Related provisions for INSPRU 1.5.4
1 - 20 of 352 items.
Where a UK firm is exercising an EEA right, other than under the Insurance Mediation Directive (see SUP 13.6.9A G) , and has established a branch in another EEA State, any changes to the details of the branch are governed by the EEA Passport Rights Regulations. References to regulations in this section are to the EEA Passport Rights Regulations. A UK firm which is not an authorised person should note that, under regulation 18, contravention of the prohibition imposed by regulation
UK firms should also note that changes to the details of branches may lead to changes to the applicable provisions to which the UK firm is subject. These changes should be communicated to the UK firm either by the Host State regulator, or, if the firm is passporting under Insurance Directives, via the FSA authorisations team.
If a UK firm has exercised an EEA right, under the Banking Consolidation Directive or the UCITS Directive, and established a branch in another EEA State, regulation 11(1) states that the UK firm must not make a change in the requisite details of the branch (see SUP 13 Annex 1), unless it has satisfied the requirements of regulation 11(2), or, where the change arises from circumstances beyond the UK firm's control, regulation 11(3) (see SUP 13.6.10 G).47
Where the change arises from circumstances within the control of the UK firm, the requirements in regulation 11(2) are that:(1) the UK firm has given notice to the FSA and to the Host State regulator stating the details of the proposed change;(2) the FSA has given the Host State regulator a notice informing it of the details of the change; and(3) either the Host State regulator has informed the UK firm that it may make the change, or the period of one month7 beginning with the
7If a UK firm has exercised an EEA right to establish a branch under MiFID, it must not make a change in the requisite details of the branch (see SUP 13 Annex 1), use, for the first time, a tied agent established in the EEA State in which the branch is established, or cease to use a tied agent established in the EEA State in which the branch is established, unless it has satisfied the requirements of regulation 11A(2) (see SUP 13.6.5B G).
(1) If the change arises from circumstances beyond the UK firm's control, the UK firm:(a) is required by regulation 11(3) or regulation 13(3) to give a notice to the FSA and to the Host State regulator stating the details of the change as soon as reasonably practicable;(b) may, if it is passporting under the Insurance Directives, make a change to its relevant UK details7 under regulation 15(1) if it has, as soon as practicable (whether before or after the change), given notice
If the FSA refuses to consent to a change, then under regulations 11(6) and 13(6):(1) the FSA will give notice of the refusal to the UK firm, stating its reasons and giving an indication of the UK firm's right to refer the matter to the Tribunal and the procedures on such a reference; and(2) the UK firm may refer the matter to the Tribunal.62
7When the FSA receives a notice from a UK MiFID investment firm (see SUP 13.6.5BG (1)), it is required by regulation 11A(3) to inform the relevant Host State regulator of the proposed change as soon as reasonably practicable. The firm in question may make the change once the period of one month beginning with the day on which it gave notice has elapsed.
Schedule to the Recognition Requirements Regulations, Paragraph 1
2(1) The [UK RIE] must have financial resources sufficient for the proper performance of its [ relevant functions] as a [UK RIE]. |
(2) In considering whether this requirement is satisfied, the [FSA]must (without prejudice to the generality of regulation 6(1)) take into account all the circumstances, including the [UK RIE's] connection with any person , and any activity carried on by the [UK RIE], whether or not it is anexempt activity. |
In determining whether a UK recognised body has financial resources sufficient for the proper performance of its relevant functions, the FSA may have regard to:(1) the operational and other risks to which the UK recognised body is exposed;(2) if the UK recognised body acts as a central counterparty or otherwise guarantees the performance of transactions in specified investments, the counterparty and market risks to which it is exposed in that capacity; (3) the amount and composition
In assessing whether a UK recognised body has sufficient financial resources in relation to counterparty and market risks, the FSA may have regard to:(1) the amount and liquidity of its financial assets and the likely availability of liquid financial resources to the UK recognised body during periods of major market turbulence or other periods of major stress for the financial system; and(2) the nature and scale of the UK recognised body's exposures to counterparty and market
In assessing whether a UK recognised body has sufficient financial resources in relation to operational and other risks, the FSA may have regard to the extent to which, after allowing for the financial resources necessary to cover counterparty and market risks, the UK recognised body's financial resources are sufficient and sufficiently liquid:(1) to enable the UK recognised body to continue carrying on properly the regulated activities that it expects to carry on; and(2) to ensure
The FSA considers that a UK recognised body which (after allowing for the financial resources necessary to cover counterparty and market risks) has at any time:(1) liquid financial assets amounting to at least six months' operating costs; and (2) net capital of at least this amount; will, at that time, have sufficient financial resources to meet the recognition requirement unless there are special circumstances indicating otherwise.
The FSA recognises that UK recognised bodies may wish to satisfy the recognition requirements in different ways. The FSA does not prescribe any particular approach to calculating financial resources or to assessing their adequacy. It is willing to discuss with each UK recognised body the most appropriate way for it to meet the recognition requirement and each UK recognised body will need to be able to show the FSA that its financial resources are at all times sufficient to meet
A firm must calculate the consolidated capital resources of its UK consolidation group or its non-EEA sub-group by applying GENPRU 2.2 (Capital resources) to its UK consolidation group or non-EEA sub-group on an accounting consolidation basis, treating the UK consolidation group or non-EEA sub-group as a single undertaking. The firm must adjust GENPRU 2.2 in accordance with this section for this purpose.
As the various components of capital differ in the degree of protection that they offer, the capital resources gearing rules as applied on a consolidated basis place restrictions on the extent to which certain types of capital are eligible for inclusion in a UK consolidation group or non-EEA sub-group'sconsolidated capital resources. GENPRU 2.2.25 R (Limits on the use of different forms of capital: Use of higher tier capital in lower tiers) also applies.
