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You are viewing the version of the document as on 2021-02-15.

PRIN 3.1 Who?

PRIN 3.1.1 R RP

PRIN applies to every firm.15

PRIN 3.1.2 G

[deleted]15

1 6 13 1 1 1
PRIN 3.1.3 G

[deleted]12

12 1 8 8 12 12 8 8 12
PRIN 3.1.4 G RP

[deleted]15

PRIN 3.1.5 G RP

[deleted]15

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 requirements of an EU measure passed or made before IP completion day19, to the extent that those requirements continue to have effect after IP completion day19 under the EUWA15.

2 3 4 17
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 requirements which implemented15 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 conduct of business obligations derived from15 the Payment Services Directive and the14Electronic Money Directive5 and applicable15 to payment service providers and electronic money issuers17 (see Parts 6 and 714 of the Payment Services Regulations and Part 5 of the Electronic Money Regulations) or derived from15 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 3.1.9 R

16 PRIN applies to a TP firm, except that Principle 4 only applies to the extent that a TP firm is subject to rules relating to capital adequacy.

PRIN 3.1.10 R

16Only Principles 1, 2, 3, 7, 9 and 11 apply to a TP UCITS qualifier and a TP AIFM qualifier, and only with respect to the activities in PRIN 3.2.2R (Communication and approval of financial promotions).

PRIN 3.1.11 G

16For the purposes of PRIN 3.1.9R, a TP firm should refer to GEN 2.2.30R and GEN 2.2.31G to determine which rules relating to capital adequacy apply to it.

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 distribution activity7 and accepting deposits; and6

  4. (4)

    activities directly arising from insurance risk transformation.6

PRIN 3.2.1B R

10Other than with respect to a firm that is a credit union, PRIN also applies with respect to:

  1. (1)

    the provision of payment services;

  2. (2)

    issuing of electronic money (where not the activity of issuing electronic money specified in article 9B of the Regulated Activities Order); and

  3. (3)

    activities connected to the provision of payment services and to the issuing of electronic money (whether or not the activity of issuing electronic money specified in article 9B of the Regulated Activities Order).

PRIN 3.2.1C G

10Issuing of electronic money will therefore be covered under either PRIN 3.2.1AR(1) where it is the regulated activity of issuing electronic money specified in article 9B of the Regulated Activities Order, or under PRIN 3.2.1BR where it is not that regulated activity.

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 3.2.2-A G

10 PRIN applies to the communication of promotions concerning payment services and electronic money.

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 or regulated claims management activities9, or to the provision of payment services or the issuing of electronic money (where not a regulated activity)10.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 to firms10 with respect to the carrying on of unregulated activities (for Principle 3 this is only in a prudential context); and

  2. (2)

    for firms and other persons that are subject to the Principles,10 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, or in respect of regulated claims management activities, apply with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A),6 unless another applicable rule or onshored regulation7 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 or onshored regulation7.

5 5

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, or in respect of regulated claims management activities, applies with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A)6.

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, or in respect of regulated claims management activities, apply with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A),6 unless another applicable rule or onshored regulation7 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 or onshored regulation7.

5 5

Principle 11

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

[deleted]3

1 3
PRIN 3.3.3 R

9 PRIN 3.3.1R applies to electronic money institutions, payment institutions and registered account information service providers10 as if the references to a firm were references to a person within that description, and references to an appointed representative were to an agent of such a person within the meaning of the Payment Services Regulations.

PRIN 3.3.4 R

8Notwithstanding PRIN 3.3.1R, PRIN applies to:

  1. (1)

    a TP firm with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom;

  2. (2)

    a TP firm with respect to services provided into the United Kingdom by the firm (or its appointed representative) from an establishment in an EEA State; and

  3. (3)

    a TP AIFM qualifier or a TP UCITS qualifier with respect to the firm’s activities in relation to the AIF or scheme in question, in the United Kingdom.

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

  4. (4)

    PRIN 3.4.1R and PRIN 3.4.2R do not apply with respect to the carrying on of regulated claims management activities. Client categorisation does not apply in relation to carrying on a regulated claims management activity.9

  5. (5)

    PRIN 3.4.1R and PRIN 3.4.2R do not apply with respect to the provision of payment services or the issuing of electronic money where it is not a regulated activity. Client categorisation does not apply in relation to carrying on of those activities. The definitions of customer in relation to those activities reflects the scope of the corporate opt out under the Payment Services Regulations. 10

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, payment services and electronic money10 whether in the United Kingdom or abroad.