PERG 10.4A The application of EU Directives

Q41A. Are pension scheme trustees and administration service providers likely to be subject to authorisation under the Markets in Financial Instruments Directive or subject to the Directive on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms3?2

This is possible, but in many instances it is likely that pension scheme trustees and service providers will either not be providing an investment service for the purposes of, or otherwise be exempt under article 2.12 of, the Markets in Financial Instruments Directive2. The following table expands on this in broad terms.

As for the CRD3, this will only apply to persons who are MiFID investment firms2 or CRD credit institutions3.

Detailed guidance on the scope of MiFID and the CRD and EU CRR is in PERG 13.2

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Activity

Potential MiFID investment activity or service?2

2

Potential application of MiFID or of a MiFID article 2.1 exemption?2

2

Dealing in scheme assets as trustee

Execution of orders on behalf of clients2

2

MiFID2 will not apply provided the trustees are either not acting by way of business or otherwise are not holding themselves out as persons who provide a dealing service to third parties. This is because the trustees would not be regarded as providing an investment service to third parties on a professional basis

In any event,2 the trustee should be exempt under article 2.12(h) as manager or2 depositary (or both)2 of a pension fund2

2222

Issuing rights under a stakeholder or personal1 pension scheme to members

None - the rights are not MiFID financial instruments2

2

MiFID2 does not apply

2

Pension scheme service provider:

a. dealing in scheme assets as agent for the trustees

b. arranging deals in scheme assets as agent for the trustees2

c. arranging for persons to join the scheme or to switch or dispose of, or to acquire further, rights under the scheme2

a. Execution of orders on behalf of clients2

b. Receiving and transmitting orders

c. None - the rights are not MiFID financial instruments and neither are any rights to or interests in financial instruments that the scheme member may acquire under the scheme2

2

MiFID2 will potentially apply where the investments are MiFID2 financial instruments (such as shares, debt securities or units)

However, many pension schemes will be employee participation schemes, the administration of which is exempt under article 2.1(e)2

Where the service provider is providing services exclusively for the benefit of a corporate trustee who is a member of its group, the exemption in article 2.1(b)2 should apply. And article 2.1(f) will provide for the exclusions in 2.1(b) and 2.1(e) to be combined where the service provider is both administering an employee participation scheme and providing services to a trustee who is a group member2

Where the activity is receiving and transmitting orders and the service provider is authorised2, the optional2 intermediaries exemption in article 3 of MiFID2 may apply

If the service provider is acting as the operator of a stakeholder or personal pension scheme (for example, as the scheme administrator), he should2 be exempt under article 2.12(h) as manager of a pension fund2

22222222

Managing the assets of the scheme

Investment management

MiFID2 will not apply to trustees provided they are either not acting by way of business or otherwise are not holding themselves out as, or additionally remunerated for, providing investment management services. This is because the trustees would not be regarded as providing an investment service to third parties on a professional basis

In any event,2 trustees2 should be exempt under article 2.1(h) as manager or depositary (or both) of a pension fund2

If a service provider is acting as the operator of a stakeholder or personal pension scheme, he should also be exempt under article 2.1(h) as manager of a pension fund

But a service provider who is merely managing the assets of a pension fund without being the manager or depositary of the scheme will not be exempt under article 2.1(h). The manager and depositary are those persons charged with responsibility for managing the fund or safeguarding its assets and not persons to whom such functions may be delegated or outsourced

222

Safeguarding and administering the scheme assets

None

Safekeeping and administration of investments is a MiFID ancillary2 service

2

Establishing, operating or winding up a stakeholder or personal1 pension scheme

None

MiFID2 does not apply

2

a. Pension scheme trustee advising fellow trustees or members or prospective members2

b. Pension scheme service provider advising trustees or members or prospective members2

2

Investment advice

MiFID will potentially apply where the advice concerns MiFID financial instruments (such as shares, debt securities or units) and so may apply to advice given to the trustees about scheme assets. However, beneficial interests in financial instruments held under the trusts of a pension scheme will not themselves be financial instruments under MiFID. And rights under a personal pension or stakeholder pension scheme are also not financial instruments. So, advice given to scheme members or prospective members should not be investment advice under MiFID 2

MiFID will not apply to trustees who are advising their fellow trustees for the purposes of the trust provided they are not additionally remunerated for providing investment advisory services

Also, trustees will be exempt under article 2.1(h) in respect of anything they do in the capacity of manager or depositary of a pension fund (including advising their fellow trustees)2

If a service provider is acting as the operator of a stakeholder or personal pension scheme, he should also be exempt under article 2.1(h) as manager of a pension fund if he gives advice to the trustees2

Where the service provider is providing advice to a corporate trustee who is a member of its group, the exemption in article 2.1(b) may apply (and may be combined with the exemption for administration of an employee participation scheme under article 2.1(f) where relevant)2

2

Q41B. [deleted]2

Q41C. As a professional trustee of a pension scheme, am I affected by the implementation of the Insurance Mediation Directive?

No. A pension scheme trustee may perform tasks on behalf of the other trustees (such as signing proposal forms or giving dealing instructions to insurers or brokers or notifying claims on the death of a scheme member). But he will not be providing an insurance mediation service to them. This is because, under the policy, he will share equal rights and equal responsibility with his co-trustees and so may be regarded as acting solely in the capacity of policyholder rather than intermediary. Also, the pension scheme trustee will not be providing an insurance mediation service on behalf of the members as the members will not be policyholders.

Q41D. As a pension scheme administration service provider, am I affected by the implementation of the Insurance Mediation Directive?

You may be. Detailed guidance about the potential effect of the Insurance Mediation Directive on the normal activities of administration service providers is in Q31 to Q41 and the table in Annex 3.

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