SUP 12.2 Introduction

1. (1)

   Under section 19 of the Act (The general prohibition), no person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is an authorised person, or he is an exempt person in relation to that activity.

2. (2)

   A person will be an exempt person if he satisfies the conditions in section 39(1) of the Act, guidance on which is given in SUP 12.2.2 G. A person who is exempt as a result of satisfying these conditions is referred to in the Act as an appointed representative.

3. (3)

   If an appointed representative is also a tied agent he must also satisfy the condition in section 39(1A) of the Act in order to be an exempt person. See SUP 12.4.12 G for guidance on that condition and SUP 12.2.16 G for more general guidance about tied agents.12

1. (1)

   A person must satisfy the conditions in section 39(1) of the Act to become an appointed representative. These are that:

   1. (a)

      the person must not be an authorised person, that is, he must not have permission under the Act to carry on any regulated activity in his own right (section 39(1) of the Act);

   2. (b)

      the person must have entered into a contract with an authorised person, referred to in the Act as the 'principal', which:

      1. (i)

         permits or requires him to carry on business of a description prescribed in the Appointed Representatives Regulations (section 39(1)(a)(i) of the Act) (see SUP 12.2.7 G); and

      2. (ii)

         complies with any requirements that may be prescribed in the Appointed Representatives Regulations (section 39(1)(a)(ii) of the Act) (see SUP 12.5.2 G (1)); and

   3. (c)

      the principal must have accepted responsibility, in writing, for the authorised activities of the person in carrying on the whole, or part, of the business specified in the contract.

2. (2)

   The appointed representative is an exempt person in relation to any regulated activity comprised in the carrying on of the business for which his principal has accepted responsibility.

As long as the conditions in section 39 of the Act are satisfied, any person, other than an authorised person, may become an appointed representative, including a body corporate, a partnership or an individual in business on his own account. However, an appointed representative cannot be an authorised person under the Act; that is, it cannot be exempt for some regulated activities and authorised for others.

The Act and the Appointed Representative Regulations do not prevent an appointed representative from acting for more than one principal. However, SUP 12.5.6A R (Prohibition of multiple principals for certain activities) prevents this for particular kinds of business.5

A firm is referred to as a 'network' if it appoints five or more appointed representatives (not counting introducer appointed representatives)7 or if it appoints fewer7 than five appointed representatives (again, not counting introducer appointed representatives)7 which have, between them, twenty-six or more representatives. However, a network does not include:54

(a) a product provider;4

(b) a firm which markets the packaged products of a product provider in the same group as the firm and which does so other than by selecting products from the whole market;4

(c) an insurer in relation to a non-investment insurance contract; or4

(d) a home finance provider.842

1. (1)

   The Appointed Representatives Regulations are made by the Treasury under section 39(1) of the Act. These regulations describe, among other things, the business for which an appointed representative may be exempt, which is business which comprises any of:

   1. (a)

      dealing in investments as agent (article 21 of the Regulated Activities Order) where the transaction relates to a pure protection contract (but only where the contract is not a long-term care insurance contract) or general insurance contract;53

      5
   2. (aa)

      14bidding in emissions auctions (article 24A of the Regulated Activities Order) where that activity does not consist either of dealing on own account or the execution of orders on behalf of clients;

   3. (b)

      arranging (bringing about) deals in investments (article 25(1) of the Regulated Activities Order) (that is in summary, deals in a designated investment, funeral plan contract, pure protection contract, general insurance contract or right to or interest in a funeral plan);5

      5
   4. (c)

      making arrangements with a view to transactions in investments (article 25(2) of the Regulated Activities Order) (that is in summary, transactions in a designated investment, funeral plan contract, pure protection contract, general insurance contract or right to or interest in a funeral plan);5

      5
   5. (d)

      arranging (bringing about) a home finance transaction8(

      588

      articles 25A(1), 25B(1) and 25C(1)8 of the Regulated Activities Order);5

   6. (e)

      making arrangements with a view to a home finance transaction8 (articles 25A(2), 25B(2) and 25C(2)8 of the Regulated Activities Order);5

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   7. (f)

      assisting in the administration and performance of a contract of insurance (article 39A of the Regulated Activities Order);53

      5
   8. (g)

      arranging safeguarding and administration of assets (part of article 40 of the Regulated Activities Order);5

      5
   9. (h)

      giving basic advice on a stakeholder product10(article 52B of the Regulated Activities Order);6

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   10. (i)

       advising on investments (article 53 of the Regulated Activities Order) (that is in summary, on any designated investment, funeral plan contract, pure protection contract, general insurance contract or right to or interest in a funeral plan);6

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   11. (j)

       advising on a home finance transaction8 (articles 53A, 53B and 53C8 of the Regulated Activities Order); and6

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   12. (k)

       agreeing to carry on a regulated activity (article 64 of the Regulated Activities Order) where the regulated activity is one of those in (a) to (h).6

2. (2)

   If the appointed representative is a tied agent of an EEA firm, the business for which the appointed representative may be exempt includes the following additional activities:12

   12
   1. (a)

      placing financial instruments ;12

   2. (b)

      providing advice to clients or potential clients in relation to the placing of financial instruments .12

3. (3)

   [deleted]12

   212

1. (1)

   An introducer appointed representative is an appointed representative appointed by a firm whose scope of appointment must, under SUP 12.5.7 R, be limited to:

