Related provisions for PERG 8.3.4
1Paragraph 7BA – Position management |
|||
(1) |
A [UK RIE] operating a trading venue which trades commodity derivatives must apply position management controls on that venue, which must at least enable the [UK RIE] to - |
||
(a) |
monitor the open interest positions of persons; |
||
(b) |
access information, including all relevant documentation, from persons about- |
||
(i) |
the size and purpose of a position or exposure entered into; |
||
(ii) |
any beneficial or underlying owners; |
||
(iii) |
any concert arrangements; and |
||
(iv) |
any related assets or liabilities in the underlying market; |
||
(c) |
require a person to terminate or reduce a position on a temporary or permanent basis as the specific case may require and to unilaterally take appropriate action to ensure the termination or reduction if the person does not comply; and |
||
(d) |
where appropriate, require a person to provide liquidity back into the market at an agreed price and volume on a temporary basis with the express intent of mitigating the effects of a large or dominant position. |
||
(2) |
The position management controls must take account of the nature and composition of market participants and of the use they make of the contracts submitted to trading and must- |
||
(a) |
be transparent; |
||
(b) |
be non-discriminatory; and |
||
(c) |
specify how they apply to persons. |
||
(3) |
A [UK RIE] must inform the FCA of the details of the position management controls in relation to each trading venue it operates. |
||
Paragraph 7BB – Position reporting |
|||
(1) |
This paragraph applies to a [UK RIE] operating a trading venue which trades commodity derivatives, emission allowances, or emission allowance derivatives. |
||
(2) |
The [UK RIE] must - |
||
(a) |
where it meets the minimum threshold, as specified in article 83 (position reporting) of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive2, make public a weekly report with the aggregate positions held by the different categories of persons for the different commodity derivatives, emission allowances, or emission allowance derivatives traded on the trading venue specifying - |
||
(i) |
the number of long and short positions by such categories; |
||
(ii) |
changes of those positions since the previous report; |
||
(iii) |
the percentage of the total open interest represented by each category; and |
||
(iv) |
the number of persons holding a position in each category; and |
||
(b) |
provide the FCA with a complete breakdown of the positions held by all persons, including the members and participants and their clients, on the trading venue on a daily basis, or more frequently if that is required by the FCA. |
||
(3) |
For the weekly report mentioned in sub-paragraph (2)(a) the [UK RIE] must - |
||
(a) |
categorise persons in accordance with the classifications required under sub-paragraph (4); and |
||
(b) |
differentiate between positions identified as- |
||
(i) |
positions which in an objectively measurable way reduce risks directly relating to commercial activities; or |
||
(ii) |
other positions. |
||
(4) |
The [UK RIE] must classify persons holding positions in commodity derivatives, emission allowances, or emission allowance derivatives according to the nature of their main business, taking account of any applicable authorisation or registration, as - |
||
(a) |
an investment firm or qualifying2 credit institution; |
||
(b) |
an investment fund, either as an undertaking for collective investment in transferrable securities within the meaning of section 236A of the Act, an AIF or an AIFM within the meaning of regulations 3 and 4 respectively of the Alternative Investment Fund Managers Regulations 2013 (SI 2013/1773)2; |
||
(c) |
another financial institution, including an insurance undertaking within the meaning of section 417 of the Act, a reinsurance undertaking within the meaning of section 417 of the Act, and an occupational pension scheme within the meaning of section 1(1) of the Pension Schemes Act 1993;2 |
||
(d) |
a commercial undertaking; or |
||
(e) |
in the case of emission allowances, or emission allowance derivatives, an operator with compliance obligations under Directive 2003/87/EC of the European Parliament and the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community. |
||
[Note: 1993 c.48. Section 1 was amended by section 239 of the Pension Schemes Act 2004 (c. 35) and S.I. 2007/3014.]2 |
|||
(5) |
The [UK RIE] must communicate the weekly report mentioned in sub-paragraph (2)(a) to the FCA2. |
1 Deductions and Ratios (Items 10, 11 and 15) |
(a) |
Notwithstanding IPRU-INV 5.8.1R and 5.8.2R for an exempt CAD firm, in calculating own funds, all of Item 8 must be deducted after the total of Tier 1 and Tier 2 capital and the following restrictions apply: |
|
(i) |
