Related provisions for MCOB 4.1.3
1 - 20 of 78 items.
If a social housing firm is carrying on home financing1or home finance administration1(and no other regulated activity), its net tangible assets must be greater than zero. However, if it carries on insurance mediation activity or home finance mediation activity1, there is no special provision and the capital resources requirement for firms carrying on designated investment business or mediation activities only applies to it as appropriate. 11111
Table: Application of capital resources requirements
Regulated activities |
Provisions |
|
1. |
(a) insurance mediation activity; or (b) home finance mediation activity1(or both); and no other regulated activity. 1 |
|
2. |
(a) home financing1; or (b) home financing1 and home finance administration1; and no other regulated activity. 111111 |
|
3. |
home finance administration;1 and no other regulated activity. 11 |
|
4. |
insurance mediation activity; and (a) home financing1; or (b) home finance administration1 (or both). 1111 |
|
5. |
home finance mediation activity;1 and (a) home financing1, or (b) home finance administration1(or both). 11111 |
|
6. |
Any combination of regulated activities not within rows 1 to 5. |
(1) If a firm carrying on insurance mediation activity or home finance mediation activity1(and no other regulated activity) does not hold client money or other client assets in relation to these activities, its capital resources requirement is the higher of:1(a) £5,000; and(b) 2.5% of the annual income from its insurance mediation activity or home finance mediation activity1(or both).1(2) If a firm carrying on insurance mediation activity or home finance mediation activity1(and
(1) The capital resources requirement for a firm carrying on home financing, 1or home financing1and home finance administration1 (and no other regulated activity) is the higher of:111111(a) £100,000; and(b) 1% of:(i) its total assets plus total undrawn commitments and unreleased amounts under the home reversion plan1; less:(ii) excluded loans or amounts 1plus intangible assets (see Note 1 in the table in MIPRU 4.4.4 R).(2) Undrawn commitments and unreleased amounts 1means the
When considering what is an undrawn commitment or unreleased amount1, the FSA takes into account an amount which a customer1has the right to draw down or to receive under a home finance transaction1, but which has not yet been drawn down or received1, whether the commitment or obligation1is revocable or irrevocable, conditional or unconditional. 1
The capital resources requirement for a firm carrying on home finance administration1only, which has all or part of the home finance transactions1that it administers on its balance sheet, is the amount which is applied to a firm carrying on home financing1or home financing1and home finance administration1(and no other regulated activity) (see MIPRU 4.2.12 R). 111111111
The capital resources requirement for a firm carrying on insurance mediation activity and home financing1 or home finance administration1 is the sum of the requirements which are applied to the firm by: 1111(1) the capital resources rule for a firm carrying on insurance mediation activity or home finance mediation activity1 (and no other regulated activity) (see MIPRU 4.2.11 R); and1(2) (a) the capital resources requirement rule for a firm carrying on home financing1 or home
(1) If a firm carrying on home finance mediation activity1 and home financing1 or home finance administration1 does not hold client money or other client assets in relation to itshome finance mediation activity1, the capital requirement isthe amount applied to a firm, according to the activities carried on by the firm, by:111111(a) the capital resources requirement rule for a firm carrying on home financing1 or home financing1 and home finance administrator1 (and no other regulated
Under article 53 of the Regulated Activities Order (Advising on investments), advising a person is a specified kind of activity if:(1) the advice is given to the person in his capacity as an investor or potential investor, or in his capacity as agent for an investor or a potential investor; and(2) it is advice on the merits of his doing any of the following (whether as principal or agent):(a) buying, selling, subscribing for or underwriting a particular investment which is a security
Articles 53,1 53A, 53B and 53C1of the Regulated Activities Order contain a number of elements, all of which must be present before a person will require authorisation. For guidance on whether a person is carrying on these regulated activities, see PERG 8 (Financial promotion and related activities),1PERG 4 (Guidance on regulated activities connected with mortgages), and PERG 14.3 and PERG 14.4 (Guidance on home reversion and home purchase activities)1.11
The result of the amendments made to the meaning of the business test in section 22 of the Act is that the test differs depending on the activity in question. Where the regulated activities of advising on investments and advising on a home finance transaction1 are concerned, the business test is not to be regarded as satisfied unless a person carries on the business of engaging in those activities. This is a narrower test than that of carrying on regulated activities by way of
In the FSA's view, for a person to be carrying on the business of advising on investments or advising on a home finance transaction1 he will usually need to be doing so with a degree of regularity and for commercial purposes – that is to say, he will normally be expecting to gain some kind of a direct or indirect financial benefit. But, in the FSA's view it is not necessarily the case that advice provided free of charge will not amount to a business. Advice is often given 'free'
But even if advice is given in the United Kingdom, the general prohibition will not be contravened if the giving of advice does not amount to the carrying on, in the United Kingdom, of the business of advising on investments or advising on a home finance transaction1. Also, the general prohibition will not be contravened if the exclusion for overseas persons in article 72 of the Regulated Activities Order (Overseas persons) applies. That exclusion applies in relation to the giving