Where a firm's UK consolidation group or non-EEA sub-group does not include a bank, building society or credit institution, the firm must calculate that group's consolidated capital resources using the calculation of capital resources in GENPRU 2 Annex 4 (Capital resources table for a BIPRU investment firm deducting material holdings) or GENPRU 2 Annex 5 (Capital resources table for a BIPRU investment firm deducting illiquid assets).
(1) This rule sets out how to determine whether minority interests in an undertaking in a UK consolidation group or non-EEA sub-group may be included in tier one capital, tier two capital or tier three capital for the purpose of calculating consolidated capital resources (each referred to as a "tier" of capital in this rule).(2) A firm must identify the item of capital of the undertaking in question that gives rise to that minority interest.(3) A firm must include the minority
Consolidated indirectly issued capital means any capital instrument issued by a member of the UK consolidation group or non-EEA sub-group where:(1) some or all of the following conditions are satisfied:(a) that capital is issued to an SPV; or(b) that capital is issued by an SPV; or(c) the subscription for the capital issued by the member of the group in question is funded directly or indirectly by an SPV; and(2) any of the SPVs referred to in (1) is a member of the UK consolidation
A firm may only include consolidated indirectly issued capital in the consolidated capital resources of its UK consolidation group or non-EEA sub-group if:(1) it is issued by an SPV that is a member of the UK consolidation group or non-EEA sub-group to persons who are not members of the UK consolidation group or non-EEA sub-group; and(2) the conditions in BIPRU 8.6.16 R to BIPRU 8.6.18 R are satisfied.
Consolidated indirectly issued capital that is eligible for inclusion in the consolidated capital resources of a UK consolidation group or non-EEA sub-group may only be included as a minority interest created by the capital instrument issued by the SPV referred to in BIPRU 8.6.13 R. If it is eligible, it is innovative tier one capital.
For the purposes of this section, an undertaking is an SPV if the main activity of the SPV is to raise funds for undertakings in:(1) (in the case of a UK consolidation group) that UK consolidation group; or(2) (in the case of a non-EEA sub-group) that non-EEA sub-group or any UK consolidation group of which it forms part.
The SPV referred to in BIPRU 8.6.13 R must satisfy the conditions in GENPRU 2.2.127 R (Conditions that an SPV has to satisfy if indirectly issued capital is to be included in capital resources on a solo basis) as modified by the following:(1) references in GENPRU 2.2.127R (1) to being controlled by the firm are to being controlled by a member of the firm'sUK consolidation group or non-EEA sub-group as the case may be; and(2) references to the firm'sgroup are to the firm'sUK consolidation
The capital issued by the SPV referred to in BIPRU 8.6.13 R must satisfy the conditions in GENPRU 2.2.129 R (Conditions that capital issued by an SPV has to satisfy if indirectly issued capital is to be included in capital resources on a solo basis) as modified by the following:(1) references to the firm'sgroup are to the firm'sUK consolidation group or non-EEA sub-group as the case may be;(2) the substitution obligation in GENPRU 2.2.129R (2) need not be the firm's but may apply
The SPV referred to in BIPRU 8.6.13 R must invest the funds raised from the issue of capital by the SPV by subscribing for capital resources issued by an undertaking that is a member of the UK consolidation group or non-EEA sub-group. Those capital resources must satisfy the following conditions:(1) those capital resources must at least comply with the requirements for lower tier two capital; and(2) the first call date or fixed maturity date (if any) of those capital resources
The calculation of the consolidated capital resources requirement of a firm's UK consolidation group or non-EEA sub-group involves taking the individual components that make up the capital resources requirement on a solo basis and applying them on a consolidated basis. Those components are the capital charge for credit risk (the credit risk capital requirement), the capital charge for market risk (the market risk capital requirement), the capital charge for operational risk (the
A firm must calculate the consolidated capital resources requirement of its UK consolidation group or non-EEA sub-group in accordance with the method identified by the decision tree in BIPRU 8 Annex 5 (Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group).
A firm must calculate a consolidated requirement component by applying the risk capital requirement applicable to that consolidated requirement component to the UK consolidation group or non-EEA sub-group in accordance with BIPRU 8.7.13 R. Except where BIPRU 8.7.34 R to BIPRU 8.7.38 R allow the requirements of another regulator to be used, the risk capital requirement must be calculated in accordance with the FSA'srules. The risk capital requirement applicable to a consolidated
(1) A firm must calculate a consolidated requirement component by using one of the methods in this rule.(2) Under the first method a firm must:(a) apply the risk capital requirement set out in BIPRU 8.7.12 R to each undertaking in the UK consolidation group or non-EEA sub-group; and(b) add the risk capital requirements together.(3) Under the second method a firm must:(a) treat the whole UK consolidation group or non-EEA sub-group as a single undertaking; and(b) apply the risk
A firm may use a combination of the CCR standardised method, the CCR mark to market method and the CCR internal model method on a permanent basis with respect to the firm's UK consolidation group or non-EEA sub-group for the purposes of calculating the consolidated credit risk requirement. In particular, where the firm is permitted to apply the CCR internal model method on a consolidated basis with respect to its UK consolidation group or non-EEA sub-group, it may combine the
(1) A firm may only treat an exposure as exempt under BIPRU 3.2.25 R (Zero risk-weighting for intra-group exposures) as applied on a consolidated basis if the member of the UK consolidation group or non-EEA sub-group that has the exposure:(a) is a BIPRU firm and that exposure is exempt under BIPRU 3.2.25 R as it applies to that BIPRU firm on a solo basis; or(b) meets the conditions in BIPRU 3.2.25 R (1)(d) (Condition relating to establishment in the UK) and that exposure would
For the purposes of calculating the consolidated market risk requirement of a UK consolidation group or non-EEA sub-group, a firm must apply BIPRU 1.2.3 R (Definition of the trading book) and BIPRU 1.2.17 R (Size thresholds for the purposes of the definition of the trading book) to the whole UK consolidation group or non-EEA sub-group as if the group were a single undertaking.