the total of fixed term cumulative preference shares (item 10) and long-term qualifying subordinated loans (item 11) that may be included in Tier 2 capital is limited to 50 per cent of Tier 1 capital; |
||
(ii) |
Tier 2 capital must not exceed 100 per cent of Tier 1 capital. |
||
(b) |
A firm which is not an exempt CAD firm and which is subject to a liquid capital requirement under IPRU-INV 5.4.1R may take into account qualifying subordinated loans in the calculation of liquid capital up to a maximum of 400% of its Tier 1 capital. |
||
2 Non corporate entities |
(a) |
In the case of partnerships or sole traders, the following terms should be substituted, as appropriate, for items 1 to 4 in Tier 1 capital: |
|
(i) |
partners' capital accounts (excluding loan capital); |
||
(ii) |
partners' current accounts (excluding unaudited profits and loan capital); |
||
(iii) |
proprietors' account (or other term used to signify the sole trader's capital but excluding unaudited profits). |
||
(b) |
Loans other than qualifying subordinated loans shown within partners' or proprietors' accounts must be classified as Tier 2 capital under item 12. |
||
(c) |
For the calculation of own funds, partners' current accounts figures are subject to the following adjustments in respect of a defined benefit occupational pension scheme: |
||
(i) |
a firm must derecognise any defined benefit asset; |
||
(ii) |
a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount. The election must be applied consistently in respect of any one financial year. |
||
Note 1 |
|||
A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme. |
|||
2A Reserves |
For the calculation of own funds the following adjustments apply to the audited reserves figure: |
||
(a) |
a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost; |
||
(b) |
in respect of a defined benefit occupational pension scheme, a firm must derecognise any defined benefit asset; |
||
(c) |
a firm may substitute for a defined benefit liability the firm's deficit reduction amount. The election must be applied consistently in respect of any one financial year. |
||
Note 2 |
|||
A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme. |
|||
(d) |
a firm must not include any unrealised gains from investment property. |
||
Note 3 |
|||
Unrealised gains from investment property should be reported as part of revaluation reserves. |
|||
(e) |
where applicable, a firm must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but exclude from the deduction or addition any asset or liability which will give rise to future cash flows), together with any associated deferred tax. |
||
Note 4 |
|||
Reserves must be audited unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
|||
3 Intangible assets (Item 6) |
Intangible assets comprise: |
||
(a) |
formation expenses to the extent that these are treated as an asset in the firm's accounts; |
||
(b) |
goodwill, to the extent that it is treated as an asset in the firm's accounts; and |
||
(c) |
other assets treated as intangibles in the firm's accounts. |
||
Intangible assets do not include a deferred acquisition cost asset. |
|||
4 Material current year losses (Item 7) |
Losses in current year operating figures must be deducted when calculating Tier 1 capital if such losses are material. For this purpose profits and losses must be calculated quarterly or monthly, as appropriate. If this calculation reveals a net loss it shall only be deemed to be material for the purposes of this Table if it exceeds 10 per cent of the firm's Tier 1 capital. |
||
5 Material holdings in credit and financial institutions (Item 8) |
Material holdings comprise: |
||
(a) |
where the firm holds more than 10 per cent of the equity share capital of the institution, the value of that holding and the amount of any subordinated loans to the institution and the value of holdings in qualifying capital items or qualifying capital instruments issued by the institution; |
||
(b) |
in the case of holdings other than those mentioned in (a) above, the value of holdings of equity share capital in, and the amount of subordinated loans made to, such institutions and the value of holdings in qualifying capital items or qualifying capital instruments issued by such institutions to the extent that the total of such holdings and subordinated loans exceeds 10 per cent of the firm'sown funds calculated before the deduction of item 8. |
||
5A Material insurance holdings (Item 8) |
(a) |
A material insurance holding means the holdings of an exempt CAD firm of items of the type set out in (b) in any: |
|
(i) |
|||
(ii) |
|||
that fulfils one of the following conditions: |
|||
(iii) |
it is a subsidiary undertaking of that firm; or |
||
(iv) |
that firm holds a participation in it. |
||
(b) |
An item falls into this provision for the purpose of (a) if it is: |
||
(i) |
an ownership share; or |
||
(ii) |
