The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017

CHAPTER 1 Exempt investment firms

Applications to be an exempt investment firm

4.—(1) A person may apply in accordance with section 55A(1) (application for permission) of the Act for a Part 4A permission to carry on regulated activities as an exempt investment firm.

(2) An authorised person may become entitled to carry on regulated activities as an exempt investment firm only by applying for a variation of its Part 4A permission in accordance with section 55H(2) (variation by FCA) or 55I(3) (variation by PRA) of the Act.

(3) A person may only apply for a Part 4A permission as mentioned in paragraph (1), and an authorised person may only apply for a variation of their Part 4A permission as mentioned in paragraph (2), if the person or authorised person has its relevant office in the United Kingdom.

(4) In this regulation “relevant office” means—

(a) in relation to a body corporate, its registered office or, if it has no registered office, its head office; and

(b) in relation to a person, or authorised person other than a body corporate, the person’s head office.

Limitation on exempt investment firms

5.  An exempt investment firm has no entitlement —

(a) to establish a branch by making use of the procedures in paragraph 19 (establishment) of Schedule 3 (EEA passport rights) to the Act; or

(b) to provide any services by making use of the procedures in paragraph 20 (services) of Schedule 3 to the Act,

in a case where the entitlement of the firm to do so would, but for this paragraph, derive from the markets in financial instruments directive.

Requirements applying to exempt investment firms

6.—(1) If the appropriate regulator—

(a) gives to a person who has applied under regulation 4(1) a Part 4A permission to carry on regulated activities as an exempt investment firm; or

(b) varies the Part 4A permission of an authorised person who has applied as mentioned in regulation 4(2) for a variation to permit them to carry on regulated activities as an exempt investment firm,

the requirements specified in paragraph (3) (“the specified requirements”) shall be treated as being imposed under section 55L(4) (imposition of requirements by FCA) (where the FCA is the appropriate regulator) or 55M(5) (imposition of requirements by PRA) (where the PRA is the appropriate regulator) of the Act.

(2) Notwithstanding paragraph (1)—

(a) the treatment of the specified requirement as a requirement imposed under section 55L or 55M of the Act does not—

(i) amount for the purpose of section 55X(1)(6) (determination of applications: warning notices and decision notices) of the Act to a proposal to exercise the power of the appropriate regulator under section 55L(1) or 55M(1) of the Act;

(ii) amount for the purpose of section 55X(4)(7) of the Act to a decision to exercise the power of the appropriate regulator under section 55L(1) or 55M(1) of the Act; or

(iii) entitle the person to refer a matter under section 55Z3(1)(8) (right to refer matters to the Tribunal) of the Act;

(b) the specified requirements shall not expire until the person ceases to be an exempt investment firm; and

(c) no application under section 55L(5) or 55M(5) of the Act to vary or cancel any of the specified requirements may be made by the person unless they inform the appropriate regulator when making the application that they wish to cease to be an exempt investment firm.

(3) The requirements are that the person—

(a) does not hold clients’ funds or securities and does not, for that reason, at any time, place themselves in debit with their clients;

(b) does not provide any investment service other than the—

(i) reception and transmission of orders in transferable securities and units in collective investment undertakings; and

(ii) provision of investment advice in relation to the financial instruments mentioned in paragraph (i); and

(c) in the course of providing the investment services mentioned in sub-paragraph (b), transmits orders only to—

(i) an investment firm authorised in accordance with the markets in financial instruments directive;

(ii) a credit institution authorised in accordance with Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms(9);

(iii) a branch of an investment firm or of a credit institution authorised under the law of an EEA State to market units to the public and to the managers of such undertakings;

(iv) a collective investment undertaking authorised under the law of an EEA State to market units to the public and to a manager of such an undertaking; or

(v) an investment company with fixed capital, the securities of which are listed or dealt in on a regulated market in an EEA State.

(4) In paragraph (3) “investment company with fixed capital” has the meaning given by Article 17.7 of Directive 2012/30/EU of the European Parliament and of the Council of 25 October 2012 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty on the Functioning of the European Union, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent(10).

(5) Terms and expressions used in paragraph (3)(c)(i) to (v) which are not otherwise defined in these Regulations and are used in Article 3.1(c)(i) to (v) (optional exemptions) of the markets in financial instruments directive have the same meaning as in those provisions of the directive.

Transitional provision: exempt investment firms

7.—(1) An authorised person who immediately before 3rd January 2018 was—

(a) an exempt investment firm by virtue of regulation 9A(11)(transitional provision: exempt investment firms) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007; or

(b) permitted to carry on regulated activities as an exempt investment firm in accordance with permission granted in accordance with regulation 4C(12) (requirements to be applied to exempt investment firms) of those Regulations,

becomes an exempt investment firm with effect from that day as if they had applied as mentioned in regulation 4(1) or (2)(13) and had been granted the permission or variation on that day.

Meaning of “exempt investment firm” in Chapter 1

8.  In this Chapter “exempt investment firm” means an authorised person who—

(a) is an investment firm; and

(b) has a Part 4A permission;

but to whom Title II of the markets in financial instruments directive does not apply by virtue of Article 3 of the markets in financial instruments directive.

(1)

Section 55A was inserted by section 11(2) of the Financial Services Act 2012.

(2)

Section 55H was inserted by section 11(2) of the Financial Services Act 2012 and amended by S.I. 2013/1773.

(3)

Section 55I was inserted by section 11(2) of the Financial Services Act 2012.

(4)

Section 55L was inserted by section 11(2) of the Financial Services Act 2012.

(5)

Section 55M was inserted by section 11(2) of the Financial Services Act 2012.

(6)

Section 55X(1) was inserted by section 11(2) of the Financial Services Act 2012.

(7)

Section 55X(4) was inserted by section 11(2) of the Financial Services Act 2012.

(8)

Section 55Z3 was inserted by section 11(2) of the Financial Services Act 2012.

(9)

OJ No L 176, 27.6.2013, p. 338.

(10)

OJ L315, 14/11/2012, p.74.

(11)

S.I. 2007/126; regulation 9A was inserted by S.I. 2007/763.

(12)

Regulation 4C was inserted by S.I. 2007/263 and was amended by S.I. 2013/472 and 2013/3115.

(13)

Regulation 4(1) and (2) were amended by S.I. 2013/472.