The Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order 2018

PART 3 Amendments to the Act

Amendments to the Act

9.  This Part amends the Act.

Applications under Part 4A

10.—(1) In section 55R (persons connected with an applicant)(1), in subsection (2)(a)(2), after “insurance”, insert “, ancillary insurance”.

(2) In section 55V (determination of applications), after subsection (8)(3), insert—

“(9) In the case of an application which—

(a) is for a Part 4A permission or a variation of a Part 4A permission, and

(b) relates only to the undertaking of insurance distribution activity,

subsection (1) has effect as if the reference to “6 months” were to “3 months”.

(10) In this section, “insurance distribution activity” has the meaning given in article 92 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.”.

Financial promotion rules

11.  In section 137R (financial promotion rules)(4), in subsection (5)(b)(5)—

(a) at the end of sub-paragraph (iii), omit “or”; and

(b) after sub-paragraph (iv)(6) insert—

“or

(v) Article 17 of the insurance distribution directive,”.

Incoming firms: appropriate regulator primarily responsible for securing compliance

12.  After section 194C (contravention by relevant EEA firm with UK branch of requirement in mortgages directive: appropriate regulator primarily responsible for securing compliance)(7), insert—

“Contravention by relevant EEA firm of requirement in insurance distribution directive: appropriate regulator primarily responsible for securing compliance

194D.— (1) This section applies if—

(a) a relevant EEA firm has a branch in the United Kingdom; and

(b) the appropriate regulator ascertains that the firm has contravened, or is contravening, a requirement to which Article 8.1 of the insurance distribution directive applies.

(2) The appropriate regulator may exercise its powers of intervention in respect of the relevant EEA firm.

(3) Subsection (2) applies whether or not the appropriate regulator’s power of intervention is also exercisable as a result of section 194, 195 or 195C.

(4) If the appropriate regulator exercises its power in respect of the relevant EEA firm by virtue of subsection (2), it must notify the home state regulator, the Commission and EIOPA without undue delay of—

(a) the fact that the appropriate regulator has exercised that power in respect of that firm;

(b) any requirements it has imposed on the firm in exercise of the power; and

(c) the reasons for the exercise of that power.

(5) In this section—

“appropriate regulator” means—

(a)

where the relevant EEA firm is a PRA-authorised person, the FCA or the PRA;

(b)

in any other case, the FCA;

“relevant EEA firm” means an EEA firm falling within paragraph 5(e) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the insurance distribution directive.”.

Division of competence between home and host state regulators

13.  After section 195B (contravention by relevant EEA firm of requirement in mortgages directive: home state regulator primarily responsible for securing compliance)(8), insert—

“Contravention by relevant EEA firm of requirement in insurance distribution directive: home state regulator primarily responsible for securing compliance

195C.— (1) This section applies if the appropriate regulator has reason to believe that a relevant EEA firm has contravened, or is contravening, a requirement to which Article 5.1 or 8.2 of the insurance distribution directive applies, unless that firm is the subject of an agreement under section 203A (in which case, the provisions in that agreement apply).

(2) The appropriate regulator must notify the relevant EEA firm’s home state regulator of the situation mentioned in subsection (1).

(3) The notice under subsection (2) must—

(a) request that the home state regulator take all appropriate measures for the purpose of ensuring that the relevant EEA firm puts an end to the contravention;

(b) state that the appropriate regulator’s power of intervention is likely to become exercisable in relation to the relevant EEA firm if it continues the contravention; and

(c) indicate any requirements that the appropriate regulator proposes to impose on the relevant EEA firm in exercise of its power of intervention in the event of the power becoming exercisable.

(4) The appropriate regulator may exercise its power of intervention in respect of the relevant EEA firm if—

(a) a reasonable period of time has elapsed since the giving of the notice under subsection (2), and

(b) conditions A to C are satisfied.

(5) Condition A is that—

(i) the home state regulator of the relevant EEA firm has failed or refused to take measures for the purpose mentioned in subsection (3)(a), or

(ii) any measures taken by the home state regulator have proved inadequate for that purpose.

(6) Condition B is that the relevant EEA firm is acting in a manner which is clearly prejudicial to the interests of consumers in the United Kingdom or to the orderly functioning of the markets.

(7) Condition C is that the appropriate regulator has informed the home state regulator of the relevant EEA firm of its intention to exercise its powers of intervention in respect of the firm.

(8) The appropriate regulator may exercise its powers of intervention in respect of a relevant EEA firm without complying with subsections (2) and (4)—

(a) in a case where the relevant EEA firm has a branch in the United Kingdom, where it decides that immediate action is necessary to protect the interests of consumers, and where measures of the home state regulator are inadequate or lacking; and

(b) in any other case, where it decides that immediate action is necessary to protect the interests of consumers.

