This chapter:

1. (1)

   contrasts "exempt regulated activities" with "non-mainstream regulated activities";

2. (2)

   sets out the conditions which must be satisfied for a regulated activity of an authorised professional firm to constitute a non-mainstream regulated activity;1

3. (3)

   refers to other parts of the Handbook in which provisions are disapplied or modified in relation to authorised professional firms when carrying on non-mainstream regulated activities;1

4. (4)

   gives effect to the Distance Marketing Regulations with respect to the non-mainstream regulated activities of authorised professional firms.1

1. (1)

   The FSA's policy is designed to provide so far as possible a level playing field for authorised and unauthorised members of the professions in relation to the carrying on of similar activities.

2. (2)

   Subject to conditions (see PROF 2), members of designated professional bodies that are not authorised can carry on particular regulated activities, known as exempt regulated activities, and obtain the benefit of the exemption under section 327 of the Act from the general prohibition.

3. (3)

   In contrast, non-mainstream regulated activities are particular regulated activities carried on by an authorised professional firm. If the professional firm were not authorised under the Act, these same activities would be exempt regulated activities which, if the firm could meet the necessary conditions in section 327, would enable it to benefit from the section 327 exemption.

4. (4)

   Therefore, a number of provisions of the Handbook (see PROF 5.3) have been disapplied or modified in respect of these non-mainstream regulated activities of authorised professional firms.

A "non-mainstream regulated activity" is defined in the Glossary as "a regulated activity of an authorised professional firm in relation to which the conditions in PROF 5.2.1 R are satisfied". Conditions (1) to (5) of PROF 5.2.1 R replicate section 327(1)(b)(i), (3), (4), (5) and (6) of the Act, as if those conditions applied to an authorised professional firm.

The parts of the Handbook in which provisions are disapplied or modified in relation to authorised professional firms when carrying on non-mainstream regulated activities include those described in PROF 5.3.1A G to PROF 5.3.9 G3521

4.3.5 R provides that 4.3.1 R (Disclosure in letters to private customers) does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

COB 1.2.1 R (4) provides that COB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, except for:7

1. (1)

   COB 2.1 (Clear, fair and not misleading communication), COB 3 (Financial promotion) and COB 4.2.1 R to COB 4.2.6 G, COB 4.2.9 R and COB 4.2.11 E (Content of terms of business); and67

2. (2)

   (where these are insurance mediation activities) the IMDimplementation provisions and COB 4.3.19 R to COB 4.3.25 R as if they also applied to a firm carrying out the activities in COB 4.3.19R (1)(a)-(c) with or on behalf of private customers, unless:7

   1. (a)

      the designated professional body of the firm has made rules which implement some or all of articles 12 and 13 of the IMD;7

   2. (b)

      those rules have been approved by the FSA under section 332(5) of the Act; and7

   3. (c)

      the firm is subject to the rules in the form in which they were approved;7

   in which case they are disapplied to the extent that articles 12 and 13 of the IMD are implemented by the rules of the designated professional body.7

3. (3)

   COB 1.2.1A G provides that the effect of COB 1.2.1 R (4)(d) is that if the relevant designated professional body of an authorised professional firm does not make rules implementing articles 12 and 13 of the IMD applicable to authorised professional firms, those firms will need to comply with the IMD implementation provisions and COB 4.3.19 R to COB 4.3.25 R as if they also applied to a firm carrying out the activities in COB 4.3.19 (1)(a)-(c) with or on behalf of private customers.7

TC 2.1.1 R (2) provides that TC 2, which imposes the substantive training and competence requirements, does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

SYSC 3.2.6A R to SYSC 3.2.6J G

, in relation to money laundering, do8 not apply to authorised professional firms when carrying on non-mainstream regulated activities.

SUP 10.1.18 R provides that SUP 10 (Approved persons) does not apply (except in respect of the required functions) to an authorised professional firm in respect of its non-mainstream regulated activities. So a person such as a partner, whose only regulated activities are incidental to his professional services, in an authorised professional firm whose principal purpose is to carry on activities other than regulated activities, need not be an approved person.

DISP 1.1.1 R (1)(c) provides that DISP 1 (Complaint handling procedures for firms) does not apply to an authorised professional firm in so far as its non-mainstream regulated activities are concerned. DISP 2.6.7 R further provides that a complaint about an authorised professional firm cannot be handled under the Compulsory Jurisdiction of the Financial Ombudsman Service if it relates solely to non-mainstream regulated activity and can be handled by a designated professional body. This is because such a complaintwill be handled by the relevant professional body.

MAR 4.4.1 R (3) provides that MAR 4, which deals with the endorsement of the City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisitions of Shares, does not have effect in relation to an authorised professional firm in respect of non-mainstream regulated activity.

3 MCOB 1.2.4 G provides that MCOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities except for MCOB 2.2 (Clear, fair and not misleading communication), MCOB 3 (Financial promotion) and to a limited extent MCOB 4.4 (Initial disclosure requirements).

4 CASS 1.2.4 R provides that CASS 2, CASS 3 and CASS 4 do not apply to authorised professional firms when carrying on non-mainstream regulated activities. CASS 1.2.5 R further provides that if the non-mainstream regulated activities are insurance mediation activity, CASS 5 does not apply to an authorised professional firm, if the firm's designated professional body has rules applicable to the firm which implement the IMD and which are in the form approved by the FSA under section 332(5) of the Act.4

1. (1)

   5ICOB 1.2.10 R provides that ICOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities , except for:

   1. (a)

      ICOB 2.2 (Clear, fair and not misleading communication);

   2. (b)

      ICOB 3 (Financial promotion);

   3. (c)

      ICOB 4.2.2 R in relation to the information for customers in table ICOB 4.2.8 R items numbered (8), (9) and Note 4 covering complaints and compensation; and

   4. (d)

      those sections in ICOB which implement articles 12 and 13 of the IMD, unless:

      1. (i)

         the designated professional body of the firm has made rules which implement articles of the IMD;

      2. (ii)

         those rules have been approved by the FSA under section 332(5) of the Act; and

      3. (iii)

         the firm is subject to the rules in the form in which they were approved.

2. (2)

   ICOB 1.2.11 G (2) provides that the effect of ICOB 1.2.10 R (4) is that if the relevant designated professional body of an authorised professional firm does not make rules implementing articles 12 and 13 of the IMD applicable to authorised professional firms those authorised professional firms will need to comply with those sections of ICOB which implement articles 12 and 13 of the IMD, namely ICOB 4.1 to ICOB 4.4 (but not ICOB 4.2.20 R to 4.2.28G), and ICOB 4.8.

The effect of PROF 5.4.1 R is that it allows designated professional bodies to make rules which allow an authorised professional firm to comply with the Distance Marketing Regulations in respect of its non-mainstream regulated activities in the same way as an exempt professional firm which is a member of the same designated professional body in respect of its exempt regulated activities.