The Financial Services Act 1986 (Investment Services) (Extension of Scope of Act) Order 1995

Explanatory Note

(This note is not part of the Order)

The Order makes amendments to the scope of the Financial Services Act 1986 (“the Act”) required to give effect to Council Directive No. 93/22/EEC on investment services in the securities field (OJ No. L 141, 10.5.93, p. 27). In so far as other legislative provision is needed to implement the provisions of the directive, this is contained in the Act, in an Order to be made under section 46 of the Act and in Regulations to be made under section 2(2) of the European Communities Act 1972. The Order comes into force on 1 January 1996.

The scope of the Act is determined by section 1 of the Act. Section 2 confers power on the Treasury to make orders extending or restricting the scope of the Act for the purposes of all or any of its provisions. The exercise of this power is among the functions transferred to the Treasury by the Transfer of Functions (Financial Services) Order 1992 (S.I. 1992/1315).

Section 1 of the Act defines “investments” by reference to the instruments falling within Part I of Schedule 1. Articles 3 and 4 of the Order add certain instruments to the investments falling within Part I of that Schedule (certain shares in industrial and provident societies and certain bills of exchange).

Article 5 of the Order extends, for the purposes of sections 47A and 48 of the Act, the activities that are to constitute the carrying on of investment business. As required by article 11 of the directive, statements of principle and rules can now be made under those two sections in respect of all services covered by the directive.

Section 1 of the Act defines “investment business” by reference to activities which fall within Part II of Schedule 1 to the Act and which are not excluded by Part III of that Schedule. Article 6 of the Order amends the meaning of “investment business” to cover the provision of all investment services to which the directive applies.