing investments (see PERG 2.7.8 G);
safeguarding and administering investments (see PERG 2.7.9 G); and
agreeing to carry on any of those activities (see PERG 2.7.21 G); and
rights under any contract of insurance, where the regulated activities concerned are:
arranging (bringing about) deals in investments and making arrangements with a view to transactions in investments (see PERG 2.7.7A G);
assisting in the administration and performance of a contract of insurance (see PERG 2.7.8A G);
advising on investments (except P2P agreements)25 (see PERG 2.7.15 G); and
agreeing to carry on any of those activities (see PERG 2.7.21 G).
PERG 5 (Guidance on insurance distribution28
activities) has more guidance on these regulated activities where they are insurance mediation activities28.
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:
for dealing in investments as principal, securities or contractually based investments (except rights under a funeral plan contract); and
for dealing in investments as agent, securities, structured deposits26 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).
36The RAO and the UK auctioning regulations together generate three broad categories of person in relation to bidding for emission allowances on an auction platform:
The first category consists of a MiFID investment firm (other than a collective portfolio management investment firm) or a third country investment firm (other than one which would be a collective portfolio management investment firm if its head office were in the United Kingdom)38.
The first category also consists of a person that is exempt from MiFID under article 2(1) (j), as onshored by Part 1 of Schedule 3 to the RAO, 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) (j) exemption from MiFID is in PERG 13.5, Q44).
A person in this first category is entitled to bid on an auction platform but requires permission from the FCA for bidding in emissions auctions to do so.
The second category consists of operators or aircraft operators bidding on their own account as well as group entities or business groupings of those operators or UK public bodies or UK state-owned entities that control any of those operators (as set out in regulation 16 of the UK auctioning regulations). 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.
The third category consists of all other persons. The UK auctioning regulations prevent 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.
36A 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)(j) (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.
33 11 2636As explained in PERG 2.6.19DG, an emission allowance and an emissions auction product are both specified investments. The Regulated Activities Order deals with this as follows.
332636A person in the first category in PERG 2.7.6BG requires permission from the FCA for bidding in emissions auctions but does not require any other permission to do so.
332636A person in the second category in PERG 2.7.6BG does not require any permission from the FCA for bidding.
332636Article 24A(2) of the RAO is the main provision that deals with (2) and (3). It provides that bidding in emissions auctions does not form part of any other regulated activity and so a person seeking to carry on bidding activity will only require permission for bidding in emissions auctions to do so and will not require permission for any other regulated activities. Except for this exclusion, in the FCA’s view, bidding in emissions auctions would broadly equate to the following regulated activities:
36making arrangements with a view to transactions in investments.
An emission allowance is a security. This means that any person wishing to carry out any activity in relation to it will need to consider whether any of the regulated activities relating to securities apply (subject to (8)). 26
A derivative on an emission allowance is potentially a contractually based investment and a relevant investment. Therefore any person wishing to carry out any activity in relation to it will need to consider whether any of the regulated activities relating to contractually based investments and relevant investments apply (subject to (8)). 26
36An emission allowance auctioned under the UK auctioning regulations, as well as being a specified investment in its own right (an emissions auction product) may also be included in the emission allowance category of specified investment (subject to (8)). It is unlikely to be a contractually based investment or a relevant investment.
332636However (as explained in (2) to (4)), for a firm that is bidding under the UK auctioning regulations:
the only regulated activity is bidding in emissions auctions; and
the only specified investment is an emissions auction product.
36(7) means that a person may need permission to carry out activities in relation to emission allowances that are auctioned under the UK auctioning regulations other than bidding activities, such as:
buying and selling them in the secondary market; or
advising a client about buying or selling them.
36Where (9) applies, the specified investment involved will be an emission allowance or one of the contractually based investments. The emissions auction product category of specified investment is only relevant to the regulated activity of bidding in emissions auctions.
332636(9) applies to a person in (2) or (3) as well as anyone else wanting to carry out such activities.
3326There are ten93 arranging activities that are regulated activities under the Regulated Activities Order. These are:
3 9arranging (bringing about) deals in investments which are securities, relevant investments, structured deposits26 or the underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate (article 25(1));
making arrangements with a view to transactions in investments which are securities, relevant investments, structured deposits26 or the underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate (article 25(2));
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 or a legacy CCA mortgage contract entered into by him as borrower24 (article 25A(1) and (2A)18);
13making arrangements with a view to regulated mortgage contracts (article 25A(2));3
3arranging (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
making arrangements with a view to a home reversion plan (article 25B(2));3
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
9making arrangements with a view to a home purchase plan (article 25C(2));93
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
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
9to enable or assist investors to deal with or through a particular firm (such as the arrangements made by introducers); or8
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.
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.
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.
35 Guidance on the MiFID investment service of operating a multilateral trading facility is given in PERG 13, Q24. An activity that comes within26 the regulated activity of operating a multilateral trading facility does not come within the regulated activities26 of dealing in investments as agent, dealing in investments as principal or arranging deals in investments. 26
26The definition of a UKmultilateral trading facility33 covers:
a multilateral trading facility as defined by article 2(1)(14A) of MiFIR33 (see PERG 13, Q24) operated by an investment firm, a credit institution or a market operator; or
a facility which:
is operated by an investment firm, a credit institution or a market operator that is set up outside the United Kingdom33; and
would come within (1) if its operator was set up in the United Kingdom33.
26 Guidance on the MiFID investment service of operating an organised trading facility is given in PERG 13, Q24A. An activity that comes within the regulated activity of operating an organised trading facility does not come within the regulated activities of dealing in investments as agent, dealing in investments as principal or arranging deals in investments.
26The definition of an UK organised trading facility33 covers:
UK33 organised trading facility as defined by article 2(1)(15A) of MiFIR33 (see PERG 13, Q24A) operated by an investment firm, a credit institution or a market operator; or
a facility which:
is operated by an investment firm, a credit institution or a market operator that is set up outside the United Kingdom33; and
would come within the MiFID definition if its operator was set up in the United Kingdom33.
26The regulated activity of operating an organised trading facility only covers a trading facility on which non-equity MiFID instruments are traded.
Subject to (3), a non-equity MiFID instrument means:
a debenture, an alternative debenture, a government and public security, a warrant, a certificate representing certain securities, a unit, an emission allowance, an option, a future or a contract for differences; or
rights to or interests in investments relating to anything in (a).
However, a product in (2) is only a non-equity MiFID investment if it also falls into one of the following categories:
a bond; or
an emission allowance; or
an instrument falling within paragraphs 4 to 10 of Section C of Annex 1 of MiFID (these are described in PERG 13.4) if the instrument is a transferable security.
15There are six activities that fall within credit broking. These are:
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;
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);
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;
presenting or offering an agreement which would (if entered into) be a credit agreement;
assisting an individual by undertaking preparatory work with a view to that person entering into a credit agreement;
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.
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.
To be caught, all of the following conditions must be met:
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);
A, or another person (“X”) acting under an arrangement with A or at A’s direction, undertakes to:
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:
For the purposes of (2)(b):
Subject to the condition in (4A), an25 article 36H agreement is an agreement by which one person provides another person with credit and either of the following conditions is satisfied, or was satisfied at the time the agreement was entered into25:
the lender is an individual; or
the borrower is an individual; and
the amount of credit provided is less than or equal to £25,000; or
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).
It is a condition to be an article 36H agreement that A does not provide credit, assume the rights (by assignment or operation of law) of a person who provided credit, or receive credit under the agreement.25
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.
It is immaterial whether the lender is carrying on a regulated activity.
A personoperating an electronic system in relation to lending (A) also carries on a regulated activity where they operate an electronic system:25
that enables A to facilitate a person (B) assuming the rights of the lender under an article 36H agreement by assignment or operation of law; and25
that meets all of the conditions in PERG 2.7.7HG(2), where C is the borrower under the agreement in (a).25
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) or (6A)25:
presenting or offering article 36H agreements to B or25 C with a view to B becoming the lender under the article 36H agreement or25 C becoming the borrower under the article 36H agreement; or25
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; or25
taking steps to procure the payment of a debt due under an article 36H agreement; or25
taking steps to perform duties or exercise or enforce25 rights under an article 36H agreement on behalf of the lender; or25
taking steps with a view to25 ascertaining whether a credit information agency holds information relevant to the financial standing of an individual; or25
taking steps with a view to25 ascertaining the contents of such information; or25
taking steps with a view to25 securing the correction of, the omission of anything from, or the making of any other kind of modification of, such information; or
taking steps with a view to25 securing that a credit information agency which holds such information stops holding the information, or does not provide it to any other person; or25
giving advice in relation to the taking of any of the steps in (e) to (h).25
The regulated activity of managing investments includes several elements.
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.
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.
Third, the property that is managed must consist of (or include) securities, structured deposits26 or contractually based investments. Alternatively, discretionary management will generally be caught if it is possible that the property could consist of or include such products26. This is the case even if there never has been any investment in these products26, 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 IDD28. Further guidance on this activity is in PERG 5.7 (The regulated activities28: assisting in the administration and performance of a contract of insurance).
15This activity comprises:
negotiating with the lender or owner, on behalf of the borrower or hirer, terms for the discharge of a debt;
taking over, in return for payments by the borrower or hirer, that person's obligation to discharge a debt; or
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.
15Taking steps to procure the payment of a debt due under a credit agreement or a consumer hire agreement is a regulated activity.
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.
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.
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.
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.
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.
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).
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.
1416There are five regulated activities associated with UCITS, AIFs and collective investment schemes:
16The activity of managing a UK UCITS33 is derived from the UCITS Directive. A person will manage a UK UCITS33 where they carry on collective portfolio management of a UK UCITS33. A UK UCITS33is a type of collective investment scheme which is authorised by the FCA33 as meeting the requirements under the UK provisions which implemented33UCITS Directive.
16A person will carry on the activity of acting as trustee or depositary of a UCITS if they act as:
trustee of an authorised unit trust scheme; or
depositary of an investment company with variable capital or an authorised contractual scheme;
16 PERG 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 UK UCITS34 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 authorisedopen-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.
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
2 2 2This 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 (except P2P agreements)25 (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 (except P2P agreements)25 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:
P gives the advice:
to a person ('C') who does not receive the advice in the course of a business that he carries on; and
in the course of a business that P carries on;
the advice is on the merits of C opening or buying a stakeholder product;
the following conditions are met:
P asks C questions to enable P to assess whether a stakeholder product is appropriate for C;
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:
C has indicated to P that he has understood the description and recommendation referred to in (3)(b).
25There are two regulated activities which constitute advising on investments in article 53 of the Regulated Activities Order. These are:
advising on investments (except P2P agreements) (in article 53(1) of the Regulated Activities Order); and
advising on P2P agreements (in article 53(2) of the Regulated Activities Order).
The regulated activity of advising on investments (except P2P agreements)25 under article 53(1)25 of the Regulated Activities Order applies to advice on securities, structured deposits26 or relevant investments. It does not, for example, include giving advice about deposits (except structured deposits)26, or about things that are not specified investments for the purposes of the Regulated Activities Order. 19 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 (except P2P agreements)25.
19The 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 (except P2P agreements)25 is in PERG 8.24 (Advising on investments).
32The scope of the regulated activity of advising on investments (except P2P agreements) is narrower for a person who is authorised for the purposes of the Act to carry on certain regulated activities (as set out in (2)) than described in PERG 2.7.15G and PERG 2.7.16G.
The narrower scope of advising on investments (except P2P agreements) referred to in (1) applies to a person who is authorised for the purposes of the Act to carry on any regulated activity other than (or in addition to):
the regulated activity of agreeing to carry on a regulated activity in relation to (a).
A person in (2) is not advising on investments (except P2P agreements) except to the extent that they are providing a personal recommendation.
In certain circumstances, the activity of advising on investments (except P2P agreements)25 can also amount to providing basic advice on a stakeholder product (see PERG 2.7.14A G (Providing basic advice on stakeholder products)).
25The regulated activity of advising on P2P agreements under article 53(2) of the Regulated Activities Order applies to advice given to a person in their capacity as a lender or potential lender under a relevant article 36H agreement (defined in article 53(4) of the Regulated Activities Order), or as an agent for a lender or potential lender under such an agreement, where that advice is on the merits of their doing any of the following (whether as principal or agent):
entering into a relevant article 36H agreement as a lender or assuming the rights of a lender under such an agreement by assignment or operation of law; or
providing instructions to a P2P platform operator with a view to entering into a relevant article 36H agreement as a lender or assuming the rights of a lender under such an agreement by assignment or operation of law, where the instructions involve:
accepting particular parameters for the terms of the agreement presented by a P2P platform operator; or
choosing between options governing the parameters of the terms of the agreement presented by a P2P platform operator; or
specifying the parameters of the terms of the agreement by other means; or
enforcing or exercising the lender’s rights under a relevant article 36H agreement; or
assigning rights under a relevant article 36H agreement.
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:
entering into a particular regulated mortgage contract; or
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, or the contract is a legacy CCA mortgage contract,24 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:
entering into a particular home reversion plan; or
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:
entering into a particular home purchase plan; or
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:
entering into a particular regulated sale and rent back agreement; or
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).
18Under article 53DA of the Regulated Activities Order, advising a person (“P”) is a regulated activity if:
19the advice is given to P in P’s capacity as a recipient of credit, or potential recipient of credit, under a regulated credit agreement;
P intends to use the credit to acquire or retain property rights in land or in an existing or projected building; and
the advice consists of the provision of personal recommendations to P in respect of one or more transactions relating to regulated credit agreements entered into, or to be entered into, on or after 21 March 201642.
19Under article 53E of the Regulated Activities Order giving advice to a person (“P”) who has subsisting rights in respect of any safeguarded benefits in their capacity as:
a survivor of a member of a pension scheme;
is a regulated activity if the advice is on the merits of P requiring the trustee or manager of the pension scheme to carry out any of the transactions listed in 29PERG 2.7.16HG.
