REC 5.1 Introduction and legal background

A body corporate or an unincorporated association may apply to the FSA for recognition as a UK recognised body under sections 287 (Application by an investment exchange) or 288 (Application by a clearing house) of the Act.

This chapter sets out guidance for UK applicants and for UK entities which are considering making an application. Guidance for applicants and prospective applicants for overseas recognised body status is given in REC 6.

The Director General of Fair Trading, the Competition Commission and the Treasury also have specific roles in relation to competition issues raised by applications to become a recognised body.

1. (1)

   Under section 303 of the Act (Initial report by the Director), the Director General of Fair Trading must issue a report on whether any of the applicant's regulatory provisions have a significantly adverse effect on competition. He must send copies of his report to the Treasury, the Competition Commission and the FSA.

2. (2)

   If the Director General of Fair Trading concludes that any of the applicant's regulatory provisions have a significantly adverse effect on competition, or if the Director General of Fair Trading concludes that none of the applicant's regulatory provisions has a significantly adverse effect on competition, but he nonetheless asks the Competition Commission to consider his report, the Competition Commission must normally make its own report under section 306 of the Act (Consideration by Competition Commission) on whether any of the applicant's regulatory provisions would have a significantly adverse effect on competition, whether any such effect is justified and, if it is not justified, what action, if any, the Treasury should direct the FSA to take.

3. (3)

   The Treasury's approval is required under section 307 of the Act (Recognition orders: role of the Treasury) before a recognition order can be made. (See also REC 5.2.11 G.)

The FSA must therefore send the Director General of Fair Trading copies of any regulatory provisions provided with the application. The FSA must also send to the Director General of Fair Trading such information in its possession as a result of the application, including supplementary information received after the application is made, but before it is determined by the FSA, as the FSA considers will assist the Director General of Fair Trading in discharging his functions in connection with the application.

The Office of Fair Trading may also make informal requests for further information from an applicant. The Director General of Fair Trading also has powers under section 305 of the Act (Investigations by Director) to obtain compulsorily documents or information from the applicant or other persons.

Potential applicants may wish to consult the Office of Fair Trading separately if they have any queries about the competition assessment or there are any aspects of their rules, guidance or clearing arrangements which they consider they may need to discuss with them.