SUP 13.3 Establishing a branch in another EEA State

Guidance on what constitutes a branch is given in SUP App 36. Note that if a UK MiFID investment firm is seeking to use a tied agent established in another EEA State, the rules in SUP 13 will apply as if that firm were seeking to establish a branch in that EEA State unless the firm has already established a branch in that EEA State (paragraph 20A of Schedule 3 to the Act).8

A UK firm other than a UK pure reinsurer 9cannot establish a branch in another EEA State for the first time under an EEA right unless the conditions in paragraphs 19(2), (4) and (5) of Part III of Schedule 3 to the Act are satisfied. It is an offence for a UK firm which is not an authorised person to contravene this prohibition (paragraph 21 of Part III of Schedule 3 to the Act). These conditions are that:

1. (1)

   the UK firm has given the FSA, in accordance with the FSA rules (see SUP 13.5.1 R), notice of its intention to establish a branch (known as a notice of intention8) which:8

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   1. (a)

      identifies the activities which it seeks to carry on through the branch; and

   2. (b)

      includes such other information as may be specified by the FSA (see SUP 13.5.1 R);

2. (2)

   the FSA has given notice (known as a consent notice) to the Host State regulator;

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3. (2A)

   if the UK firm's EEA right relates to providing collective portfolio management services, the FSA has provided to the Host State regulator:10

   1. (a)

      confirmation that the firm has been authorised as a management company under the provisions of the UCITS Directive;10

   2. (b)

      a description of the scope of the firm's authorisation; and 10

   3. (c)

      details of any restriction on the types of EEA UCITS scheme that the firm is authorised to manage; and10

4. (3)
   1. (a)

      if the UK firm's EEA right derives from the Insurance Mediation Directive one month has elapsed beginning on the date on which the UK firm received notice that the FSA had given a consent notice8 as described in SUP 13.3.6 G (1) (see SUP 13.3.2A G);4

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   2. (b)

      in any other case:4

      1. (i)

         the Host State regulator has notified the UK firm (or, where the UK firm is passporting under theInsurance Directives, the FSA) of the applicable provisions or, in the case of a UK firm passporting under MiFID or the UCITS Directive,10 that the branch may be established8; or4

      2. (ii)

         two months have elapsed beginning with the date on which the FSA gave the consent notice.41

4If the UK firm is passporting under the Insurance Mediation Directive and the EEA State in which the UK firm is seeking to establish a branch has not notified the European Commission of its wish to be informed of the intention of persons to establish a branch in its territory in accordance with article 6(2) of that directive, SUP 13.3.2 G (2) and SUP 13.3.2 G (3) do not apply. Accordingly, the UK firm may establish the branch to which its notice of intention8 relates as soon as the conditions referred to in SUP 13.3.2 G (1) are satisfied. The list of EEA States that have notified the European Commission of their wish to be informed in accordance with article 6(2) of the Insurance Mediation Directive is published on the FSA's website at www.fsa.gov.uk.8

4An appointed representative appointed by a firm to carry on insurance mediation activity on its behalf may establish a branch in another EEA State under the Insurance Mediation Directive. In this case, the notice of intention8 in SUP 13.3.2 G (1) should be given to the FSA by the firm on behalf of the appointed representative.5

4An exempt professional firm which is included in the record of unauthorised persons carrying on insurance mediation activity maintained by the FSA under article 93 of the Regulated Activities Order may establish a branch in another EEA State under the Insurance Mediation Directive (see PROF 7.2).

8A tied agent appointed by a MiFID investment firm to carry on investment services and activities (and ancillary services where relevant) does not have its own passporting right to establish a branch in another EEA State. However, a MiFID investment firm remains free to appoint a tied agent to do business in another EEA State and where it does so, the tied agent will benefit from its passport.

9Once authorised in the United Kingdom, a UK pure reinsurer has an automatic EEA right to carry on reinsurance business in another EEA State by establishing a branch in that state or providing cross border services into that state. There are no additional requirements to be satisfied before the firm can commence business in that state.

Where the UK firm is passporting under the Insurance Directives and the Host State regulator has notified the FSA of the applicable provisions, then under paragraph 19(9) of Part III of Schedule 3 to the Act, the FSA is required to inform the firm of these provisions.