A firm may not apply the second method in BIPRU 8.7.13R (3) (accounting consolidation for the whole group) or apply accounting consolidation to parts of its UK consolidation group or non-EEA sub-group under method three as described in BIPRU 8.7.13R (4)(a) for the purposes of the calculation of the consolidated market risk requirement unless the group or sub-group and the undertakings in that group or sub-group satisfy the conditions in this rule. Instead the firm must use the
(1) This rule sets out how BIPRU 6.3.2 R (3) (Negative figure arising in calculation of the relevant indicator under the basic indicator approach) applies on a consolidated basis.(2) If the calculation for any individual undertaking under method one in BIPRU 8.7.13R (2) (application of aggregation approach to the whole group) or method three as described in BIPRU 8.7.13R (4)(c) (mixture of aggregation and accounting consolidation) or for any sub-group created under method three
BIPRU 8.7.21 R to BIPRU 8.7.26 R are generally examples of the application of the general principles in BIPRU 8.2.1 R (Main consolidation rule for UK consolidation groups) and BIPRU 8.3.1 R (Main consolidation rule for non-EEA sub-groups). BIPRU 8.7.20 R and BIPRU 8.7.25 R are exceptions to those principles.
In accordance with BIPRU 8.2.1 R and BIPRU 8.3.1 R (The basic consolidation rules for a UK consolidation group or non-EEA sub-group), a firm may exclude that part of the risk capital requirement that arises as a result of:(1) (in respect of the consolidated credit risk requirement) intra-group balances; or(2) (in respect of the consolidated operational risk requirement and consolidated fixed overheads requirement) intra-group transactions;with other undertakings in the UK consolidation
A firm may calculate the risk capital requirement for an institution in the firm'sUK consolidation group or non-EEA sub-group that is an EEA firm in accordance with the CRD implementation measures in the EEA firm'sEEA State that correspond to the FSA'srules that would otherwise apply under this section if the institution is subject to those CRD implementation measures.
(1) This rule applies if:(a) a firm is applying an accounting consolidation approach to part of its UK consolidation group or non-EEA sub-group under method three as described in BIPRU 8.7.13R (4)(a); and(b) the part of the group in (a) constitutes the whole of a group subject to the consolidated capital requirements of a competent authority under the CRD implementation measures relating to consolidation under the Banking Consolidation Directive or the Capital Adequacy Directive.(2)
Section 19 of the Act (The general prohibition) provides that the requirement to be authorised under the Act only applies in relation to regulated activities which 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 borrower is outside the United Kingdom or because some other element of the activity happens outside the United Kingdom,
Even if a person concludes that he is not carrying on a regulated activity in the United Kingdom, he will need to ensure that he does not contravene other provisions of the Act that apply to unauthorised persons. These include the controls on financial promotion (section 21 (Financial promotion) of the Act) (see PERG 8 (Financial promotion and related activities)), and on giving the impression that a person is authorised (section 24 (False claims to be authorised or exempt)).
Section 418 of the Act deals with the carrying on of regulated activities in the United Kingdom. It extends the meaning that 'carry on a regulated activity in the United Kingdom' would ordinarily have by setting out additional cases. The Act states that in these cases a person who is carrying on a regulated activity but 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
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 exclusions in article 72(5A) to (5F) of the Regulated Activities Order (Overseas persons) provide that an overseas person does not carry on the regulated activities of:(1) arranging (bringing about) or making arrangements with view to a regulated mortgage contract;(2) entering into a regulated mortgage contract; or(3) administering a regulated mortgage contract;if the borrower (and each of them, if more than one) is an individual and is normally resident overseas. In the case
An overseasperson might advise a person in the United Kingdom on an endowment assurance at the same time as advising on a regulated mortgage contract. If so, whilst the overseas person exclusion in article 72(5) will apply in relation to the advice on the endowment assurance, there will be no 'overseas persons exclusion' for the advice on the regulated mortgage contract.
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: |
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in the UK |
outside the UK |
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Service provider carrying on regulated activity from establishment: |
in the UK |
Yes |
Yes |
outside the UK |
Yes |
No |
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Yes = authorisation or exemption required No = authorisation or exemption not required |
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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.
There may also be situations where a lender, who does not maintain an establishment in the United Kingdom, provides services in the United Kingdom. For instance, a lender might attend a property exhibition in the United Kingdom at which he sets up a loan with a borrower. A lender might also attend the offices of its UK-based lawyers, or appoint them as its agent, to enter into a contract with a borrower. In these cases, the overseas lender would only be carrying on a regulated
If a service provider is overseas, the question of whether that person is carrying on a regulated activity in the United Kingdom will depend upon:(1) the type of regulated activity being carried on;(2) section 418 of the Act;(3) the residence and location of the borrower;(4) the application of the overseas persons exclusion in article 72(5A) to (5F) of the Regulated Activities Order; and(5) whether the service provider is carrying on an electronic commerce activity.The factors
When a person is arranging (bringing about) regulated mortgage contracts or making arrangements with a view to regulated mortgage contracts from overseas, the question of whether he will be carrying on regulated activities in the United Kingdom will depend on the relevant circumstances. In the FSA's view, factors to consider include:(1) the territorial limitation in the definition of regulated mortgage contract so that regulation only applies if the land is in the United Kingdom;(2)
In the FSA's view:(1) if the borrower is normally resident in the United Kingdom, the clear territorial limitation in the definition of regulated mortgage contract carries most weight in determining where regulation should apply; it is likely that the arranger will be carrying on regulated activities in the United Kingdom;(2) if the borrower is normally resident overseas, the arrangements are excluded by the overseas persons exclusion.In the case of arranging (bringing about)
In the FSA's view, advising on regulated mortgage contracts is carried on where the borrower receives the advice. Accordingly:(1) if the borrower is located in the United Kingdom, a person advising that borrower on regulated mortgage contracts is carrying on a regulated activity in the United Kingdom; but(2) if the service provider and borrower are both located overseas, the regulated activity is not carried on in the United Kingdom.
