It’s extremely important that you first establish as to whether your company’s proposed business requires the business employer to request for authorisation to continue with regulated activities. For the majority of smaller firms, this would usually involve intermediaries negotiating or selling investments and/or home financing exercises and/or general insurance. The specific activities and specified investments are highlighted within The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, of which are secondary in terms of legislation under the FSMA.
The Financial Services & Markets Act 2000 (FSMA)
FSMA is considered troubled with the current regulation of financial services and markets within the United Kingdom. Any person, employee, employer who carries out a regulated activity in the United Kingdom under the Section 19 of FSMA must be clearly authorised by the FCA or exempt. Breach of section 19 can be considered a criminal offence and can also be a punishable offence on indictment with a maximum term of up to two years imprisonment and/or a considerable fine.
What activities are regulated?
Specified activities have been defined in Part II of the RAO and consist of:
Specified investments have been defined in Part III of the RAO and consist of:
For considerably smaller businesses, there has been several developed standard permission profiles that contain regulated investment and activities types. These can be found within business application packs. If there are no suitable profiles that match your business you will unfortunately need to put together your own.
The specified investment and activities types that are regulated are described in further detail within chapter two of the Perimeter Guidance Manual (PERG).
For an activity or investment to be regulated, it needs to be carried on ‘By way of business’, under section 22 of the FSMA.
Exclusions are known as provisions that turn activities into unregulated activities, if they would otherwise be regulated activities. If you have significant confidence on an exclusion for an activity, you do not require FCA authorisation to implement it.
Examples of exclusions:
Who is cleared from authorisation?
A person who is a selected delegate is exempt from requiring authorisation. Further information on this subject can be located within the factsheet ‘Becoming an appointed representative’. Other examples can also include:
An invitation or inducement to engage in investment activity or also known as a financial promotion. Investment activity is outlined under section 21(8) in the FSMA as:
Nevertheless, under section 21 of the FSMA, a person who is unauthorised is disallowed to communicate a financial promotion within the United Kingdom, in the progress of business, unless either:
Anyone wishing to continue with one or more regulated activity, through the way of business, must first request authorisation (unless they can submit to the terms of exclusion or are cleared).
Money Laundering Regulations 2007 (MLR)
There are also organisations responsible for the registration of businesses that handle activities under Annex 1 of the Banking Coordination Directive (BCD), in extension to business authorised by the FCA under FSMA. These activities are also outlined under the Money Laundering Regulations 2007.
Payment Services Regulations 2009 (PSRs)
The Payment Services Directive (PSD) primary goal is to supply a common regulatory path to the supplying of electronic payment services. This regulation came into force within the United Kingdom on 1st November back in 2009 with assistance from the PSRs.
Electronic Money Regulations 2011 (EMRs)
The EMRs, is known to implement the secondary Electronic Money Directive (2EMD) within the United Kingdom, which came into action back in 2011 on the 30th of April. 2EMD primary goal is to stimulate the growth of the current electronic money market.