subordinated debt or another item of capital that forms part of the tier two capital resources that falls into GENPRU 2 or, as the case may be, INSPRU 7, or is an item of “basic own funds” defined in the PRA Rulebook: Glossary. |
||
6 Long term qualifying subordinated loans (Item 11) |
Loans having the characteristics prescribed by IPRU-INV 5.6.1R may be included in item 11, subject to the limits set out in paragraph (1) above. |
||
6A Perpetual cumulative preference share capital |
Perpetual cumulative preference share capital may not be included in the calculation of own funds by an exempt CAD firm unless it meets the following requirements: |
||
(a) |
it may not be reimbursed on the holder's initiative or without the prior agreement of the FCA; |
||
(b) |
the instrument must provide for the firm to have the option of deferring the dividend payment on the share capital; |
||
(c) |
the shareholder's claims on the firm must be wholly subordinated to those of all non-subordinated creditors; |
||
(d) |
the terms of the instrument must provide for the loss-absorption capacity of the share capital and unpaid dividends, whilst enabling the firm to continue its business; and |
||
(e) |
it must be fully paid-up. |
||
7 Qualifying arrangements (Item 13) |
(a) |
An exempt CAD firm may only include a qualifying undertaking or other arrangement in item 13 if it is a qualifying capital instrument or a qualifying capital item. |
|
(b) |
A firm which is not an exempt CAD firm may only include qualifying undertakings in its calculation of liquid capital if: |
||
(i) |
it maintains liquid capital equivalent to 6/52 of its annual expenditure in a form other than qualifying undertakings; and |
||
(ii) |
the total amount of all qualifying undertakings plus qualifying subordinated loans does not exceed the limits set out in paragraph (1)(b) above. |
||
8 Net trading book profits (Item 14) |
For firms which are not exempt CAD firms unaudited profits can be included at item 14. |
||
This Item must not be included in the liquid capital calculation of a firm whose permitted business includes establishing, operating or winding up a personal pension scheme. |
|||
Note 5 |
|||
Non-trading book interim profits may only be included in Tier 1 of the calculation if they have been independently verified by the firm’s external auditors, unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
|||
For this purpose, the external auditor should normally undertake at least the following: |
|||
(a) |
satisfy himself that the figures forming the basis of the interim profits have been properly extracted from the underlying accounting records; |
||
(b) |
review the accounting policies used in calculating the interim profits so as to obtain comfort that they are consistent with those normally adopted by the firm in drawing up its annual financial statements; |
||
(c) |
perform analytical review procedures on the results to date, including comparisons of actual performance to date with budget and with the results of prior periods; |
||
(d) |
discuss with management the overall performance and financial position of the firm; |
||
(e) |
obtain adequate comfort that the implications of current and prospective litigation, all known claims and commitments, changes in business activities and provisions for bad and doubtful debts have been properly taken into account in arriving at the interim profits; and |
||
(f) |
follow up problem areas of which the auditors are already aware in the course of auditing the firm’s financial statements. |
||
A firm wishing to include interim profits in Tier 1 capital in a financial return should submit to the FCA with the financial return a verification report signed by its external auditor which states whether the interim results are fairly stated, unless the firm is exempt from the provisions of Part VII of the Companies Act 198 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
|||
Profits on the sale of capital items or arising from other activities which are not directly related to the investment business of the firm may also be included within the calculation of liquid capital, but (unless the firm is exempt as above) only if they can be separately verified by the firm’s auditors. In such a case, such profits can form part of the firm’s Tier 1 capital as profits. |
|||
9 Short term qualifying subordinated loans (Item 15) |
Loans having the characteristics prescribed by IPRU-INV 5.6.3R may be included in item 15 subject to the limits set out in paragraph (1) above. Tier 2 capital which exceeds the ratios prescribed by paragraph (1)(a) and (b) may be included in item 15 subject to paragraph (1) above. |
||
10 Illiquid assets (Item 16) |
Illiquid assets comprise: |
||
(a) |
tangible fixed assets. |
||
Note 6 |
|||
In respect of tangible fixed assets purchased under finance leases the amount to be deducted as an illiquid asset shall be limited to the excess of the asset over the amount of the related liability shown on the balance sheet. |