In the FSA's view, in circumstances other than those excluded by article 72(5D) of the Regulated Activities Order, an overseas lender is likely to carry on the regulated activity of entering into regulated mortgage contracts in the United Kingdom. This is because of:(1) the territorial limitation in the definition of regulated mortgage contract so that regulation applies only if the land is in the United Kingdom;(2) the general principle and practice that contracts relating to
In the FSA's view, in circumstances other than those excluded by article 72(5E) of the Regulated Activities Order, an overseas administrator is likely to carry on the regulated activity of administering a regulated mortgage contract in the United Kingdom. This is because:(1) the territorial limitation in the definition of regulated mortgage contract means that regulation applies only if the land is in the United Kingdom;(2) when administrators notify borrowers resident in the
The FSA will be responsible for implementing the Distance Marketing Directive for those firms and activities it regulates. The FSA and the Treasury agree that the Distance Marketing Directive is intended to operate on a country of origin basis, except where a firm is marketing into the UK from an establishment in an EEA State which has not implemented the Directive.
Schedule to the Recognition Requirements Regulations, paragraph 3
2(1) |
The [UK RIE] must ensure that the systems and controls used in the performance of its [relevant functions] are adequate, and appropriate for the scale and nature of its business. |
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(2) |
Sub-paragraph (1) applies in particular to systems and controls concerning - |
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(a) |
the transmission of information; |
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(b) |
the assessment, mitigation and management of risks to the performance of the [UK RIE'srelevant functions]; |
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(c) |
the effecting and monitoring of transactions on the [UK RIE]; |
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(ca) |
the technical operation of the [UK RIE], including contingency arrangements for disruption to its facilities; |
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(d) |
the operation of the arrangements mentioned in paragraph 4(2)(d); and |
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(e) |
(where relevant) the safeguarding and administration of assets belonging to users of the [UK RIE's] facilities. |
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Schedule to the Recognition Requirements Regulations, paragraph 4(2)(ea)
2Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that - |
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appropriate arrangements are made to - |
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(i) |
identify conflicts between the interests of the [UK RIE], its owners and operators and the interests of the persons who make use of itsfacilities or the interests of the financial markets operated by it; and |
(ii) |
manage such conflicts so as to avoid adverse consequences for the operation of the financial markets operated by the [UK RIE] and for thepersons who make use of itsfacilities. |
In assessing whether the systems and controls used by a UK recognised body in the performance of its relevant functions are adequate and appropriate for the scale and nature of its business, the FSA may have regard to the UK recognised body's:(1) arrangements for managing, controlling and carrying out its relevant functions, including: (a) the distribution of duties and responsibilities among its key individuals and the departments of the UK recognised body responsible for performing
The following paragraphs set out other matters to which the FSA may have regard in assessing the systems and controls used for the transmission of information, risk management, the effecting and monitoring of transactions, the operation of settlement arrangements (the matters covered in paragraphs 4(2)(d) and 19(2)(b) of the Schedule to the Recognition Requirements Regulations) and the safeguarding and administration of assets .
In assessing a UK recognised body's systems and controls for the transmission of information, the FSA may also have regard to the extent to which these systems and controls ensure that information is transmitted promptly and accurately: (1) within the UK recognised body itself; (2) to members; and (3) (where appropriate) to other market participants or other relevant persons.
In assessing a UK recognised body's systems and controls for assessing and managing risk, the FSA may also have regard to the extent to which these systems and controls enable the UK recognised body to:(1) identify all the general, operational, legal and market risks wherever they arise in its activities;(2) measure and control the different types of risk;(3) allocate responsibility for risk management to persons with appropriate knowledge and expertise; and(4) provide sufficient,
In assessing a UK RIE's systems and controls for the effecting and monitoring of transactions, and the systems and controls used by a UK recognised body for the operation of settlement arrangements, the FSA may have regard to the totality of the arrangements and processes through which a transaction is effected, cleared and settled, including:(1) a UK RIE's arrangements under which orders are received and matched, and its arrangements for trade and transaction reporting, and (if
In assessing a UK recognised body's systems and controls for the safeguarding and administration of assets belonging to users of its facilities, the FSA may have regard to the totality of the arrangements and processes by which the UK recognised body: (1) records the assets held and the identity of the owners of (and other persons with relevant rights over) those assets; (2) records any instructions given in relation to those assets;(3) records the carrying out of those instructions;(4)
A conflict of interest arises in a situation where a person with responsibility to act in the interests of one person may be influenced in his action by an interest or association of his own, whether personal or business or employment related. Conflicts of interest can arise both for the employees of UK recognised bodies and for the members (or other persons) who may be involved in the decision-making process, for example where they belong to committees or to the governing body.
