The Act prohibits any person from carrying on, or purporting to carry on, regulated activities in the United Kingdom unless that person is an authorised person or an exempt person. If an overseas investment exchange or overseas clearing house wishes to undertake regulated activities in the United Kingdom, it will need to:

1. (1)

   obtain a Part IV permission from the FSA;

2. (2)

   (in the case of an EEA firm or a Treaty firm) qualify for authorisation under Schedule 3 (EEA Passport Rights) or Schedule 4 (Treaty rights) to the Act, respectively; or

3. (3)

   (in the case of an EEA market operator)1 obtain exempt person status by exercising its passport rights under Articles 31(5) and 31(6) of MiFID (in the case of arrangements relating to a multilateral trading facility) or Article 42(6) of MiFID (in the case of arrangements relating to a regulated market);1 or

   1
4. (4)

   obtain exempt person status by being declared by the FSA to be (in the case of an overseas investment exchange) an ROIE or (in the case of an overseas clearing house) an ROCH.

Having the status of an overseas recognised body facilitates the participation of overseas investment exchanges and overseas clearing houses in UKmarkets. In comparison with authorisation, it reduces the involvement which UK authorities need to have in the day-to-day affairs of an overseas recognised body because they are able to rely substantially on the supervisory and regulatory arrangements in the country where the applicant's head office is situated.

1. (1)

   Overseas investment exchanges and overseas clearing houses which are considering whether to seek authorisation or recognition should first consider whether they will be carrying on regulated activities in the United Kingdom. Overseas investment exchangesand overseas clearing houses which do not carry on regulated activities in the United Kingdom need take no action.

2. (2)

   Prospective applicants should discuss authorisation and recognition with the FSA before deciding whether to seek authorisation or recognition.

A prospective applicant may wish to contact the Markets Division at the FSA at an early stage for advice on the preparation, scheduling and practical aspects of an application to become an overseas recognised body.

Applicants for authorised person status should refer to the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml1. Applications for recognition as an overseas recognised body should be addressed to:

The Financial Services Authority (Markets Division)

25 The North Colonnade

Canary Wharf

London E14 5HS

There is no standard application form for application for recognition as an overseas recognised body. An application should be made in accordance with any direction the FSA may make under section 287 (Application by an investment exchange) or section 288 (Application by a clearing house) of the Act and should include:

1. (1)

   the information, evidence and explanatory material necessary to demonstrate to the FSA that the recognition requirements (set out in REC 6.3) will be met;

2. (2)

   the application fee (see REC 7);

3. (3)

   the address of the applicant's head office in its home territory;

4. (4)

   the address of a place in the United Kingdom for the service on the applicant of notices or other documents required or authorised to be served on it under the Act (see section 292(1));

5. (5)

   the applicant's regulatory provisions;

6. (6)

   one copy of each of the following documents:

   1. (a)

      its most recent annual report and accounts; and

   2. (b)

      the applicant's memorandum and articles of association or any similar or analogous documents; and

7. (7)

   information identifying the following (if not contained in the documents listed in (5) or (6) or the material referred to in (1)):

   1. (a)

      any type of regulated activity which the applicant envisages carrying on in the United Kingdom;

   2. (b)

      any type of specified investmentdealt in on, or cleared by,the applicant;

   3. (c)

      the date by which the applicant wishes the recognition order to take effect; and

   4. (d)

      any body or authority which supervises the applicant under the law of the home territory, the status of the applicant under that law, and the enactment or regulation under which the supervision is conducted.

The FSA may require further information from the applicant and may need to have discussions with the appropriate authorities in the applicant's home territory. To allow sufficient time for applications to be processed and for the necessary contacts to be made with the appropriate home territory authorities, applications should be made not later than six months before the applicant wishes the recognition order to take effect. No guarantee can be given that a decision will be reached within this time, although the FSA will endeavour to meet the applicant's reasonable timing requirements.

All material should be supplied in English, or accompanied, if appropriate, by an accurate English translation. An English glossary of technical or statistical terms may be sufficient to accompany tables of statistical or financial information.

Before making a recognition order, the FSA will need to be satisfied that the recognition requirements in section 292(3) of the Act (Overseas investment exchanges and clearing houses) have been met. These requirements are the only recognition requirements applicable to overseas recognised bodies.

The reference to recognition requirements in section 292(3)(a) of the Act is a reference to the requirements applicable to UK RIEs or UK RCHs in the Recognition Requirements Regulations. These requirements are set out, together with guidance, in REC 2.

Applications from overseas investment exchanges and overseas clearing houses are subject to the same competition scrutiny as applications from prospective UK recognised bodies (see REC 5). The FSA will therefore follow the relevant steps set out in REC 5.2 and may not make a recognition order without the approval of the Treasury.

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 or guidance which they consider they may need to discuss with the Office of Fair Trading.

