PART 2Exempt and third-country investment firms
CHAPTER 1Exempt investment firms
Requirements applying to exempt investment firms6
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 M1 (imposition of requirements by FCA) (where the FCA is the appropriate regulator) or 55M M2 (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) M3 (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) M4 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) M5 (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 M6;
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 M7.
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.