PERG 7.3 Does the activity require authorisation?

Under article 53(1)6 of the Regulated Activities Order (Advising on investments), advising a person is a specified kind of activity if:

1. (1)

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

2. (2)

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

   1. (a)

      buying, selling, subscribing for or underwriting a particular investment which is a security, structured deposit7 or a relevant investment; or

   2. (b)

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

6Under article 53(2) of the Regulated Activities Order (Advising on investments), advising a person is a specified kind of activity if:

1. (1)

   the advice is given to the 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; and

2. (2)

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

   1. (a)

      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

   2. (b)

      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:

      1. (i)

         accepting particular parameters for the terms of the agreement presented by a P2P platform operator; or

      2. (ii)

         choosing between options governing the parameters of the terms of the agreement presented by a P2P platform operator; or

      3. (iii)

         specifying the parameters of the terms of the agreement by other means; or

   3. (c)

      enforcing or exercising the lender’s rights under a relevant article 36H agreement; or

   4. (d)

      assigning rights under a relevant article 36H agreement.

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

1. (1)

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

2. (2)

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

   1. (a)

      entering into a particular regulated mortgage contract; or

   2. (b)

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

1Under article 53B of the Regulated Activities Order (Advising on regulated home reversion plans), advising a person is a specified kind of activity if:

1. (1)

   the advice is given to the person in his capacity as a reversion occupier or reversion provider or as a potential reversion occupier or reversion provider; and

2. (2)

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

   1. (a)

      entering into a particular home reversion plan; or

   2. (b)

      varying the terms of a home reversion plan entered into by him as reversion occupier or as reversion provider (but only where the plan was originally entered into on or after 6 April 2007) in such a way as to vary his obligations under that plan.

1Under article 53C of the Regulated Activities Order (Advising on regulated home purchase plans), advising a person is a specified kind of activity if:

1. (1)

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

2. (2)

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

   1. (a)

      entering into a particular home purchase plan; or

   2. (b)

      varying the terms of a home purchase plan entered into by him on or after 6 April 2007 in such a way as to vary his obligations under that plan.

3. (3)

   Under article 53D of the Regulated Activities Order (Advising on regulated sale and rent back agreements), advising a person is a specified kind of activity if:3

Under article 53D of the Regulated Activities Order (Advising on regulated sale and rent back agreements), advising a person is a specified kind of activity if:3

3Under article 53D of the Regulated Activities Order (Advising on regulated sale and rent back agreements), advising a person is a specified kind of activity if:

1. (1)

   the advice is given to the person in his capacity as an SRB agreement seller or SRB agreement provider or as a potential SRB agreement seller or SRB agreement provider; and

2. (2)

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

   1. (a)

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

   2. (b)

      varying the terms of a regulated sale and rent back agreement entered into by him on or after 1 July 2009 in such a way so as to vary his obligations under that agreement.

4Under article 53DA of the Regulated Activities Order (Advising on regulated credit agreements for the acquisition of land), advising a person (“P”) is a specified kind of activity if:

1. (1)

   the advice is given to P in P’s capacity as a recipient of credit, or potential recipient of credit, under a regulated credit agreement;

2. (2)

   P intends to use the credit to acquire or retain property rights in land or in an existing or projected building; and

3. (3)

   the advice consists of the provision of personal recommendations to P in respect of one or more transactions relating to regulated credit agreements.

5Under article 53E of the Regulated Activities Order (Advising on conversion or transfer of pension benefits), advising a person (“P”) is a specified kind of activity if the advice:

1. (1)

   is given to P in their capacity as:

   1. (a)

      a member of a pension scheme; or

   2. (b)

      a survivor of a member of a pension scheme;

   where P has subsisting rights in respect of any safeguarded benefits; and

2. (2)
   1. (a)

      convert any of the safeguarded benefits into different benefits that are flexible benefits under the scheme; or

   2. (b)

      make 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

   3. (c)

      pay a lump sum that would be an uncrystallised funds pension lump sum in respect of any of the safeguarded benefits.

Articles 53,1 53A, 53B,3 53C1, 53D 53DA4 and 53E 5of the Regulated Activities Order contain a number of elements, all of which must be present before a person will require authorisation. For guidance on whether a person is carrying on these regulated activities, see PERG 8 (Financial promotion and related activities),1PERG 4 (Guidance on regulated activities connected with mortgages), PERG 12.6 (Advising on conversion or transfer of pension benefits), 5, 3PERG 14.3, 3PERG 14.4 and PERG 14.4A (Guidance on home reversion,3 home purchase and regulated sale and rent back agreement 3activities)1. Guidance on the activity in article 53DA (advising on regulated credit agreements for the acquisition of land) of the Regulated Activities Order is in PERG 2.7.16F G.4

2Advice about financial instruments in a newspaper, journal, magazine, publication, internet communication or radio or television broadcast should not normally be a personal recommendation under MiFID (see PERG 13, Q18 to Q21).