If a person is carrying on the business of advising on investments or advising on a home finance transaction1in the United Kingdom, he will not require authorisation if:(1) he is able to rely on an exclusion; in addition to the exclusions already mentioned (in articles 54 and 72 of the Regulated Activities Order), other exclusions that may be relevant are in Chapter XVII of Part II of the Regulated Activities Order; or(2) he is an exempt person (see PERG 2.11 (What to do now?1));
Many people may be involved in the production of a periodical publication, news service or broadcast. But if the regulated activity of advising on investments or advising on a home finance transaction1 is being carried on so that authorisation is required, the FSA's view is that the person carrying on the activity (and who will require authorisation) is the person whose business it is to have the editorial control over the content. In the case of a periodical publication, this
2This chapter applies to a firm with Part IV permission to carry on any of the following activities, unless an exemption in this section applies:(1) insurance mediation activity;(2) home finance mediation activity;11(3) entering into a home finance transaction1(that is, home financing1);111(4) administering a home finance transaction1(that is, home finance administration1).11
Social housing firms undertake small amounts of home finance1business even though their main business consists of activities other than regulated activities. Their home financing1is only done as an adjunct to their primary purpose (usually the provision of housing) and is substantially different in character to that done by commercial lenders. Furthermore, they are subsidiaries of local authorities or registered social landlords which are already subject to separate regulation.
The various exclusions outlined below deal with a range of different circumstances. (1) Each set of circumstances described in PERG 2.9.3 G to PERG 2.9.17 G has some application to several regulated activities relating to securities, relevant investments orhome finance transactions.4 They have no effect in relation to the separate regulated activities of accepting deposits, issuing e-money, effecting or carrying out contracts of insurance, advising on syndicate participation at
This group of exclusions applies, in specified circumstances, to the regulated activities of:(1) dealing in investments as principal;(2) arranging (bringing about) dealsininvestments and4making arrangements with a view to transactions in investments;44(2A) arranging a home finance transaction;4(3) managing investments;(4) assisting in the administration and performance of a contract of insurance;(5) safeguarding and administering investments;(6) sending dematerialised instructions;(7)
A person carrying on certain regulated activities does not require authorisation in specified circumstances if he is acting in a representative capacity. The representative capacities covered by the exclusions depend on the regulated activity concerned but, in most cases, the focus is on persons who are acting as trustee or personal representative. In broad terms, the exclusions apply to specified transactions, or activities, that are part of the discharge of his general obligations
This group of exclusions applies, in specified circumstances, to the regulated activities of:(1) dealing in investments as agent;(2) arranging (bringing about) deals in investments, and4making arrangements with a view to transactions in investments;44(2A) arranging a home finance transaction;4(3) assisting in the administration and performance of a contract of insurance;(4) safeguarding and administering investments; and(5) advising on investments or advising on a home finance
This group of exclusions applies, in specified circumstances, to the regulated activities of:(1) dealing in investments as principal;(2) dealing in investments as agent;(3) arranging (bringing about) deals in investments and4making arrangements with a view to transactions in investments;4(3A) arranging a home finance transaction;4(3B) 5operating a multilateral trading facility;(4) advising on investments;(5) entering into a home finance transaction;44(6) administering a home finance
The exclusions are available, for regulated activities other than those that relate to home finance transactions4 in the two broad cases set out below. For some of these regulated activities, the exclusions apply in each case. In others, they apply in only one.4(1) The first case is where the nature of the regulated activity requires the direct involvement of another person and that person is authorised or exempt (and acting within the scope of his exemption). For example, this
The exclusions for overseas persons who carry on certain regulated activities related to home finance transactions4 work in a different way. They depend on the residency of the borrower or borrowers, the reversion occupier or reversion occupiers or the home purchaser or home purchasers as the case may be. In addition, some of the exclusions also depend on the residency of the reversion provider4. Guidance on these exclusions is in PERG 4.11 (Link between activities and the United
There are six regulated mortgage activities requiring authorisation or exemption if they are carried on in the United Kingdom. These are set out in the Regulated Activities Order. They are:(1) arranging (bringing about) regulated mortgage contracts (article 25 A(1) (Arranging regulated mortgage contracts));(2) making arrangements with a view to regulated mortgage contracts (article 25A(2) (Arranging regulated mortgage contracts));(3) advising on regulated mortgage contracts (article
A person will only need authorisation or exemption if he is carrying on a regulated activity 'by way of business' (see section 22 of the Act (Regulated activities)). There are, in fact, three different forms of business test applied to the regulated mortgage activities. In the FSA's view, however, the difference in the business tests should have little practical effect.