|||
(b) |
holdings in, including subordinated loans to, credit or financial institutions which may be included in the own funds of such institutions unless they have been deducted under item 8; |
||
(c) |
any investment in undertakings other than credit institutions and other financial institutions where such investments are not readily realisable; |
||
(d) |
any deficiency in net assets of a subsidiary; |
||
(e) |
deposits not available for repayment within 90 days or less (except for payments in connection with margined futures or options contracts); |
||
Note 7 |
|||
Where cash is placed on deposit with a maturity of more than 90 days but is repayable on demand subject to the payment of a penalty, then this is not required to be deducted as an illiquid asset but a deduction is required for the amount of the penalty. |
|||
(f) |
loans, other debtors and accruals not falling due to be repaid within 90 days or which are more than one month overdue by reference to the contractual payment date; |
||
(g) |
physical stocks (except where subject to the position risk requirement as set out in IPRU-INV 5.11; and |
||
(h) |
prepayments to the extent that the period of prepayment exceeds six weeks in the case of a firm subject to the 6/52 expenditure based requirement or thirteen weeks in the case of a firm subject to the 13/52 expenditure based requirement. |
||
(i) |
if not otherwise covered, any holding in eligible capital instruments of an insurance undertaking, insurance holding company, or reinsurance undertaking that is a subsidiary or participation. Eligible capital instruments include ordinary share capital, cumulative preference shares, perpetual securities and long-term subordinated loans that are eligible for insurance undertakings under INSPRU 1. |
||
Illiquid assets do not include a defined benefit asset or a deferred acquisition cost asset. |
|||
11 Qualifying property (Item 17) |
This item comprises the qualifying amount calculated in accordance with IPRU-INV 5.7.1R. |
Explanatory table: This table belongs to COLL 6.2.2 G (4) (Purpose).
Correction of box management errors |
||
1 |
Controls by authorised fund managers |
|
An authorised fund manager needs to be able to demonstrate that it has effective controls over: |
||
(1) |
its calculations of what units are owned by it (its 'box'); and |
|
(2) |
compliance with COLL 6.2.8 R which is intended to prevent a negative box. |
|
2 |
Controls by depositaries |
|
(1) |
Under COLL 6.6.4 (General duties of the depositary), a depositary should take reasonable care to ensure that a scheme2 is managed in accordance with COLL 6.2 (Dealing) and COLL 6.3 (Pricing and valuation). |
|
(2) |
A depositary should therefore make a regular assessment of the authorised fund manager's box management procedures (including supporting systems) and controls. This should include reviewing the authorised fund manager's controls and procedures when the depositary assumes office, on any significant change and on a regular basis, to ensure that a series of otherwise minor changes do not have a cumulative and a significant effect on the accuracy of the controls and procedures. |
|
3 |
Recording and reporting of box management errors |
|
(1) |
An authorised fund manager should record all errors which result in a breach of COLL 6.2.8 R (Controls over the issue and cancellation of units) and as soon as an error is discovered, the authorised fund manager should report the fact to the depositary, together with details of the action taken, or to be taken, to avoid repetition of the error. |
|
(2) |
A depositary should report material box management errors to the FCA immediately. Materiality should be determined by taking into account a number of factors including:
|
|
(3) |
A depositary should also make a return to the FCA (in the manner prescribed by SUP 16.6.8 R) on a quarterly basis. |
In practice, private individuals may act in a number of capacities. The following table sets out a number of examples of how an individual acting in certain capacities should, in the FCA's view, be categorised.
Customer classification examples |
|
Capacity |
Classification |
Personal representatives, including executors, unless they are acting in a professional capacity, for example, a solicitor acting as executor. |
|
Private individuals acting in personal or other family circumstances, for example, as trustee of a family trust. |
|
Trustee of a trust such as a housing or NHS trust. |
|
Member of the governing body of a club or other unincorporated association such as a trade body and a student union. |
|
Pension trustee. |
|
Person taking out a policy covering property bought under a buy-to-let mortgage. |
|
Partner in a partnership when taking out insurance for purposes related to his profession. |
Types of activity – are they regulated activities and, if so, why?
