PART 2 U.K.Exempt and third-country investment firms

CHAPTER 1U.K.Exempt investment firms

Requirements applying to exempt investment firmsU.K.

6.—(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—

[F1(i)an investment firm which—

(aa)has a Part 4A permission to carry on regulated activities relating to investment services and activities; or

(bb)is authorised in accordance with the markets in financial instruments directive;]

[F2(ii)a credit institution which—

(aa)has a Part 4A permission to carry on the regulated activity of accepting deposits and falls within paragraph (3A); or

(bb)is authorised in accordance with Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and investment firms;]

[F3(iii)a branch of an investment firm or of a credit institution authorised in a third country and which is subject to, and complies with, prudential rules considered by the appropriate regulator to be at least as stringent as those laid down in the markets in financial instruments directive, the capital requirements regulation, and the solvency 2 directive;]

(iv)a collective investment undertaking authorised under the law of [F4the United Kingdom or 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 [F5a UK regulated market or] a regulated market in an EEA State.

[F6(3A) A credit institution falls within this paragraph if—

(a)it has its head office in the United Kingdom; and

(b)it is not a credit union within the meaning of the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985, or a friendly society within the meaning of section 417(1) of the Act.]

[F7(4) In paragraph (3), “investment company with fixed capital” means a company—

(a)the exclusive object of which is to invest its funds in various stocks and shares, land or other assets with the sole aim of spreading investment risks and giving its shareholders the benefit of the results of the management of their assets; and

(b)which offers its own shares for subscription by the public.]

F8(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F9(6) In this regulation—

“appropriate regulator” means the appropriate regulator for the purposes of section 55A in relation to an application under regulation 4(1);

[F10“the capital requirements regulation” means Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms;]

“the solvency 2 directive” means Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).]

Textual Amendments

Marginal Citations

M1Section 55L was inserted by section 11(2) of the Financial Services Act 2012.

M2Section 55M was inserted by section 11(2) of the Financial Services Act 2012.

M3Section 55X(1) was inserted by section 11(2) of the Financial Services Act 2012.

M4Section 55X(4) was inserted by section 11(2) of the Financial Services Act 2012.

M5Section 55Z3 was inserted by section 11(2) of the Financial Services Act 2012.