2929The transactions in PERG 2.7.16GG are:
19 29converting any of the safeguarded benefits into different benefits that are flexible benefits under the scheme; or
making a transfer payment in respect of any of the safeguarded benefits with a view to acquiring a right or entitlement to flexible benefits for P under another pension scheme; or
paying a lump sum that would be an uncrystallised funds pension lump sum in respect of any of the safeguarded benefits.
19 Advising on conversion or transfer of pension benefits can only be carried on in respect of one type of specified investments (see PERG 2.6.19CG(2)).
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'ssyndicate), there are three other regulated activities as follows.
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.
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.
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.
15Entering into a regulated credit agreement as lender is a regulated activity.
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.
A credit agreement entered into before 1 April 2014 is a regulated credit agreement for the purposes of PERG 2.7.19AG if it was a ‘regulated agreement’ within the meaning of the CCA when it was entered into, or became such a ‘regulated agreement’ by virtue of being varied or supplemented by another agreement before 1 April 2014. But a credit agreement is not a regulated credit agreement for the purposes of PERG 2.7.19AG if was entered into before 1 April 2014 and, if it had been entered into on 21 March 2016:42
a person would have been carrying on the regulated activity of entering into a regulated mortgage contract or entering into a home purchase plan by entering into the agreement; or42
a person would have been carrying on the regulated activity of administering a regulated mortgage contract by administering the agreement.42
A credit agreement entered into on or after 1 April 2014 is not a regulated credit agreement for the purposes of PERG 2.7.19AG if it is an exempt agreement. PERG 2.7.19CG to PERG 2.7.19JG describe the categories of exempt agreement. Where part of a credit agreement falls within the exemptions in articles 60C to 60H of the Regulated Activities Order, only that part of the agreement is an exempt agreement.42
15A credit agreement is an exempt agreement17 in the following cases:
if:42
by entering into the agreement as lender, a person is or was carrying on the regulated activity of entering into regulated mortgage contracts; or42
by entering into the agreement as home purchase provider, a person is or was carrying on a regulated activity of the kind specified by article 63F(1) of the Regulated Activities Order (entering into regulated home purchase plans); or42
by administering the agreement on 21 March 2016, a person is carrying on a regulated activity of the kind specified by article 61(2) of the Regulated Activities Order (administering regulated mortgage contracts);42
if:
if:
if it is made in connection with trade in goods or services:
between the United Kingdom and a country outside the United Kingdom; or
within a country outside the United Kingdom; or,
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:
is made by the borrower;
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
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:
any sums due under it are secured by a legal or equitable mortgage on land;
20less than 40% of the land is used, or is intended to be used, as or in connection with a dwelling:
the credit agreement is not an article 3(1)(b) credit agreement which is not one to which section 423A(3) of the Act applies, and which is secured on land less than 40% of which is intended to be used as or in connection with a dwelling35.
20For 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.
[deleted]20
2015A credit agreement is an exempt agreement17 in the following cases:
if the credit agreement is a relevant credit agreement relating to the purchase of land and the lender is a local authority;
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;
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
If the lender is an investment firm or a credit institution (other than a credit union or friendly society)35 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.
18The exclusion referred to in PERG 2.7.19FG may 35 not be available to a firm that is an MCD firm (see PERG 4.10A (Activities regulated under the Mortgage Credit Directive)).
42In PERG 2.7.19FG(3), ‘housing authority’ has the same meaning as in article 60E(7) of the Regulated Activities Order. The definition of ‘housing authority’ in article 60E includes housing associations registered under the relevant housing legislation.
The effect of the definition of ‘regulated credit agreement’ in the Regulated Activities Order is that credit agreements entered into by housing associations and other housing authorities before 1 April 2014 that were regulated credit agreements when they were entered into are to be regulated credit agreements notwithstanding the introduction of the exemption in article 60E(5) of the Regulated Activities Order. Credit agreements entered into on or after 1 April 2014 and that meet the conditions in PERG 2.7.19F(3) are exempt. See also PERG 4.4.28CG.
15A credit agreement is also an exempt agreement in the following cases:
if (subject to PERG 2.7.19H G):
the agreement is a borrower-lender-supplier agreement for fixed-sum credit;
the number of payments to be made by the borrower is not more than 1221;
those payments are required to be made within a period of 12 months or less (beginning on the date of the agreement); and
the credit is:
secured on land; or
provided without interest or other charges;
if (subject to PERG 2.7.19H G):
the agreement is a borrower-lender-supplier agreement for running-account credit;
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;
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
the credit is:
secured on land; or
provided without interest or other significant charges;
if:
the agreement is a borrower-lender-supplier agreement financing the purchase of land;
the number of payments to be made by the borrower is not more than four; and
the credit is:
secured on land; or
provided without interest or other charges;
if:
the agreement is a borrower-lender-supplier agreement for fixed-sum credit;
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);
the lender is the lender under a credit agreement secured by a legal or equitable mortgage on that land;
the credit is to be repaid within the period (which must be 12 months or less) to which the premium relates;
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);
in the case of an agreement which is not secured on land, the credit is provided without interest or other charges; and
the number of payments to be made by the borrower is not more than 12;
if:
the agreement is a borrower-lender-supplier agreement for fixed-sum credit;
the lender is the lender under a credit agreement secured by a legal or equitable mortgage on land;
the agreement is to finance a premium under a life insurance policy that meets certain conditions;
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);
in the case of an agreement which is not secured on land, the credit is provided without interest or other charges; and
the number of payments to be made by the borrower is not more than 12.
For the purposes of (1) to (5), “payment” means any payment which comprises or includes a repayment, a payment of interest or any other charge which forms part of the total charge for credit.21
18The exclusion referred to in PERG 2.7.19G G may 35 not be available to a firm that is an MCD firm (see PERG 4.10A (Activities regulated under the Mortgage Credit Directive)).
15The exemptions in PERG 2.7.19GG (1) and PERG 2.7.19GG (2) do not apply to:
credit agreements financing the purchase of land;
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:
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 provided that:42
the agreement is not an article 3(1)(b) credit agreement; or42
35the agreement is an article 3(1)(b) credit agreement but:42
35the agreement is of a kind to which section 423A(3) of the Act applies 35(see PERG 4.10A.5G(1) to (6))35; or 42
it is a credit agreement which relates to the deferred payment, free of charge, of an existing debt and is not secured by a legal or equitable mortgage); or42
it is a bridging loan described in PERG 4.13.6G; or 42
it is a restricted public loan described in PERG 4.13.7G; or42
the agreement was entered into before 21 March 2016;42
if (subject to (5), (6) and (7)42):
it is a borrower-lender agreement;
it is offered to a particular class of individual and not offered to the public generally;
it provides that the only charge included in the total charge for credit (see CONC App 1) is interest; and
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;
if (subject to (5), (6) and (7)42):
it is a borrower-lender agreement;
it is an agreement of a kind offered to a particular class of individual and not offered to the public generally;
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
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;
the banks (referred to in (3)(d)) are:
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;
unless the agreement:
is secured on land; or
is offered by a lender21 to a borrower as an incident of employment with the lender, or with an undertaking in the same group as the lender21;
the exemptions in (2) and (3) apply only if:
the agreement is offered under an enactment with a general interest purpose; and
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; and42
if the agreement is an article 3(1)(b) credit agreement, the agreement is only an exempt agreement if:42
3515A credit agreement is an exempt agreement17 if:
the borrower is an individual;
the agreement is either:18
18the 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;
a statement has been made in relation to the income or assets of the borrower which complies with CONC App 1.4; and
the connection between that statement and the credit agreement complies with CONC App 1.4; and
a copy of that statement was provided to the lender before the agreement was entered into.
18The exclusion referred to in PERG 2.7.19JG may 35 not be available to a firm that is an MCD firm (see PERG 4.10A (Activities regulated under the Mortgage Credit Directive)).
15Entering into a regulated consumer hire agreement as owner is a regulated activity.
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.
15As in the case of a credit agreement (see PERG 2.7.19D G), if a consumer hire agreement includes a declaration which:
is made by the hirer;
provides that the agreement is entered into by the hirer wholly or predominantly for business purposes; and
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).
3 Entering 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).
3 Entering 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).
9 Entering 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:
15Taking any of the steps in (2) on behalf of an individual is a regulated activity.
This activity catches steps taken with a view to:
ascertaining whether a credit information agency holds information relevant to the financial standing of an individual;
ascertaining the contents of such information;
securing the correction of, the omission of anything from, or the making of, any other kind of modification of, such information; or
securing that a credit information agency which holds such information stops holding the information or does not provide it to any other person.
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.
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.
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.
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.
A person requires authorisation for this activity only if its business primarily consists of the activities in (1).
This activity does not include an activity in so far as it is operating an electronic system in relation to lending.
31Section 22(1B) of the Act provides that an activity is a regulated activity if it is an activity of a specified kind which:
is, or relates to, claims management services; and
is carried on in Great Britain.
The activities which have been specified are those set out in articles 89G to 89M of the Regulated Activities Order; these are listed in the Glossary definition of “regulated claims management activity” and set out in PERG 2.7.20N. However, these are subject to the exclusions set out in articles 89N to 89W of the Regulated Activities Order: an activity which falls within one of the exclusions is not a regulated activity (see PERG 2.8.14D).
The activity must be or relate to a claims management service. The drafting of the Regulated Activities Order has the effect that the regulated claims management activities all meet this condition.
The activity must be carried on in Great Britain: see PERG 2.4A. A person outside Great Britain (including a person outside the United Kingdom) may require permission for a regulated claims management activity if they deal with claims involving claimants who are constituted or ordinarily resident in Great Britain or handle details of such claimants, even if that person has no branch, office or establishment in Great Britain.
31Seeking out, referrals and identification of claims or potential claims, as specified in article 89G of the Regulated Activities Order, involves any or all of the following:
seeking out persons who may have a claim (unless that activity constitutes a controlled claims management activity: see PERG 8.7A.5G);
referring details of a claim or a potential claim or a claimant or potential claimant to another person; and
identifying a claim or potential claim, or a claimant, or potential claimant;
when carried on in relation to a personal injury claim, a financial services or financial product claim, a housing disrepair claim, a claim for a specified benefit, a criminal injury claim or an employment-related claim.
The other regulated claims management activities are:
advice, investigation or representation in relation to a personal injury claim;
advice, investigation or representation in relation to a housing disrepair claim;
advice, investigation or representation in relation to a claim for a specified benefit;
advice, investigation or representation in relation to a criminal injury claim; and
advice, investigation or representation in relation to an employment-related claim.
Advice includes any type of advice in relation to a claim, including advice on the merits of a claim, advice on the procedure for pursuing a claim, advice on how best to present a claim, and advice on possible means of challenging an unsatisfactory outcome to a claim.
Investigation of a claim means carrying out an investigation into, or commissioning the investigation of, the circumstances, merits or foundation of a claim (see article 89F(2)(i) of the Regulated Activities Order).
Representation of a claimant means representation in writing or orally, regardless of the tribunal, body or person before which or to whom the representation is made (see article 89F(2)(j) of the Regulated Activities Order).
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,10effecting or carrying out contracts of insurance, operating a multilateral trading facility, operating an organised trading facility26, managing dormant account funds, the meeting of repayment claims75, managing a UK UCITS34, acting as trustee or depositary of a UK UCITS34, 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 it26 has appropriate authorisation at the stage of agreement and before it26 actually carries on the underlying activity (such as the dealing or arranging).
10 16 26Most regulated activities are subject to exclusions that are set out in the Regulated Activities Order directly following each activity.
Two22 exclusions apply10 to the regulated activity of accepting deposits. The first22 relates to a firm with a Part 4A permission to manage an AIF or manage a UK UCITS22 (see PERG 2.9.22 G (Managers of UK22 UCITS and AIFs)).10 There is also excluded from accepting deposits any activity which is carried on by a local authority (see PERG 2.9.23 G).9 In addition to the situations that are excluded from being 'deposits' (see PERG 2.6.2 G to PERG 2.6.4 G), several persons are exempt persons in relation to the regulated activity of accepting deposits (see PERG 2.10.8G (2)).
10 9 9 10 10The following activities are excluded from both the regulated activities of effecting and carrying out contracts of insurance.
In specified circumstances, the activities of an EEA firm when participating in a Community co-insurance operation are excluded. A Community co-insurance operation is defined in the Solvency II Directive.11
11In specified circumstances, activities that are carried out in connection with the provision of on-the-spot accident or breakdown assistance for cars and other vehicles (such as repairs, vehicle retrieval, delivery of parts or fuel) are excluded.
[deleted]22
1111Activities carried on by a firm with a Part 4A permission to manage an AIF or manage a UK UCITS22, where they are in connection with, or for the purposes of, managing an AIF or managing a UK UCITS22 (see PERG 2.9.22 G (Managers of UK22 UCITS and AIFs)).10
The regulated activity of dealing in investments as principal applies to specified transactions relating to any security or to any contractually based investment (apart from rights under funeral plan contracts or rights to or interests in such contracts). The activity is cut back by exclusions as follows.
Of particular significance is the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc). This applies where dealing in investments as principal involves entering into transactions relating to any security or assigning rights under a life policy (or rights or interests in such a contract). In effect, it superimposes an additional condition that must be met before a person's activities become regulated activities. The additional condition is that a person must hold himself out as making a market in the relevant specified investments or as being in the business of dealing in them, or he must regularly solicit members of the public with the purpose of inducing them to deal. This exclusion does not apply to dealing activities that relate to any contractually based investment except the assigning of rights under a life policy.
