Content Options:

Content Options

View Options:

SUP 10.10 Customer functions

SUP 10.10.1R

SUP 10.10 (Customer functions) applies with respect to activities carried on from an establishment maintained by the firm (or by its appointed representative) in the United Kingdom.

SUP 10.10.2G

Without SUP 10.10.1 R the description of the customer functions would extend to functions wherever they are performed. The effect of SUP 10.10.1 R is that the descriptions arelimited, in relation to regulated activities with an overseas element, in a manner which is broadly consistent with the scope of conduct of business regulation.

SUP 10.10.3G

The customer functions haveto do with giving advice on, dealing and arranging deals in and managing investments; they haveno application to banking business such as deposit taking and lending, nor to general insurance business.

The customer conditions (the second and third conditions)

SUP 10.10.4R

Each customer function is one which will involve the person performing it in dealing with customers, (and for the corporate finance adviser function, clients), or dealing with property of customers, of a firm in a manner substantially connected with the carrying on of a regulated activity of the firm.

SUP 10.10.5G

SUP 10.10.4 R gives effect to sub-sections (6) and (7) of section 59 of the Act (referred to in that section as the second and third conditions). Customer is given the meaning in the Glossary (which is not the same as the definition given in section 59 (11) of the Act).

SUP 10.10.6G

The FSA interprets the phrase "dealing with" as including having contact with customers and extending beyond "dealing" as used in the phrase "dealing in investments". "Dealing in" is used in Schedule 2 to the Act to describe in general terms the regulated activities which are specified in Part II of the Regulated Activities Order.

Investment adviser function (CF21)

SUP 10.10.7R
  1. (1)

    The investment adviser function is the function of:

    1. (a)

      advising on investments other than a non-investment insurance contract; and1

    2. (b)

      performing functions within the customer trading function in connection with advising on investments other than non-investment insurance contract.1

  2. (2)

    This function does not include:

    1. (a)

      the investment adviser (trainee) function; and

    2. (b)

      the pension transfer specialist function.

  3. (3)

    This function does not extend to an individual who is based overseas and who, in a 12 month period, spends no more than 30 days in the United Kingdom to the extent that he is appropriately supervised by a person approved for this function.

SUP 10.10.8G

The function of advising on investments would include, for example, giving advice to clients in connection with corporate finance business. It does not include managing investments (see the investment management function) or advising on syndicate participation at Lloyd's (see the adviser on syndicate participation at Lloyd's function).

SUP 10.10.9G

When considering an application for approval in relation to this controlled function, the FSA may ask for evidence of the individual's competence. TC 2.4.1 R provides that a firm must ensure that an employee is not allowed to engage in an activity unless the employee has been assessed as competent in that activity, in accordance with TC 2.4.5 R, or is appropriately supervised. TC 2.4.5 R provides that a firm must, before an employee can be assessed as competent, ensure that the employee has been assessed as able to apply the knowledge and skills necessary to engage without supervision in the relevant activity and has passed an appropriate examination.

SUP 10.10.10G

The FSA would expect an individual from overseas to be accompanied on a visit to a customer. TC 2.5.5 R (1) provides that the firm will have to be satisfied that the individual has at least three years' up-to-date relevant experience obtained outside the United Kingdom. However, the remaining provisions of TC 2.5.5 R (1) are disapplied in these circumstances (except for an individual who gives advice to private customers on packaged products or is a broker fund adviser). The effect of this is that the individual who may previously have been required to comply fully with the United Kingdom examination requirements, now need not pass the relevant regulatory module of an appropriate examination (see TC 2.5.5 R (3) and TC 2.5.5 R (4)).

Investment adviser (trainee) function (CF22)

SUP 10.10.11R

The investment adviser (trainee) function is the function of advising on investments other than a non-investment insurance contract where the individual performing the function has not yet been assessed as competent in accordance with the rules in the Training and Competence sourcebook (TC).1

SUP 10.10.12G

If a firm notifies the FSA that an individual who is performing the investment adviser (trainee) function has passed the appropriate examination, and has been assessed as competent, the FSA will treat this as an application for the individual to perform the investment adviser function. A Form E (SUP 10 Annex 8 G) may be used for this purpose.