   1. (a)

      effecting introductions to the firm or other members of the firm's group; and5

   2. (b)

      distributing non-real time financial promotions which relate to products or services available from or through the firm or other members of the firm's group.5

2. (2)

   The permitted scope of appointment of an introducer appointed representative does not include in particular:5

   1. (a)

      dealing in investments as agent; or5

      5
   2. (b)

      arranging (bringing about) deals in investments or arranging (bringing about) regulated mortgage contracts; or5

      5
   3. (c)

      assisting in the administration and performance of a contract of insurance; or53

   4. (d)

      advising on investments, giving basic advice on a stakeholder product 106advising on a home finance transaction8 or other activity that might reasonably lead a customer to believe that he had received basic advice or 6advice on investments or on regulated mortgage contracts8home finance transactions8 or that the introducer appointed representative is permitted to give basic advice10 or 6give personal recommendations on investments10 or on home finance transactions.8

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3. (3)

   An introducer appointed representative may have more than one principal, but will need a contract with each principal.5

4. (4)

   The approved persons regime does not apply to an introducer appointed representative (see SUP 10.1.16 R).5

To become an introducer appointed representative, a person must meet the conditions in the Act to become an appointed representative (see SUP 12.2.2 G).5

All rules in SUP 12 apply in relation to introducer appointed representatives except for:

1. (1)

   SUP 12.4.2 R, SUP 12.4.5B R and SUP 12.4.5C, on the appointment of appointed representatives, which are replaced by SUP 12.4.6 R;

   5
2. (2)

   SUP 12.5.6A R on required contract terms, which is replaced by SUP 12.5.7 R; and5

3. (3)

   SUP 12.9.1 R (4) (Record keeping).5

If an introducer appointed representative is an individual in business on his own, then he will also be an introducer (see SUP 12.2.13 G). This has certain implications in COBS.10

A firm or its appointed representative may appoint or employ individuals to act as introducers or representatives in respect of designated investment business.4

1. (1)

   An introducer is an individual appointed by a firm or by an appointed representative of such a firm to carry out, in the course of designated investment business, either or both of the following activities:4

   1. (a)

      effecting introductions;

   2. (b)

      distributing non-real time financial promotions.

2. (2)

   An introducer is not an exempt person under section 39 of the Act (unless he is also an introducer appointed representative) and hence cannot benefit from the exemption to carry on regulated activities in his own right. As a result, an introducer that is not an introducer appointed representative works in the name of his firm or the firm's appointed representative but he does not fall within the scope of the approved persons regime as he does not, as such, perform a controlled function.1

1. (1)

   A representative is an individual who is appointed by a firm or an appointed representative, to carry on any of the activities in (1)(a) to (c):54

   1. (a)

      advising on investments;5

   2. (b)

      arranging (bringing about) deals in investments;5

   3. (c)

      dealing in investments as agent.5

2. (2)

   If a firm appoints an appointed representative who is an individual in (1), that appointed representative will also be a representative. The individual may need to be approved to perform the customer function9, (see SUP 12.6.8 G and SUP 12.6.9 G). In these circumstances, in addition to complying with the requirements of SUP 12 and other regulatory requirements, the firm should ensure that the rules for representatives inCOBS 6 (Information about the firm, its services and remuneration)13 are complied with.54

   91113

1. (1)

   12A tied agent is a person who acts for and under the responsibility of a MiFID investment firm (or a third country investment firm) in respect of MiFID business (or the equivalent business of the third country investment firm). Most tied agents appointed by firms are also appointed representatives.

2. (2)

   Unless otherwise provided, this chapter applies to a firm that appoints a tied agent that is an appointed representative in the same way as it applies to the appointment of any other appointed representative.

3. (3)

   This chapter sets out the provisions which apply to tied agents:

   1. (a)

      established in the UK; or

   2. (b)

      established in another EEA State and appointed by a UK MiFID investment firm.

4. (4)

   A tied agent appointed by a firm to carry on investment services and activities or ancillary services on its behalf may not provide cross border services or establish a branch in another EEA State in its own right. This is because tied agents do not have passporting rights. The tied agent of a MiFID investment firm may, however, provide cross border services or establish a branch in another EEA State by availing itself of the appointing firm's passport. MiFID investment firms may also appoint tied agents established in different EEA States.

5. (5)

   A tied agent will not be an appointed representative if it does not and is not likely to conduct any business as a tied agent in the UK. If such a tied agent is appointed by a UK MiFID investment firm it will be an EEA tied agent. EEA tied agents are either FSA registered tied agent or EEA registered tied agents.

6. (6)

   This chapter only applies to a firm that appoints a tied agent that is not an appointed representative where it expressly refers to tied agents.

7. (7)

   Under MiFID, an EEA State may prohibit the appointment of tied agents by MiFID investment firms for which it is the Home State. If a UK MiFID investment firm appoints a tied agent established in such an EEA State, the tied agent must be registered with the FSA. Such an EEA tied agent is referred to in the Handbook as an FSA registered tied agent.

8. (8)

   If a UK MiFID investment firm appoints a tied agent established in an EEA State that allows MiFID investment firms for which it is the Home State to appoint tied agents, the tied agent must be registered with the competent authority of the EEA State in which it is established. Such an EEA tied agent is referred to in the Handbook as an EEA registered tied agent.