Entering into a transaction relating to a contractually based investment is not regulated if the transaction is entered into by an unauthorised person and it takes place in either of the following circumstances (a transaction entered into by an authorised person would be caught). The first set of circumstances is where the person with whom the unauthorised person deals is either an authorised person or an exempt person who is acting in the course of a business comprising a regulated activity in relation to which he is exempt. The second set of circumstances is where the unauthorised person enters into a transaction through a non-UK office (which could be his own) and he deals with or through a person who is based outside the United Kingdom. This non-UKperson must be someone who, as his ordinary business, carries on any of the activities relating to securities or contractually based investments that are generally treated as regulated activities.
A person (for example, a bank) who provides another person with finance for any purpose can accept an instrument acknowledging the debt (and as security for it) without risk of dealing as principal as a result.
A company does not deal as principal by issuing its own shares or sharewarrants and a person does not deal as principal by issuing his own debentures, alternative debentures6 or debenture warrants or alternative debenturewarrants.6
A company does not carry on the activity of dealing in investments as principal by purchasing its own shares where section 162A of the Companies Act 1985 (Treasury shares) applies to the shares purchased or by dealing in its own shares held as Treasury shares, in accordance with section 162D of that Act (Treasury shares: disposal and cancellation).
Risk-management activities involving options, futures and contracts for differences will not require authorisation if specified conditions are met. The conditions include the company's business consisting mainly of unregulated activities and the sole or main purpose of the risk management activities being to limit the impact on that business of certain kinds of identifiable risk.
A person will not be treated as carrying on the activity of dealing in investments as principal if, in specified circumstances (outlined in PERG 2.9), he enters as principal into a transaction:
while acting as bare trustee (or, in Scotland, as nominee);
in connection with the sale of goods or supply of services;
that takes place between members of a group or joint enterprise;
in connection with the sale of a body corporate;
in connection with an employee share scheme;
as an overseas person;
[deleted]22
1010where it is in connection with or for the purposes of managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs));910
99while acting as an insolvency practitioner (see PERG 2.9.25 G).
25An activity that might otherwise be both dealing in investments as principal and bidding in emissions auctions is specifically excluded from dealing in investments as principal as a result of article 24A(2) of the RAO which provides that the activity of bidding in emissions auctions does not form part of any other regulated activity (see PERG 2.7.6DG).
228Persons who enter as principal into transactions involving rights under a contract of insurance of any kind will need to consider whether they may, as a result, be carrying on the regulated activity of:
making arrangements with a view to transactions in investments; or
agreeing to do (1) or (2).
The possibility referred to in PERG 2.8.4 G will only arise where it is not the case that the person who enters into the transaction as principal either:
is the only policyholder; or
as a result of the transaction, would become the only policyholder.
2The exclusions referred to in PERG 2.8.4G (1), (2), (4),19 (5) and (6)(b), (c) and (d) will not be available to persons who, when4 carrying on the activity of dealing in investments as principal, are MiFID investment firms or third country investment firms4 (see PERG 2.5.4 G to PERG 2.5.5 G4 (Investment services and activities)).
4 4The regulated activity of dealing in investments as agent applies to specified transactions relating to any security or to any relevant investment (apart from rights under funeral plan contracts or rights to or interests in such rights). In addition, the activity is cut back by exclusions as follows.
An exclusion applies to certain transactions entered into by an agent who is not an authorised person which depend on him dealing with (or through) an authorised person. It does not apply if the transaction relates to a contract of insurance. There are certain conditions which must be satisfied for the exclusion to apply. These are that the agent must not give any relevant advice on the transaction and that he must not receive any remuneration from the transaction unless account is made to his client.
There is an exclusion for risk-management transactions where the agent is dealing on behalf of a group company or a co-participant in a joint enterprise.
In addition, exclusions apply in specified circumstances (outlined in PERG 2.9 (Regulated activities: exclusions available in certain circumstances)) where a person enters as agent into a transaction:
in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G );
in connection with the sale of goods or supply of services (see PERG 2.9.7 G);
that takes place between members of a group or joint enterprise (see PERG 2.9.9 G );
in connection with the sale of a body corporate (see PERG 2.9.11 G );
in connection with an employee share scheme (see PERG 2.9.13 G);
as an overseas person (see PERG 2.9.15 G);
[deleted]22
as a provider of non-motor goods or travel services where the transaction involves a general insurance contract that satisfies certain conditions (see PERG 2.9.19 G);
that involves a contract of insurance covering large risks situated outside the EEA (see PERG 2.9.19 G);2
2on behalf of the participants of a business angel-led enterprise capital fund and that person is a body corporate as specified in article 72E(7) of the Regulated Activities Order;10
10where it is in connection with or for the purposes of managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs));910
99as a local authority in relation to certain contracts of insurance (see PERG 2.9.23 G);
9while acting as an insolvency practitioner (see PERG 2.9.25 G).
25An activity that might otherwise be both dealing in investments as agent and bidding in emissions auctions is specifically excluded from dealing in investments as agent as a result of article 24A(2) of the RAO which provides that the activity of bidding in emissions auctions does not form part of any other regulated activity (see PERG 2.7.6DG).
228More detailed guidance on the exclusions that relate to contracts of insurance is in PERG 5 (Guidance on insurance distribution20 activities).
2The exclusions referred to in PERG 2.8.5G (1), (2) and (3)(a),4 (b), (c), (d) and (j) will not be available to persons who, when4 carrying on the activity of dealing in investments as agent, are MiFID investment firms or third country investment firms4 (see PERG 2.5.4 G to PERG 2.5.5 G4 (Investment services and activities)).
4 4The various activities that involve arranging fall into two general types. These are:3
3those relating to arranging a particular transaction or a contract, agreement5 or plan variation (articles 25(1), 25A(1), 25A(2A).12 25B(1),5 25C(1) , and 25E(1) 5of the Regulated Activities Order); and
53those relating to making arrangements with a view to persons entering into certain transactions (articles 25(2), 25A(2), 25B(2),5 25C(2) , and 25E(2) 5of the Regulated Activities Order).
53The exclusions in relation to the regulated activities of arranging under articles 25(1) and (2) are of particular relevance in the context of raising corporate finance. Some of the exclusions outlined in PERG 2.8.6A G relate to all of the arranging activities but most relate only to certain of those activities as indicated.
3The exclusions in the Regulated Activities Order that relate to the various arranging activities are as follows.
25Under article 24A(2), an activity that would otherwise be both arranging and bidding in emissions auctions is specifically excluded from arranging because the activity of bidding in emissions auctions does not form part of any other regulated activity (see PERG 2.7.6DG).
228Under article 26, arrangements that do not or would not bring about the transaction to which they relate are excluded from the arranging activities that relate to a particular transaction (see PERG 2.8.6G (1)) only. A person will bring about a transaction or a contract or plan variation only if his involvement in the chain of events leading to a transaction or contract or plan variation is of sufficient importance that, without that involvement, it would not take place. This will require something more than the mere giving of advice (although giving such advice may be the regulated activity of advising on investments (except P2P agreements)18 or advising on home finance transactions).
Under article 27, simply providing the means by which parties to a transaction (or possible transaction) are able to communicate with each other is excluded from arrangements made with a view to persons entering into certain transactions (see PERG 2.8.6G (2)) only. This will ensure that persons such as Internet service providers or telecommunications networks are excluded if all they do is provide communication facilities (and these would otherwise be considered to be arrangements made with a view to the participants entering into transactions). If a person makes arrangements that go beyond providing the means of communication, and add value to what is provided, he will lose the benefit of this exclusion.
Under article 28, arranging investment transactions to which the arranger is to be a party is excluded from both article 25(1) and (2). The main purpose is to ensure that a person is not regarded as arranging deals for another when the transaction in question is one to which he intends to be a party. As a result, a person cannot both be engaging in a dealing activity (as principal or agent) and arranging deals for another as regards any particular transaction. But where the transaction involves a contract of insurance, article 28 will not apply if the person making the arrangements:
is the only policyholder; or
as a result of the transaction, would become the only policyholder.
Under article 28A, a person is excluded from any of the arranging activities that relate to home finance transactions if he is to enter into the contract or plan to which the arrangements relate or if he is or is to become a party to a contract or plan that is varied or to be varied.
Under article 29, an unauthorised person who, on behalf of a client, arranges transactions or contract or plan variations, with or through an authorised person, is excluded from each of the arranging activities if specified conditions as to advice and remuneration are satisfied. For example, the exclusion is dependent on the client not receiving any advice on the transactions or variations from the unauthorised person making the arrangements. The exclusion does not apply where the investment is a contract of insurance.
Under article 29A, an unauthorised person is excluded from the regulated activity of arranging for another person to vary the terms of a regulated mortgage contract entered into on or after 31 October 2004 or a legacy CCA mortgage contract17 (article 25A(1)(b)) or a home reversion plan or home purchase plan entered into on or after 6 April 2007 (articles 25B(1)(b) and 25C(1)(b)) or a regulated sale and rent back agreement entered into on or after 1 July 2009 (article 25E(1)(b))5. This is if the arranging is the result of:
anything done in the course of the administration, by an authorised person:
of a regulated mortgage contract in the way set out in article 62(a);
of a home reversion plan in the way set out in article 63C(a);
of a home purchase plan in the way set out in article 63G(a);
5of a regulated sale and rent back agreement in the way set out in article 63K(a); or5
anything done by the unauthorised person in connection with the administration:
of a regulated mortgage contract in the way set out in article 62(b);
of a home reversion plan in the way set out in article 63C(b);
of a home purchase plan in the way set out in article 63G(b);5
of a regulated sale and rent back agreement in the way set out in article 63K(b).5
Under article 30, arranging investment transactions in connection with lending on the security of contracts of insurance is excluded, from article 25(1) and (2) but only where a person is not carrying on insurance distribution or reinsurance distribution20.
Under article 31, making arrangements for finance (in whatever form) to be supplied to a person by a third party is excluded from article 25(1) and (2) if the finance is given in exchange for an instrument acknowledging the debt. This mirrors the exclusion from dealing in investments as principal in similar circumstances (see PERG 2.8.4G (3)).
Under article 32, arrangements the only purpose of which is to provide finance to enable persons to enter into investment transactions are excluded from article 25(2) only. There is no equivalent exemption from article 25(1). But arrangements for the provision of finance will only be caught by that provision if the arrangements actually bring about the transaction.
Under article 33, making arrangements under which persons will be introduced to third parties who will provide independent services (consisting of advice or the exercise of discretion in relation to certain investments) is excluded from articles 25(2), 25A(2), 25B(2),5 25C(2) and 25E(2) 5only. The party to whom the introduction is made must be of a specified standing (including that of an authorised person). The exclusion does not apply where the arrangements relate to a contract of insurance.
5Under article 33A, making arrangements for introducing persons to:
an authorised person who has permission to carry on certain regulated activities concerned with home finance transactions; or
an appointed representative who is able to carry on any of those activities without breaching the general prohibition; or
an overseas person who carries on any of those activities;
is excluded from articles 25A(2), 25B(2),5 25C(2), and 25E(2) 5 subject to certain conditions related to the receipt of client money and the disclosure of certain information.
5Under article 33B, the mere provision of certain information is excluded from article 25(1) and (2). The information must be: 20
about a potential policyholder, and provided to either a relevant insurer (as defined in article 39B(2) of the Regulated Activities Order), an insurance intermediary (as defined in article 2(1)(3) of the IDD) or an IDD reinsurance intermediary, or20
about certain insurance products or providers, and provided to a potential policyholder.20
This is on the condition that the provider of the information takes no step other than to provide this information to assist in the conclusion of a contract of insurance.20
Under article 34, a company is not carrying on a regulated activity under article 25(1) or (2) of the Regulated Activities Order(Arranging deals in investments) by arranging for the issue of its own shares or share warrants and a person is not doing so by arranging for the issue of his own debentures or alternative debentures6or debenture warrants or alternative debenture warrants6.
Under article 35, a body carrying out international securities business of a specified type can apply to the Treasury for approval as an international securities self-regulating organisation (ISSRO). Arrangements made in order to carry out the functions of an ISSRO are excluded from article 25(1) and (2). The exclusion applies whether the arrangements are made by the ISSRO or by a person acting on its behalf.
The following exclusions from both article 25(1) and (2) (outlined in PERG 2.9) apply in specified circumstances where a person makes arrangements:
while acting as trustee or personal representative (see PERG 2.9.3 G);
in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G);
in connection with the sale of goods or supply of services (see PERG 2.9.7 G);
in connection with certain transactions by a group member or by a participator in a joint enterprise (see PERG 2.9.9 G);
in connection with the sale of a body corporate (see PERG 2.9.11 G);
in connection with an employee share scheme (see PERG 2.9.13 G);
as an overseas person (see PERG 2.9.15 G);
as an incoming ECA provider (see PERG 2.9.18 G);
as a provider of non-motor goods or services related to travel (see PERG 2.9.19 G);
involving the provision, on an incidental basis, of information to policyholders or potential policyholders about contracts of insurance (see PERG 2.9.19 G);
that involve a contract of insurance covering large risks situated outside the EEA (see PERG 2.9.19 G);
for or with a view to transactions to be entered into by or on behalf of the participants of a business angel-led enterprise capital fund and that person is a body corporate as specified in article 72E(7) of the Regulated Activities Order;10
10in connection with or for the purposes of managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs));910
99as a local authority in relation to certain contracts of insurance (see PERG 2.9.23 G);
9while acting as an insolvency practitioner (see PERG 2.9.25 G).
The exclusions referred to in (a), (b), (g), (h),9 (m)10 and (n)9 also apply to arranging activities related to home finance transactions (in that context, the exclusion in (n) covers any activity which is carried on by a local authority)9. More detailed guidance on the exclusions that relate to contracts of insurance is in PERG 5 Guidance on insurance distribution20 activities).