Summary of which variant of the business test applies to the different regulated mortgage activities. This table belongs to PERG 4.3.4 G.
By way of business |
Carrying on the business |
Entering into a regulated mortgage contract (article 61(1)) |
Arranging (bringing about) regulated mortgage contracts (article 25A(1)) |
Administering a regulated mortgage contract (article 61(2)) (and the contract administered must have been entered into by way of business) |
Making arrangements with a view to regulated mortgage contracts (article 25A(2)) |
|
Advising on regulated mortgage contracts (article 53A) |
It follows that whether or not any particular person may be carrying on a regulated mortgage activity 'by way of business' will depend on his individual circumstances. However, some typical examples where the applicable business test would be likely to be satisfied are where a person:(1) enters into one or more regulated mortgage contracts as lender in the expectation of receiving interest or another form of payment that would enable him to profit from his actions;(2) administers
A firm must take reasonable steps to ensure that it, and any person acting on its behalf, does not: (1) offer, give, solicit or accept an inducement; or (2) direct or refer any actual or potential business in relation to a regulated mortgage contract or home reversion plan2 to another person on its own initiative or on the instructions of an associate; if it is likely to conflict to a material extent with any duty that the firm owes to its customers in connection with such a home
MCOB 2.3.2 R does not prevent a firm: (1) assisting a home finance intermediary2 so that the quality of the home finance intermediary's2 service to customers is enhanced; or 22(2) giving or receiving indirect benefits (such as gifts, hospitality and promotional competition prizes); providing in either case this is not likely to give rise to a conflict with the duties that the recipient owes to the customer. In particular, such benefits should not be of a kind or value that is
(1) A mortgage lender or reversion provider2 must quantify, in cash terms, any material inducement it offers to a mortgage intermediary, reversion intermediary or a third party. 2(2) In quantifying the value of the material inducement, the firm must include any subsequent payments (such as a trail fee) made where the customer continues with the samehome finance transaction.22
(1) Quantification of any material inducement offered by the mortgage lender or reversion provider2 supports the disclosure requirements elsewhere in MCOB. Further guidance on the disclosure of any inducement in cash terms is provided in MCOB 5.6.118 G for regulated mortgage contracts other than lifetime mortgages, MCOB 9.4.124 G for lifetime mortgages and MCOB 9.4.173 G for home reversion plans.2(2) A payment made to a third party unconnected with thehome finance intermediary,2
There are exclusions that apply, in certain circumstances, in relation to each of the regulated mortgage activities if the person carrying on the activity is acting in the capacity of trustee or personal representative. Article 66 of the Regulated Activities Order (Trustees, nominees and personal representatives) sets out the circumstances in which the exclusions apply. The terms of these differ slightly depending on the regulated activity.
For the purposes of regulated mortgage activities, sections 418(2), (4), (5), (5A) and (6) are relevant, as follows:(1) Section 418(2) refers to a case where a UK-based person carries on a regulated activity in another EEA State in the exercise of rights under a Single Market Directive. The only Single Market Directive which is relevant to mortgages is the Banking Consolidation Directive.(2) Section 418(4) refers to the case where a UK-based person carries on a regulated activity
The FSA's view of the effect of the Act and Regulated Activities Order in various territorial scenarios is set out in the remainder of this section. In those scenarios:(1) the term "service provider" is used to describe a person carrying on any of the regulated mortgage activities;(2) the term "borrower" refers to a borrower who is an individual and not a trustee; the position of a borrower acting as a trustee is not considered; and(3) it is assumed that the activity is not an
Simplified summary of the territorial scope of the regulated mortgage activities, to be read in conjunction with the rest of this section.
