PART II SPECIFIED ACTIVITIES

Chapter VIArranging Deals in Investments

Exclusions

Arrangements not causing a deal26.

There are excluded from F1articles 25(1), 25A(1), 25B(1) F2, 25C(1) and 25E(1) arrangements which do not or would not bring about the transaction to which the arrangements relate.

Enabling parties to communicate27.

A person does not carry on an activity of the kind specified by F3article 25(2), 25A(2), 25B(2) F4, 25C(2) or 25 E(2) merely by providing means by which one party to a transaction (or potential transaction) is able to communicate with other such parties.

Arranging transactions to which the arranger is a party28.

(1)

There are excluded from article 25(1) any arrangements for a transaction into which the person making the arrangements enters or is to enter as principal or as agent for some other person.

(2)

There are excluded from article 25(2) any arrangements which a person makes with a view to transactions into which he enters or is to enter as principal or as agent for some other person.

F5(3)

But the exclusions in paragraphs (1) and (2) do not apply to arrangements made for or with a view to a transaction which relates to a contract of insurance, unless the person making the arrangements either—

(a)

is the only policyholder; or

(b)

as a result of the transaction, would become the only policyholder.

F6Arranging contracts F7, plans or agreements to which the arranger is a party28A.

(1)

There are excluded from F8articles 25A(1), 25B(1) F9, 25C(1) and 25E(1) any arrangements—

(a)

for a F10contract F11, plan or agreement into which the person making the arrangements enters or is to enter; or

(b)

for a variation of a F10contract F11, plan or agreement to which that person is (or is to become) a party.

(2)

There are excluded from F12articles 25A(2), 25B(2) F13, 25C(2) and 25E(2) any arrangements which a person makes with a view to contracts F14, plans or agreements into which he enters or is to enter.

Arranging deals with or through authorised persons29.

(1)

There are excluded from F15articles 25(1) and (2), F1625A(1), (2) and (2A), 25B(1) and (2) F17, 25C(1) and (2) and 25E(1) and (2) arrangements made by a person (“A") who is not an authorised person for or with a view to a transaction which is or is to be entered into by a person (“the client") with or though an authorised person if—

(a)

the transaction is or is to be entered into on advice to the client by an authorised person; or

(b)

it is clear, in all the circumstances, that the client, in his capacity as an F18investor, borrower, reversion seller, plan provider, home purchaser, agreement provider or (as the case may be) agreement seller, is not seeking and has not sought advice from A as to the merits of the client’s entering into the transaction (or, if the client has sought such advice, A has declined to give it but has recommended that the client seek such advice from an authorised person).

F19(2)

But the exclusion in paragraph (1) does not apply if—

(a)

the transaction relates, or would relate, to a contract of insurance; or

(b)

A receives from any person other than the client any pecuniary reward or other advantage, for which he does not account to the client, arising out of his making the arrangements.

F20(3)

This article is subject to article 4(4) F21and (4B).

F22Arrangements made in the course of administration by authorised person29A.

F23(1)

A person who is not an authorised person (“A”) does not carry on an activity of the kind specified by article 25A(1)(b) as a result of—

(a)

anything done by an authorised person (“B”) in relation to a regulated mortgage contract which B is administering pursuant to an arrangement of the kind mentioned in article 62(a); or

(b)

anything A does in connection with the administration of a regulated mortgage contract in circumstances falling within article 62(b).

F24(2)

A person who is not an authorised person (“A”) does not carry on an activity of the kind specified by article 25B(1)(b) as a result of—

(a)

anything done by an authorised person (“B”) in relation to a regulated home reversion plan which B is administering pursuant to an arrangement of the kind mentioned in article 63C(a); or

(b)

anything A does in connection with the administration of a regulated home reversion plan in circumstances falling within article 63C(b).

(3)

A person who is not an authorised person (“A”) does not carry on an activity of the kind specified by article 25C(1)(b) as a result of—

(a)

anything done by an authorised person (“B”) in relation to a regulated home purchase plan which B is administering pursuant to an arrangement of the kind mentioned in article 63G(a); or

(b)

anything A does in connection with the administration of a regulated home purchase plan in circumstances falling within article 63G(b).

F25(4)

A person who is not an authorised person (“A”) does not carry on an activity of the kind specified by article 25E(1)(b) as a result of—

(a)

anything done by an authorised person (“B”) in relation to a regulated sale and rent back agreement which B is administering pursuant to an arrangement of the kind mentioned in article 63K(a); or

(b)

anything A does in connection with the administration of a regulated sale and rent back agreement in circumstances falling within article 63K(b).