109Under article 36(2A), arrangements related to regulated mortgage contracts are excluded from article 25A in so far they constitute CBTL business (see PERG 4.10B) carried on by a CBTL firm.14
3The exclusions referred to in PERG 2.8.6AG (4), PERG 2.8.6AG(11)19 and PERG 2.8.6AG (13)(b), (c)4, (d), (e) and (l) will not be available to persons who, when4 carrying on an arranging activity, are MiFID investment firms or third country investment firms4 (see PERG 2.5.4 G to PERG 2.5.5 G4 (Investment services and activities)).
4 4 412The exclusion referred to in PERG 2.8.6AG (4) will not be available to persons who, when carrying on an arranging activity, are MCD firms (see PERG 4.10A (Activities regulated under the Mortgage Credit Directive)).
9The following activities are excluded from the regulated activity of credit broking:
Introducing by individuals in the course of canvassing off trade premises
Activities carried on by an individual by canvassing off trade premises:
a restricted-use credit agreement to finance a transaction between the lender or a member of the lender's group and the borrower; or
are excluded from credit broking, as long as the individual does not carry on any other activity in PERG 2.7.7EG (1) to PERG 2.7.7EG (3).
Activities for which no fee is paid
The activities in PERG 2.7.7EG (4) to PERG 2.7.7EG (6) carried on by a person for which that person does not receive a fee are excluded from credit broking.
“Fee” includes pecuniary consideration or any other form of financial consideration for the purposes of this paragraph.24
Transaction to which the broker is a party
Activities carried on by a person in relation to a credit agreement or a consumer hire agreement into which that person enters or is to enter as lender or owner are excluded from credit broking.
Activities in relation to certain agreements relating to land (article 36E of the Regulated Activities Order)16
Activities carried on with a view to an individual entering into an investment property loan (within the meaning of article 61A of the Regulated Activities Order) are excluded from credit broking.16
The regulated activities of arranging (bringing about) regulated mortgage contracts, making arrangements with a view to regulated mortgage contracts, arranging (bringing about) a home purchase plan and making arrangements with a view to a home purchase plan are excluded from credit broking.16
Also excluded from credit broking, when not excluded by (3A) or (3B), are activities which consist of effecting an introduction with a view to an individual entering into regulated mortgage contract or a home purchase plan, if the person to whom the introduction is made is an authorised person who has permission to:16
enter into such an agreement as lender or home purchase provider; or16
make an introduction to an authorised person who has permission to enter into such an agreement as lender or home purchase provider.16
[deleted]16
[deleted]16
Activities carried on by members of the legal profession
Activities carried on by:
a barrister or advocate acting in that capacity;
a solicitor acting in the course of providing advocacy services or litigation services15;
a person acting in the course of providing advocacy services or litigation services15 who, for the purposes of the Legal Services Act 2007, is authorised to exercise a right of audience or conduct litigation;
are excluded from credit broking. For these purposes:15
“advocacy services” means any service which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right of audience in relation to any proceedings, or contemplated proceedings, to provide for the purpose of those proceedings or contemplated proceedings; and15
“litigation services” means any service which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide for the purpose of those proceedings or contemplated proceedings.15
Activities carried on by registered social landlords24
Activities carried on by registered social landlords are excluded from credit broking where: 24
the registered social landlord does not receive a fee, and24
the activities relate to the introduction of an individual who wishes to enter into a credit agreement to:24
For these purposes:24
“community benefit society” means a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014 or a registered society within the meaning of the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969;24
“community interest company limited by guarantee” means a community interest company limited by guarantee within the meaning of section 26 of the Companies (Audit, Investigations and Community Enterprise) Act 2004;24
“credit union” means a credit union within the meaning of the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985;24
“registered charity” means:24
in England and Wales, a charity registered under section 30(1) of the Charities Act 2011;24
in Scotland, a charity registered within the meaning of section 13(1) of the Charities and Trustee Investment (Scotland) Act 2005; and24
in Northern Ireland, a charity registered under section 16(2) of the Charities Act (Northern Ireland) 2008;24
“registered social landlord” means:24
in England, a private registered provider within the meaning of section 80(3) of the Housing and Regeneration Act 2008;24
in Wales, a registered social landlord within the meaning of Part 1 of the Housing Act 1996;24
in Scotland, a registered social landlord within the meaning of the Housing (Scotland) Act 2010; and24
in Northern Ireland, a housing association within the meaning of Part 2 of the Housing (Northern Ireland) Order 1992;24
“subsidiary” means a subsidiary as defined by section 1159 of the Companies Act 2006; and24
“fee” includes pecuniary consideration or any other form of financial consideration.24
Other exclusions
The exclusions for electronic commerce activities by an incoming ECA provider (see PERG 2.9.18 G), activities carried on by a CBTL firm with a view to an individual entering into a CBTL credit agreement (see PERG 2.9.28G and PERG 4.10B) 14 and activities carried on by local authorities (see PERG 2.9.23 G) also apply to credit broking.
9An activity of a kind specified below is excluded from the regulated activity of operating an electronic system in relation to lending:18
The regulated activity of advising on P2P agreements does not apply where such advice is given in relation to a relevant article 36H agreement (defined in article 53(4) of the Regulated Activities Order) which has been facilitated by the person giving the advice in the course of carrying on an activity specified by article 36H of the Regulated Activities Order and is given by:18
an authorised person with permission to carry on the regulated activity of operating an electronic system in relation to lending; or18
an appointed representative in relation to the regulated activity of operating an electronic system in relation to lending; or18
an exempt person in relation to the regulated activity of operating an electronic system in relation to lending; or18
a person to whom, as a result of Part 20 of the Act, the general prohibition does not apply in relation to the regulated activity of operating an electronic system in relation to lending.18
[deleted]22
The activities of persons appointed under a power of attorney are excluded under article 38 of the Regulated Activities Order, from the regulated activity of managing investments, if specified conditions are satisfied. The exclusion only applies where a person is not carrying on insurance distribution or reinsurance distribution20 and is subject to further limitations discussed below2. In addition, the following exclusions (outlined in PERG 2.9) apply in specified circumstances where a person manages assets:
While acting as trustee or personal representative; or
in connection with the sale of goods or supply of services; or
that belong to a group member or participator in a joint enterprise; or
[deleted]22
22belonging to the participants of a business angel-led enterprise capital fund and that person is a body corporate as specified in article 72E(7) of the Regulated Activities Order; or10
10in connection with or for the purposes of managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs)); or910
99while acting as an insolvency practitioner (see PERG 2.9.25 G).
2The exclusion in article 38 of the Regulated Activities Order and the exclusions referred to in PERG 2.8.7G (2), PERG 2.8.7G (3) and PERG 2.8.7G (5) will not be available to persons who, when4 carrying on the activity of managing investments, are MiFID investment firms or third country investment firms4 (see PERG 2.5.4 G to PERG 2.5.5 G4 (Investment services and activities)).
4 4Assisting in the administration and performance of a contract of insurance is excluded under article 39B where it is carried on by a person acting in the capacity of:
an expert appraiser; or
a loss adjuster acting for a relevant insurer; or
a claims manager acting for a relevant insurer.
The term 'relevant insurer' is defined in article 39B(2).
The following exclusions from assisting in the administration and performance of a contract of insurance also apply to a person in specified circumstances:
while acting as trustee or personal representative (see PERG 2.9.3 G); or
in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G); or
[deleted]22
as a provider of non-motor goods or services related to travel (see PERG 2.9.19 G); or
that involve the provision, on an incidental basis, of information to policyholders or potential policyholders about contracts of insurance (see PERG 2.9.19G (2));
10that involve a contract of insurance covering large risks situated outside the United Kingdom22 (see PERG 2.9.19 G); or10
10where it is in connection with, or for the purposes of, managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs)); or910
99as a local authority in relation to certain contracts of insurance (see PERG 2.9.23 G); or
9while acting as an insolvency practitioner (see PERG 2.9.25 G).
9Activities carried on by:
the supplier in relation to the credit agreement;
a credit broker who has acquired the business of the person who was the supplier in relation to the credit agreement; or
a person who would be a credit broker but for the exclusion in PERG 2.8.6CG (1) where the agreement was made in consequence of an introduction (by that person or another person) to which that exclusion applies;
are excluded from the regulated activities of debt adjusting, debt counselling and debt collecting.
Steps taken under, or in relation to, an agreement by any of the persons in (1) are excluded from being debt administration.
Activities carried on by a relevant energy supplier in relation to debts due under a green deal plan associated with the supplier are excluded from being debt adjusting, debt counselling, debt collecting or debt administration. A green deal plan is associated with a supplier if the payments under the plan are to be made to the supplier.
There is also an exclusion from debt adjusting, debt counselling, debt collecting and debt administration for any activity that relates to a regulated mortgage contract or a home purchase plan to the extent that the activity constitutes a regulated activity (other than only debt adjusting, debt counselling, debt collecting and debt administration), where entering into that contract as lender constitutes entering into a regulated mortgage contract or entering into that home purchase plan as provider constitutes entering into a home purchase plan.
Activities carried on by:
a barrister or advocate acting in that capacity;
a solicitor acting in the course of providing advocacy services or litigation services15;
a person acting in the course of providing advocacy services or litigation services15 who, for the purposes of the Legal Services Act 2007, is authorised to exercise a right of audience or conduct litigation;
are excluded from debt adjusting, debt counselling, debt collecting and debt administration. For these purposes:15
“advocacy services” means any service which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right of audience in relation to any proceedings, or contemplated proceedings, to provide for the purpose of those proceedings or contemplated proceedings; and15
“litigation services” means any service which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide for the purpose of those proceedings or contemplated proceedings.15
The exclusions relating to 22activities carried on by a local authority (see PERG 2.9.23 G) or an insolvency practitioner (see PERG 2.9.25 G) also apply to these regulated activities.
18The regulated activity of advising on P2P agreements does not apply in so far as the advice is given in the course of carrying on an activity of a kind specified by:
article 39F of the Regulated Activities Order (debt collecting); or
article 39G of the Regulated Activities Order (debt administration);
by a person carrying on that activity not in contravention of the general prohibition.
The exclusions from the regulated activity of safeguarding and administering investments are as follows.
Safeguarding and administration activities carried on by one person are excluded if a specified third party undertakes a responsibility for the assets which is no less onerous than it would have been if he were doing the safeguarding and administration himself. The effect of this is that an authorised person with permission to carry on this regulated activity (or in certain circumstances an exempt person) can delegate all or part of the activities without the delegate needing to be authorised and without loss of protection to the owner of the assets.
Introductions to an authorised person, or to an exempt person acting within the scope of his exemption and in the course of a business, are excluded from that aspect of this regulated activity which consists of arranging safeguarding and administration of assets by another person (see PERG 2.7.9 G).
1Trustees are excluded from arranging for another person to safeguard and administer assets where that other person is either:
an authorised person who has permission to safeguard and administer investments; or
an exempt person whose exemption permits him to safeguard and administer investments; or
a person to whom (1) applies.
Certain specified activities (such as currency conversion and document handling) are excluded from being the administration of investments. A person who safeguards and administers assets will not be carrying on regulated activities if these are the only administration activities in which he engages. This is because a person must be carrying on both the activity of safeguarding and that of administration, or be arranging for both to be carried on by another, before he requires authorisation (see PERG 2.7.9 G).
A person with a Part 4A permission to act as trustee or depositary of an AIF or act as trustee or depositary of an UCITS will not carry on the activity of safeguarding and administering investments in respect of their activities for an AIF or UCITS for which they are acting as trustee or depositary.10
The following exclusions apply in specified circumstances where a person safeguards and administers assets (or arranges for another to do so):
while acting as trustee or personal representative (see PERG 2.9.3 G);
in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G);
in connection with the sale of goods or supply of services (see PERG 2.9.7 G);
which belong to a group member or participator in a joint enterprise (see PERG 2.9.9 G);
in connection with an employee share scheme (see PERG 2.9.13 G);
[deleted]22
2that are contracts of insurance and, in so doing, provides information to policyholders or potential policyholders on an incidental basis in the course of his carrying on a business or profession not otherwise consisting of regulated activities (see PERG 2.9.19G (2));2
102belonging to the participants in a business angel-led enterprise capital fund, but only where such safeguarding and administration is carried on by a body corporate as specified in article 72E(7) of the Regulated Activities Order;
10910in connection with or for the purposes of managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs)); and910
99while acting as an insolvency practitioner (see PERG 2.9.25 G).
Exclusions from the regulated activity of sending dematerialised instructions apply in relation to certain types of instructions sent in the operation of the system maintained under the Uncertificated Securities Regulations 2001 (SI 2001/3755). The various exclusions relate to the roles played by participating issuers, settlement banks and network providers (such as Internet service providers) and to instructions sent in connection with takeover offers (as long as specified conditions are met). In addition, the following exclusions (outlined in PERG 2.9) apply in specified circumstances where a person sends dematerialised instructions:
while acting as trustee or personal representative (see PERG 2.9.3 G);
on behalf of a group member (see PERG 2.9.3 G);
[deleted]22
where it is in connection with, or for the purposes of, managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs));109
99while acting as an insolvency practitioner (see PERG 2.9.25 G).