The FSA recognises that a UK RCH2 has legitimate interests of its own and that its general business policy may properly be influenced by other persons (such as its owners). Such a connection does not necessarily imply the existence of a conflict of interest nor is it necessary to exclude individuals closely connected with other persons (for example, those responsible for the stewardship of the owner's interests) from all decision-making processes in a UK recognised body. However,
The FSA may have regard to the arrangements a UK recognised body makes to structure itself and to allocate responsibility for decisions so that it can continue to take proper regulatory decisions notwithstanding any conflicts of interest, including:(1) the size and composition of the governing body and relevant committees; (2) the roles and responsibilities of key individuals, especially where they also have responsibilities in other organisations; (3) the arrangements for transferring
A UK recognised body's arrangements for internal and external audit will be an important part of its systems and controls. In assessing the adequacy of these arrangements, the FSA may have regard to: (1) the size, composition and terms of reference of any audit committee of the UK recognised body'sgoverning body;(2) the frequency and scope of external audit; (3) the provision and scope of internal audit; (4) the staffing and resources of the UK recognised body's internal audit
Information technology is likely to be a major component of the systems and controls used by any UK recognised body. In assessing the adequacy of the information technology used by a UK recognised body to perform or support its relevant functions, the FSA may have regard to:(1) the organisation, management and resources of the information technology department within the UK recognised body;(2) the arrangements for controlling and documenting the design, development, implementation
The FSA may also have regard to the arrangements for maintaining, recording and enforcing technical and operational standards and specifications for information technology systems, including:(1) the procedures for the evaluation and selection of information technology systems;(2) the arrangements for testing information technology systems before live operations;(3) the procedures for problem management and system change;(4) the arrangements to monitor and report system performance,
Where an incoming EEA firm is exercising an EEA right, other than under the Insurance Mediation Directive, and has established a branch in the United Kingdom, the EEA Passport Rights Regulations govern any changes to the details of that branch. Where an incoming EEA firm has complied with the relevant requirements in the EEA Passport Rights Regulations, then the firm'spermission given under Schedule 3 to the Act is to be treated as varied accordingly. All references to regulations
(1) Where an incoming EEA firm passporting under the Banking Consolidation Directive or the UCITS Directive has established a branch in the United Kingdom, regulation 4 states that it must not make a change in the requisite details of the branch unless it has complied with the relevant requirements.5655(2) The relevant requirements are set out in regulation 4(4) or, where the change arises from circumstances beyond the incoming EEA firm's control, in regulation 4(5) (see SUP 14.2.8
Where the change arises from circumstances within the control of the incoming EEA firm, the requirements in regulation 4(4) are that:(1) the incoming EEA firm has given notice to the FSA (see SUP 14.4.1 G) and to its Home State regulator stating the details of the proposed change;(2) the FSA has received a notice stating those details; and(3) either:(a) the FSA has informed the firm that it may make the change; or(b) the period of one month beginning with the date on which the
Changes to the requisite details may lead to changes to the applicable provisions to which the incoming EEA firm is subject. The FSA will, as soon as practicable after receiving a notice in SUP 14.2.3 G or SUP 14.2.8 G, inform the incoming EEA firm of any consequential changes in the applicable provisions (regulation 4(6)).1
If the change arises from circumstances beyond the incoming EEA firm's control, the firm is required by regulation 4(5) (see SUP 14.2.2 G) or regulation 6(5) (see SUP 14.2.5 G (2)) to give a notice to the FSA (see SUP 14.4.1 G) and to its Home State regulator stating the details of the change as soon as reasonably practicable.
The FSA believes that for a change to arise from circumstances beyond the control of an incoming EEA firm, the circumstances should be outside the control of the firm as a whole and not just its UK branch. For example, the FSA considers that this provision would be unlikely to apply to circumstances in which lack of planning at the incoming EEA firm's head office resulted in a problem arising in a UKbranch which was outside its control. In practice, therefore, use of this provision
6Changes to the requisite details may lead to changes to the applicable provisions to which the EEA MiFID investment firm is subject. The FSA will, as soon as practicable after receiving a notice in SUP 14.2.11 G inform the EEA MiFID investment firm of any consequential changes in the applicable provisions.
Section 19 of the Act (The general prohibition) provides that the requirement to be authorised under the Act only applies in relation to regulated activities which 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 customer is outside the United Kingdom or because some other element of the activity happens outside the United Kingdom,
Even if a person concludes that he is not carrying on a regulated activity in the United Kingdom, he will need to ensure that he does not contravene other provisions of the Act that apply to unauthorised persons. These include the controls on financial promotion (section 21 (Financial promotion) of the Act) (see PERG 8 (Financial promotion and related activities)), and on giving the impression that a person is authorised (section 24 (False claims to be authorised or exempt)).
Table Territorial issues relating to overseas insurance intermediaries carrying on insurance mediation activities in or into the United Kingdom
Needs Part IVpermission |
Schedule 3 EEA passport rights available |
Overseas persons exclusion available |
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Registered EEA-based intermediary with UK branch (registered office or head office in another EEA State) |
No |
Yes |
No |
Registered EEA-based intermediary with no UK branch providing cross-border services |
No |
Yes |
Potentially available [see Note] |
Third country intermediary operating from branch in the UK |
Yes |
No |
No |
Third country intermediary providing services in (or into) the UK |
Yes unless overseas persons exclusion applies |
No |
Potentially available |
This does not, however, affect the firm'sauthorisation under Schedule 3 to the Act (see PERG 5.12.9 G to PERG 5.12.10 G (Passporting)). |
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Persons carrying on insurance mediation activities from a registered office or head office in the United Kingdom will clearly be carrying on regulated activities in the United Kingdom. However, a person may be considered to be carrying on regulated activities in the United Kingdom even where not carrying on the activity from a registered office or head office in the United Kingdom. This is explained further in PERG 5.12.6 G to PERG 5.12.8 G.