Arranging transactions in connection with lending on the security of insurance policies30.

(1)

There are excluded from article 25(1) and (2) arrangements made by a money-lender under which either—

F26(a)

a relevant authorised person or a person acting on his behalf will introduce to the money-lender persons with whom the relevant authorised person has entered, or proposes to enter, into a relevant transaction, or will advise such persons to approach the money-lender, with a view to the money-lender lending money on the security of any contract effected pursuant to a relevant transaction;

(b)

a relevant authorised person gives an assurance to the money-lender as to the amount which, on the security of any contract effected pursuant to a relevant transaction, will or may be received by the money-lender should the money-lender lend money to a person introduced to him pursuant to the arrangements.

(2)

In paragraph (1)—

  • “money-lender" means a person who is—

    1. (a)

      a money-lending company within the meaning of F27section 209 of the Companies Act 2006;

    2. (b)

      a body corporate incorporated under the law of, or of any part of, the United Kingdom relating to building societies; or

    3. (c)

      a person whose ordinary business includes the making of loans or the giving of guarantees in connection with loans;

  • “relevant authorised person" means an authorised person who has permission to effect F28contracts of insurance or to sell investments of the kind specified by article 89, so far as relevant to such contracts;

  • “relevant transaction" means the effecting of a F29contract of insurance or the sale of an investment of the kind specified by article 89, so far as relevant to such contracts.

F30(3)

This article is subject to article 4(4A).

Arranging the acceptance of debentures in connection with loans31.

(1)

There are excluded from article 25(1) and (2) arrangements under which a person accepts or is to accept, whether as principal or agent, an instrument creating or acknowledging indebtedness in respect of any loan, credit, guarantee or other similar financial accommodation or assurance which is, or is to be, made, granted or provided by that person or his principal.

(2)

The reference in paragraph (1) to a person accepting an instrument includes a reference to a person becoming a party to an instrument otherwise than as a debtor or a surety.

Provision of finance32.

There are excluded from article 25(2) arrangements having as their sole purpose the provision of finance to enable a person to buy, sell, subscribe for or underwrite investments.

Introducing33.

There are excluded from F31articles 25(2), 25A(2), 25B(2) F32, 25C(2) and 25E(2) arrangements where—

(a)

they are arrangements under which persons (“clients") will be introduced to another person;

(b)

the person to whom introductions are to be made is—

(i)

an authorised person;

(ii)

an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or

(iii)

a person who is not unlawfully carrying on regulated activities in the United Kingdom and whose ordinary business involves him in engaging in an activity of the kind specified by any of articles 14, 21, 25, F3325A, F3425B, 25C, F3525E, 37 F36, 39A 40, 45, F3751ZA, 51ZB, 51ZC, 51ZD, 51ZE, F3852, 53F39, 53A, 53BF40, 53C and 53D (or, so far as relevant to any of those articles, article 64), or would do so apart from any exclusion from any of those articles made by this Order; F41...

(c)

the introduction is made with a view to the provision of independent advice or the independent exercise of discretion in relation to investments generally or in relation to any class of investments to which the arrangements relate F42; and

F43(d)

The arrangements—

(i)

are made with a view to a person entering into a transaction which does not relate to a contract of insurance, or

(ii)

are of the type specified in article 33B (provision of information – contracts of insurance).

F44Introducing to authorised persons etc.33A

(1)

There are excluded from article 25A(2) arrangements where—

(a)

they are arrangements under which a client is introduced to a person (“N”) who is—

(i)

an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25A, 53A, and 61(1),

(ii)

an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25A and 53A without contravening the general prohibition, or

(iii)

an overseas person who carries on activities specified by any of articles 25A, 53A and 61(1); and

(b)

the conditions mentioned in paragraph (2) are satisfied.

F45(1A)

There are excluded from article 25B(2) arrangements where—

(a)

they are arrangements under which a client is introduced to a person (“N”) who is—

(i)

an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25B, 53B and 63B(1),

(ii)

an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25B and 53B without contravening the general prohibition, or

(iii)

an overseas person who carries on activities specified by any of articles 25B, 53B and 63B(1); and

(b)

the conditions mentioned in paragraph (2) are satisfied.

(1B)

There are excluded from article 25C(2) arrangements where—

(a)

they are arrangements under which a client is introduced to a person (“N”) who is—

(i)

an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25C, 53C and 63F(1),

(ii)

an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25C and 53C without contravening the general prohibition, or

(iii)

an overseas person who carries on activities specified by any of articles 25C, 53C and 63F(1); and

(b)

the conditions mentioned in paragraph (2) are satisfied.