22The exclusion for business angel-led capital funds (see PERG 2.9.20 G) applies to the activities of managing an AIF, managing a UK UCITS22 and establishing, operating and winding up a collective investment scheme.10There is a third exclusion for insolvency practitioners (see PERG 2.9.25 G).9
In addition, there are two further exclusions which apply to the activity of establishing, operating or winding up a collective investment scheme:10
the exclusion in PERG 2.9.22 G (Managers of UCITS and AIFs); and10
a person (A) does not carry on the regulated activity of establishing, operating or winding up a collective investment scheme if:10
in relation to a UCITS, at the time A carries on the activity, the UCITS is managed by a person with a Part 4A permission to manage a UK UCITS22 or, no more than 30 days have passed since the UCITS was managed by a person with that permission (this 30-day period can be extended in certain circumstances, as set out in article 51ZG(2) of the RAO); or10
in relation to an AIF, the exclusion described in PERG 16.5, question 5.2(2) applies.10
In other cases, the key issue is whether or not what is being done relates to something that is a collective investment scheme (see PERG 2.6.18 G) or an AIF (see PERG 16.6). 10
Two22 exclusions apply to10 the range of activities specified as being regulated in relation to stakeholder pension schemesand personal pension schemes2. 22 The first22 relates to firms with a Part 4A permission to manage an AIF or manage a UK UCITS22 (see PERG 2.9.22 G (Managers of UK22 UCITS and AIFs)).10The second22 relates to insolvency practitioners (see PERG 2.9.25 G).9
10 9 9 10In certain circumstances, advice that takes the form of a regularly updated news or information service and advice which is given in one of a range of different media (for example, newspaper or television) is excluded from the regulated activities of:3
advising on a home reversion plan; 3
5advising on a home purchase plan;53
513advising on a regulated sale and rent back agreement; and135
13[text to follow]13
See PERG 7 (Periodical publications: news services and broadcasts: applications for certification) for further guidance on this exclusion.
3Advice given by an unauthorised person in relation to a home finance transaction or advising on regulated credit agreements for the acquisition of land12 in the circumstances referred to in PERG 2.8.6AG (5)(a) or (b) (Arranging deals in investments and arranging a home finance transaction) is also excluded. In addition:
the following exclusions apply in specified circumstances where a person is advising on investments, advising on regulated credit agreements for the acquisition of land12 or advising on a home finance transaction:
while acting as trustee or personal representative (see PERG 2.9.3 G);
in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G);
10[deleted]22
109where it is in connection with, or for the purposes of, managing a UK UCITS22 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS22 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs)); 910
9149as a local authority (in the case of advising on investments, in relation to certain contracts of insurance) (see PERG 2.9.23 G);and14
as a CBTL firm in the course of CBTL business (see PERG 4.10B) (in the case of advising on regulated credit agreements the purpose of which is to acquire land);14
the following exclusions apply in specified circumstances where a person is advising on investments:
in connection with the sale of goods or supply of services (see PERG 2.9.7 G);
to a group member or participator in a joint enterprise (see PERG 2.9.9 G);
in connection with the sale of a body corporate (see PERG 2.9.11 G);
as an overseas person (see PERG 2.9.15 G);
that are limited to certain covering risks to non-motor goods or related to travel (see );
that are covering large risks situated outside the (see )
to be made by or on behalf of the participants of a business angel-led enterprise capital fund, when the advice is given to the participants in that fund and that person is a as specified in article 72E(7) of the ;9
99while acting as an insolvency practitioner (see PERG 2.9.25 G).
More detailed guidance5 on certain of these exclusions is in PERG 4 (Guidance on regulated20 activities connected with mortgages), PERG 5 (Guidance on insurance distribution20 activities), PERG 14.3 (Activities relating to home reversion plans)20, PERG 14.4 (Activities relating to home purchase plans)20 and PERG 14.4A (Activities relating to regulated sale and rent back agreements20).
555555554The exclusions referred to in PERG 2.8.12AG (1)(b) and (2)(a), (b), (c) and (g) will not be available to persons who, when carrying on the activity of advising on investments are MiFID investment firms or third country investment firms (see PERG 2.5.4 G to PERG 2.5.5 G (Investment services and activities)).
22A firm with a Part 4A permission to manage an AIF or manage a UK UCITS22 is also excluded from carrying on a regulated activity if the person carries on that activity in connection with, or for the purposes of, managing an AIF or managing a UK UCITS22 (see PERG 2.9.22 G).10 Otherwise the only exclusions that apply concern the regulated activity of arranging deals in its application to business carried on at Lloyd's.
Entering as provider into a funeral plan contract is not treated as a regulated activity where:
the contract is one under which the sums received from the customer will be applied towards a contract of insurance on the life of the person whose funeral is to be provided or be held on trust for the purpose of providing a funeral; in each case certain specified conditions must be met for the exclusion to apply; or
the customer and the provider intend or expect that the funeral will be provided within one month of the contract being entered into; or
[deleted]22
1010it is provided by a firm with a Part 4A permission to manage a UK UCITS23 or manage an AIF in connection with, or for the purposes of, managing a UK UCITS23 or managing an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs)).10
Exclusions from the regulated activities that involve administering a home finance transaction3 are provided where an unauthorised person:3
3 3arranges for administration by an authorised person who has permission for carrying on that regulated activity;3
carries out the administration for up to one month after an arrangement of the kind mentioned in (1) comes to an end; or3
carries out the administration under an agreement with an authorised person who has permission for carrying on that regulated activity.3
These exclusions are subject to certain conditions and are explained in greater detail in PERG 4.83 (Administering a regulated mortgage contract), 5PERG 14.3, 5PERG 14.4 and PERG 14.4A5 (Guidance on home reversion,5 home purchase and regulated sale and rent back agreement 5activities).3
3 5 5 53The following exclusions apply in specified circumstances where a person is administering a home finance transaction:5
5while acting as trustee or personal representative (see PERG 2.9.3 G);
in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G);
10[deleted]22
109in connection with, or for the purposes of, managing a UK UCITS23 or managing an AIF and the person has a Part 4A permission to manage a UK UCITS23 or manage an AIF (see PERG 2.9.22 G (Managers of UCITS and AIFs)); and910
99if the person is a local authority (see PERG 2.9.23 G);14
14in the course of carrying on CBTL business as a CBTL firm (see PERG 4.10B).14
9A person who is not an authorised person and exercises, or has the right to exercise, the lender's rights and duties under a regulated credit agreement does not require authorisation to do so where he:
arranges for another person to do so and the other person is an authorised person with permission to carry on that regulated activity;
does so for up to one month after an arrangement of the kind in (1) comes to an end; or
does so under an agreement with an authorised person who has permission to carry on that regulated activity.
[deleted]22
9There is also an exclusion from entering into a regulated credit agreement as lender and exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement for any activity carried on by a local authority in so far as the credit agreement is of a kind to which the Consumer Credit Directive does not apply under article 2(2) of that Directive (see PERG 2.9.23 G).
9The exclusion22 for an activity carried on by a local authority (see PERG 2.9.23 G) also applies22 to the regulated activities of entering into a regulated consumer hire agreement as owner and exercising, or to having the right to exercise, the owner's rights and duties under a regulated consumer hire agreement.
9The exclusions relating to activities carried on by members of the legal profession (see PERG 2.8.6CG (6)) applies22 to providing credit information services and providing credit references.
The exclusions for activities carried on by a local authority (see PERG 2.9.23 G) and insolvency practitioners (see PERG 2.9.25 G) also apply to providing credit information services.
21The Regulated Activities Order excludes a number of activities from regulated claims management activity. The exclusions include:
activity carried on by or through a legal practitioner, or by a natural person who carries on that activity at the direction of, and under the supervision of, a legal practitioner, provided that the legal practitioner carries on that activity in the ordinary course of legal practice pursuant to the professional rules to which that legal practitioner is subject (article 89N);
activity carried on by a charity or not-for-profit body (article 89O);
exclusion from seeking out, referrals and identification of claims or potential claims for providers of referrals who meet all the following conditions (article 89V):
the person who refers those details (“the introducer”) carries on no other regulated claims management activity;
the activity is incidental to the introducer’s main business;
the details are only referred to authorised persons, legal practitioners, or a firm, organisation, or body corporate that provides the service through legal practitioners;
of the claims that the introducer refers to such persons, that introducer is paid, in money or money’s worth, for no more than 25 claims per calendar quarter;
the introducer, in obtaining and referring those details, has complied with22, the Privacy and Electronic Communications (EC Directive) Regulations 2003,data protection legislation22 and the Unfair Trading Regulations (but this condition does not apply in the case of a referral to a legal practitioner, or to a firm, organisation, or body corporate that carries on the activity through legal practitioners); and
any regulated activity of the kind specified in articles 21, 25, 39A, 53 or 64 of the Regulated Activities Order carried on by a person who has permission to carry on that activity in relation to a contract of insurance (article 89U).
A person who agrees to carry on certain other regulated activities (which is itself a regulated activity see PERG 2.7.21 G) does not require authorisation where the person concerned is an overseasperson and the agreement is reached as a result of a legitimate approach (see PERG 2.9.12 G). For this exclusion to apply, the agreement must be one to arrange deals, manage investments, assist in the administration and performance of a contract of insurance, safeguard and administer investments or send dematerialised instructions. 22
11 11To the extent that an exclusion applies in relation to a regulated activity, then 'agreeing' to carry on an activity falling within the exclusion will not be a regulated activity. This is the effect of article 4(3) of the Regulated Activities Order.
The various exclusions outlined below deal with a range of different circumstances.
Each set of circumstances described in PERG 2.9.3 G to PERG 2.9.17 G has some application to several regulated activities relating to securities, structured deposits,18relevant investments orhome finance transactions.4 They have no effect in relation to the separate regulated activities of accepting deposits, issuing electronic money,9effecting or carrying out contracts of insurance, bidding in emissions auctions22, 20advising on syndicate participation at Lloyd's, managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's or entering as provider into a funeral plan contract. Within each set of circumstances, the Regulated Activities Order, in Chapter XVII of Part II of the Order, makes separate provision for each regulated activity affected. This is necessary because each exclusion has to be tailored to reflect the different nature of the regulated activity involved and the different language required (for example, some activities involve entering directly into transactions while others relate to the provision of services).
4910[deleted]20
The exclusions grouped together in the Regulated Activities Order are described below in this chapter in general terms. The exact terms of each exclusion will need to be considered by any person who is considering whether they need authorisation. Each description is accompanied by an indication of which regulated activities are affected.
This group of exclusions applies, in specified circumstances, to the regulated activities of:
arranging (bringing about) dealsininvestments and4making arrangements with a view to transactions in investments;
44assisting in the administration and performance of a contract of insurance;
advising on investments, advising on regulated credit agreements for the acquisition of land15 or advising on a home finance transaction;4
4entering into a home finance transaction;4 and
4administering a home finance transaction.4
4The exclusion is, however, disapplied where a person is carrying on insurance distribution or reinsurance distribution19, or the person would be an MCD firm.15 This is due to article 4(4A) and 4(4B)15 of the Regulated Activities Order. Guidance on exclusions relevant to insurance distribution activities19 is in PERG 5 (Guidance on insurance distribution19 activities) and guidance on activities and exclusions relevant to the MCD is in PERG 4.10A (Activities regulated under the Mortgage Credit Directive).15
15A person carrying on certain regulated activities does not require authorisation in specified circumstances if he is acting in a representative capacity. The representative capacities covered by the exclusions depend on the regulated activity concerned but, in most cases, the focus is on persons who are acting as trustee or personal representative. In broad terms, the exclusions apply to specified transactions, or activities, that are part of the discharge of his general obligations by the trustee or representative when he is acting as such. Many of the exclusions require that the trustee or representative must not hold himself out as providing services consisting of the regulated activity in question. In addition, he must not receive remuneration that is additional to any he receives for acting in the representative capacity (although a person is not to be regarded as receiving additional remuneration merely because his remuneration as trustee or representative is calculated by reference to time spent). The exclusions for entering into a home finance transaction and for administering a home finance transaction,4 however, work on a different basis. They apply where the activity relates to a home finance transaction4 under which the borrower, reversion occupier,8home purchaser or SRB agreement seller8as the case may be4 is a beneficiary.
4 4 8This group of exclusions applies, in specified circumstances, to the regulated activities of:
arranging (bringing about) deals in investments, and4making arrangements with a view to transactions in investments;
44assisting in the administration and performance of a contract of insurance;
advising on investments,15advising on regulated credit agreements for the acquisition of land or15advising on a home finance transaction.4
4The exclusion is, however, disapplied where a person is carrying on insurance distribution or reinsurance distribution19. This is due to article 4(4A) of the Regulated Activities Order. Guidance on exclusions relevant to insurance distribution activities19 is in PERG 5 (Guidance on insurance distribution19 activities). The exclusion is also disapplied for persons who, when carrying on the relevant regulated activity, are MiFID investment firms or third country investment firms (see PERG 2.5.4 G to PERG 2.5.5 G (Investment services and activities)).5
The exclusion is also disapplied for persons who, when carrying on the relevant regulated activity, are MCD firms (see PERG 4.10A (Activities regulated under the Mortgage Credit Directive)).15
The exclusions apply where the regulated activity is carried out in the course of a profession or business which does not otherwise consist of the carrying on of regulated activities in the United Kingdom. However, activities are only excluded to the extent that they may reasonably be regarded as a necessary part of the other services provided in the course of the profession or business. The exclusion does not apply if separate remuneration is received in respect of any regulated activity that is carried on. (See separate guidance for authorisedprofessional firms in PROF.)
