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You are viewing the version of the document as on 2023-09-29.

PRIN 3.1 Who?

PRIN 3.1.1 R RP

PRIN applies to every firm, except that it does not apply to a firm in relation to its carrying on of auction regulation bidding.20

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 or PRIN 2A21 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 and PRIN 2A21 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 12 and PRIN 2A21 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
  1. (1)

    16Only Principles 1, 2, 3, 9, 11, 12 and PRIN 2A apply to a TP UCITS qualifierand a TP AIFM qualifier, and only with respect to the activities in PRIN 3.2.2R (Communication and approval of financial promotions).

    21
  2. (2)

    22Where Principle 12 and PRIN 2A do not apply, Principle 7 also applies to a TP UCITS qualifier and a TP AIFM qualifier with respect to the activities in PRIN 3.2.2R.

16 21
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 3.1.12 R

21 Principle 12 and PRIN 2A only apply where a client is a retail customer, or there is distribution chain which involves a retail customer.

PRIN 3.1.13 R

21 Principle 12 and PRIN 2A apply to:

  1. (1)

    a TP firm; and

  2. (2)

    a Gibraltar-based firm.

PRIN 3.2 What?

PRIN 3.2.1A R RP

4 PRIN (other than Principle 12 and PRIN 2A)12 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, regulated funeral plan activity, 11credit-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

[deleted]11

4 9 10
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.

Principle 12 and PRIN 2A: additional application provisions

PRIN 3.2.6 R
  1. (1)

    13Principle 12 and PRIN 2A apply to a firm’s retail market business, including in respect of existing products and closed products.

  2. (2)
    1. (a)

      Subject to (b), Principle 12 and PRIN 2A apply to a firm with respect to the communication or approval of a financial promotion (see PRIN 3.2.2R), but only if the financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail customer.

    2. (b)

      Principle 12 and PRIN 2A do not apply to the communication or approval of a financial promotion to the extent that the financial promotion relates to an activity that is excluded from the definition of retail market business by virtue of limbs (1) to (6) of that definition.

  3. (3)

    If the firm is a credit union, and except insofar as Principle 12 and PRIN 2A apply by virtue of (2), then Principle 12 and PRIN 2A do not apply to the following activities:

    1. (a)

      payment services and activities connected to the provision of payment services, except where the activity is an ancillary activity in relation to a regulated activity other than issuing electronic money; and

    2. (b)

      activities connected to or ancillary activities in relation to issuing electronic money, but only insofar as the activity is not an ancillary activity in relation to another regulated activity.

PRIN 3.2.7 R

12Where Principle 12 and PRIN 2A apply to the activities of13 a firm13 operating in a distribution chain, Principle 12 and PRIN 2A apply only to the extent that the person is responsible in the course of carrying out those activities13 for determining or materially influencing retail customer outcomes.

PRIN 3.2.8 R

12Subject to PRIN 3.2.7R, Principle 12 and PRIN 2A do not apply to activities to the extent that those activities are not included in a rule which sets out the scope of protections offered to retail customers by COBS, ICOBS, MCOB, BCOBS, CMCOB, FPCOB, PROD or CONC.

PRIN 3.2.9 G

[deleted]13

Interaction between Principle 12 and Principles 6 and 7

PRIN 3.2.10 R

12 Principles 6 and 7 do not apply to a firm’s activities to the extent that Principle 12 and PRIN 2A apply.

PRIN 3.2.11 G

12Activities to which Principles 6 and 7 rather than Principle 12 and PRIN 2A may apply include, for example, services provided to professional clients.

PRIN 3.2.12 G

12 Principle 12 and PRIN 2A have a broader application than Principles 6 and 7, for example they apply to firms in the distribution chain for whom the retail customer may not be a client.

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 these Principles11 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

11 Principle 12 and PRIN 2A

apply with respect to activities carried on with retail customers located in the United Kingdom unless another applicable rule or onshored regulation which is relevant to the activity has a different territorial scope, in which case Principle 12 and PRIN 2A apply with that scope in relation to the activity described in that rule or onshored legislation.

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

11 PRIN 3.4.1R , PRIN 3.4.2R and PRIN 1 Annex 1 do not apply with respect to:

  1. (1)

    credit-related regulated activities; or

  2. (2)

    regulated claims management activities; or

  3. (3)

    regulated funeral plan activities; or

  4. (4)

    payment services; or

  5. (5)

    the issuing of electronic money (where not a regulated activity).

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

[deleted]11

1

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 and as if they were a retail customer for the purposes of Principle 12 and PRIN 2A12.

  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.