(9) Subsections (4) and (8) apply whether or not the appropriate regulator’s power of intervention is also exercisable as a result of section 194, 194D or 195.

(10) If circumstances exist which enable the appropriate regulator to exercise its power of intervention under subsection (4), the appropriate regulator may refer the matter to EIOPA and request its assistance in accordance with Article 19 of Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority)(9).

(11) If the appropriate regulator exercises its power of intervention in respect of the relevant EEA firm by virtue of subsection (4) or (8), it must notify the home state regulator, the Commission and EIOPA, without undue delay of—

(a) the fact that the appropriate regulator has exercised that power in respect of that firm;

(b) any requirements it has imposed on the firm in exercise of the power; and

(c) the reasons for the exercise of that power.

(12) Subsection (2) is not to be regarded as requiring the PRA to notify the home state regulator in relation to the situation mentioned in subsection (1) in a case where the PRA is satisfied that the FCA is required to act, and is acting, or has acted, under subsection (2) in relation to that situation.

(13) In this section—

“appropriate regulator” means—

(a)

where the relevant EEA firm is a PRA-authorised person, the FCA or, subject to subsection (12), the PRA;

(b)

in any other case, the FCA;

“relevant EEA firm” means an EEA firm falling within paragraph 5(e) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the insurance distribution directive.”.

Agreements between regulators to exercise enhanced supervision

14.  After Part 13 (incoming firms: intervention by FCA or PRA)(10) insert—

“PART 13A Enhanced supervision of firms exercising rights under the Insurance Distribution Directive

Insurance distribution directive: enhanced supervision of EEA firms by UK regulators

203A.— (1) The appropriate regulator may agree with a relevant EEA firm’s home state regulator that the appropriate regulator may exercise relevant functions in relation to the firm.

(2) The appropriate regulator must notify the firm and EIOPA of the agreement without delay.

(3) Subsection (2) does not require the PRA to notify the firm and EIOPA where the PRA is satisfied that the FCA is required to do so, or has done so, or will do so.

(4) An agreement under subsection (1) must specify which relevant functions the appropriate regulator may exercise in relation to the firm.

(5) The appropriate regulator may exercise relevant functions in relation to the firm in accordance with the agreement, as if the firm were a UK firm.

(6) In this section—

“appropriate regulator” means—

(a)

where the relevant EEA firm is a PRA-authorised person, the FCA or, subject to subsection (3), the PRA;

(b)

in any other case, the FCA;

“relevant functions” means any functions that may be exercised by the appropriate regulator in relation to a UK firm, that exist to implement, or enable to be implemented, obligations in Chapters IV to VII of the insurance distribution directive (or any functions that exist to deal with matters arising out of, or related to, any such obligations);

“primary place of business”, in relation to a firm, means the location from where the main business of the firm is managed;

“relevant EEA firm” means an EEA firm falling within paragraph 5(e) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the insurance distribution directive and whose primary place of business is the United Kingdom; and

“UK firm” has the meaning given in paragraph 10 of Schedule 3.

Insurance distribution directive: enhanced supervision of UK firms by an EEA regulator

203B.— (1) This section applies where—

(a) a UK firm is exercising a right derived from the insurance distribution directive in an EEA State other than the United Kingdom, and

(b) that EEA State is the firm’s primary place of business.

(2) The appropriate regulator may agree with the host state regulator for that EEA State that the host state regulator may exercise relevant functions in relation to the UK firm.

(3) In this section—

“appropriate regulator” means—

(a)

where the relevant UK firm is a PRA-authorised person, the FCA or the PRA;

(b)

in any other case, the FCA;

“relevant functions” means any functions that may be exercised by the host state regulator in relation to a firm for whom that regulator is its home state regulator, that exist to implement, or enable to be implemented, obligations in Chapters IV to VII of the insurance distribution directive (or any functions that exist to deal with matters arising out of, or related to, any such obligations);

“host state regulator” has the meaning given in paragraph 11 of Schedule 3;

“primary place of business”, in relation to a firm, means the location from where the main business of the firm is managed;

“UK firm” has the meaning given in paragraph 10 of Schedule 3.

Modification or waiver of rules where firm subject to enhanced supervision

203C.— (1) Where a firm is subject to an agreement under section 203A or 203B, the appropriate regulator may direct that all or any of its rules—

(a) do not apply to that firm, or

(b) apply to that firm with such modifications as may be specified in the direction.