In determining the location of an activity, and hence whether it is carried on in the United Kingdom, various factors need to be taken into account in turn, notably:(1) section 418 of the Act (Carrying on regulated activities in the United Kingdom);(2) the nature of the activity; and(3) the overseas persons exclusion (see PERG 5.12.9 G to PERG 5.12.10 G (Overseas persons)).
Section 418 of the Act extends the meaning that 'carry on regulated activity in the United Kingdom' would normally have by setting out additional cases in which a person who would not otherwise be regarded as carrying on the activity in the United Kingdom is to be regarded as doing so. Each of the following cases thus amounts to carrying on a regulated activity in the United Kingdom:(1) where a UK-based person carries on a regulated activity in another EEA State in the exercise
Article 72 of the Regulated Activities Order (Overseas persons) provides a potential exclusion for persons with no permanent place of business in the United Kingdom from which regulated activities are conducted or offers to conduct regulated activities are made. Where these persons carry on insurance mediation activities in the United Kingdom, they may be able to take advantage of the exclusions in article 72 of the Regulated Activities Order. In general terms, these apply where
The overseas person exclusion is available to persons who do not have a permanent place of business in the United Kingdom and so is of relevance to third country intermediaries (that is, non EEA-based intermediaries) who carry on insurance mediation activities in, or into, the United Kingdom (for example with or through authorised insurance brokers and insurance undertakings operating in the Lloyd's market).
UK-based persons must obtain Part IV permission in relation to their insurance mediation activities in the United Kingdom as one of the following:(1) a body corporate whose registered office is situated in the United Kingdom; or(2) a partnership or unincorporated association whose head office is situated in the United Kingdom; or(3) an individual (that is, a sole trader) whose residence is situated in the United Kingdom.The United Kingdom will, in each case, be the Home State
Non-UK-based persons wishing to carry on insurance mediation activities in the United Kingdom must:(1) qualify for authorisation by exercising passport rights (see section 31 (Authorised persons) and schedule 3 (EEA passport rights) to the Act and PERG 5.12.13 G to PERG 5.12.14 G (Passporting)); or(2) make use of the overseas persons exclusion (which then has the effect that activities are deemed not to be regulated activities carried on in the United Kingdom); or(3) seek Part
The effect of the IMD is that any EEA-based insurance intermediaries must first be registered in their home EEA State before carrying on insurance mediation in that EEA State or other EEA States. For these purposes, an EEA-based insurance intermediary is either:(1) a legal person with its registered office or head office in an EEA State other than the United Kingdom; or(2) a natural person resident in an EEA State other than the United Kingdom.Registered EEA-based insurance intermediaries
The E-Commerce Directive does not remove the IMD requirement for persons taking up or pursuing insurance mediation for remuneration to be registered in their Home State. Nor does it remove the requirement for EEA-based intermediaries to acquire passporting rights in order to establish branches in the United Kingdom (see PERG 5.12.7 G (Where is insurance mediation carried on?) in relation to electronic commerce activity carried on from an establishment in the United Kingdom) or
Put shortly, the E-Commerce Directive relates to services provided into the United Kingdom from other EEA States and from the United Kingdom into other Member States. In broad terms, such cross-border insurance mediation services provided by an EEA firm into the United Kingdom (via electronic commerce activity or distance means) will generally be subject to IMD registration in, and conduct of business regulation of, the intermediary's EEA State of origin. By contrast, insurance
639This chapter contains rules and guidance on how respondents should deal promptly and fairly with complaints in respect of business carried on from establishments in the United Kingdom or by certain branches of firms in the EEA. It is also relevant to those who may wish to make a complaint or refer it to the Financial Ombudsman Service.
(1) This chapter applies to a firm in respect of complaints from eligible complainants concerning activities carried on from an establishment maintained by it or its appointed representative in the United Kingdom.(2) For complaints relating to the MiFID business of a firm, the complaints handling rules and the complaints record rule:(a) apply to complaints from retail clients and do not apply to complaints from eligible complainants who are not retail clients; (b) also apply in
Where a UK firm is exercising an EEA right under the UCITS Directive, MiFID or the5Insurance Directives and is providing cross border services into another EEA State, any changes to the details of the services are governed by the EEA Passport Rights Regulations. References to regulations in this section are to the EEA Passport Rights Regulations. A UK firm which is not an authorised person should note that contravention of the prohibition imposed by regulation 12(1), 12A(1)5 or
If a UK firm is passporting under the UCITS Directive, regulation 12(1) states that the UK firm must not make a change in its programme of operations, or the activities to be carried on under its EEA right, unless the relevant requirements in regulation 12(2) have been complied with. These requirements are:5(1) the UK firm has given a notice to the FSA and to the Host State regulator stating the details of the proposed change; or(2) if the change arises as a result of circumstances
5If a UK firm is providing cross border services in a particular EEA State in exercise of an EEA right deriving from MiFID, the UK firm must comply with the requirements of regulation 12A(2) before it makes a change to its programme of operations, including:(1) changing the activities to be carried on in exercise that EEA right;(2) using, for the first time, any tied agent to provide services in the territory of that EEA State; or(3) ceasing to use any tied agent to provide services
A UK recognised body must give the FSA:(1) a copy of its annual report and accounts; and(2) a copy of the consolidated annual report and accounts: (a) of any group in which the UK recognised body is a subsidiary undertaking; or(b) (if the UK recognised body is not a subsidiary undertaking in any group) of any group of which the UK recognised body is a parent undertaking;no later than the time specified for the purpose of this rule in REC 3.8.2 R.