This table belongs to PERG 4.11.8 G
Individual borrower resident and located: |
|||
in the UK |
outside the UK |
||
Service provider carrying on regulated activity from establishment: |
in the UK |
Yes |
Yes |
outside the UK |
Yes |
No |
|
Yes = authorisation or exemption required No = authorisation or exemption not required |
|||
Where a person is carrying on any of the regulated mortgage activities from an establishment maintained by him in the United Kingdom, that person will be 'carrying on a regulated activity in the United Kingdom'. The location and residence of the borrower is irrelevant. That is the practical effect of sections 418(4), (5) and (6) of the Act.
But the exclusion applies only if the principal purpose of the publication or service is not:(1) to advise on securities or relevant investments or home finance transactions1: or1(2) to lead or enable persons:(a) to buy, sell, subscribe for or underwrite securities or relevant investments; or1(b) to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by them 1as borrower on or after 31 October 2004; or111(c) 1to
The exclusion applies only if the principal purpose of the publication or service is not:(1) to give advice on securities, relevant investments or home finance transactions1(see PERG 7.3.1 G); or1(2) to lead or enable persons to:(a) buy, sell, subscribe for or underwrite securities or relevant investments; or(b) to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by them 1 as borrower on or after 31 October 2004;
Looking at the first disqualifying purpose set out in the exclusion, all the matters relevant to whether the regulated activities of advising on investments or advising on a home finance transaction1are being carried on must be taken into account (see PERG 8.24 (Advising on investments)). If the principal purpose of a publication or service is to give to persons, in their capacity as investors (or potential investors), 1 as borrowers, as reversion occupiers or reversion providers
For the second disqualifying purpose, the focus switches to assessing whether the principal purpose of a publication or service is to lead a person to engage in a relevant transaction or enable him to do so. This disqualifying purpose is an alternative to the first. So it extends to material not covered by the first. In this respect:(1) material in a publication or service that invites or seeks to procure persons to engage in a relevant transaction can be said to "lead" to those
The first condition is that the person, in relation to the activity: (1) has permission;
or(2) is an exempt
person; or(3) is an exempt
professional firm; or(4) is registered in another EEA State for the purposes of the Insurance
Mediation Directive2; or2(5) in relation to insurance mediation
activity, is not carrying this activity on in the EEA; or(6) in relation to home finance mediation activity1, is not carrying this activity on in the United
Kingdom.1[Note: Article 3(6) of
1(1) This sourcebook3 applies to every firm that:113(a) carries on a home finance activity3 (subject to 31the business loan application provisions3); or3(b) communicates or approves a financial promotion of qualifying credit, of a home purchase planorof a home reversion plan.33(2) Where a firm has outsourced activities to a third party processor, any rule in MCOB which requires the third party processor, when acting as such, to disclose its identity to a customer must be read
3(1) This sourcebook applies to activities carried out in respect of three types of product: regulated mortgage contracts (which includes lifetime mortgages), home purchase plans, and home reversion plans. Together, these products are referred to as home finance transactions.3(2) Lifetime mortgages and home reversion plans are together referred to as equity release transactions.3(3) The application of most of this sourcebook is expressed by reference to four types of firm: lenders/providers,
The effect of article 28A of the Regulated Activities Order would normally mean that arrangements made by a party to a home finance transaction3 would not fall within the home finance activity3 of arranging. So in a direct sale, a home finance provider3 would not be carrying on the regulated activity of arranging but, where the transaction proceeds to completion, would instead be involved in a regulated activity comprising entering into a home finance transaction3. However, the
2This
chapter applies to a firm with
a Part IV permission to carry on:(1) insurance
business; or(2) home
financing;111(3) and which uses, or proposes
to use, the services of another person consisting of:(a) insurance mediation; or(b) insurance mediation activity; or(c) home
finance mediation activity.11
The purpose of this chapter is
to implement article 3.6 of the Insurance
Mediation Directive in relation to insurance
undertakings. The provisions of this chapter have been extended
to home
finance providers1 in relation to insurance
mediation activity, and to insurance
undertakings and home finance providers in relation to home
finance mediation activity1, to ensure that firms using
these services are treated in the same way and to ensure that clients have the same protection.