This group of exclusions applies, in specified circumstances, to the regulated activities of:
arranging (bringing about) deals in investments and making arrangements with a view to transactions in investments;
Broadly speaking, the exclusions focus on cases where the main business of a person is to sell goods or supply services but where certain activities may have to be carried on for the purposes of that business which would otherwise be regulated activities. The exclusions are not available where the customer to whom goods are sold or services are supplied is an individual. They are also not available where what is at issue is a transaction entered into, or service provided, in relation to rights under a contract of insurance or units in a collective investment scheme (or rights to, or interests in, either). The exclusions are also disapplied for persons who, when5 carrying on the relevant regulated activity, are MiFID investment firms or third country investment firms5 (see PERG 2.5.4 G to PERG 2.5.5 G5 (Investment services and activities)).3
5This group of exclusions applies, in specified circumstances, to the regulated activities of:
arranging (bringing about) deals in investments and making arrangements with a view to transactions in investments;
These exclusions apply to intra-group dealings and activities and to dealings or activities involving participators in a joint enterprise which take place for the purposes of, or in connection with, the enterprise. The general principle here is that, as long as activities that would otherwise be regulated activities take place wholly within a group of companies, then there is no need for authorisation. The same principle applies to dealings or activities that take place wholly within a joint enterprise entered into for commercial purposes related to the participators' unregulated business. The exclusions in PERG 2.9.9G (2), (3), (4) and (7) are disapplied where they concern a contract of insurance. Guidance on exclusions relevant to insurance distribution activities19 is in PERG 5 (Guidance on insurance distribution19 activities). The exclusions are also disapplied for persons who, when5 carrying on the relevant regulated activity, are MiFID investment firms or third country investment firms5 (see PERG 2.5.4 G to PERG 2.5.5 G5 (Investment services and activities)).3
5 5This group of exclusions applies, in specified circumstances, to the regulated activities of:
The exclusions apply in relation to transactions to buy or sellshares in a body corporate where, in broad terms:
the transaction involves the acquisition or disposal of a least 50 per cent of the voting shares in the body corporate and is, or is to be, between certain specified kinds of person; or
the object of the transaction may otherwise reasonably be regarded as being the acquisition of day-to-day control of the affairs of the body corporate.
These exclusions also apply to transactions that are entered into for the purposes of the above transactions (such as transactions involving the offer of securities in the offeror as consideration or part consideration for the sale of the shares in the body corporate). These exclusions do not have effect in relation to shares in an open-ended investment company. The exclusions in PERG 2.9.11G (2), (3) and (4) are disapplied where they concern a contract of insurance. Guidance on exclusions relevant to insurance distribution activities19 is in PERG 5 (Guidance on insurance distribution19 activities). The exclusions are also disapplied for persons who, when5 carrying on the relevant regulated activity, are MiFID investment firms or third country investment firms5 (see PERG 2.5.4 G to PERG 2.5.5 G5 (Investment services and activities)).3
5 5This group of exclusions applies, in specified circumstance, to the regulated activities of:
In broad terms, the exclusions apply to activities which further an employee share scheme, or are carried on in operation of such a scheme. They apply to activities carried on by the company whose securities or debentures (which are given an extended meaning for this exclusion) are the subject of the scheme. They also apply to activities of any company in the same group or of any trustee who holds certain types of securities or debentures under the scheme. They do not apply to the activities of a person who is neither such a company nor such a trustee (for example, a third party administration service provider).6
This group of exclusions applies, in specified circumstances, to the regulated activities of:
arranging (bringing about) deals in investments and4making arrangements with a view to transactions in investments;
4entering into a home finance transaction;4
4administering a home finance transaction;4 and
4agreeing to carry on the regulated activities of managing investments, arranging (bringing about) deals in investments, making arrangements with a view to transactions in investments, assisting in the performance and administration of a contract of insurance, safeguarding and administering investments or sending dematerialised instructions.
An overseasperson is defined as a person who carries on what would be regulated activities (including any activity that would otherwise be excluded from being a regulated activity by virtue of the exclusions for overseas persons referred to in PERG 2.9.15 G) but who does not do so, or offer to do so, from a permanent place of business maintained by him in the United Kingdom. Where a person does not have a permanent place of business in the United Kingdom, he will not, in any event, need to rely on these exclusions unless what he does is regarded as carried on in the United Kingdom (see PERG 2.4). Nor will a person be able to rely on the exclusions in PERG 2.9.15G (1) to (4) if when carrying on the relevant regulated activity it is a MiFID investment firm and its Home State is the United Kingdom.5
The exclusions are available, for regulated activities other than those that relate to home finance transactions4 in the two broad cases set out below. For some of these regulated activities, the exclusions apply in each case. In others, they apply in only one.
4The first case is where the nature of the regulated activity requires the direct involvement of another person and that person is authorised or exempt (and acting within the scope of his exemption). For example, this might occur where the person with whom an overseasperson deals is an authorised person or where the arrangements he makes are for transactions to be entered into by such a person.
The second case is where a particular regulated activity is carried on as a result of what is termed a 'legitimate approach'. An approach to an overseasperson that has not been solicited by him in any way, or has been solicited in a way that does not contravene the restrictions on financial promotion in section 21 of the Act, is a legitimate approach. An approach that is made by him in a way that does not contravene section 21 of the Act is also a legitimate approach. In such circumstances, the overseasperson can, without requiring authorisation, enter into deals with (or on behalf of) a person in the United Kingdom, give advice in the United Kingdom or enter into agreements in the United Kingdom to carry on certain regulated activities. The exemptions to the financial promotion restrictions made by the Treasury under section 21 of the Act (Restrictions on financial promotion) will be relevant to the question of whether those restrictions have been contravened (see separate guidance on financial promotion in PERG 8 (Financial promotion and related activities)).
The exclusions for overseas persons who carry on certain regulated activities related to home finance transactions4 work in a different way. They depend on the residency of the borrower or borrowers, the reversion occupier or reversion occupiers,8 the home purchaser or home purchasers or the SRB agreement seller or SRB agreement sellers8as the case may be. In addition, some of the exclusions also depend on the residency of the reversion provider4 or SRB agreement provider8. Guidance on these exclusions is in PERG 4.11 (Link between activities and the United Kingdom) and PERG 14.6 (Guidance on home reversion,8 home purchase and regulated sale and rent back agreement 8activities).4
4 8 818The exclusion for overseas persons described in PERG 2.9.17G does not apply to an investment firm or credit institution set up in a third country that has been found equivalent under article 46 or 47 of MiFIR, as described in more detail in the rest of this paragraph.
Article 46 of MiFIR has a mechanism under which the FCA20 may register a third country investment firm or a third country credit institution without a branch in the United Kingdom20. Registration allows the third country investment firm or third country credit institution to provide certain services to certain customers within the United Kingdom20 without the need for further authorisation by the United Kingdom20.
(2) only applies where the Treasury20 has made a formal assessment that the legal and supervisory arrangements of that third country ensure that investment firms and credit institutions authorised in that third country comply with legally binding prudential and conduct of business requirements which have equivalent effect to the UK provisions which implemented20MiFID, MiFIR and CRD.
[deleted]20
The exclusion for overseas persons described in PERG 2.9.17G does not apply to investment services or activities provided by an investment firm or credit institution in (1) if:
it is registered as described in (2); or
[deleted]20
it provides the investment services or activities at the initiative of certain United Kingdom20-based clients.
However, (5) only applies from three years after the equivalence decision in (3). For the first three years following the equivalence decision, the exclusion for overseas persons described in PERG 2.9.17G continues to apply in the normal way.
The purpose of the three year period is to implement article 54 of MiFIR (transitional provisions) under which the Act will20 continue to apply for three years after the equivalence decision in (3).
There are currently no special provisions in the Act or related legislation such as the Regulated Activities Order dealing expressly and specifically with the treatment of third country investment firms and third country credit institutions under the general prohibition after the overseas persons exclusion is switched off at the end of the three year period in (6).
The exclusions in this group apply to certain regulated activities involving certain contracts of insurance. The exclusions and the regulated activities to which they apply are as follows.
The first exclusion of this kind relates to certain activities carried on by a provider of non-motor goods or services,19 or services related to travel in connection with general insurance contracts that satisfy a number of conditions.19
777The contracts must:19
have a premium of:19
600 euro or less (calculated on a pro rata annual basis); or19
200 euro or less, where the contracts of insurance are complementary to a service being provided by the provider and the duration of that service is equal to or less than three months,19
or equivalent amounts of sterling or another currency;19
cover:19
The travel services must be the hire of an aircraft, vehicle or vessel which does not provide sleeping accommodation, or must relate to attendance at an event organised or managed by the provider.19
Where the travel services relate to an event, the exclusion does not apply if the party seeking insurance is an individual (acting in their private capacity) or a small business. A small business is a sole trader, body corporate, partnership or unincorporated association which had a turnover in the last financial year of less than £1,000,000 (but where it is a member of a group, the combined turnover of the group is used). Turnover means the amounts derived from the provision of goods and services falling within the business’s ordinary activities, after deduction of trade discounts, value added tax and any other taxes based on those amounts.19
There must not be any liability risk cover other than (in relation to travel risk) where this is ancillary to the main risk covered in a travel policy.19
The insurance must be complementary to the goods or services being supplied by the provider in the course of the provider’s carrying on a business or profession not otherwise consisting of regulated activities. 19
This exclusion applies where the regulated activities concerned are:19
The second exclusion applies where information is provided to a policyholder by a person on an incidental basis in the course of that person's profession or business that does not otherwise consist of regulated activities. This exclusion applies where the regulated activities are:
The third exclusion applies to certain general insurance contracts covering large risks where the risk is situated outside the United Kingdom20. This exclusion applies where the regulated activities concerned are:
The fourth exclusion applies where specified information is provided to a potential policyholder, or to a relevant insurer (as defined in article 39B(2) of the Regulated Activities Order), an insurance intermediary (as defined in article 2(1)(3) of the IDD) or an IDD reinsurance intermediary, by a person who does not take any other step to assist in the conclusion of a contract of insurance (see PERG 2.8.6A(10A)G and PERG 5.6.4B-EG).19
Guidance on these and other exclusions relevant to insurance distribution activities19 is in PERG 5 (Guidance on insurance distribution19 activities).
1This group of exclusions applies, in specified circumstances, to the regulated activities of:
arranging (bringing about) deals in investments and making arrangements with a view to transactions in investments;
establishing, operating or winding up a collective investment scheme; and
1The exclusions apply, in general terms:
to a body corporate with limited liability:
that is formed in accordance with the law of, and having its registered office, central administration or principal place of business in, the United Kingdom20;
that operates a business angel-led enterprise capital fund, being a fund that invests only in securities of unlisted companies and whose participants are made up solely of persons of a specified kind; and
whose members are limited to persons of a specified kind.
5The exclusions for business angel-led enterprise capital funds are also disapplied for persons who, when carrying on the relevant regulated activity, are MiFID investment firms or third country investment firms (see PERG 2.5.4 G (Investment services and activities)).
3 13This exclusion applies to a person with a Part 4A permission to carry on the activity of managing an AIF or managing a UK UCITS21. The exclusion means that activities carried on by the person in connection with, or for the purposes of, managing a UK UCITS21 or (as the case may be) managing an AIF, are excluded from being regulated activities (except the activities of managing an AIF and managing a UK UCITS21 themselves). In the FCA's view this is particularly likely to affect the following regulated activities:
6advising on investments (except pension transfers and pension opt-outs); and
agreeing to carry on specified kinds of activity.
12This group of exclusions applies, in specified circumstances, to the regulated activities of:
making arrangements with a view to transactions in investments;
making arrangements with a view to regulated mortgage contracts;
arranging (bringing about) a regulated sale and rent back agreement;
making arrangements with a view to a regulated sale and rent back agreement;
assisting in the administration and performance of a contract of insurance;
advising on regulated credit agreements for the acquisition of land;15
exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement;
exercising, or having the right to exercise, the owner's rights and duties under a regulated consumer hire agreement;
12Subject to (2), (3) and (4),15 the exclusions apply, in relation to any activity carried on by a local authority.
15The exclusion relating to the regulated activities of:
making arrangements with a view to transactions in investments;
assisting in the administration and performance of a contract of insurance; and
applies to any activity carried on by a local authority which relates to a contract of insurance which is not a life policy.
In essence, the Regulated Activities Order exempts activity in relation to credit agreements carried on by a local authority to the extent permitted by the Consumer Credit Directive and the MCD.26 The exclusions26 relating to entering into a regulated credit agreement as lender and exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement therefore apply only in relation to an agreement within (3A) or (4).26
1115A credit agreement is within this paragraph if:26
it was entered into before 21 March 2016; or26
it is entered into on or after that date for a purpose other than acquiring or retaining property rights in land or in an existing or projected building;26
but a credit agreement is only within this paragraph in so far as the agreement is of a kind to which the Consumer Credit Directive does not apply under article 2(2) of that Directive (see (3B)).26
In summary, the kinds of agreements to which the Consumer Credit Directive does not apply under article 2(2) of that Directive include credit agreements:26
involving a total amount of credit less than £160 or more than £60,260, except where the agreement is a residential renovation agreement17;26
which are hire-purchase agreements, where an obligation to purchase the object of the agreement is not laid down either by the agreement itself or by any separate agreement (such an obligation is deemed to exist if it is so decided unilaterally by the lender);26
in the form of an overdraft facility and where the credit has to be repaid within one month;26
where the credit is granted free of interest and without any other charges;26
under which the credit has to be repaid within three months and only insignificant charges are payable;26
where the credit is granted by an employer to his employees as a secondary activity free of interest or at an APR lower than those prevailing on the market and which are not offered to the public generally;26
which are the outcome of a settlement reached in court or before another statutory authority;26
which relate to the deferred payment, free of charge, of an existing debt; 26
for pawnbroking where the liability of the consumer is strictly limited to the pledged item; and26
which relate to loans granted to a restricted group (not the public generally) under a statutory provision with a general interest purpose, and at lower interest rates than those prevailing on the market or free of interest, or on other terms which are more favourable to the consumer than those prevailing on the market and at interest rates not higher than those prevailing on the market.26
A credit agreement is within this paragraph if it:26
15is entered into on or after 21 March 2016; and 26
meets one of the following conditions:
it is of a kind to which the MCD does not apply by virtue of article 3(2) of the MCD (in other words, it is an agreement listed in PERG 4.10A.5G(1) to (6); or it is a credit agreement which relates to the deferred payment, free of charge, of an existing debt and is not secured by a legal or equitable mortgage); or26
it is a bridging loan described in PERG 4.13.6 G; or
it is a restricted public loan described in PERG 4.13.7 G.