Type of activity |
Is it a regulated activity? |
Rationale |
MARKETING AND EFFECTING INTRODUCTIONS |
||
Passive display of information -for example, medical insurance brochures in doctor’s surgery (whether or not remuneration is received for this activity) |
No. |
Merely displaying information does not constitute making arrangements under article 25(2) (see PERG 5.6.4 G). |
Providing a2 customer with contact details or information about a broker / insurance undertaking2 (whether by phone, fax, e-mail, face-to-face or any other means of communication) |
Yes, but articles 33B or2 72C may be available. |
This will constitute making arrangements under article 25(2). But, the exclusions in articles 33B or 72C2 will apply if all the intermediary does is supply information to the customer and the relevant conditions of those exclusions2 are otherwise met (see PERG 5.6.4AG2 to PERG 5.6.9 G). Generally, this will not amount to advice under article 53(1)1 unless there is an implied recommendation of a particular policy (see PERG 5.8.4 G), in which case articles 33B and 72C2 would not be available. |
Providing an insurance undertaking/broker with contact details of customer |
Yes, but article 33B may be available2. |
This will constitute making arrangements under article 25(2) when undertaken in the context of regular or ongoing arrangements for introducing customers. Article 33B applies to the provision of information about a potential policyholder to an insurance undertaking or an insurance or reinsurance intermediary, and so may apply here if the relevant conditions are met. It will only apply if the provider of the customer information does not take any step other than providing the information to assist in the conclusion of a contract of insurance.2 |
Marketing on behalf of insurance undertaking to intermediaries only (for example, broker consultants) |
Yes. |
This amounts to work preparatory to the conclusion of contracts of insurance and so constitutes making arrangements under article 25(2). Article 33B does not apply because the information provided to the intermediary doesn’t relate to a potential policyholder, and isn’t provided to a policyholder.2 Article 72C is not available because this activity does not involve provision of information to the policyholder or potential policyholder only. |
Telemarketing services (that is, companies specialising in marketing an insurance undertaking's products/services to prospective customers) |
Yes. |
This amounts to introducing and/or other work preparatory to the conclusion of contracts of insurance and so constitutes making arrangements under article 25(2). This could also involve article 25(1) arranging where the telemarketing company actually sells a particular policy and could involve advising on investments. Article 33B is unlikely to apply, as the telemarketing company is likely to be actively persuading the customer rather than merely providing information.2 Article 72C will not be available where the provision of information is more than incidental to the telemarketing company’s main business. Articles 33B and 72C will not be available2 where the telemarketing company is advising on investments. |
PRE-PURCHASE DISCUSSIONS WITH CUSTOMERS AND ADVICE |
||
Discussion with client about need for insurance generally/need to take out a particular type of insurance |
Generally, no. Articles 33B or2 72C available if needed. |
Not enough, of itself, to constitute making arrangements under article 25(2), but you should consider whether, viewed as a whole, your activities might amount to arranging. If so, articles 33B or2 72C might be of application (see PERG 5.6.5 G to PERG 5.6.9 G). |
Advising on the level of cover needed |
Generally, no. Articles 33B or2 72C available if needed. |
Not enough, of itself, to constitute making arrangements under article 25(2), but you should consider whether, viewed as a whole, your activities might amount to making arrangements under article 25(2) (see PERG 5.8.3 G). If so,articles 33B or2 72C might be of application (see PERG 5.6.4AG2 to PERG 5.6.9 G). |
Pre-purchase questioning in the context of filtered sales (intermediary asks a series of questions and then suggests several policies which suit the answers given) |
Yes. Subject to article 72 C exclusion where available. |
This will constitute arranging although article 72C may be of application (see PERG 5.6.4AG2 to PERG 5.6.9 G). If there is no express or implied recommendation of a particular policy, this activity will not amount to advice under article 53(1)1 (see PERG 5.8.15 G to PERG 5.8.19 G). |
Explanation of the terms of a particular policy or comparison of the terms of different policies |
Possibly. Article 72C available. |
