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AUTH 2 Annex 2 Regulated activities and the permission regime

AUTH 2 Annex 2.1 G

1.1 G

Table 1 is designed to relate the permission regime to regulated activities. Section 42(6) of the Act gives the FSA the power to describe the regulated activity or regulated activities for which it gives permission in such manner as the FSA considers appropriate. Table 1 details how the FSA has chosen to describe the regulated activities and specified investments for the purposes of the permission regime.1

1.2 G

In an application for Part IV permission, an applicant will need to state the regulated activities it requires permission to carry on. This will involve an applicant identifying the regulated activities and the specified investments associated with those activities for which it requires Part IV permission.

1.3 G

Part II of the Regulated Activities Order (Specified activities) specifies the activities for the purposes of section 22 of the Act. This section states that an activity is a regulated activity if it is an activity of a specified kind which is carried on by way of business and:

(1)

relates to an investment of a specified kind; or

(2)

in the case of an activity specified for the purposes of section 22(1)(b) of the Act, is carried on in relation to property of any kind.

Part III of the Regulated Activities Order (Specified investments) specifies the investments referred to at AUTH 2 Annex 2.5

1.4 G

Column 1 of Table 1 lists the regulated activities and column 2 lists the associated specified investments. Descriptions of some categories of specified investments are expanded in Tables 2 and 3. There are notes to all three tables which provide further explanation where appropriate.

1.5 G

A reference to an article in the tables in AUTH 2 Annex 2 G is to the relevant article in the Regulated Activities Order.

7

Table 1: Regulated Activities [See note 1 to Table 1]

Regulated activity

Specified investment in relation to which the regulated activity (in the corresponding section of column one) may be carried on

Accepting deposits 5

(a) accepting deposits (article 5)

deposit (article 74)

Issuing electronic money 5

(aa) issuing electronic money (article 9B)

electronic money (article 74A)

Insurance business

(b) effecting contracts of insurance (article 10(1))

contract of insurance (article 75) [Expanded in Table 2]

(c) carrying out contracts of insurance (article 10(2))

Designated investment business [see note 1A and 1B to Table 1] 5

(d) dealing in investments as principal (article 14) [see note 2 to Table 1]

security [Expanded in Table 3]; or

(e) dealing in investments as agent (article 21) [see note 2 to Table 1]

contractually based investment [Expanded in Table 3]

(f) arranging (bringing about) deals in investments (article 25(1)) [see note 1B to Table 1] [also see Sections of Table 1 headed 'Lloyd's market' and 'regulated mortgage activities']5

(g) making arrangements with a view to transactions in investments (article 25(2)) [see note 1B to Table 1] [also see Sections of Table 1 headed 'Lloyd's market' and 'regulated mortgage activities']5

(h) managing investments (article 37) [see note 3 to Table 1]

(i) safeguarding and administering investments (article 40) [see note 3 Table 1]

For the purposes of the permission regime, this regulated activity is subdivided into:

(i)

safeguarding and administration of assets (without arranging);

(ii)

arranging safeguarding and administration of assets

(j) advising on investments (article 53) [see note 1B to Table 1] [also see Section of Table 1 headed 'Lloyd's market' and 'regulated mortgage activity']5

For the purposes of the permission regime, this regulated activity is subdivided into:

(i)

advising on investments (except pension transfers and pension opt-outs);

(ii)

advising on pension transfers and pension opt-outs [see note 4 to Table 1]

(k) sending dematerialised instructions (article 45(1))

(l) causing dematerialised instructions to be sent (article 45(2))

(m) establishing, operating or winding up a collective investment scheme (article 51(1(a))

[see note 5 to Table 1]

For the purposes of the permission regime, this regulated activity is subdivided into:

(i)

establishing, operating or winding up a regulated collective investment scheme;

(ii)

establishing, operating or winding up an unregulated collective investment scheme

(n) acting as trustee of an authorised unit trust scheme (article 51(1)(b))

(o) acting as the depositary or sole director of an open-ended investment company (article 51(1)(c))

(p) establishing, operating or winding up a stakeholder pension scheme (article 52)

(pp) providing advice on a stakeholder product(article 52B)7

those specified investments that are also a stakeholder product [see note 7]7

Insurance mediation activity [see note 5A to Table 1] 5

(pa) dealing in investments as agent (article 21)5

life policy [see note 5B to Table 1]5

(pb) arranging (bringing about) deals in investments (article 25(1))5

pure protection contract [see note 5C to Table 1]5

(pc) making arrangements with a view to deals in investments (article 25(2))5

general insurance contract [see note 5D to Table 1]5

(pd) assisting in the administration and performance of a contract of insurance (article 39A)5

rights to or interests in investments (Article 89) in so far as they relate to a life policy5

(pe) advising on investments (article 53)5

For the purposes of the permission regime, this regulated activity is subdivided into:5

