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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 an EU4 instrument to the firm's Home State regulator;

    4
  2. (2)

    for an incoming EEA firm which is a CRDcredit institution8 without a top-up permission, Principle 4 does not apply;12

    812
  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 and AIFM qualifier9, only Principles 11, 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);1

    11
  5. (5)

    PRIN does not apply to an incoming ECA provider acting as such; and71

  6. (6)

    PRIN does not apply to a firm in relation to its carrying on of auction regulation bidding.7

PRIN 3.1.2 G

COBS 1 Annex 1 contains 13guidance that is relevant to1 the reservation of responsibility to a Home State regulator referred to in PRIN 3.1.1 R (1).

1 6 1 1
PRIN 3.1.3 G

[deleted]12

12 1 8 8 12 12 8 8 12
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 3.1.6 R RP

A firm will not be subject to a Principle to the extent that it would be contrary to the UK's obligations under an EU4 instrument.

2 3
PRIN 3.1.7 G RP

2 PRIN 4 provides specific guidance on the application of the Principles for MiFID business.

PRIN 3.1.8 G RP

3The Principles will not apply to the extent that they purport to impose an obligation which is inconsistent with the Payment Services Directive, the11Consumer Credit Directive10 or the Electronic Money Directive.5 For example, there may be circumstances in which Principle 6 may be limited by the harmonised conduct of business obligations applied by the Payment Services Directive and the14Electronic Money Directive5 to credit institutions (see Parts 6 and 714 of the Payment Services Regulations and Part 5 of the Electronic Money Regulations) or applied by the Consumer Credit Directive (see, for example, the information requirements in the Consumer Credit (Disclosure of Information) Regulations 2010 (SI 2010/1013)).105

5

PRIN 3.2 What?

PRIN 3.2.1A R RP

4 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); 6

  3. (3)

    ancillary activities in relation to designated investment business, home finance activity, credit-related regulated activity, insurance mediation activity and accepting deposits; and6

  4. (4)

    activities directly arising from insurance risk transformation.6

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 3.2.2A R RP

4 PRIN 1 Annex 1 , PRIN 3.4.1 R and PRIN 3.4.2 R do not apply with respect to the carrying on of credit-related regulated activities.

PRIN 3.2.3 R RP

Subject to PRIN 3.2.4R,8Principles 3, 4 and (in so far as it relates to disclosing to the FCA5) 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 3.2.4 R

8In relation to an Annex II benchmark administrator which:

  1. (1)

    administers only benchmarks which are subject to Annex II to the benchmarks regulation; and

  2. (2)

    does not have permission to carry on any other regulated activities in relation to which Principle 11 applies,

Principle 11 (in so far as it relates to disclosing to the FCA) applies only to the regulated activity of administering a benchmark.

PRIN 3.2.5 G

8The FCA only expects an Annex II benchmark administrator subject to PRIN 3.2.4R to disclose information under Principle 11 which is relevant to the firm’s compliance with its obligations under the benchmarks regulation.

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 or EU regulation5which 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 or EU regulation5.

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 the UK financial system4, 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.

4

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 or EU regulation5which 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 or EU regulation5.

Principle 11

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

[deleted]3

1 3

PRIN 3.4 General

Clients and the Principles

PRIN 3.4.1 R RP

For business other than MiFID or equivalent third country business,7 the only requirement of Principle 7 relating to eligible counterparties3 is that a firm must communicate information to eligible counterparties3 in a way that is not misleading.

3 3
PRIN 3.4.1A G RP

7 Principle 7 applies in full to MiFID or equivalent third country business.

PRIN 3.4.2 R RP

For the purposes of PRIN, a firm intending to carry on, or carrying on, activities that do not involve designated investment business, may treat a client as an eligible counterparty in accordance with PRIN 1 Annex 1 R.2

2
PRIN 3.4.3 G RP
1
  1. (1)

    COBS 3 (Client categorisation)2 applies to a firm intending to conduct, or conducting, designated investment business 2(other than giving basic advice),8ancillary activities relating to designated investment business and to a firm intending to carry on, or carrying on, insurance risk transformation and activities directly arising from insurance risk transformation8. Any client categorisation2established in relation to such business will be applicable for the purposes of Principles 6, 7, 8 and 9.1

    2222
  2. (2)

    The person to whom a firm gives basic advice2 will be a retail client3 for all purposes including the purposes of Principles 6, 7, 8 and 9.1

    23
  3. (3)

    PRIN 3.4.1 R and PRIN 3.4.2 R do not apply with respect to the carrying on of credit-related regulated activities. Client categorisation does not apply in relation to carrying on a credit-related regulated activity. The definitions of client and customer in relation to those regulated activities reflect the modified meaning of “consumer” in articles 36J, 39M and 89E of the Regulated Activities Order, as well as the definitions of “individual” and of “relevant recipient of credit” in that Order.45

Guarantors etc

PRIN 3.4.3A R RP
  1. (1)

    6Paragraph (2) applies in relation to an individual who:

    1. (a)

      has provided, or is to provide, a guarantee or an indemnity (or both) in relation to a regulated credit agreement, a regulated consumer hire agreement or a P2P agreement; and

    2. (b)

      is not the borrower or the hirer.

  2. (2)

    If the individual is not a customer, they are to be treated as if they were a customer for the purposes of Principles 6 and 7.

  3. (3)

    For the purposes of this rule, a guarantee does not include a legal or equitable mortgage or a pledge.

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 138D of the Act (and each of those rules is specified under section 138D(3) 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 FCA7, other regulators with recognised jurisdiction in relation to regulated activities, whether in the United Kingdom or abroad.