(2) The appropriate regulator may not give or vary a direction unless it is satisfied that—

(a) compliance by the firm with the rules, or with the rules as unmodified, would not give effect to the agreement under section 203A or 203B (as the case may be), and

(b) the direction would not adversely affect the advancement of any of the appropriate regulator’s objectives.

(3) In subsection (2)(b) “objectives”, in relation to the FCA, means operational objectives.

(4) The appropriate regulator may—

(a) revoke a direction, or

(b) vary it on its own initiative or on the application of the firm to which it relates.

(5) In this section, “appropriate regulator” means—

(a) where the firm is a PRA-authorised person, the FCA or the PRA;

(b) in any other case, the FCA.

Publication of directions under section 203C

203D.— (1) Subject to subsection (2), a direction under section 203C must be published by the appropriate regulator in the way appearing to the appropriate regulator to be the best calculated for bringing it to the attention of—

(a) persons likely to be affected, and

(b) persons who are, in the opinion of the appropriate regulator, likely to be subject to a similar direction.

(2) Subsection (1) does not apply if the appropriate regulator is satisfied that it is inappropriate or unnecessary to publish the direction.

(3) In deciding whether to publish the direction, the appropriate regulator must consider whether publication—

(a) would be detrimental to the stability of the financial system of the United Kingdom,

(b) would prejudice, to an unreasonable degree, the commercial interests of the person concerned, or

(c) would be contrary to an international obligation of the United Kingdom.

(4) In this section “appropriate regulator” means—

(a) where the firm is a PRA-authorised person, the FCA or the PRA;

(b) in any other case, the FCA.”.

Information under the Insurance Distribution Directive

15.  After section 354G (information under the UCITS Directive)(11) insert—

“Information under the Insurance Distribution Directive

354H.— (1) The FCA and the PRA must give the Commission information about any general difficulties which UK insurance distributors encounter—

(a) in establishing themselves, or

(b) in carrying out insurance distribution or reinsurance distribution,

in any territory or country other than an EEA State.

(2) In this section—

“UK insurance distributor” is an insurance distributor, reinsurance intermediary or reinsurance undertaking (within the meanings in Article 2.1(5), (7) and (8) of the insurance distribution directive) whose home member state (within the meaning of Article 2.1(10) of the insurance distribution directive) is the United Kingdom;

“insurance distribution” has the meaning given in Article 2.1(1) of the insurance distribution directive; and

“reinsurance distribution” has the meaning given in Article 2.1(2) of the insurance distribution directive.”.

Publication

16.  After section 391D (publication: special provisions relating to the markets in financial instruments directive)(12), insert—

“Publication: special provisions relating to the insurance distribution directive

391E.— (1) This section applies where a supervisory notice, decision notice or final notice relates to the imposition of a sanction or measure to which Article 32 of the insurance distribution directive applies.

(2) Where a regulator publishes information under section 391(4) or (5) about a matter to which a decision notice or supervisory notice relates and the person to whom the notice is given refers the matter to the Tribunal, the regulator must, without undue delay, publish on its official website information about the status of the appeal and its outcome.

(3) Subject to subsection (4), where the regulator gives a final notice, it must, without undue delay, publish on its official website information on the type and nature of the breach and the identity of the person on whom the sanction or measure is imposed.

(4) The regulator may publish the information anonymously, defer publication of the information or withhold some, or all, of the information where—

(a) following an obligatory prior assessment, the regulator considers that publication of the identity of the person, or any personal data, would be disproportionate; or

(b) the regulator considers that publication would jeopardise the stability of financial markets or an ongoing investigation.

(5) The regulator must—

(a) inform EIOPA of all sanctions or measures imposed to which Article 32 of the insurance distribution directive applies (whether or not information about such matters is published) and all appeals against such a sanction or measure and the outcome of any appeals, without delay; and

(b) provide EIOPA annually with aggregate information about all such sanctions or measures imposed.

(6) In this section “supervisory notice” has the same meaning as in section 395.”.

EEA Passport Rights

17.—(1) Schedule 3 (EEA passport rights) is amended as follows.

(2) In paragraph 1(e) (the single market directives)(13), for “the insurance mediation directive” substitute “the insurance distribution directive”.

(3) For paragraph 4A (the insurance mediation directive)(14) and the heading before it, substitute—

“The insurance distribution directive

4A.   “The insurance distribution directive” means Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast)(15) as amended by Directive (EU) 2018/411 of the European Parliament and of the Council of 14 March 2018(16).”.

(4) In paragraph 5 (EEA firm), for sub-paragraph (e)(17), substitute—

“(e) an insurance intermediary (as defined in Article 2.1(3) of the insurance distribution directive), an ancillary insurance intermediary (as defined in Article 2.1(4) of that directive) or a reinsurance intermediary (as defined in Article 2.1(5) of that directive), which is registered with its home state regulator under Article 3 of that directive;”.

