The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2003

Explanatory Note

(This note is not part of the Order)

This Order implements in part the European Parliament and Council Directive 2002/92/EC on insurance mediation (“the Directive”). A Transposition Note setting out how the main elements of the Directive will be transposed into UK law is available from the Banking and General Insurance Team, HM Treasury, 1 Horseguards Road, London SW1A 2HQ. The Transposition Note is also on HM Treasury’s website (www.hm-treasury.gov.uk).

Part 2 of the Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (“the Regulated Activities Order”). It provides for insurance mediation activities (dealing as agent in contracts of insurance, arranging deals in contracts of insurance, assisting in the performance and administration of a contract of insurance and advising on the merits of buying or selling a contract of insurance) to be regulated activities, to the extent that such activities are not already regulated. Part 2 also amends the exclusions in the Regulated Activities Order from specified kinds of activities. In particular, this Order inserts a number of new exclusions in relation to activities in relation to contracts of insurance sold as part of a package (including travel insurance and extended warranties) and in relation to the provision of information on an incidental basis in the context of another professional activity.

Part 3 of the Order amends the Regulated Activities Order so as to make provision for appointed representatives (within the meaning of section 39 of the Financial Services and Markets Act 2000—“the Act”) and members of a designated professional body (within the meaning of Part XX of the Act) who carry on insurance mediation activities without being authorised persons (within the meaning of the Act). In accordance with the provisions of the Directive, the amendments require the Financial Services Authority to maintain a record of such persons.

Part 4 of the Order makes a number of miscellaneous amendments to legislation made under the Act. Article 14 amends the Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 (S.I. 2001/1217) so as to permit appointed representatives to carry on certain insurance mediation activities. These Regulations are also amended so as to require that the contract between the appointed representative and his principal must provide that the representative is not permitted or required to carry on certain activities in relation to a contract of insurance unless he is included in the record of insurance intermediaries maintained by the Financial Services Authority under section 347 of the Act. Article 15 amends the Financial Services and Markets Act 2000 (Compensation Scheme: Electing Participants) Regulations 2001 (S.I. 2001/1783) so as to provide that EEA firms who exercise their right to establish a branch, or to provide services, in the UK pursuant to the Directive are not automatically subject to the Financial Services Compensation Scheme established pursuant to the Act. Article 16 amends the Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities) Order 2001 (S.I. 2001/1227) to ensure that members of certain professional bodies can, in accordance with the provisions of Part XX of the Act, carry on insurance mediation activities. Article 17 amends the Financial Services and Markets Act 2000 (Misleading Statements and Practices) Order 2001 (S.I. 2001/3645) so as to make section 397 of the Act (misleading statements and practices) apply to all insurance mediation activities. Article 18 amends the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (S.I. 2001/1177) so as to provide that a person is not to be regarded as carrying on by way of business any insurance mediation activity unless he takes up or pursues that activity for remuneration.

Part 5 makes certain provisions in relation to insurance mediation activities. Article 19 makes a number of amendments to Schedule 6 to the Act (threshold conditions). These amendments reflect the provisions of the Directive which relate to the location of offices of an insurance intermediary. Article 20 amends section 49 of the Act (consultation of relevant home state regulators when considering application for, or variation or cancellation of, Part IV permission) in so far as it relates to those who carry on insurance mediation activities. Article 21 confers a conditional exemption from the obligations imposed by Part XII of the Act on controllers of insurance intermediaries to notify the Financial Services Authority of any change of control.

Part 6 makes transitional provisions in relation to this Order. In particular, it extends the time in which the Financial Services Authority must determine applications for permission under Part IV of the Act to carry on regulated activities in relation to contracts of insurance and the time in which the Financial Services Authority must determine applications for approval for persons to carry on certain functions in relation to those regulated activities. Separate provision is made in relation to applications in connection with the mediation of long-term care insurance in consequence of the commencement provisions of this Order.