PERG 2.4 Link between activities and the United Kingdom

Section 19 of the Act (The general prohibition) provides that the requirement to be authorised under the Act only applies in relation to activities that are carried on 'in the United Kingdom'. In many cases, it will be quite straightforward to identify where an activity is carried on. But when there is a cross-border element, for example because a client is outside the United Kingdom or because some other element of the activity happens outside the United Kingdom, the question may arise as to where the activity is carried on.

Even with a cross-border element a person may still be carrying on an activity 'in the United Kingdom'. For example, a person who is situated in the United Kingdom and who is safeguarding and administering investments will be carrying on activities in the United Kingdom even though his client may be overseas.

The regulated funeral plan activities only apply if the contract is for a funeral in the United Kingdom.

Section 418 of the Act (Carrying on regulated activities in the United Kingdom) takes this one step further. It extends the meaning that 'in the United Kingdom' would ordinarily have by setting out additional cases. The Act states that, in these cases – as set out in (3), (4), and (6) to (8) – a person who is carrying on a regulated activity but who would not otherwise be regarded as carrying on the activity in the United Kingdom is, for the purposes of the Act, to be regarded as carrying on the activity in the United Kingdom.

1. (1)

    [deleted]

2. (2)

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3. (3)

    The case is where a regulated activity is carried on by a UK-based person and the day-to-day management of the activity is the responsibility of an establishment in the United Kingdom.

4. (4)

    The case is where a regulated activity is carried on by a person who is not based in the United Kingdom but is carried on from an establishment in the United Kingdom. This might occur when each of the stages that make up a regulated activity (such as managing investments) takes place in different countries. For example, a person's management is in country A, the assets are held by a nominee in country B, all transactions take place in country B or country C but all decisions about what to do with the investments are taken from an office in the United Kingdom. Given that the investments are held, and all dealings in them take place, outside the United Kingdom there may otherwise be a question as to where the regulated activity of managing investments is taking place. For the purposes of the Act, it is carried on in the United Kingdom.

5. (5)

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6. (6) The case is where the regulated activity being carried on by a person (‘A’) is that of issuing a qualifying stablecoin (article 9M of the Regulated Activities Order), and all of the activities specified in the conditions set out in paragraph (2)(a) to (c) of that article are carried on by A, or on behalf of A, in the United Kingdom.
7. (7)
   1. (a) The case is where:
      1. (i) the regulated activity being carried on by a person (‘A’) is that of:
         1. (A) operating a qualifying CATP (article 9S of the Regulated Activities Order);

         2. (B) dealing in qualifying cryptoassets as principal (article 9T of the Regulated Activities Order);

         3. (C) dealing in qualifying cryptoassets as agent (article 9W of the Regulated Activities Order); or
         4. (D) arranging deals in qualifying cryptoassets (article 9Y of the Regulated Activities Order); and
      2. (ii) A is involved in the sale or subscription of a qualifying cryptoasset to, or by, a consumer (‘C’).
   2. (b) For this to be the case, there must be no person who:
      1. (i) is an authorised person with a Part 4A permission to carry on the activity of operating a qualifying CATP (article 9S of the Regulated Activities Order) or dealing in qualifying cryptoassets as principal (article 9T of the Regulated Activities Order);
      2. (ii) is carrying on that activity in relation to the sale or subscription of a qualifying cryptoasset to, or by, a consumer; and
      3. (iii) in doing so, is acting as an intermediary between A and C.
8. (8) The case is where the regulated activity being carried on by a person (‘A’) is that of safeguarding cryptoassets (article 9N of the Regulated Activities Order) or arranging qualifying cryptoasset staking (article 9Z6 of the Regulated Activities Order). In this case:
   1. (a) A must be carrying on that activity on behalf of a consumer; and
   2. (b) A must not be carrying on that activity at the direction of another person authorised under Part 4A of the Act to carry on that regulated activity.

The application of the third and fourth cases will depend on how the activities carried on from the UK establishment are set up and operated.

A person who is based outside the United Kingdom but who sets up an establishment in the United Kingdom must therefore consider the following matters. First, he must not, unless he is authorised, carry on regulated activities in the United Kingdom. Second, unless he is authorised, the day-to-day management of the carrying on of the regulated activity must not be the responsibility of the UK establishment. This may, for example, affect those UK establishments that in the context of deposit-taking activities were, before the commencement of the Act, treated as representative offices of overseas institutions. Such institutions will need to seek authorisation if the responsibility for the day-to-day management of the accepting of deposits by them outside the United Kingdom is nevertheless effectively that of their UK establishment. Third, such a person will need to ensure that he does not contravene other provisions of the Act that apply to persons who are not authorised. These include the controls on financial promotion (section 21 of the Act (Financial promotion)), and on giving the impression that a person is authorised (section 24).

A person based outside the United Kingdom may also be carrying on activities in the United Kingdom even if he does not have a place of business maintained by him in the United Kingdom (for example, by means of the internet or other telecommunications system or by occasional visits). In that case, it will be relevant to consider whether what he is doing satisfies the business test as it applies in relation to the activities in question. In addition, he may be able to rely on the exclusions from certain regulated activities that apply in relation to overseas persons (see PERG 2.9.15 G).

Whether a credit agreement or consumer hire agreement is subject to the law of a country outside the United Kingdom is immaterial to whether an activity is credit broking, see PERG 2.7.7E G.

1. (1)

   The requirement to be authorised to carry on the regulated activity of administering a benchmark gives effect to the authorisation and registration regime under article 34 of the benchmarks regulation.

2. (2)

   Article 34 only requires a person to be authorised or registered in the UK if that person is located in the UK.

3. (3)

   Accordingly, the FCA considers that where a person (P) administers a benchmark in the UK but P is not located in the UK:

   1. (a)

      P does not carry on the regulated activity of administering a benchmark from an establishment maintained by P in the UK for the purposes of section 418 of the Act; and

   2. (b)

      P would not otherwise be regarded as carrying on that regulated activity in the UK.

4. (4)

   Located is defined in the Glossary and has the same meaning as it does in the benchmarks regulation.