One purpose of this chapter is to limit the activities of an ELMI to ones closely connected to issuing e-money. ELM simplifies, for ELMIs, the capital adequacy requirements that apply to banks and building societies but imposes controls that do not apply to them. Those controls include ones on the activities that an ELMI may carry on. The prudential requirements for ELMIs are not designed to support a wider range of activities. The limitation on activities provides further help in ensuring that an ELMI is able to redeem its e-money when it is required to.
The prohibition on issuing e-money at a discount avoids the financial risk that might affect an e-money firm that issues e-money for less than the amount required to redeem it. The prohibition also helps to prevent e-money firms from creating monetary value in an uncontrolled way. In an extreme case, that could lead the monetary stock to expand without central banks being able to monitor it. That would hinder monetary analysis and affect the adequacy of monetary policy instruments. If the activities of e-money firms were to become a source of such instability, that could prejudice consumers who deal with them.
The activities referred to in ELM 4.3.1 R are:
the provision of financial and non-financial services closely related to issuing e-money, such as:
the administering of e-money by the performance of operational and other ancillary functions related to its issuance; and
the issuing and administering of other means of payment; and
the storing (on behalf of other undertakings or public institutions) of data on e-money electronic devices on which e-money issued by the firm is stored or which can be used to use or spend e-money issued by the firm;
but excluding the granting of any form of credit.
A firm may be able to issue e-money in the way described in ELM 4.4.2 G without infringing ELM 4.4.1 R. A sum paid by a third party to the firm before the firmissues e-money can form part of the e-money issue price for that e-money if:
Under Principle 11, a firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice. If a firm decides to launch a promotion of the type described in ELM 4.4.2 G, the firm should notify the FSA of its intention and details about the promotion. Those details should include the type of promotion, any other businesses taking part in it, the likely amount over the life of the promotion of the difference between the monetary value of the e-money and the amount to be paid by those to whom the firm issues it and the proposed length of the promotion. The information should also include details about the persons who are to make the payments in ELM 4.4.2 G, how much each is to pay and when the payments are to be made.