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PROF 5.1 Application and purpose

Application

PROF 5.1.1 R

This chapter applies to an authorised professional firm that carries on non-mainstream regulated activities.

Purpose

PROF 5.1.2 G

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

Exempt regulated activities contrasted with non-mainstream regulated activities

PROF 5.1.3 G
  1. (1)

    The FCA'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.

PROF 5.1.4 G

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 (6)2 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.

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PROF 5.2 Nature of non-mainstream regulated activities

Conditions for non-mainstream regulated activity

PROF 5.2.1 R

A "non-mainstream regulated activity" is a regulated activity of an authorised professional firm in relation to which the following conditions are satisfied:

  1. (1)

    the firm must not receive from a person other than his client any pecuniary reward or other advantage, for which he does not account to his client, arising out of the carrying on of the regulated activity;

  2. (2)

    the manner of the provision by the firm of any service in the course of carrying on the regulated activity must be incidental to the provision by it of professional services (see PROF 5.2.2 R);

  3. (3)

    the regulated activity must not be of a description, or relate to an investment of a description, specified in The Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities) Order 2001 (SI 2001/1227) or in any other order made by the Treasury under section 327(6) of the Act (see PROF 2 Annex 2 GG);

  4. (4)

    there must not be in force any direction under section 328 of the Act (Directions in relation to the general prohibition) in relation to:

    1. (a)

      a class of person which would have included the firm were it not an authorised person; or

    2. (b)

      a description of regulated activity which includes the regulated activity the firm proposes to carry on;

      2
  5. (5)

    the regulated activity must be an activity which exempt professional firms which are members of the same designated professional body as the authorised professional firm are permitted to carry on under rules made by that body as required by section 332(3) of the Act; and2

    1
  6. (6)

    the authorised professional firm is subject to the rules referred to in (5).2

PROF 5.2.1A R

[deleted]3

3 2
PROF 5.2.2 R

In PROF 5.2.1 R (2), "professional services" means services:

  1. (1)

    which do not constitute a regulated activity; and

  2. (2)

    the provision of which is supervised and regulated by a designated professional body.

PROF 5.3 Reference to other sourcebooks and manuals

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Introduction

PROF 5.3.1 G

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

General provisions

PROF 5.3.1A G

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.

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Conduct of business sourcebook

PROF 5.3.2 G

COBS 18 .1112 provides that COBS12 does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, except for:7

12
  1. (1)

    the fair, clear and not misleading rule;12

    12
  2. (1A)

    12the financial promotion rules, but only in limited circumstances;

  3. (2)

    (where these are insurance mediation activities) COBS 7 (Insurance mediation)12unless:12

    12
    1. (a)

      the designated professional body of the firm has made rules which implement some or all of articles 12 and 13 of the Insurance Mediation Directive12;7

      12
    2. (b)

      those rules have been approved by the FCA 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

    1212
  4. (3)

    COBS 8.1.3 R (Client agreements), except for the requirement to provide information on conflicts of interest; and1412

    1214
  5. (4)

    COBS 5.2 (E-commerce).14

Training and Competence sourcebook

PROF 5.3.3 G

TC Appendix 3 11 provides that TC11, which imposes the substantive training and competence requirements for retail clients or customers11, does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

11 11 1

8Senior Management Arrangements, Systems and Controls8

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PROF 5.3.4 G

SYSC 3.2.6A R to SYSC 3.2.6J G and SYSC 6.3 (Financial crime)9, in relation to money laundering, do8 not apply to authorised professional firms when carrying on non-mainstream regulated activities.

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Supervision manual

PROF 5.3.5 G

19 SUP 10A.1.17 R 19 provides that 19SUP 10A19 (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.

Dispute resolution: Complaints sourcebook

PROF 5.3.6 G

DISP 1.1.5R (3) 10 provides that DISP 1 (Treating complainants fairly10) only applies 12to an authorised professional firm in so far as its mainstream regulated activities are12 concerned. DISP 2.3.4 R15 further provides that a complaint15 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 complaint15will be handled by the relevant professional body.

10 12 12 12 15 15 15 1

Market Conduct sourcebook

PROF 5.3.7 G

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.

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3Mortgages: Conduct of business sourcebook

PROF 5.3.8 G

3 MCOB 1.2.10 R 16 16 provides that MCOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities except for MCOB 3A (Financial promotions and communications with customers).18

18
PROF 5.3.9 G

4 CASS 1.2.4 R provides that with the exception of CASS 1 and the insurance client money chapter, CASS12 does12 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 (the insurance client money chapter)12 does not apply to an authorised professional firm, if the firm's designated professional body has rules applicable to the firm which implement the Insurance Mediation Directive12 and which are in the form approved by the FCA under section 332(5) of the Act.4

12 12

5Insurance: Conduct of Business sourcebook

PROF 5.3.10 G
  1. (1)

    5ICOBS13 does not apply to an authorised professional firm with respect to its non-mainstream regulated activities (see ICOBS 1 Ann 1, Part 1, 3.1R13, except for:

    13
    1. (a)

      the provisions on communications to clients and financial promotions (ICOBS 2.2);13

      13
    2. (b)

      the e-commerce provisions (ICOBS 3.2);13

      13
    3. (c)

      status disclosure requirements in relation to complaints procedures (ICOBS 4.1); and13

      13
    4. (d)

      provisions13 in ICOBS13which implement articles 12 and 13 of the Insurance Mediation Directive12 (ICOBS 4.1 and ICOBS 5.2.3 R)13, except to the extent that the firm is subject to equivalent rules of its designated professional body which have been approved by the FCA.13

      131312
  2. (2)

    [deleted]13

    1213

PROF 5.4 2Application of the Distance Marketing Regulations

PROF 5.4.1 R
  1. (1)

    In addition to those provisions of the Distance Marketing Regulations which apply directly , an authorised professional firm must, with respect to its non-mainstream regulated activities, comply with regulations 7 to 11 and 15 of the Distance Marketing Regulations. Those regulations have effect to cancel distance contracts the making or performance of which by such firms constitutes a non-mainstream regulated activity.3

    4
  2. (2)

    Paragraph (1) does not apply in relation to regulations 7 to 8 and 15 if the designated professional body of the authorised professional firm has rules equivalent to 3some or all of 1those regulations and:

    1. (a)

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

    2. (b)

      the authorised professional firm is subject to those rules in the form in which they have been approved;

    in which case those regulations are disapplied to the extent that they are implemented by the rules of the designated professional body.1

PROF 5.4.2 G

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.

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