(5) In paragraph 6(a) (EEA authorisation)(18), for “insurance mediation directive” substitute “insurance distribution directive”.

(6) In paragraph 7A(a) (EEA right)(19), for “insurance mediation directive” substitute “insurance distribution directive”.

(7) In paragraph 10A(a) (UK firm)(20), for “insurance mediation directive” substitute “insurance distribution directive”.

(8) In paragraph 13 (establishment)—

(a) in sub-paragraph (1)(21), in the words before sub-paragraph (a), after “(d)” insert “, (e)”;

(b) after sub-paragraph (1)(c) insert—

“(ca) in the case of a firm falling within paragraph 5(e), the firm has been informed of the applicable provisions or one month has elapsed beginning with the date on which the appropriate UK regulator received the consent notice”;

(c) omit sub-paragraph (1A)(22);

(d) in sub-paragraph (2)(b)(23), after “5(a)” insert “, (e)”.

(e) after sub-paragraph (3B)(24) insert—

“(3C) If the appropriate UK regulator has received a consent notice in respect of a firm that falls within paragraph 5(e), it must—

(a) acknowledge receipt, and

(b) notify the firm’s home state regulator of the applicable provisions (if any),

before the end of one month beginning with the day on which the appropriate UK regulator received the consent notice.”.

(9) In paragraph 14 (services)—

(a) in sub-paragraph (1)(d)(25), for “5(e) or (i)” substitute “5(i)”; and

(b) after sub-paragraph (3), insert—

“(3AZA) If the appropriate UK regulator has received a relevant notice in respect of a firm that falls within paragraph 5(e), it must—

(a) acknowledge receipt, and

(b) notify the firm’s home state regulator of the applicable provisions (if any).”.

(10) In paragraph 19 (establishment)—

(a) in sub-paragraph (5)(a)(26), omit “the insurance mediation directive or”;

(b) after sub-paragraph (5)(a), insert—

“(aa) if the EEA right in question derives from the insurance distribution directive, that either—

(i) the host state regulator has notified the appropriate UK regulator of the applicable provisions; or

(ii) one month has elapsed beginning with the date on which the appropriate UK regulator gave the consent notice;”;

(c) omit sub-paragraph (5A)(27);

(d) in sub-paragraph (7A)(28)—

(i) in paragraph (a), for “insurance mediation directive”, substitute “insurance distribution directive”;

(ii) in the wording after paragraph (c), after “consent notice” insert “unless it has reason to doubt the adequacy of the firm’s resources or its administrative structure”; and

(e) in sub-paragraph (9)(29), after “Solvency 2 Directive”, insert “, or the insurance distribution directive,”;

(f) in sub-paragraph (11), at the beginning insert “Except where paragraph (11ZA) applies,”;

(g) after sub-paragraph (11) insert—

“(11ZA) If the firm’s EEA right derives from the insurance distribution directive, where the appropriate UK regulator has given a consent notice and the host state regulator has acknowledged receipt of that notice, the appropriate UK regulator must give written notice to the firm concerned that the host state regulator has received the consent notice.”;

(h) in sub-paragraph (12A)(30), after paragraph (a) insert—

“(aa) if the firm’s EEA right derives from the insurance distribution directive, one month beginning with the date on which the appropriate UK regulator received the notice of intention;”.

(11) In paragraph 20(3B) (services)(31)—

(a) in the words before paragraph (a), for the words from “insurance” to “territory” substitute “insurance distribution directive”;

(b) at the end of sub-paragraph (a), insert “and”;

(c) for paragraph (b), substitute—

“(b) when the host state regulator has acknowledged receipt of that copy, the appropriate UK regulator must—

(i) give written notice to the firm concerned that the host state regulator has received the notice of intention, and that the firm may begin providing the services to which the notice of intention relates, and

(ii) notify the firm concerned of the applicable provisions (if any).”;

(d) omit sub-paragraph (c) and the “and” immediately preceding it.

(12) After paragraph 20(4I)(b) (services)(32), insert—

“(c) “applicable provisions” means the host state rules with which the firm is required to comply when providing services in the EEA State concerned;

(d) “host state rules” means rules—

(i) made in accordance with the insurance distribution directive; and

(ii) which are the responsibility of the EEA State concerned (both as to implementation and as to supervision and compliance) in accordance with that directive.”.

(13) In paragraph 25 (information to be included in the public record)(33), for “insurance mediation directive” substitute “insurance distribution directive”.