12This group of exclusions applies, in specified circumstances, to the regulated activities of:
making arrangements with a view to transactions in investments;
assisting in the administration and performance of a contract of insurance;
acting as a trustee or depositary of an AIF;
establishing, operating or winding up a collective investment scheme;
establishing, operating or winding up a stakeholder pension scheme;
establishing, operating or winding up a personal pension scheme;
12These exclusions apply to a person acting as an insolvency practitioner. The term "insolvency practitioner" is to be read with section 388 of the Insolvency Act 1986 or, as the case may be, article 3 of the Insolvency (Northern Ireland) Order 1989. The exclusions relating to debt adjusting, debt counselling and providing credit information services also apply to any activity carried on by a person acting in reasonable contemplation of that person's appointment as an insolvency practitioner.
12A person acting as an insolvency practitioner or in reasonable contemplation of that person's appointment as an insolvency practitioner include anything done by the person's firm in connection with that person so acting. For these purposes, the reference to "the person's firm" means the person's employer, the partnership in which he is a partner or the limited liability partnership of which he is a member, as the case may be.
16This group of exclusions applies, in specified circumstances, to the regulated activities of:
making arrangements with a view to regulated mortgage contracts;
advising on regulated credit agreements for the acquisition of land;
16These exclusions apply to any CBTL business carried on by a CBTL firm (see PERG 4.10B).
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, a5person 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)).
5Investment 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.
3Various 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.
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.
The second category is the regulated activity of accepting deposits. Exempt persons here include municipal banks, local authorities, charities and industrial and provident societies.
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.
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:
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;
is, or is controlled by, a member of a profession;
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);
provides any service in the course of carrying on the regulated activities in a manner which is incidental to the provision of professional services;
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
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:
[deleted]8
4acting as trustee or depositary of a UK UCITS89;
6establishing, operating or winding up a collective investment scheme;
establishing, operating or winding up a stakeholder pension scheme or a personal pension scheme1;
managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's;
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,2advising on syndicate participation at Lloyd's, entering into a home finance transaction or administering a home finance transaction.2
2 2A 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)).
3Various persons are exempted by Order made by the Treasury under section 38 of the Act from the need to obtain authorisation for certain credit-related regulated activities in the circumstances specified in the Order (for example, in some cases, a person is exempt only when acting in a particular capacity or for particular purposes). Persons exempt under the Order cannot be exempt in relation to some regulated activities and authorised in relation to others (except where the person is an authorised person with only interim permission).
A person acting as:
is exempt in respect of debt adjusting, debt counselling, debt collecting, debt administration or providing credit information services.
This exemption applies to a scheme under which an employer provides or makes available to their employees a cycle or cyclist's safety equipment up to the value of £1,000 (which is designed to allow employees to take advantage of section 244 of the Income Tax (Earnings and Pensions) Act 2003). An employer does not require authorisation for the regulated activities relating to regulated consumer hire agreements just because it operates such a scheme.
A person who takes steps to ascertain the identity or location (or the means of ascertaining the identity or location) of a borrower or hirer is exempt from debt-collecting as long as the person is not the lender or owner under the agreement concerned, takes no other steps to collect debts due under the agreement and carries on no other activity which requires authorisation.
There are also exemptions from credit broking, debt adjusting, debt-counselling and providing credit information services for an enterprise scheme as long as it does not carry on the activity for, or with the prospect of, direct or indirect pecuniary gain. Sums reasonably regarded as necessary to meet the costs of carrying on the activity do not constitute a pecuniary gain for this purpose.
4The exemption from operating an electronic system in relation to lending in paragraph 44(A1) of the Schedule to the Exemption Order applies to a charity (as defined in article 3 to the Exemption Order) which carries on that activity in relation to an article 36H agreement (see PERG 2.7.7HG(4)). For the exemption to apply, the only amount payable to the lender under, or in connection with, the agreement must be the amount of credit provided; no interest or other charges may be added.
4Under paragraph 54A(1) of the Schedule to the Exemption Order, a person who serves, or takes steps to serve, a document on a borrower or a hirer for the purposes of legal proceedings, including arbitration and insolvency proceedings, brought or to be brought for the payment of a debt due under a credit agreement, a P2P agreement or a consumer hire agreement is exempted from debt collecting, as long as the person:
Under paragraph 54A(2) of the Schedule to the Exemption Order, a person who serves, or takes steps to serve, a document on a borrower or a hirer for the purposes of legal proceedings, including arbitration and insolvency proceedings, brought or to be brought for the exercise or enforcement of rights under a credit agreement, a P2P agreement or a consumer hire agreement is exempted from debt administration, as long as the person:
4The exemption in paragraph 55 of the Schedule to the Exemption Order covers special purpose vehicles and other entities which are part of a structured finance transaction and which meet the specified conditions. It confers exemption from the general prohibition on a person (“P”) for the regulated activity of exercising, or having the right to exercise. the lender’s rights and duties under a regulated credit agreement (and associated regulated activities) where there is an arrangement for an authorised person who holds a relevant permission to service the loans, or such an arrangement has ended in the previous 30 days.
The exemption is available to a person (“P”) who:
is not the original lender;
does not grant or promise to grant, and is not required to grant, credit under any regulated credit agreement;
has entered into a servicing arrangement with an authorised person who has permission to carry on the regulated activities of debt collecting, debt administration or consumer credit lending (“the servicer”), under which the servicer is to exercise on P’s behalf P’s rights under a regulated credit agreement (other than P’s right to dispose of those rights); and
does not undertake the regulated activities of debt counselling, debt adjusting or debt collecting in relation to a regulated credit agreement other than during an “exempt period”. An “exempt period” is the period of 30 days beginning on the day after the day on which a servicing arrangement came to an end. Where, for example, a servicing agreement comes to an end suddenly or unexpectedly, P has a grace period of 30 days to find a new servicer and enter into a new servicing arrangement, and may service its own loans in that period without being authorised.
In addition, P must have arranged for the servicer to comply with:
any provision of, or made under, the Act applicable to authorised persons that relates to the exercise of the right of the lender under a regulated credit agreement to vary terms and conditions of the agreement; and
the requirements of, or made under, section 82 of the CCA (variation of agreements).
Where P varies the agreement itself, P must comply with those provisions and requirements.
Where P is exempt (as set out above), the exemption also extends to the regulated activities of debt counselling and debt collecting carried on in an exempt period in relation a regulated credit agreement under which P exercises, or has the right to exercise, the rights of the original lender.
For the purposes of this exemption, activities carried on by P under, or for the purposes of, a servicing arrangement are excluded from the regulated activities of debt counselling and debt collecting in relation to a regulated credit agreement.
4Paragraph 56 of the Schedule to the Exemption Order confers an exemption analogous to that in paragraph 55 of the Schedule to the Exemption Order and described in PERG 2.11.8G. It applies to the regulated activity of exercising, or having the right to exercise. the lender’s rights and duties under a regulated credit agreement.
1 Table
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1.1 G |
Table 1 is designed to relate the permission regime as operated by the FCA25 to regulated activities. It does not explain how the permission regime as operated by the PRA relates to regulated activities. It therefore does not cover PRA-regulated activities which only apply to PRA-authorised persons. Those PRA-regulated activities are set out in Table 1A.25 Section 55E(4)25of the Act gives the FCA25 the power to describe the regulated activity or regulated activities for which it gives permission in such manner as the FCA25 considers appropriate. Table 1 details how the FCA25 has chosen to describe the regulated activities and specified investments for the purposes of the permission regime. 25 25 25 25 |
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1.2 G |
In an application for Part 4A permission25, an applicant will need to state the regulated activities it requires permission to carry on. This will involve an applicant identifying the regulated activities and the specified investments associated with those activities for which it requires Part 4A permission.25 25 25 |
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1.3 G |
Part II of the Regulated Activities Order (Specified activities) specifies the activities for the purposes of section 22 of the Act. This section states that an activity is a regulated activity if it is an activity of a specified kind which is carried on by way of business and: |
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(1) |
relates to an investment of a specified kind; or |
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(2) |
in the case of an activity specified for the purposes of section 22(1)(b) of the Act, is carried on in relation to property of any kind.13 |
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13(3) |
relates to information about a person's financial standing. |
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Part III of the Regulated Activities Order (Specified investments) specifies the investments referred to in (1). |
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1.4 G |
Column 1 of Table 1 lists the regulated activities and column 2 lists the associated specified investments. Descriptions of some categories of specified investments are expanded in Tables 2 and 3. There are notes to all three tables which provide further explanation where appropriate. |
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1.5 G |
A reference to an article in the tables in PERG 2 Annex 2 G is to the relevant article in the Regulated Activities Order. |
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2 Table
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Table 1: Regulated Activities (excluding PRA-only activities) 25 [See note 1 to Table 1] |
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Regulated activity |
Specified investment in relation to which the regulated activity (in the corresponding section of column one) may be carried on |
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(a) [deleted]25 25 |
25 |
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Issuing electronic money |
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(aa) issuing electronic money (article 9B) |
electronic money (article 74A) |
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8 Activities of a dormant account fund operator |
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8(ab) the meeting of repayment claims and managing dormant account funds (including the investment of such funds) (article 63N) |
See Note 8 to Table 111 |
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Bidding in emissions auctions 23 11 21 |
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11(ac) bidding in emissions auctions23 21 |
21 |
| 25 | |
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(b) [deleted]25 (c) [deleted]25 25 25 |
25 |
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Designated investment business [see notes 1A, 1B and 1C to Table 1] 11 11 |
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(d) dealing in investments as principal (article 14) [see note 2 to Table 1] (e) dealing in investments as agent (article 21) [see notes 1B and 2 to Table 1] [also see Section of Table 1 headed ‘Activities relating to structured deposits’]19 (f) arranging (bringing about) deals in investments (article 25(1)) [see note 1B to Table 1] [also see Sections of Table 1 headed 'The Lloyd's market',19 and 'Regulated mortgage activity' and ‘Activities relating to structured deposits’]19 (g) making arrangements with a view to transactions in investments (article 25(2)) [ see note 1B to Table 1] [also see Sections of Table 1 headed 'The Lloyd's market,19 ‘Regulated mortgage activity’ and ‘Activities relating to structured deposits’]19 |
(in relation to (d) to (g) and (h) to6 (l)) security [expanded in Table 3]; or contractually based investment [expanded in Table 3].6 (in relation to (e) to (g) and (j) only) a long-term care insurance contract which is a pure protection contract. 6 |
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6(ga) operating a multilateral trading facility (article 25D) [see note 2A] |
6 securities or contractually based investments which are financial instruments (see PERG 13 Annex 2 G Table 2 and note 2A to Table 1]). |
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19(gb) operating an organised trading facility (article 25DA) [see note 2A] |
certain kinds of securities or contractually based investments which are financial instruments. PERG 2.7.7DDG lists the securities and contractually based investments covered. |
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6(h) managing investments (article 37) [see note 3 to Table 1] [also see Section of Table 1 headed ‘Activities relating to structured deposits’]19 |
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(i) safeguarding and administering investments (article 40) [see note 3 Table 1] For the purposes of the permission regime, this regulated activity is subdivided into:
(j) advising on investments (except P2P agreements)18 (article 53(1)18 [see note 1B to Table 1] [also see Sections19 of Table 1 headed 'Regulated mortgage activity' and ‘Activities relating to structured deposits’19] For the purposes of the permission regime, this regulated activity:
16(ja) advising on P2P agreements (article 53(2)) [see note 9 to Table 1]18 (jb) advising on conversion or transfer of pension benefits (article 53E) is contained in the permission of advising on pension transfers and pension opt-outs [see note 4 to Table 1]18 (k) sending dematerialised instructions (article 45(1)) (l) causing dematerialised instructions to be sent (article 45(2)) 2 |
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(m) [deleted]14 (article 51ZA);14 (mb) acting as trustee or depositary of a UK UCITS22 (article 51ZB);14 (mc) managing an AIF (article 51ZC); For the purposes of the permission regime, this regulated activity is subdivided into: (i) managing an AIF where the AIF is an authorised AIF; and (ii) managing an AIF where the AIF is an unauthorised AIF.14 (md) acting as trustee or depositary of an AIF (article 51ZD); For the purposes of the permission regime, this regulated activity is subdivided into: (i) acting as trustee or depositary of an AIF where the AIF is an authorised AIF; and (ii) acting as trustee or depositary of an AIF where the AIF is an unauthorised AIF.14 (me) establishing, operating or winding up a collective investment scheme (article 51ZE);14 (n) [deleted]14 (na) [deleted]14 (o) [deleted]14 (p) establishing, operating or winding up a stakeholder pension scheme (article 52(a)3) 14 12 14 14 |
[see note 5 to Table 1] |
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(pa2) providing basic advice on a stakeholder product (article 52B) (p-a) establishing, operating or winding up a personal pension scheme (article 52(b))3 2 |
those specified investments that are also a stakeholder product [see note 7] |
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Insurance distribution 20 activity [see note 5A to Table 1] |
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(pb2) dealing in investments as agent (article 21) (pc2) arranging (bringing about) deals in investments (article 25(1)) (pd2) making arrangements with a view to transactions in investments (article 25(2)) (pe2) assisting in the administration and performance of a contract of insurance (article 39A) (pf2) advising on investments (except P2P agreements)18 (article 53(1)18) For the purpose of the permission regime, this regulated activity is sub-divided into:
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life policy [see note 5B to Table 1] non-investment insurance contract [see note 5C to Table 1]2 rights to or interests in investments (article 89) in so far as they relate to a life policy 2 2 |
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The Lloyd's market 25 |
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(q) advising on syndicate participation at Lloyd's (article 56) |
membership of a Lloyd's syndicate (article 86(2)) |
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(r) [deleted]25 25 |
25 |