The time specified for the purpose of REC 3.8.1 R is the latest of:(1) four months after the end of the financial year to which the document which is to be given to the FSA relates; or(2) the time when the documents described in REC 3.8.1 R (1) or REC 3.8.1 R (2)(b) are sent to the members or shareholders of the UK recognised body; or (3) the time when the document described in REC 3.8.1 R (2)(a) are sent to the shareholders in a parent undertaking of the group to which that document
A UK recognised body is not required to provide quarterly and monthly management accounts in respect of the same period, but management accounts (whether quarterly or monthly) should be submitted for all periods. A UK recognised body may choose whichever method is the more suitable for it, but where it intends to change from providing monthly to quarterly management accounts (or from quarterly to monthly management accounts), it should inform the FSA of that fact.
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).846
A UK firm cannot 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) the UKfirm has given the FSA, in accordance with the FSArules (see SUP 13.5.1 R), notice of its intention
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
(1) 8If the UK firm'sEEA right derives from the Banking Consolidation Directive, MiFID8 or the UCITS Directive, 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
(1) If the FSA gives a consent notice, it will inform the UK firm in writing that it has done so.(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)).8888
(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) 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'snotice of intention8(two months8 in the case of a UK firm which is a
Where a UK RIE proposes to operate a new regulated market or close an existing regulated market it must give the FSA notice of that event and the information specified for the purposes of this rule in REC 3.14A.3 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).
The following information is specified for the purposes of REC 3.14A.2 R:(1) where the UK RIE proposes to operate a new regulated market:(a) a description of the regulated market; and(b) a description of the specified investments which will be admitted to trading on that regulated market. (2) where the UK RIE proposes to close a regulated market, the name of that regulated market.
Where a UK RIE proposes to operate a new MTF or close an existing MTF it must give the FSA notice of that event and the information specified for the purposes of this rule in REC 3.14A.5 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).
The following information is specified for the purposes of REC 3.14A.4 R:(1) where the UK RIE proposes to operate a new MTF:(a) a description of the MTF; and(b) a description of the specified investments which will be admitted to trading on that MTF.(2) where the UK RIE proposes to close a MTF, the name of that MTF.
The purpose of REC 3.14 is to ensure that the FSA is informed of planned changes to the services a UK recognised body intends to provide and of the normal hours of operation of those services. Unplanned suspensions of those services, unplanned changes in hours of operation and events causing a UK recognised body to be unable to provide those services should be notified to the FSA under the rules in REC 3.15.
Where a UK RIE proposes to admit to trading (or to cease to admit to trading) by means of its facilities:(1) a specified investment (other than a security or an option in relation to a security); or(2) a type of security or a type of option in relation to a security; it must give the FSA notice of that event, and the information specified for the purposes of this rule in REC 3.14.6 R to the FSA, at the same time as that proposal is first formally communicated to its members or
Where a UK recognised body proposes to provide (or to cease to provide) clearing services in respect of:(1) a specified investment (other than a security or an option in relation to a security); or (2) a type of security or a type of option in relation to a security;it must, unless REC 3.14.4 R applies, give the FSA notice of that event and the information specified for the purposes of this rule in REC 3.14.6 R, at the same time as that proposal is first formally communicated
Securities falling within the same article in Part III of the Regulated Activities Order which may be given the same generic description (for example, shares admitted to the UKofficial list) will normally be regarded as being of the same type. Options in relation to the same type of security will normally be regarded as being options of the same type.
The following information is specified for the purposes of REC 3.14.2 R and REC 3.14.3 R:(1) a description of the specified investment to which the proposal relates; (2) where that specified investment is a derivative, the proposed terms of that derivative; and (3) in the case of a UK RIE which is admitting that specified investment to trading, the name of any RCH which will provide clearing services in respect of that specified investment under an agreement with that UK RIE.
Where:(1) a UK RIE proposes to amend the standard terms of any derivative admitted to trading by means of its facilities; or (2) a UK recognised body proposes to amend the standard terms relating to the provision of clearing services for any derivative in respect of which it provides clearing services;it must give the FSA notice of that event, and written particulars of those proposed amendments, at the same time as that proposal is first formally communicated to its members or
Where a UK recognised body proposes to make (or to cease to make) arrangements for the safeguarding and administration of assets belonging to any other person (other than an undertaking in the same group), that recognised body must give the FSA notice of that event, and the information specified for the purposes of this rule in REC 3.14.9 R, at the same time as that proposal is first formally communicated to its members or shareholders (or any group or class of them).
The FSA does not need to be notified of proposals to offer (or to withdraw offers of) safeguarding and administration services for individual assets of the same type. Specified investments (other than securities) falling within the same article in Part III of the Regulated Activities Order will normally be regarded as being of the same type. Securities falling within the same article in Part III of the Regulated Activities Order which may be given the same generic description
Where a UK recognised body proposes to change its normal hours of operation, it must give the FSA notice of that proposal, and particulars of, and the reasons for, the actions proposed, at the same time as the proposal is first formally communicated to its members or shareholders, or any group or class of them.
A UK firm cannot start providing cross border services into another EEA State under an EEA right unless it satisfies the conditions in paragraphs 20(1) of Part III of Schedule 3 to the Act and, if it derives its EEA right from the Insurance Directives, paragraph 20(4B) of Part III of Schedule 3 to the Act. It is an offence for a UK firm which is not an authorised person to breach this prohibition (paragraph 21 of Part III of Schedule 3 to the Act).The conditions are that:(1) the
8A MiFID investment firm that wishes to obtain a passport for the activity of operating an MTF should follow the procedures described in this chapter. A UK market operator that operates a recognised investment exchange or an MTF and wishes to provide cross border services into another EEA State should follow the procedure described in REC 4.2B.