(i)5

advising on investments (except pension transfers or pension opt-outs);5

(ii) 5

advising on pension transfers or pension opt-outs [See note 5E to Table 1]5

The Lloyd's market [see note 6 to Table 1]

(q) advising on syndicate participation at Lloyd's (article 56)

membership of a Lloyd's syndicate (article 86(2))

(r) managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's (article 57)

underwriting capacity of a Lloyd's syndicate (article 86(1))

(s) arranging (bringing about) deals in investments (article 25(1))

underwriting capacity of a Lloyd's syndicate (article 86(1)), membership of a Lloyd's syndicate (Article 86(2)) or rights to or interests in investments (Article 89) in so far as they relate to underwriting capacity of a Lloyd's syndicate or membership of a Lloyd's syndicate5

(t) making arrangements with a view to transactions in investments (article 25(2))

Funeral plan providers 5

(u) entering as provider into a funeral plan contract (article 59) [see note 1A]

funeral plan contract (article 87)

Regulated mortgage activity 5

(v) arranging (bringing about) regulated mortgage contracts (article 25(A)(1))5

regulated mortgage contract (Article 88)5

(w) making arrangements with a view to regulated mortgage contracts (article 25(A)(2))5

(x) advising on regulated mortgage contracts (article 53A)5

(y) entering into a regulated mortgage contract (article 61(1))5

(z) administering a regulated mortgage contract (article 61(2))532

77777

Notes to Table 1

Note 1:

In addition to the regulated activities listed in Table 1, article 64 of the Regulated Activities Order specifies that agreeing to carry on a regulated activity is itself a regulated activity in certain cases. This applies in relation to all the regulated activities listed in Table 1 apart from:5

• accepting deposits (article 5);

issuing electronic money (article 9B)

effecting and carrying out contracts of insurance (article 10);

establishing, operating or winding up a collective investment scheme (article 51(a));

acting as trustee of an authorised unit trust scheme (article 51(1)(b));

acting as the depositary or sole director of an open-ended investment company (article 51(1)(c)); and

establishing, operating or winding up a stakeholder pension scheme (article 52).

Permission to carry on the activity of agreeing to carry on a regulated activity will be given automatically by the FSA in relation to those other regulated activities for which an applicant is given permission (other than those activities in articles 5, 9B, 10, 51 and 52 detailed above).

Note 1A: 5

Funeral plan contracts are contractually based investments. Accordingly, the following are regulated activities when carried on in relation to a funeral plan contract: (a) arranging (bringing about) deals in investments, (b) making arrangements with a view to transactions in investments, (c) managing investments, (d) safeguarding and administering investments, (e) advising on investments, (f) sending dematerialised instructions and (g) causing dematerialised instructions to be sent (as well as agreeing to carry on each of the activities listed in (a) to (g)). However, they are not designated investment business.5

Note 1B: 5

Life policies are contractually based investments. Where the regulated activities listed as designated investment business in (e) to (g) and (j) are carried on in relation to a life policy, these activities also count as 'insurance mediation activities'. The full list of insurance mediation activities is set out in (pa) to (pe). The regulated activities of agreeing to carry on each of these activities will, if carried on in relation to a life policy, also come within both designated investment business and insurance mediation activities.5

Note 2:

For the purposes of the regulated activities of dealing in investments as principal (article 14) and dealing in investments as agent (article 21), the definition of contractually based investments [expanded in Table 3] excludes a funeral plan contract (article 87) and rights to or interests in funeral plan contracts.

Note 3:

(i) The regulated activities of managing investments (article 37) and safeguarding and administering investments (article 40) may apply in relation to any assets, in particular circumstances, if the assets being managed or safeguarded and administered include, or may include, any security or contractually based investment.

Note 4:

(j) For the purposes of the permission regime, the activity in (j)(ii) of advising on pension transfers and pension opt-outs is carried on in respect of the following specified investments:

unit (article 81);

stakeholder pension scheme (article 82); and

life policy (as defined in note 5);

rights to or interests in investments in so far as they relate to a unit, a stakeholder pension scheme or a life policy.5

Note 5:

Article 4(2) of the Regulated Activities Order specifies the activities (m) to (p) for the purposes of section 22(1)(b) of the Act. That is, these activities will be regulated activities if carried on in relation to any property and are not expressed as relating to a specified investment.

Note 5A: 5

Where they are carried on in relation to a life policy, the activities listed as insurance mediation activities in (pa) to (pe) (as well as the regulated activity of agreeing to carry on those activities) are also designated investment business.5

Note 5B: 5

Life policy is the term used in the Handbook to mean 'qualifying contract of insurance' (as defined in Article 3(1) of the Regulated Activities Order), and except in COB 3, AUTH App 1 and AUTH App 5 the term also includes a long-term care insurance contract which is a pure protection contract.56

Note 5C: 5

Pure protection contract is the term used in the Handbook to mean a long-term insurance contract which is not a life policy.