F46(1C)

There are excluded from article 25E(2) arrangements where—

(a)

they are arrangements under which a client is introduced to a person (“N”) who is—

(i)

an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25E, 53D and 63J(1),

(ii)

an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25E or 53D without contravening the general prohibition, or

(iii)

an overseas person who carries on activities specified by any of articles 25E, 53D and 63J(1); and

(b)

the conditions mentioned in paragraph (2) are satisfied.

(2)

Those conditions are—

(a)

that the person making the introduction (“P”) does not receive any money, other than money payable to P on his own account, paid by the client for or in connection with any transaction which the client enters into with or through N as a result of the introduction; and

(b)

that before making the introduction P discloses to the client such of the information mentioned in paragraph (3) as applies to P.

(3)

That information is—

(a)

that P is a member of the same group as N;

(b)

details of any payment which P will receive from N, by way of fee or commission, for introducing the client to N;

(c)

an indication of any other reward or advantage received or to be received by P that arises out of his introducing clients to N.

F47(4)

In this article, “client” means—

(a)

for the purposes of paragraph (1), a borrower within the meaning given by article 61(3)(a)(i), or a person who is or may be contemplating entering into a regulated mortgage contract as such a borrower;

(b)

for the purposes of paragraph (1A), a reversion seller, a plan provider or a person who is or may be contemplating entering into a regulated home reversion plan as a reversion seller or as a plan provider;

(c)

for the purposes of paragraph (1B), a home purchaser or a person who is or may be contemplating entering into a regulated home purchase plan as a home purchaserF48;

(d)

for the purposes of paragraph (1C), an agreement provider, an agreement seller or a person who is or may be contemplating entering into a regulated sale and rent back agreement as an agreement provider or agreement seller.

F49Provision of information – contracts of insurance33B.

(1)

There is excluded from article 25(1) and (2) (arranging deals in investments) the making of arrangements for, or with a view to, a transaction for the sale or purchase of a contract of insurance, where that activity meets the conditions specified in paragraphs (2) and (3).

(2)

The conditions specified in this paragraph are that the activity—

(a)

consists of the provision of information about a potential policyholder to a relevant insurer or an insurance or reinsurance intermediary, or

(b)

consists of the provision of information to a potential policyholder about—

(i)

a contract of insurance, or

(ii)

a relevant insurer or insurance or reinsurance intermediary.

(3)

The condition specified in this paragraph is that the provider of the information does not take any step other than the provision of information to assist in the conclusion of a contract of insurance.

(4)

In this article—

F50“insurance intermediary” means a person other than—

(a)

an insurance or reinsurance undertaking or an employee of such an undertaking, or

  1. (b)

    an ancillary insurance intermediary,

who, for remuneration, takes up or pursues the activity of insurance distribution;

F51“reinsurance intermediary” means a person other than—

(a)

a reinsurance undertaking, or

  1. (b)

    an employee of a reinsurance undertaking,

who, for remuneration, takes up or pursues the activity of reinsurance distribution;

“relevant insurer” has the meaning given in article 39B(2) (claims management on behalf of an insurer etc.).

F52(5)

In paragraph (4)—

“ancillary insurance intermediary”, “insurance distribution” and “reinsurance distribution” have the same meaning as in article 4;

“remuneration” means any commission, fee, charge or other payment, including an economic benefit of any kind or any other financial or non-financial advantage or incentive offered or given.

Arrangements for the issue of shares etc.34.

(1)

There are excluded from article 25(1) and (2)—

(a)

arrangements made by a company for the purposes of issuing its own shares or share warrants; and

(b)

arrangements made by any person for the purposes of issuing his own debentures or debenture warrants;

and for the purposes of article 25(1) and (2), a company is not, by reason of issuing its own shares or share warrants, and a person is not, by reason of issuing his own debentures or debenture warrants, to be treated as selling them.

(2)

In paragraph (1), “company", “shares", “debentures", “share warrants" and “debenture warrants" have the meanings given by article 18(2).

F53(3)

This article is subject to article 4(4).

International securities self-regulating organisations35.

(1)

There are excluded from article 25(1) and (2) any arrangements made for the purposes of carrying out the functions of a body or association which is approved under this article as an international securities self-regulating organisation, whether the arrangements are made by the organisation itself or by a person acting on its behalf.