8(1) If8 the UK firm'sEEA right derives from MiFID8, the Banking Consolidation Directive or the UCITS Directive, paragraph 20(3) of Part III of Schedule 3 to the Act requires the FSA to send a copy of the notice of intention8 to the Host State Regulator within one month8 of receipt.8However, a UK firm passporting under the Banking Consolidation Directive or MiFID may start providing cross border services as soon as it satisfies the relevant conditions (see SUP 13.4.2 G).888888(2)
(1) The purpose of REC 3.13 is to enable the FSA to monitor any significant instances where UK recognised bodies outsource their functions to other persons (as they are permitted to dounder Regulation 6 of the Recognition Requirements Regulations. See REC 2.2).(2) The FSA does not need to be notified of every instance of outsourcing by a UK recognised body, but only where an activity or activities which form a significant part of a relevant function or which make a significant
Where a UK recognised body makes an offer or agrees to delegate any of its relevant functions to another person, it must immediately give the FSA notice of that event, and:(1) inform the FSA of the reasons for that delegation or proposed delegation;(2) inform the FSA of the reasons why it is satisfied that it will continue to meet the recognition requirements following that delegation;(3) where it makes such an offer by issuing a written invitation to tender to another body or
If transferable securities are admitted to trading in more than one EEA State including the United Kingdom and the United Kingdom is the Home State, regulated information must be disclosed:(1) in English; and(2) either in a language accepted by the competent authorities of each Host State or in a language customary in the sphere of international finance, at the choice of the issuer. [Note: article 20(2) of the TD]
(1) If transferable securities are admitted to trading in one or more EEA States excluding the United Kingdom and the United Kingdom is the Home State, regulated information must be disclosed either:(a) in a language accepted by the competent authorities of those Host States; or(b) in a language customary in the sphere of international finance,at the choice of the issuer.(2) Where the United Kingdom is the Home State, regulated information must be disclosed either in English or
If transferable securities whose denomination per unit amounts to at least 50,000 Euros (or an equivalent amount) are admitted to trading in the United Kingdom or in one or more EEA States, regulated information must be disclosed to the public in either a language accepted by the competent authorities of the Home State and Host States or in a language customary in the sphere of international finance, at the choice of the issuer or of the person who, without the issuer's consent,
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
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.
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 five additional cases. The Act states that, in these five cases, 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
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
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
A firm must include only the following types of undertaking in a UK consolidation group or non-EEA sub-group for the purposes of this chapter:(1) a BIPRU firm;(2) an institution;(3) a financial institution;(4) an asset management company;(5) a financial holding company; and(6) an ancillary services undertaking.
Although an undertaking falling outside BIPRU 8.5.1 R will not be included in a UK consolidation group or non-EEA sub-group it may be relevant in deciding whether one undertaking in the banking sector or the investment services sector is a subsidiary undertaking of another with the result that they should be included in the same UK consolidation group or non-EEA sub-group.
In carrying out the calculations for the purposes of this chapter a firm must only include the relevant proportion of an undertaking that is a member of the UK consolidation group or non-EEA sub-group:(1) by virtue of a consolidation Article 12(1) relationship;(2) by virtue of an Article 134 relationship; or(3) because the group holds a participation in it.
In BIPRU 8.5.5 R, the relevant proportion is either:(1) (in the case of a participation) the proportion of shares issued by the undertaking held by the UK consolidation group or the non-EEA sub-group; or(2) (in the case of a consolidation Article 12(1) relationship or an Article 134 relationship), such proportion (if any) as stated in the Part IV permission of the firm.
A firm may, having first notified the FSA in writing in accordance with SUP 15.7 (Form and method of notification), exclude an institution, asset management company, financial institution or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group if the balance sheet total of that undertaking is less than the smaller of the following two amounts:(1) 10 million Euros;(2)
Article 73(1) of the Banking Consolidation Directive allows the FSA to decide to exclude an institution, financial institution, asset management company or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group for the purposes of this chapter in the following circumstances:(1) where the head office of the undertaking concerned is situated in a country outside the
(1) The operator of a recognised scheme under section 264, section 270 or section 272 of the Act must maintain facilities in the United Kingdom in order to satisfy the requirements of COLL 9.4.2 R to COLL 9.4.6 R. (2) In this section, a facility is a place of business that complies with COLL 9.4.6 R (Place of facilities).
(1) The operator of a recognised scheme must maintain facilities in the United Kingdom for any person, for inspection (free of charge) and for the obtaining (free of charge, in the case of the documents at (c) and (d), and otherwise at no more than a reasonable charge) of copies in English of: (a) the instrument constituting the scheme;(b) any instrument amending the instrument constituting the scheme; (c) the latest prospectus (which must include the address where the facilities
(1) The operator must maintain facilities in the United Kingdom for any person where: (a) information in English can be obtained about prices of units in the scheme; and(b) a participant may redeem or arrange for redemption of units in the scheme and obtain payment. (2) An operator is treated as complying with paragraph (1) if it ensures participants may sell their units on an investment exchange at a price not significantly different from net asset value; and if so, must inform
(1) The operator must maintain facilities in the United Kingdom at which the unitholder of a bearer certificate may obtain free of charge: (a) payment of dividends; and(b) details or copies of any notices which have been given or sent to participants in the scheme. (2) The operator must state:(a) the nature of the right represented by the units in the scheme; and(b) whether persons other than unitholders can vote at meetings of unitholders and, if so, who those persons are.
(1) The address of the facilities maintained by the operator in accordance with this section and the details of the facilities so maintained must be stated in the prospectus of the scheme.(2) The address of the facilities referred to in (1) must be the address of the operator's principal place of business in the United Kingdom, or, if there is no such address,, the alternative address in paragraph (3).(3) The alternative address is such convenient address as the operator determines,