If the FSA considers that the requirements of the Act are satisfied, it may make a recognition order, which will state the date on which it takes effect.

Where the FSA considers that it is unlikely to make a recognition order, it will discuss its concerns with the applicant with a view to enabling the applicant to make changes to its rules or guidance, or other parts of the application. If the FSA decides to refuse to make a recognition order, it will follow the procedure set out in section 298 of the Act (Directions and revocation: procedure) (which applies in consequence of section 290(5) of the Act (Recognition orders)) which is described in more detail in REC 4.8.

The FSA will notify the applicant if the Treasury fails to give its approval under section 307 of the Act (Recognition orders: role of the Treasury). Under section 290, the FSA is not required to follow the procedure under section 298 in this case and will not normally do so.

An overseas recognised body is required to notify the FSA of certain events and give information to it on a regular basis and when certain specified events occur. Section 295 of the Act (Notification: overseas investment exchanges and overseas clearing houses) requires each overseas recognised body to provide the FSA, the Treasury and the Director General of Fair Trading with a report (at least once a year) which contains:

1. (1)

   a statement as to whether any events have occurred which are likely:

   1. (a)

      to affect the assessment of whether it is satisfied that the overseas recognised body continues to satisfy the recognition requirements set out in section 292(3) of the Act (Overseas investment exchanges and overseas clearing houses)(see REC 6.3); and

   2. (b)

      to have any effect on competition;

2. (2)

   the information specified in the FSA'snotification rules for overseas recognised bodies (see REC 6.7).

The following events are examples of events likely to affect an assessment of whether an overseas recognised body is continuing to satisfy the recognition requirements, or to have an effect on competition:1

1. (1)

   significant changes to any relevant law or regulation in its home territory, including laws or regulations:

   1. (a)

      governing exchanges or clearing houses;

   2. (b)

      designed to prevent insider dealing, market manipulation or other forms of market abuse or misconduct;

   3. (c)

      designed to protect the interests of clients of members of the overseas recognised body, or of a class of bodies which includes the overseas recognised body;

   4. (d)

      which affect:

      1. (i)

         the ability of the overseas recognised body to seek information (whether compulsorily or voluntarily) from its members, including information relating to the price and volume of transactions, the identity of parties to transactions, and the movement of funds associated with transactions;

      2. (ii)

         which affect the ability of the overseas recognised body to pass such information, on request, to UK authorities;

2. (2)

   significant changes to its internal organisation or structure;

3. (3)

   significant changes to the practices of the overseas recognised body applying to any regulated activities carried on by it in the United Kingdom;

4. (4)

   any other event or series of events in relation to the body which:

   1. (a)

      affects or may significantly affect cooperation between the overseas recognised body, or its supervisor in its home territory, and the FSA; or

   2. (b)

      has or may have a substantial effect on the structure of the markets in which the body operates; or

   3. (c)

      brings about or may bring about a substantial change in the nature and composition of its membership in the United Kingdom; or

   4. (d)

      brings about or may bring about a substantial change in the regulated activities undertaken by it in the United Kingdom.

The period covered by a report submitted under section 295(1) of the Act starts on the day after the period covered by its last report or, if there is no such report, after the making of the recognition order recognising the overseas recognised body as such, and ends on the date specified in the report or, if no date is specified, on the date of the report.

If an overseas recognised body changes the period covered by its report, it should ensure that the first day of the period covered by a report is the day immediately following the last day of the period covered by the previous report.

The period covered by a report submitted under section 295(1) of the Act would most conveniently be one year.

Copies of the report should be sent to the FSA, the Treasury and the Director General of Fair Trading within two months after the end of the period to which it relates.

The notification rules in this chapter are made by the FSA in order to ensure that it is provided with notice of events and information which it reasonably requires for the exercise of its functions under the Act.

Guidance on the period covered by an overseas recognised body's report submitted in compliance with section 295(1) of the Act is given in REC 6.6.3.

An English glossary of technical or statistical terms may be sufficient to accompany tables of statistical or financial information.

Overseas recognised bodies may apply to the FSA for a waiver of any of the notification rules. The procedure is the same as that for applications from UK recognised bodies. Guidance on the procedure is given in REC 3.3.

The FSA has similar powers to supervise overseas recognised bodies to those it has to supervise UK recognised bodies. It may (in addition to any other powers it might exercise):

1. (1)

   give directions to an overseas recognised body under section 296 of the Act (Authority's power to give directions) if it has failed, or is likely to fail, to satisfy the recognition requirements or if it has failed to comply with any other obligation imposed by or under the Act; or

2. (2)

   revoke a recognition order under section 297 of the Act (Revoking recognition) if an overseas recognised body is failing, or has failed, to comply with the recognition requirements or any other obligation in or under the Act.

The FSA will follow the approach in REC 4.6, REC 4.7 and REC 4.8 if it is considering exercising these powers in relation to an overseas recognised body.