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(s) arranging (bringing about) deals in investments (article 25(1)) (t) making arrangements with a view to transactions in investments (article 25(2)) |
underwriting capacity of a Lloyd's syndicate (article 86(1)) membership of a Lloyd's syndicate (article 86(2)) rights to or interests in investments (article 89) in so far as they relate to underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate |
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Funeral plan providers |
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(u) entering as provider into a funeral plan contract (article 59) [see note 1A to Table 1] |
funeral plan contract (article 87) |
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Regulated home finance 4 activity 4 |
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(v) arranging (bringing about) regulated mortgage contracts (article 25A(1)4 and (2A)15) (w) making arrangements with a view to regulated mortgage contracts (article 25A(2)4) (x) advising on regulated mortgage contracts (article 53A) (xa) [deleted]17 (y) entering into a regulated mortgage contract (article 61(1)) (z) administering a regulated mortgage contract (article 61(2)) 4 4 15 |
regulated mortgage contract (article 88)17 15 |
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4(za) arranging (bringing about) a home reversion plan (article 25B(1)) (zb) making arrangements with a view to a home reversion plan (article 25B(2)) (zc) advising on a home reversion plan (article 53B) (zd) entering into a home reversion plan (article 63B(1)) (ze) administering a home reversion plan (article 63B(2)) |
rights under a home reversion plan (article 88A) |
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4(zf) arranging (bringing about) a home purchase plan (article 25C(1)) (zg) making arrangements with a view to a home purchase plan (article 25C(2)) (zh) advising on a home purchase plan (article 53C) (zi) entering into a home purchase plan (article 63F(1)) (zj) administering a home purchase plan (article 63F(2)) |
rights under a home purchase plan (article 88B) |
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(zk) arranging (bringing about) a regulated sale and rent back agreement (article 25E(1))9 (zl) making arrangements with a view to a regulated sale and rent back agreement (article 25E(2))9 (zm) advising on a regulated sale and rent back agreement (article 53D))9 (zn) entering into a regulated sale and rent back agreement (article 63J(1))9 (zo) administering a regulated sale and rent back agreement (Article 63(J)(2))9 |
rights under a regulated sale and rent back agreement (Article 88C)913 |
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13 Credit-related regulated activity |
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(zp) entering into a regulated credit agreement as lender (article 60B(1)) (zq) exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement (article 60B(2)) (zr) credit broking (article 36A) (zs) operating an electronic system in relation to lending (article 36H) (zt) debt adjusting (article 39D(1)) (zu) debt counselling (article 39E(1)) (zv) debt collecting (article 39F(1)) (zw) debt administration (article 39G(1)) (zwa) advising on regulated credit agreements for the acquisition of land (article 53DA)17 |
Rights under a credit agreement (article 88D) (see note 9 to Table 1), except for (zwa): see note 11 to Table 117 |
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(zx) entering into a regulated consumer hire agreement as owner (article 60N(1)) (zy) exercising, or having the right to exercise, the owner's rights and duties under a regulated consumer hire agreement (article 60N(2)) (zz) credit broking (article 36A) (zaa) debt adjusting (article 39D(2)) (zab) debt counselling (article 39E(2)) (zac) debt collecting (article 39F(2)) (zad) debt administration (article 39G(2)) |
Rights under a consumer hire agreement (article 88E) |
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(zae) providing credit information services (article 89A) (zaf) providing credit references (article 89B) |
(see note 10 to Table 1) |
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19 Activities relating to structured deposits |
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19(zag) dealing in investments as agent (article 21) 19zah) arranging (bringing about) deals in investments (article 25(1)) 19(zai) making arrangements with a view to transactions in investments (article 25(2)) 19(zaj) managing investments (article 37) [see note 3 to Table 1] 19(zak) advising on investments (except P2P agreements) (article 53(1)) |
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3 Table
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Notes to Table 1 |
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Note 1: In addition to the regulated activities listed in Table 1, article 64 of the Regulated Activities Order specifies that agreeing to carry on a regulated activity is itself a regulated activity in certain cases. This applies in relation to all the regulated activities listed in Table 1 apart from:
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Permission to carry on the activity of agreeing to carry on a regulated activity will be given automatically by the FCA25 in relation to those other regulated activities for which an applicant is given permission (other than those activities in articles 9B, 51 and 52 detailed above). 25 25 25 |
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Note 1A: Funeral plan contracts are contractually based investments. Accordingly, the following are regulated activities when carried on in relation to a funeral plan contract: (a) arranging (bringing about) deals in investments, (b) making arrangements with a view to transactions in investments, (c) managing investments, (d) safeguarding and administering investments, (e) advising on investments (except P2P agreements)18, (f) sending dematerialised instructions and (g) causing dematerialised instructions to be sent (as well as agreeing to carry on each of the activities listed in (a) to (g)). However, they are not designated investment business. |
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Note 1B: Life policies are contractually based investments. Where the regulated activities listed as designated investment business in (e) to (g) and (j) are carried on in relation to a life policy, these activities also count as insurance mediation activities20’. The full list of insurance distribution activities20 is set out in (pb) to (pf). The regulated activities of agreeing to carry on each of these activities will, if carried on in relation to a life policy, also come within both designated investment business and insurance distribution activities20. 2 2 2 2 |
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23Note 1C: Although MiFID business bidding (part of bidding in emissions auctions) is designated investment business, it is not separately listed in this table under designated investment business because bidding in emissions auctions is already referred to above. |
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Note 2: For the purposes of the regulated activities of dealing in investments as principal (article 14) and dealing in investments as agent (article 21), the definition of contractually based investments [expanded in Table 3] excludes a funeral plan contract (article 87) and rights to or interests in funeral plan contracts. |
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6Note 2A: PERG 13 Ann 2 Table 2 contains a map indicating which securities and contractually based investments correspond to financial instruments. A firm'spermission should comprise each of the categories of security and contractually based investment in relation to which it carries on the activity of operating a multilateral trading facility. |
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Note 3: The regulated activities of managing investments (article 37) and safeguarding and administering investments (article 40) may apply in relation to any assets, in particular circumstances, if the assets being managed or safeguarded and administered include, (or may include), any security, contractually based investment or (in the case of managing investments) structured deposit19. |
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Note 4: For the purposes of the permission regime, the activity in (j)(ii) of advising on pension transfers and pension opt-outs includes the following two regulated activities:16(1) advising on investments (except P2P agreements)18 where it 16 is carried on in respect of the following specified investments:
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Note 5: Article 4(2) of the Regulated Activities Order specifies the activities (ma)14to (p) for the purposes of section 22(1)(b) of the Act. That is, these activities will be regulated activities if carried on in relation to any property and are not expressed as relating to a specified investment. 14 |
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Note 5A: Where they are carried on in relation to a life policy, the activities listed as insurance distribution activities20 in (pb) to (pf) (as well as the regulated activity of agreeing to carry on those activities) are also designated investment business. 2 2 2 2 |
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Note 5B: In PERG, life policy5 is the term used in the Handbook to mean 'qualifying contract of insurance' (as defined in article 3(1) of the Regulated Activities Order). For the purpose of the permission regime,5 the term also includes a long-term care insurance contract which is a pure protection contract and a pension term assurance policy5. 5 5 5 |
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Note 5C: Non-investment insurance contract is the term used in firms permissions to mean pure protection contract or general insurance contract.2Pure protection contract is the term used in the Handbook to mean a long-term insurance contract which is not a life policy. General insurance contract is the term used in the Handbook to mean contract of insurance within column 1 of Table 2.2 |
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Note 5D: [deleted]2 2 |
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Note 5E: For the purposes of the permission regime, the activity in (pf)2(ii) of advising on pension transfers and pension opt-outs is carried on in respect of the following specified investments:
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Note 6: [deleted]25 25 |
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Note 7: A stakeholder product is defined in the Glossary as:
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8Note 8: Article 4(2) of the Regulated Activities Order specifies the activity at (ab) for the purposes of section 22(1)(b) of the Act, that is, these activities will be regulated activities if carried on in relation to any property and are not expressed as related to a specified investment. |
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13Note 9: For the purposes of the permission regime with respect to the regulated activities of entering into a regulated credit agreement as lender and exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement, this is sub-divided into: (i) a regulated credit agreement (excluding high-cost short-term credit, a home credit loan agreement and a bill of sale loan agreement); (ii) high-cost short-term credit; (iii) a home credit loan agreement; (iv) a bill of sale loan agreement. For the purposes of operating an electronic system in relation to lending, rights under a credit agreement include rights under an article 36H agreement within the meaning of article 36H (4) of the Regulated Activities Order. For the purposes of advising on P2P agreements, rights under a credit agreement include rights under a relevant article 36H agreement within the meaning of article 53(4) of the Regulated Activities Order.18 |
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13Note 10: Article 4 (2A) of the Regulated Activities Order specifies the activities (zae) and (zaf) for the purposes of section 22(1A)(a) of the Act (these activities are expressed as relating to information about a person's financial standing rather than to a specified investment) and accordingly will be regulated activities when carried on by way of business. |
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15Note 11: The specified investment in relation to which the regulated activity of advising on regulated credit agreements for the acquisition of land (article 53DA) may be carried on, is a regulated credit agreement which meets the description in PERG 2.7.16F G. |
254 Table
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25 Table 1A: PRA-only regulated Activities [See notes 1 and 2 to Table 1A] |
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Regulated activity |
Specified investment in relation to which the regulated activity (in the corresponding section of column one) may be carried on |
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Accepting deposits |
|
|
(a) accepting deposits (article 5) |
deposit (article 74) See note (3)19 |
|
Insurance business |
|
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(b) effecting contracts of insurance (article 10(1)) (c) carrying out contracts of insurance (article 10(2)) |
contract of insurance (article 75) [expanded in Table 2] |
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The Lloyd's market |
|
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(d) managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's (article 57) |
underwriting capacity of a Lloyd's syndicate (article 86(1)) |
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(e) the activity of arranging, by the Society, of deals in contracts of insurance written at Lloyd's (article 58) |
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255 Table
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25Notes to Table 1A |
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Note 1: In addition to the regulated activities listed in Table 1A, article 64 of the Regulated Activities Order specifies that agreeing to carry on a regulated activity is itself a regulated activity in certain cases. This only applies in relation to the Lloyd's market activities in paragraphs (d) and (e). |
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Note 2: The activity of dealing in investments as principal is also a PRA regulated activity where carried on by a person designated by the PRA. |
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19Note 3: Accepting deposits is not the only regulated activity relating to deposits. For a deposit that is a structured deposit, certain other regulated activities apply. These are listed in Table 1. |
625 Table
25|
Table 2: Contracts of insurance |
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Contract of insurance (article 75 of the RAO) |
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(a) general insurance contract (Part I of Schedule 1 to the Regulated Activities Order) |
(b) long-term insurance contract (Part II of Schedule 1 to the Regulated Activities Order ) |
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Number |
||
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1 |
Accident (paragraph 1) |
life and annuity (paragraph I) |
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2 |
Sickness (paragraph 2) |
1 marriage or the formation of a civil partnership and birth (paragraph II) 1 |
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3 |
Land vehicles (paragraph 3) |
linked long-term (paragraph III) |
|
4 |
Railway rolling stock (paragraph 4) |
permanent health (paragraph IV) |
|
5 |
Aircraft (paragraph 5) |
tontines (paragraph V) |
|
6 |
Ships (paragraph 6) |
capital redemption (paragraph VI) |
|
7 |
Goods in transit (paragraph 7) |
pension fund management (paragraph VII) |
|
8 |
fire and natural forces (paragraph 8) |
collective insurance (paragraph VIII) |
|
9 |
damage to property (paragraph 9) |
social insurance (paragraph IX) |
|
10 |
motor vehicle liability (paragraph 10) |
|
|
11 |
aircraft liability (paragraph 11) |
|
|
12 |
liability of ships (paragraph 12) |
|
|
13 |
general liability (paragraph 13) |
|
|
14 |
credit (paragraph 14) |
|
|
15 |
suretyship (paragraph 15) |
|
|
16 |
miscellaneous financial loss (paragraph 16) |
|
|
17 |
legal expenses (paragraph 17) |
|
|
18 |
assistance (paragraph 18) |
|
725 Table
25|
Table 3: Securities, contractually based investments and relevant investments [see notes 1 and 2 to Table 3] |
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Security (article 3(1)) |
Contractually based investment (article 3(1)) |
Relevant investments (article 3(1)) |
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share (article 76) debenture (article 77) alternative debenture (article 77A)10 government and public security (article 78) warrant (article 79) certificate representing certain security (article 80) unit (article 81) stakeholder pension scheme (article 82(1)3) personal pension scheme (article 82(2));3 emission allowance (article 82B)19 rights to or interests in investments (article 89) in so far as they relate to any of the above categories of security |
option (article 83) For the purposes of the permission regime, option is subdivided into:
future (article 84) For the purposes of the permission regime, future is subdivided into:
contract for differences (article 85) For the purposes of the permission regime, contract for differences is subdivided into:
life policy (but excluding a long-term care insurance contract which is a pure protection contract) [see note 5B to Table 1] funeral plan contract (article 87) [see note 1A to Table 1] rights to or interests in investments (article 89) in so far as they relate to any of the above categories of contractually based investment. |
contractually based investments (article 3(1)) non-investment insurance contract [see note 5C to Table 1]2 2 2 |
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Notes to Table 3 |
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Note 1: Security, contractually based investment and relevant investment are not, in themselves, specified investments they are defined as including a number of specified investments as set out in Table 3. Relevant investments is the term that is used to cover contractually based investments together with rights under a general insurance contract and a pure protection contract. Note 2: For the purposes of the regulated activities of dealing in investments as principal (article 14) and dealing in investments as agent (article 21), the definition of contractually based investments excludes a funeral plan contract (article 87) and rights to or interests in funeral plan contracts. |
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