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PRIN 3.1 Who?

PRIN 3.1.1 R RP

PRIN applies to every firm, except that:

  1. (1)

    for an incoming EEA firm or an incoming Treaty firm, the Principles apply only in so far as responsibility for the matter in question is not reserved by a European Community instrument to the firm's Home State regulator;

  2. (2)

    for an incoming EEA firm which is a BCD credit institution without a top-up permission, Principle 4 applies only in relation to the liquidity of a branch established in the United Kingdom;

  3. (3)

    for an incoming EEA firm which has permission only for cross border services and which does not carry on regulated activities in the United Kingdom, the Principles do not apply;

  4. (4)

    for a UCITS qualifier, only Principles1, 2, 3, 7 and 9 apply, and only with respect to the activities in PRIN 3.2.2 R (Communication and approval of financial promotions).

PRIN 3.1.2 G

SYSC App 1 containsguidance on the reservation of responsibility to a Home State regulator referred to in PRIN 3.1.1 R (1).

PRIN 3.1.3 G

PRIN 3.1.1 R (2) reflects article 27of the Banking Consolidation Directive which provides that the Host State regulator retains responsibility in cooperation with the Home State regulator for the supervision of the liquidity of a branch of a BCD credit institution.

PRIN 3.1.4 G RP

PRIN 3.1.1 R (3) puts incoming EEA firms on an equal footing with unauthorised overseas persons who utilise the overseas persons exclusions in article 72 of the Regulated Activities Order.

PRIN 3.1.5 G RP

PRIN 3.1.1 R (4) reflects section 266 of the Act (Disapplication of rules).

PRIN 3.2 What?

PRIN 3.2.1 R

PRIN applies with respect to the carrying on of:

  1. (1)

    regulated activities;

  2. (2)

    activities that constitute dealing in investments as principal, disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc); and

  3. (3)

    ancillary activities in relation to designated investment business, regulated mortgage activity andinsurance mediation activity.1

PRIN 3.2.2 R RP

PRIN also applies with respect to the communication and approval of financial promotions which:

  1. (1)

    if communicated by an unauthorised person without approval would contravene section 21(1) of the Act (Restrictions on financial promotion); and

  2. (2)

    may be communicated by a firm without contravening section 238(1) of the Act (Restrictions on promotion of collective investment schemes).

PRIN 3.2.3 R RP

Principles 3, 4 and (in so far as it relates to disclosing to the FSA) 11 (and this chapter) also:

  1. (1)

    apply with respect to the carrying on of unregulated activities (for Principle 3 this is only in a prudential context); and

  2. (2)

    take into account any activity of other members of a group of which the firm is a member.

PRIN 3.3 Where?

PRIN 3.3.1 R RP

Territorial application of the Principles

Principle

Territorial application

Principles 1, 2 and 3

in a prudential context, apply with respect to activities wherever they are carried on; otherwise, apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case the Principle applies with that wider scope in relation to the activity described in that rule.

Principle 4

applies with respect to activities wherever they are carried on.

Principle 5

if the activities have, or might reasonably be regarded as likely to have, a negative effect on confidence in thefinancial system operating in the United Kingdom, applies with respect to activities wherever they are carried on; otherwise, applies with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom.

Principles 6, 7, 8, 9 and 10

Principle 8, in a prudential context, applies with respect to activities wherever they are carried on; otherwise apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case the Principle applies with that wider scope in relation to the activity described in that rule.

Principle 11

applies with respect to activities wherever they are carried on.2
PRIN 3.3.2 G

ECO 1.1.6 R has the effect that PRIN does not apply to an incoming ECA provider acting as such.1

PRIN 3.4 General

Clients and the Principles

PRIN 3.4.1 R RP

Although Principle 7 refers to clients, the only requirement of Principle 7 relating to market counterparties is that a firm must communicate information to market counterparties in a way that is not misleading.

PRIN 3.4.2 R RP

For the purposes of PRIN, the following provisions of COB 4.1 (Client classification) also apply to a firm intending to carry on, or carrying on, activities other than designated investment business:

  1. (1)

    COB 4.1.12 R and COB 4.1.13 G (Large intermediate customer classified as a market counterparty); and

  2. (2)

    COB 4.1.14 R (Client classified as a private customer).

PRIN 3.4.3 G RP

The whole of COB 4.1 (Client classification) applies to a firm intending to conduct, or conducting, designated investment business and ancillary activities relating to designated investment business. Any client classifications established in relation to such business will be applicable for the purposes of Principles 6, 7, 8 and 9.

Actions for damages

PRIN 3.4.4 R RP

A contravention of the rules in PRIN does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

Reference to "regulators" in Principle 11

PRIN 3.4.5 R RP

Where Principle 11 refers to regulators, this means, in addition to the FSA, other regulators with recognised jurisdiction in relation to regulated activities, whether in the United Kingdom or abroad.