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PROF 4.1 Disclosure rules

PROF 4.1.1 G

The effectiveness of arrangements made by a designated professional body for securing compliance with the rules in this chapter is one of the factors that the FCA must take into account in considering whether to exercise its powers to give a direction under section 328 of the Act (see PROF 3.2.5 G (2) and PROF 3.2.5 G (3)1.

PROF 4.1.2 R

An exempt professional firm must avoid making any representation to a client that:

  1. (1)

    it is authorised under the Act or regulated by the FCA; or

  2. (2)

    the regulatory protections provided by or under the Act to a person using the services of an authorised person are available.

PROF 4.1.3 R
  1. (1)

    An exempt professional firm must, before it provides a service which includes the carrying on of a regulated activity in the United Kingdom, other than an insurance mediation activity, with or for a client, disclose in writing to the client in a manner that is clear, fair and not misleading that it is not authorised under the Act.1

  2. (2)

    An exempt professional firm, must, before it provides a service which includes the carrying on of an insurance mediation activity with or for a client, make the following statement in writing to the client in a way that is clear, fair and not misleading and no less prominent than any other information provided to the client at the same time:

    "[This firm is]/[We are] not authorised by the Financial Conduct Authority2. However, we are included on the register maintained by the Financial Conduct Authority2 so that we can carry on insurance mediation activity, which is broadly the advising on, selling and administration of insurance contracts. This part of our business, including arrangements for complaints or redress if something goes wrong, is regulated by [DPB]. The register can be accessed via the Financial Conduct Authority2 website at www.fsa.gov.uk/register/home.do32."1

PROF 4.1.4 G
  1. (1)

    The FCA considers that material provided to satisfy PROF 4.1.3 R (1) and PROF 4.1.3R (2) need not be tailored to the individual client. The disclosures in PROF 4.1.3 R (1) and PROF 4.1.3R (2) may be provided alongside or integrated with other material provided to a client. Exempt professional firms may therefore include the information within engagement letters or client care letters, if they wish.1

  2. (2)

    The FCA considers that it is important that clients understand the implications for them of receiving services from an exempt professional firm that is not authorised under the Act. It is also important that clients understand the implications of the difference between authorisation under the Act and being on the register maintained by the FCA, so that the exempt professional firm can conduct insurance mediation activity, in relation to which activity the regulatory protections established by the Act for the benefit of consumers will not apply. The FCA therefore expects designated professional bodies to make rules covering the information to be provided to clients. These rules should requireexempt professional firmsto make a disclosure to clients containing the following elements:1

    1. (a)

      where the exempt professional firm conducts a regulated activity other than an insurance mediation activity, a statement that the exempt professional firm is not an authorised person;1

    2. (b)

      the nature of the regulated activities carried on by the exempt professional firm, and the fact that they are limited in scope;

    3. (c)

      a statement that the exempt professional firm is regulated for these regulated activities by the exempt professional firm's designated professional body, identifying the designated professional body concerned; 1

    4. (d)

      the nature of the complaints and redress mechanisms available to clients in respect of these regulated activities; and1

    5. (e)

      where the regulated activity consists of insurance mediation activity, the statement contained at PROF 4.1.3 R (2).1

  3. (3)

    Exempt professional firms should also ensure that any statement that makes reference to the FCA does not lead a client to suppose that the FCA has direct regulatory responsibility for the exempt professional firm. This could be a breach of PROF 4.1.2 R. This consideration is particularly important in relation to insurance mediation activity, where clients may well fail to appreciate the difference between authorisation under the Act and being included on the register maintained by the FCA so as to permit the exempt professional firm to carry on insurance mediation activity.1

PROF 4.1.5 G

For further guidance on when a regulated activity is carried on 'in the United Kingdom', exempt professional firms are referred to section 418 of the Act and the guidance in PERG 2.4.