(1) The purpose of MCOB 5.3.1 R, taken in conjunction with other rules in this chapter, is to ensure that the customer has received details of the particular home finance transaction for which he has applied, and has had the opportunity to satisfy himself that it is appropriate for him.1(2) In relation to a regulated mortgage contract, the application should identify the type of interest rate, rate of interest, and the mortgage lender at the point it is submitted by the customer
A person who is concerned to know whether his proposed activities may require authorisation will need to consider the following questions (these questions are a summary of the issues to be considered and have been reproduced, in slightly fuller form, in the flowchart in PERG 4.18):(1) will I be carrying on my activities by way of business (see PERG 4.3.3 G (The business test))?(2) if so, will my activities relate to regulated mortgage contracts (see PERG 4.4 (What is a regulated
An unauthorised person who intends to carry on activities connected with mortgages will also need to comply with section 21 of the Act (Restrictions on financial promotion). This guidance does not cover financial promotions that relate to mortgages. Persons should refer to the general guidance on financial promotion in Appendix 1 to the Authorisation manual, PERG 8 (Financial promotion and related activities)) and, in particular, to PERG 8.17 (Financial promotions concerning agreements
(1) This chapter applies if a firm:(a) makes a personal recommendation to a customer to enter into a home finance transaction2; or2(b) provides information to a customer that is specific to the amount to be provided on a particular home finance transaction2, including information provided in response to a request from a customer; or2(c) provides the means for a customer to make an application to it;in connection with entering into, or agreeing to enter into, a home finance transaction
(1) MCOB 5.1.3 R means that this chapter applies where the customer can apply to enter into a home finance transaction2. This includes circumstances where, for example, the means to apply is provided in person, by telephone, through a website or through an application pack sent through the post.2(2) The effect of this chapter is to require a customer to be provided with key information about a home finance transaction before he submits an application to a home finance provide
3The exclusions in the Regulated Activities Order that relate to the various arranging activities are as follows.(1) Under article 26, arrangements that do not or would not bring about the transaction to which they relate are excluded from the arranging activities that relate to a particular transaction (see PERG 2.8.6G (1)) only. A person will bring about a transaction or a contract or plan variation only if his involvement in the chain of events leading to a transaction or contract
3Advice given by an unauthorised person in relation to a home finance transaction in the circumstances referred to in PERG 2.8.6AG (5)(a) or (b) (Arranging deals in investments and arranging a home finance transaction) is also excluded. In addition:(1) the following exclusions apply in specified circumstances where a person is advising on investments or advising on a home finance transaction:(a) while acting as trustee or personal representative (see PERG 2.9.3 G);(b) in connection
Exclusions from the regulated activities that involve administering a home finance transaction3 are provided where an unauthorised person:333(1) arranges for administration by an authorised person who has permission for carrying on that regulated activity;3(2) carries out the administration for up to one month after an arrangement of the kind mentioned in (1) comes to an end; or3(3) carries out the administration under an agreement with an authorised person who has permission
3The following exclusions apply in specified circumstances where a person is administering a home finance plan:(1) while acting as trustee or personal representative (see PERG 2.9.3 G);(2) in connection with the carrying on of a profession or of a business not otherwise consisting of regulated activities (see PERG 2.9.5 G); and(3) as an incoming ECA provider (see PERG 2.9.18 G).(4)
4(1) This chapter applies to a firm4 in the course of carrying on an equity release activity:44(a) makes, or anticipates making, a personal recommendation about; or(b) gives, or anticipates giving, personalised information relating to;the customer:(c) entering into an equity release transaction4; or4(d) varying the terms of an equity release transaction4 entered into by the customer.44(2) In respect of arranging or advising on a home reversion plan for a customer who is acting
This chapter applies if a firm:(1) enters into a home finance transaction2 with a customer; or2(2) administers a home finance transaction2which was entered into with a customer; or2(3) arranges or advises on or makes a further advance or other variation to the terms of a home finance transaction2entered into with a customer.2
This chapter applies in relation to further advances and other variations (as specified in MCOB 7.6.7 R - MCOB 7.7.4 R in relation to a regulated mortgage contract2) regardless of whether they are variations to an existing home finance transaction2or are such that they involve the customer entering into a new home finance transaction2.22
If a firm ceases to be a participant firm part way through a financial year of the compensation scheme:(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and(2) the FSCS may make a levy upon it (which may be before or after the firmhas ceased to be a participant firm, but must be before it ceases to be an authorised person) for the costs which it would have been liable to pay had the FSCS made a levy on all participant firms at the time