1. (1)

   9SUP 13.3.3 G does not apply to UK pure reinsurers as they have automatic passport rights on the basis of their Home State authorisation under the Reinsurance Directive.

2. (2)

   9Under section 3 of Part III of the General Protocol, Home State regulators have agreed to inform Host State regulators if a pure reinsurer for which the Home State is responsible carries on business through a branch in the Host State. Therefore SUP 13.5.1A R requires a UK firm passporting under the Reinsurance Directive to notify the FSA of certain information relating to the branch.

1. (1)

   8If the UK firm's EEA right derives from the Banking Consolidation Directive or10MiFID8,10 the FSA will give the Host State regulator a consent notice within three months unless it has reason to doubt the adequacy of a UK firm's resources or its administrative structure.8 The Host State regulator then has a further two months to notify the applicable provisions (if any) and prepare for the supervision, as appropriate, of the UK firm, or in the case of a MiFID investment firm, to inform the UK firm that a branch can be established.8

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2. (1A)

   If the UK firm's EEA right derives from the UCITS Directive, the FSA will give the Host State regulator a consent notice within two months unless it has reason to doubt the adequacy of the UK firm's resources or its administrative structure. The Host State regulator then has a further two months to prepare for the supervision of the UK firm.10

3. (2) 8
   1. (a)

      If the UK firm's EEA right derives from the Insurance Directives, the FSA will give the Host State regulator a consent notice within three months unless it has reason to:8

      1. (i)

         doubt the adequacy of the UK firm's resources or its administrative structure; or8

      2. (ii)

         question the reputation, qualifications or experience of the directors or managers of the UK firm or its proposed authorised agent;8

      in relation to the business the UK firm intends to conduct through the proposed branch. The Host State regulator then has a further two months to notify the applicable provisions (if any) and prepare for the supervision, as appropriate, of the UK firm.8

   2. (b)

      In assessing the matters in (2)(a), the FSA may, in particular, seek further information from the firm or require a report from a skilled person (see SUP 5 (skilled persons)).8

   3. (c)

      If the FSA has required a financial recovery plan of a UK firm of the kind mentioned in paragraph 1 of article 38 of the Consolidated Life Directive or paragraph 1 of article 20a of the First Non-Life Directive, the FSA will not give a consent notice for so long as it considers that policyholders are threatened within the meaning of those provisions.8

   4. (d)

      If the UK firm's EEA right derives from the Insurance Mediation Directive and SUP 13.3.2 G (2) applies, the FSA will give the Host State regulator a consent notice within one month of the date on which it received the UK firm's notice of intention. In cases where SUP 13.3.2 G (2) does not apply (see SUP 13.3.2A G), the UK firm may establish a branch as soon as it satisfies the conditions referred to in SUP 13.3.2 G.8

1. (1)

   If the FSA gives a consent notice, it will inform the UK firm in writing that it has done so.

2. (2)

   The consent notice will contain, among other matters, the requisite details or, 8if the firm is passporting under the Insurance Directives, the relevant EEA details8 (see SUP 13 Annex 18) provided by the UK firm in its notice of intention8 (see SUP 13.5 (Notices of intention)).

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3. (3)

   10Where a consent notice is given under the UCITS Directive, the FSA will at the same time:

   1. (a)

      communicate to the Host State regulator details of the compensation scheme intended to protect investors; and

   2. (b)

      enclose the information described at SUP 13.3.2 G (2A).

1. (1)

   If the FSA proposes to refuse to give a consent notice, then paragraph 19(8) of Part III of Schedule 3 to the Act requires the FSA to give the UK firm a warning notice.

2. (2)

   If the FSA decides to refuse to give a consent notice, then paragraph 19(12) of Part III of Schedule 3 to the Act requires the FSA to give the UK firm a decision notice within three months8 of the date on which it received the UK firm's notice of intention8(two months8 in the case of a UK firm which is a UCITS management company). The UK firm may refer the matter to the Tribunal.

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3. (3)

   For details of the FSA's procedures for the giving of warning notices or decision notices see DEPP 2 (Statutory notices and the allocation of decision making).7

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10A UK firm seeking to provide collective portfolio management services from a branch in another EEA State, is advised that it will need to refer to the rules of the competent authority of the UCITS Home State implementing article 20 of the UCITS Directive which will require it to submit to that competent authority information relating to its depositary agreement and certain delegation arrangements.