Corporate finance adviser function (CF23)

SUP 10.10.13R
  1. (1)

    The corporate finance adviser function is the function of:

    1. (a)

      giving advice to clients solely in connection with corporate finance business; and

    2. (b)

      performing functions within the customer trading function in connection with giving that advice.

  2. (2)

    This function does not extend to an individual who is based overseas and who, in a 12 month period, spends no more than 30 days in the United Kingdom to the extent that he is appropriately supervised by a person approved for this function.

SUP 10.10.13AG

The FSA would expect an individual from overseas to be accompanied on a visit to a customer. TC 2.5.5 R (1) provides that the firm will have to be satisfied that the individual has at least three years' up-to-date relevant experience obtained outside the United Kingdom. However, the remaining provisions of TC 2.5.5 R (1) are disapplied in these circumstances. The effect of this is that the individual, who may previously have been required to comply fully with the United Kingdom examination requirements, now need not pass the relevant regulatory module of an appropriate examination (seeTC 2.5.5 R (3) and (4)).

Pension transfer specialist function (CF24)

SUP 10.10.14R

The pension transfer specialist function is the function of giving advice or performing related activities in connection with:

  1. (1)

    pension transfers; or

  2. (2)

    opt-outs;

for private customers.

Adviser on syndicate participation at Lloyds's function (CF25)

SUP 10.10.15R

The adviser on syndicate participation at Lloyd's function is the function of giving advice to a person to become, or continue or cease to be, a member of a particular Lloyd's syndicate.

Customer trading function (CF26)

SUP 10.10.16R
  1. (1)

    The customer trading function is the function of dealing, as principal or as agent, and arranging (bringing about) deals in investments other than a non-investment insurance contract with or for, or in connection with, private customers and intermediate customers where:1

    1. (a)

      the dealing or arranging deals is governed by COB 7 (Dealing and managing); and

    2. (b)

      the person performing the function is not advising on or managing investments unless approved to perform the investment adviser function or the investment management function.

  2. (2)

    This function does not extend to an individual who is based overseas and who, in a 12 month period, spends no more than 30 days in the United Kingdom to the extent that he is appropriately supervised by a person approved for this function.

SUP 10.10.17G

A person who advises on or manages investments must be approved to perform the investment adviser function or the investment management function (see SUP 10.10.7 R and SUP 10.10.20 R) and does not need to be separately approved for the customer trading function (see SUP 10.10.16 R).

SUP 10.10.18G

COB 7 applies to a firm conducting designated investment business. Where a firm's proprietary trader may deal with a private or intermediate customer, the firm should ensure that the trader is approved under the customer trading function.

SUP 10.10.19G

The customer trading function does not extend to the individual who, on the instructions of the customer, simply inputs the customer's instructions into an automatic execution system where no discretion is or may be exercised by the individual carrying out the activity. Nor does it extend to merely introducing a customer to a firm or distributing advertisements.

Investment management function (CF27)

SUP 10.10.20R
  1. (1)

    The investment management function is the function of:

    1. (a)

      acting in the capacity of an investment manager; and

    2. (b)

      performing functions within:

      1. (i)

        the investment adviser function; and

      2. (ii)

        the customer trading function;

    in connection with acting as an investment manager.

  2. (2)

    This function does not extend to an individual who is based overseas and who, in a 12 month period, spends no more than 30 days in the United Kingdom to the extent that he is appropriately supervised by a person approved for this function.

SUP 10.10.21G

Note that the definition of investment manager is a person who, in summary, manages designated investments on a discretionary or non-discretionary basis under the terms of a discretionary or non-discretionary management agreement. If a person seeks to perform the controlled function of advising on investments outside of the agreement, he will need to be approved for the investment adviser function.

SUP 10.10.22G

The FSA would expect an individual from overseas to be accompanied on a visit to a customer. TC 2.5.5 R (1) provides that the firm will have to be satisfied that the individual has at least three years' up-to-date relevant experience obtained outside the United Kingdom. However, the remaining provisions of TC 2.5.5 R (1) are disapplied in these circumstances. The effect of this is that the individual, who may previously have been required to comply fully with the United Kingdom examination requirements, now need not pass the relevant regulatory module of an appropriate examination (see TC 2.5.5 R (3) and (4)).