This is likely to amount to making arrangements under article 25(2). In certain circumstances, it could involve advising on investments (except P2P agreements)1 (see PERG 5.8.8 G (Advice or information)). Where the explanation is provided to the potential policyholder, and does not involve advising on investments (except P2P agreements)1, article 72C may be of application (see PERG 5.6.5 G to PERG 5.6.9 G), and where information is provided by a professional in the course of a profession, article 67 may apply (see PERG 5.11.9 G to PERG 5.11.12 G). Article 33B will not be available where this involves taking steps other than the provision of information.2 |
Advising that a customer take out a particular policy |
Yes. |
This amounts to advice on the merits of a particular policy under article 53(1)1 (see PERG 5.8.4 G to PERG 5.8.5 G). |
Advising that a customer does not take out a particular policy |
Yes. |
This amounts to advice on the merits of a particular policy under article 53(1)1 (see PERG 5.8.4 G to PERG 5.8.5 G). |
Advice by journalists in newspapers, broadcasts etc. |
Generally, no because of the article 54 exclusion. |
Article 54 provides an exclusion for advice given in newspapers etc (see PERG 5.8.24 G to PERG 5.8.25 G). |
Giving advice to a customer in relation to2buying a consumer product, where insurance is a compulsory secondary purchase and/or a benefit that comes with buying the product |
Not necessarily but depends on the circumstances. |
Where the advice relates specifically to the merits of the consumer product, it is possible that references to the accompanying insurance may be seen to be information and not advice. If, however, the advice relates, in part, to the merits of the insurance element, then it will be regulated activity. |
ASSISTING CUSTOMERS WITH COMPLETING/SENDING APPLICATION FORMS |
||
Providing information to customer who fills in application form |
Possibly. Subject to article 67 or 72C, and article 33B,2 exclusions where available. |
This activity may amount to arranging although the exclusions in article 67 (see PERG 5.11.9 G to PERG 5.11.12 G) and article 72C (see PERG 5.6.4AG2 to PERG 5.6.9 G) may be of application. Article 33B could also apply, depending on the type of information provided.2 |
Helping a potential policyholder fill in an application form |
Yes. |
This activity amounts to arranging. Articles 33B and2 72C will not apply because this activity goes beyond the mere provision of information to a policyholder or potential policyholder (see PERG 5.6.4AG2 to PERG 5.6.9 G). |
Receiving completed proposal forms for checking and forwarding to an insurance undertaking (for example, an administration outsourcing service provider that receives and processes proposal forms) |
Yes. |
This amounts to arranging. Articles 33B and 72C do2 not apply because this activity goes beyond the mere provision of information to a policyholder or potential policyholder (see PERG 5.6.4AG2 to PERG 5.6.9 G). |
Assisting in completion of proposal form and sending to insurance undertaking |
Yes. |
This activity amounts to arranging. Articles 33B and 72C do2 not apply because this activity goes beyond the mere provision of information (see PERG 5.6.4AG2 to PERG 5.6.9 G). |
NEGOTIATING AND CONCLUDING CONTRACTS OF INSURANCE |
||
Negotiating terms of policy on behalf of a customer with the insurance undertaking |
Yes. |
This activity amounts to arranging (see PERG 5.6.2 G). |
Negotiating terms of policy on behalf of insurance undertaking with the customer and signing proposal form on his behalf |
Yes. |
These activities amount to both arranging and dealing in investments as agent. |
Concluding a contract of insurance on insurance company’s behalf, for example, motor dealer who has authority to conclude insurance contract on behalf of insurance undertaking when selling a car |
Yes. |
A person carrying on this activity will be dealing in investments as agent. He will also be arranging (as the article 28 exclusion only applies in the limited circumstances envisaged under article 28(3)) (see PERG 5.6.12 G). |
Agreeing, on behalf of a prospective policyholder, to buy a policy. |
Yes. |
A person who, with authority, enters into a contract of insurance on behalf of another is dealing in investments as agent under article 21, and will also be arranging. |
Providing compulsory insurance as a secondary purchase |
Yes. It will amount to dealing in investments as agent or arranging. |
The fact that the insurance is secondary to the primary product does not alter the fact that arranging the package involves arranging the insurance. |
COLLECTION OF PREMIUMS |
||
Collection of cheque for premium from the customer at the pre-contract stage. |
Yes (as part of arranging). |