Miscellaneous

18.—(1) In section 328 (directions in relation to the general prohibition), in subsection (6)(b)(34), for “insurance mediation directive”, substitute “insurance distribution directive”.

(2) In section 417(1) (definitions) after the definition of “EBA”(35) insert—

““EIOPA” means the European Insurance and Occupational Pensions Authority established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority);”.

(3) In section 425 (expressions relating to authorisation elsewhere in the single market), in subsection (1)(a)(36), for “insurance mediation directive”, substitute “insurance distribution directive”.

(4) In paragraph 2B of Schedule 6 (threshold conditions: location of offices)(37), in sub-paragraphs (4) and (5) for “mediation” substitute “distribution”.

(1)

Part 4A (sections 55A to 55Z4) was inserted by section 11 of the Financial Services Act 2012.

(2)

Subsection (2)(a) was amended by S.I. 2017/701.

(3)

Subsection (8) was inserted by S.I. 2013/1773 and amended by S.I. 2013/1797.

(4)

Section 137R was inserted by section 24 of the Financial Services Act 2012.

(5)

Subsection (5) was amended by S.I. 2015/910.

(6)

Sub-paragraph (iv) was inserted by S.I. 2015/910.

(7)

Section 194C was inserted by S.I. 2015/910.

(8)

Section 195B was inserted by S.I. 2015/910.

(9)

O.J. 15.12.2010 L 331/48.

(10)

The heading to Part 13 was amended by paragraph 30 of Schedule 4 to the Financial Services Act 2012.

(11)

Section 354G was inserted by S.I. 2016/1095.

(12)

Section 391D was inserted by S.I. 2017/701.

(13)

Paragraph 1(e) was inserted by S.I. 2003/1473.

(14)

Paragraph 4A was inserted by S.I. 2003/1473.

(15)

O.J. 2.2.2016 L 26/19.

(16)

O.J. 19.3.2018 L 76/28.

(17)

Sub-paragraph (e) was inserted by S.I. 2003/1473.

(18)

Paragraph 6 was substituted by S.I. 2003/1473 and amended by S.I. 2012/1906.

(19)

Paragraph 7A was inserted by S.I. 2003/1473. There are amendments but none are relevant.

(20)

Paragraph 10A was inserted by S.I. 2003/1473. There are amendments but none are relevant.

(21)

Sub-paragraph (1) was amended by S.I. 2003/1473, S.I. 2003/2066, S.I. 2013/1773, and S.I. 2015/910.

(22)

Sub-paragraph (1A) was inserted by S.I. 2013/1472.

(23)

Sub-paragraph (2)(b) was amended by S.I. 2007/126 and S.I 2015/910.

(24)

Sub-paragraph (3B) was inserted by S.I. 2015/910.

(25)

Sub-paragraph (1)(d) was inserted by S.I. 2003/1473 and amended by S.I. 2015/910 and paragraph 3 of Schedule 4 to the Financial Services Act 2012.

(26)

Sub-paragraph (5) was substituted by S.I. 2003/1472 and amended by S.I. 2015/910.

(27)

Sub-paragraph (5A) was inserted by S.I. 2003/1473.

(28)

Sub-paragraph (7A) was inserted by S.I. 2003/1473 and amended by paragraph 10 of Schedule 4 to the Financial Services Act 2012.

(29)

Sub-paragraph (9) was amended by S.I. 2015/575.

(30)

Sub-paragraph (12A) was inserted by S.I. 2003/2066 and amended by paragraph 10 of Schedule 4 to the Financial Services Act 2012.

(31)

Sub-paragraph (3B) was inserted by S.I. 2003/1473 and amended by paragraph 11 of Schedule 4 to the Financial Services Act 2012.

(32)

Sub-paragraph (4I) was inserted by S.I. 2015/575.

(33)

Paragraph 25 was inserted by S.I. 2003/1473 and amended by paragraph 18 of Schedule 4 to the Financial Services Act 2012 and S.I. 2015/910.

(34)

Subsection (6) was substituted by S.I. 2003/1473 and amended by S.I. 2011/1053, paragraph 2 of Schedule 16 to the Financial Services Act 2012 and S.I. 2013/1883.

(35)

The definition of “EBA” was inserted by S.I. 2012/916.

(36)

Subsection (1)(a) was amended by S.I. 2003/2066, S.I. 2004/3379, S.I. 2006/2975, S.I. 2007/126, S.I. 2007/3253, S.I. 2012/1906, S.I. 2013/1773, S.I. 2013/3115, S.I. 2015/575 and S.I. 2015/910.

(37)

Paragraph 2B was inserted by S.I. 2013/555.