(2)

The Treasury may approve as an international securities self-regulating organisation any body corporate or unincorporated association with respect to which the conditions mentioned in paragraph (3) appear to them to be met if, having regard to such matters affecting international trade, overseas earnings and the balance of payments or otherwise as they consider relevant, it appears to them that to do so would be desirable and not result in any undue risk to investors.

(3)

The conditions are that—

(a)

the body or association does not have its head office in the United Kingdom;

(b)

the body or association is not eligible for recognition under section 287 or 288 of the Act (applications by investment exchanges and clearing houses) on the ground that (whether or not it has applied, and whether or not it would be eligible on other grounds) it is unable to satisfy the requirements of one or both of paragraphs (a) and (b) of section 292(3) of the Act (requirements for overseas investment exchanges and overseas clearing houses);

F54(ba)

the body or association is also not eligible to become F55... a third country central counterparty (as defined in section 285(1)(d) of the Act);

F56(bb)

the body or association is also not eligible to become F57... a third country CSD (as defined in section 285(1)(g) of the Act);

(c)

the body or association is able and willing to co-operate with F58the FCA and the PRA by the sharing of information and in other ways;

(d)

adequate arrangements exist for co-operation between F58the FCA and the PRA and those responsible for the supervision of the body or association in the country or territory in which its head office is situated;

(e)

the body or association has a membership composed of persons falling within any of the following categories, that is to say, authorised persons, exempt persons, and persons whose head offices are outside the United Kingdom and whose ordinary business involves them in engaging in activities which are activities of a kind specified by this Order (or would be apart from any exclusion made by this Part); and

(f)

the body or association facilitates and regulates the activity of its members in the conduct of international securities business.

(4)

In paragraph (3)(f), “international securities business" means the business of buying, selling, subscribing for or underwriting investments (or agreeing to do so), either as principal or agent, where—

(a)

the investments are securities or F59relevant investments and are of a kind which, by their nature, and the manner in which the business is conducted, may be expected normally to be bought or dealt in by persons sufficiently expert to understand the risks involved; and

(b)

either the transaction is international or each of the parties may be expected to be indifferent to the location of the other;

and, for the purposes of this definition, it is irrelevant that the investments may ultimately be bought otherwise than in the course of such business by persons not so expert.

(5)

Any approval under this article is to be given by notice in writing; and the Treasury may by a further notice in writing withdraw any such approval if for any reason it appears to them that it is not appropriate to it to continue in force.

F60Trade repositories35A.

F61(1)

A trade repository does not carry on an activity of the kind specified by article 25(2) by carrying on its functions of centrally collecting and maintaining records of—

F62(a)

derivatives under Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositoriesF63; or

(b)

securities financing transactions under the SFT regulation.

F64(2)

The reference in paragraph (1)(a) to Regulation (EU) 648/2012 is a reference to that instrument as it F65forms part of retained EU law.

F66Securitisation repositories35AB

A securitisation repository does not carry on an activity of the kind specified by article 25(2) by carrying on its functions of centrally collecting and maintaining records of securitisations under the EU Securitisation Regulation 2017.

F67Providing pensions guidance under Part 20A of the Act35B.

(1)

A person does not carry on an activity of the kind specified in article 25(1) or (2) by reason of providing pensions guidance under arrangements made with the Treasury pursuant to section 333B of the Act.

(2)

For the purposes of paragraph (1), pensions guidance given by a designated guidance provider is given under arrangements made with the Treasury.

Other exclusions36.

F68(1)

Article 25 is also subject to the exclusions in articles 66 (trustees etc.), 67 (profession or non-investment business), 68 (sale of goods and supply of services), 69 (groups and joint enterprises), 70 (sale of body corporate), 71 (employee share schemes)F69, 72 (overseas persons)F70,F71...72B (activities carried on by a provider of relevant goods or services), 72C (provision of information about contracts of insurance on an incidental basis)F72, 72AA (managers of F73UK UCITS and AIFs)F74, 72D (large risks contracts where risk situated F75outside the United Kingdom), 72G (local authorities) and 72H (insolvency practitioners).

F76(2)

F77Articles 25A, 25BF78, 25C and 25E are also subject to the exclusions in articles 66 (trustees etc.), 67 (profession or non-investment business), 72 (overseas persons)F79,F80...F81 72AA (managers of F73UK UCITS and AIFs) and 72G (local authorities).

F82(2A)

Article 25A is also subject to the exclusion in article 72I (registered consumer buy-to-let mortgage firms).

F83(3)

Article 25D is also subject to F84the exclusions in articles 72 (overseas persons)F85, 72AA (managers of F73UK UCITS and AIFs) and 72H (insolvency practitioners).