Part Xxix: Interpretation
737.This Part defines a number of the terms used in the Act. The majority of such definitions are contained in section 417.
Section 418: Carrying on regulated activities in the United Kingdom
738.This section deals with the territorial scope of the authorisation requirement, and establishes its so-called “outward”application, whereby persons based in the United Kingdom who carry on regulated activities overseas need to be regulated in the United Kingdom. The section reflects the provisions of the EC directives in determining when a person is to be considered to be carrying on regulated activities in the United Kingdom, and sets out four broad cases:
first, all persons who have their head or registered office in the United Kingdom, but who only carry on regulated activities in another EEA State, but are entitled to exercise rights under a single market directive as UK firms, and are carrying on in another EEA state regulated activities to which that directive applies, will need to be authorised in the United Kingdom;
second, all persons who have their registered offices (or head offices, where they do not have registered offices) in the United Kingdom, and operate as managers of schemes which are entitled to enjoy the rights conferred by a relevant Community Instrument will require authorisation where persons in another EEA state are invited to become participants in the schemes;
third, all persons who have their head or registered office in the United Kingdom, but who only carry on regulated activities in non-EEA states, will need to be authorised if they direct the day-to-day management of the activities from an establishment in the United Kingdom; or
fourth, even if a person does not have a head or registered office in the United Kingdom and is not dealing with UK customers, he will still need to be authorised if the activity is carried on from an establishment maintained by him in the United Kingdom.
739.These provisions complement the so-called “inward” territorial scope of the Act, whereby overseas persons who carry on regulated activities in the United Kingdom need to be regulated unless an exemption or exclusion applies. The “inward” scope of the Act is implicit in the terms of section 19, but it may also be further amplified or restricted by the order to be made under section 22.
Section 419: Carrying on regulated activities by way of business
740.This section allows the Treasury to make orders to define “carrying on a regulated activity by way of business” for the purposes of section 22. This would, for example, allow special provision to be made in the case of occupational pension schemes, as under the FS Act 1986. The section would also enable different provision to be made in the case of different activities, if that was thought to be desirable in the light of the slightly different tests which apply under the existing legislation.
Section 420: Parent and subsidiary undertaking
741.The definitions of parent and subsidiary undertaking for the purposes of the Act are consistent with the definitions used in the single market directives.
742.Although individuals are not themselves “undertakings”, it is possible for an individual to have a relationship with an undertaking which would be classified as a parent/subsidiary relationship if they were an undertaking. Subsection (2) clarifies that for the purposes of the Act such an individual is to be included as a parent undertaking. The undertaking with whom the individual has a parent/subsidiary relationship is to be included as a subsidiary undertaking.
743.Subsection (2) also extends the definitions in relation to EEA bodies to cover any undertaking which would be treated as a parent or subsidiary undertaking under the law of the EEA state where the body is established.