Under section 22 of the Act (Regulated activities), for an activity to be a regulated activity it must be carried on 'by way of business'. There is power in the Act for the Treasury to change the meaning of the business test by including or excluding certain things. It has exercised this power (through the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177) (the Business Order), as amended from time to time7.

The result of the amendments made to the meaning of the business test in section 22 of the Act is that the test differs depending on the activity in question. Where the regulated activities of advising on investments and advising on a home finance transaction1 are concerned, the business test is not to be regarded as satisfied unless a person carries on the business of engaging in those activities. This is a narrower test than that of carrying on regulated activities by way of business (as required by section 22 of the Act), as it requires the regulated activities to represent the carrying on of a business in their own right. Where the advice relates to a contract of insurance, the business test is not to be regarded as satisfied unless the person carrying on the activity of giving the advice is taking up or pursuing the activity for remuneration. PERG 2.3 (The Business element) and PERG 2.4 (Link between activities and the United Kingdom) together with PERG 5.4 (The business test) provide further detail on this.

In the FCA's view, for a person to be carrying on the business of advising on investments or advising on a home finance transaction1 he will usually need to be doing so with a degree of regularity and for commercial purposes – that is to say, he will normally be expecting to gain some kind of a direct or indirect financial benefit. But, in the FCA's view it is not necessarily the case that advice provided free of charge will not amount to a business. Advice is often given 'free' by a journalist or presenter, or in a publication or website, in the sense that no charge is made or commission received. For example, a newspaper may reply to readers' letters to generate goodwill or to generate a supply of further material that it can publish or a website that is 'free' to the user will be sponsored or paid for by advertising. In such cases, if advice on securities, relevant investments, P2P agreements6 or home finance transactions1is given, then, in the FCA's view, the business of advising on investments or advising on a home finance transaction 1is being carried on. In addition, non-commercial motives may be relevant in determining whether a person can be said to be carrying on the business of giving advice. For example, an investigative journal or journalist may occasionally feel that it is necessary to warn investors against the purchase of a particular investment because there are suspicions of fraud in connection with that investment. The FCA takes the view that, in such circumstances, the journal or journalist would not be regarded as carrying on the business of advising on investments or advising on a home finance transaction1as he would be acting to prevent crime rather than in the carrying on of a business.

4For persons carrying on advising on regulated credit agreements for the acquisition of land the by the way of business test is set out in PERG 2.3.2G (4)

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

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

1. (1)

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

2. (2)

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

But even if advice is given in the United Kingdom, the general prohibition will not be contravened if the giving of advice does not amount to the carrying on, in the United Kingdom, of the business of advising on investments, advising on regulated credit agreements for the acquisition of land4 or advising on a home finance transaction1. Also, the general prohibition will not be contravened if the exclusion for overseas persons in article 72 of the Regulated Activities Order (Overseas persons) applies. That exclusion applies in relation to the giving of advice on securities, structured deposits7 or relevant investments by an overseas person as a result of a 'legitimate approach' (defined in article 72(7)). In many cases where publications or services are provided from outside the United Kingdom it is likely that they will fall within the terms of this exclusion. For example, this will exclude any advice in a publication or service from being a regulated activity if it is given in response to an approach that has not been solicited in any way. It should be noted, however, that the exclusions in article 72 do not 1apply to the regulated activities1 that involve advising on a home finance transaction1 or advising on regulated credit agreements for the acquisition of land4. The effect of this is that, where the principal1 purpose of an overseas periodical publication is to offer advice on securities or relevant investments or P2P agreements6 and home finance transactions1, the exclusion for an overseas person who provides advice to persons in the United Kingdom as a result of a legitimate approach will not apply to the advice concerning home finance transactions1.

If a person is carrying on the business of advising on investments, advising on regulated credit agreements for the acquisition of land4 or advising on a home finance transaction1in the United Kingdom, he will not require authorisation if:

1. (1)

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

2. (2)

   he is an exempt person (see PERG 2.11 (What to do now?1)); since persons are exempt only in relation to specified regulated activities, his exemption must apply to the regulated activity of advising on investments, advising on regulated credit agreements for the acquisition of land4 or advising on a home finance transaction as the case may be1.

   1

Many people may be involved in the production of a periodical publication, news service or broadcast. But if the regulated activity of advising on investments, advising on regulated credit agreements for the acquisition of land4 or advising on a home finance transaction1 is being carried on so that authorisation is required, the FCA's view is that the person carrying on the activity (and who will require authorisation) is the person whose business it is to have the editorial control over the content. In the case of a periodical publication, this will often be the proprietor. But particular circumstances may vary so that the responsibility for content and editorial control rests with a freelance journalist rather than with the proprietor. In such cases it may well be that the journalist may properly be viewed as carrying on his own business, using the periodical publication as the vehicle for doing so – in which case it is likely to be the journalist alone who needs the authorisation.

Similar principles apply to news services and broadcasts.