Note 5D: 5

General insurance contract is the term used in the Handbook to mean contract of insurance within column 1 of Table 2.5

Note 5E: 5

For the purposes of the permission regime, the activity in (pe)(ii) of advising on pension transfers and pension opt-outs is carried on in respect of the following specified investments:5

life policy (explained in note 5A);5

rights to or interests in investments in so far as they relate to a life policy.5

Note 6:

Section 315 of the Act (The Society: authorisation and permission) states that the Society of Lloyd's has permission to carry on the regulated activities referred to in that section, one of which is specified in article 58 of the Regulated Activities Order. This permission is unique to the Society of Lloyd's.

Note 7: 7

A stakeholder product is defined in the Glossary as:7

• an investment of a kind specified in the Stakeholder Regulations;7

• a stakeholder pension scheme; and7

• a stakeholder CTF.7

Table 2: Contracts of insurance

Contract of insurance (article 75 of the RAO)

(a) general insurance contract (Part I of Schedule 1 to the Regulated Activities Order)

(b) long-term insurance contract (Part II of Schedule 1 to the Regulated Activities Order)

1.1.3 Number

(1)

1

Accident (paragraph 1)

life and annuity (paragraph I)

(a)

2

Sickness (paragraph 2)

marriage and birth (paragraph II)

(i)

3

Land vehicles (paragraph 3)

linked long-term (paragraph III)

(ii)

4

Railway rolling stock (paragraph 4)

permanent health (paragraph IV)

(iii)

5

Aircraft (paragraph 5)

tontines (paragraph V)

(iv)

6

Ships (paragraph 6)

capital redemption (paragraph VI)

(v)

7

Goods in transit (paragraph 7)

pension fund management (paragraph VII)

(vi)

8

fire and natural forces (paragraph 8)

collective insurance (paragraph VIII)

(vii)

9

damage to property (paragraph 9)

social insurance (paragraph IX)

(viii)

10

motor vehicle liability (paragraph 10)

(ix)

11

aircraft liability (paragraph 11)

(x)

12

liability of ships (paragraph 12)

(xi)

13

general liability (paragraph 13)

(xii)

14

credit (paragraph 14)

(xiii)

15

suretyship (paragraph 15)

(xiv)

16

miscellaneous financial loss (paragraph 16)

(xv)

17

legal expenses (paragraph 17)

(xvi)

18

assistance (paragraph 18)

Notes to Table 2

Note 1:See IPRU(INS) Ann 10.2 Part II for the groups of classes of general insurance business from the Annex to the First non-Life Directive.

Note 2:See IPRU(INS) 11.8 and the definition of ancillary risks in IPRU(INS) and AUTH 3.12.6 G to AUTH 3.12.12 G for guidance on the treatment of supplementary and ancillary provisions in relation to contracts of insurance.4

Table 3: Securities, contractually based investments and relevant investments [see notes 1 and 2 to Table 3] 5

Security (article 3(1))

Contractually based investment (article 3(1)) 5

Relevant investment (article 3(1)) 5

share (article 76)

debenture (article 77)

government and public security (article 78)

warrant (article 79)

certificate representing certain security (article 80)

unit (article 81)

stakeholder pension scheme (article 82)

rights to or interests in investments (article 89) in so far as they relate to any of the above categories of security

option (article 83)

For the purposes of the permission regime, option is subdivided into:

option (excluding a commodity option and an option on a commodity future);

commodity option and option on a commodity future.

future (article 84)

For the purposes of the permission regime, future is subdivided into:

future (excluding a commodity future and arolling spot forex contract);

commodity future;

rolling spot forex contract.

contract for differences (article 85)

For the purposes of the permission regime, contract for differences is subdivided into:

contract for differences (excluding a spread bet and a rolling spot forex contract);

spread bet;

rolling spot forex contract.

life policy (but excluding a long-term care insurance contract which is a pure protection contract) [see note 5B to Table 1]6

funeral plan contract (article 87) [see note 1A to Table 1]5

rights to or interests in investments (article 89) in so far as they relate to any of the above categories of contractually based investment.

contractually based investment (article 3(1))5

pure protection contract [see note 5C to Table 1] 5

general insurance contract [see note 5D to Table 1] 5

Notes to Table 3

Note 1:

1. Security, contractually based investment and relevant investment are not, in themselves, specified investments they are defined as including a number of specified investments as set out in Table 3. Relevant investments is the term that is used to cover contractually based investments together with rights under a general insurance contract and a pure protection contract.5

Note 2:

(1) For the purposes of the regulated activities of dealing in investments as principal (article 14) and dealing in investments as agent (article 21), the definition of contractually based investments excludes a funeral plan contract (article 87) and rights to or interests in funeral plan contracts.