This activity is likely to form part of arranging. But the mere collection/receipt of premiums from the customer is unlikely, without more, to amount to arranging. |
Collection of premiums at post-contract stage |
No. |
The mere collection of premiums from policyholders is unlikely, without more, to amount to assisting in the administration and performance of a contract of insurance. |
MID-TERM ADJUSTMENTS AND ASSIGNMENTS |
||
Solicitors or licensed conveyancers discharging client instructions to assign contracts of insurance. |
Not where article 67 applies. |
As the assignment of rights under a contract of insurance (as opposed to the creation of new contracts of insurance) does not fall within insurance distribution45, article 67 is of potential application (see PERG 5.11.9 G to PERG 5.11.12 G). |
Making mid-term adjustments to a policy, for example, property manager notifies changes to the names of the leaseholders registered as “interested parties” in the policy in respect of the property. |
Yes. |
Assuming the freeholder (as policyholder) is obliged under the terms of the policy to notify the insurance undertaking of changes to the identity of the leaseholders, the property manager is likely to be assisting in the administration and the performance of the contract of insurance. |
TRADED ENDOWMENT POLICIES (“TEPs”) |
||
Making introductions for the purposes of selling TEPs |
Yes, unless article 72C applies. |
Making introductions for these purposes is arranging unless article 72C applies (see PERG 5.6.5 G to PERG 5.6.9 G). The exclusions in article 29 (Arranging deals with or through authorised persons) and 33 (Introducing) no longer apply to arranging contracts of insurance. |
Market makers in TEPs |
Yes, although the exclusion in article 28 may apply. |
Unauthorised market makers can continue to make use of the exclusions in articles 15 (Absence of holding out etc.) and 16 (Dealing in contractually based investments), where appropriate. In order to avoid the need for authorisation in respect of arranging they may be able to rely upon article 28 (see PERG 5.6.12 G). |
ASSISTING POLICYHOLDER WITH MAKING A CLAIM |
||
Merely providing information to the insured to help him complete a claim form |
No. |
Of itself, this is likely to amount to assisting in the administration but not the performance of a contract of insurance. In the FCA's view, the provision of information in these circumstances is more akin to facilitating performance of a contract of insurance rather than assisting in the performance (see PERG 5.7.3 G to PERG 5.7.5 G) |
Completion of claim form on behalf of insured |
Potentially. |
This activity amounts to assisting in the administration of a contract of insurance. Whether this activity amounts to assisting in the administration and performance of a contract of insurance will depend upon whether a person's assistance in filling in a claims form is material to whether performance of the contractual obligation to notify a claim takes place (see PERG 5.7.2 G to PERG 5.7.3 G). |
Notification of claim to insurance undertaking and helping negotiate its settlement on the policyholder's behalf |
Yes. |
This activity amounts to assisting in the administration and performance of a contract of insurance (see PERG 5.7.4 G). |
ASSISTING INSURANCE UNDERTAKING WITH CLAIMS BY POLICYHOLDERS |
||
Negotiation of settlement of claims on behalf of an insurance undertaking |
No. |
Managing claims3 on behalf of an insurance undertaking does not amount to assisting in the administration and performance of a contract of insurance by virtue of the exclusion in article 39B (see PERG 5.7.7 G). |
Providing information to an insurance undertaking in connection with its investigation or assessment of a claim |
No. |
This activity does not amount to assisting in the administration and performance of a contract of insurance. |
Loss adjusting and managing claims3 (for example, by administration outsourcing providers) |
Potentially. |
These activities may amount to assisting in the administration and performance of a contract of insurance. Article 39B excludes these activities, however, when undertaken on behalf of an insurance undertaking only (see PERG 5.7.7 G). |
Providing an expert appraisal of a claim |
No. |
This activity does not amount to assisting in the administration and performance of a contract of insurance whether carried out on behalf of an insurance undertaking or otherwise. |
Jeweller repairs customer’s jewellery pursuant to a policy which permits the jeweller to carry out repairs |
No. |
This activity does not amount to assisting in the administration and performance of a contract of insurance. It amounts to managing claims on behalf of an insurance undertaking and so falls within the exclusion in article 39B (see PERG 5.7.7 G). |