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SERV 1.1 Application and Purpose

SERV 1.1.1 G

This special guide is for service companies. Its purpose is to help service companies find their way around the Handbook by setting out which parts of it apply to them.

SERV 1.1.2 G

Service companies are firms whose regulated activities are restricted to making arrangements with a view to transactions in investments and agreeing to carry on that regulated activity. They are, in the main, technology companies who provide order routing, post-trade processing, or other services to market participants which assist them to deal in investments or arrange (bring about) deals in investments among themselves. A light-touch regulatory regime applies to service companies as set out in this Special guide.

SERV 1.2 Parts of the Handbook applicable to service companies

SERV 1.2.1 G

The parts of the Handbook applicable to service companies are listed in SERV 1.2.2 G. Service companies should read applicable parts of the Handbook to find out what the detailed regulatory requirements for service companies are.

SERV 1.2.2 G

Parts of the Handbook applicable to service companies

This table belongs to SERV 1.2.1 G

Part of Handbook

Applicability to service companies

High Level Standards

Principles for Businesses (PRIN)

This applies.

Senior management arrangements, Systems and Controls (SYSC)

This applies.

Threshold Conditions (COND)

This applies.

Statements of Principle and Code of Practice for Approved Persons (APER)

This applies to an approved person who performs a controlled function for a service company.

The Fit and Proper test for Approved Persons (FIT)

This applies.

The Financial Stability and Market Confidence sourcebook (FINMAR)

This applies

General provisions (GEN)

This applies.

Prudential Standards

Interim Prudential sourcebooks (IPRU)

In the Interim Prudential sourcebook for investment business (IPRU(INV)), only Chapters 1 (Application and General) and 6 (Service Companies) apply: see IPRU(INV) 1.2.4R. The other Interim Prudential sourcebooks do not apply.

Business Standards

[deleted]

[deleted]

Conduct of Business sourcebook (COBS)

Only some parts of COBS apply to service companies: see COBS 18.10.

The permission given to service companies means that they must not approve financial promotions on behalf of another person or specified class of person, or deal with private customers. If the firm communicates financial promotions to eligible counterparties and professional clients only, the financial promotion rules will have only very limited application.

Mortgages: Conduct of Business sourcebook (MCOB1)

Client assets sourcebook (CASS2)

This applies. However, service companies should not, ordinarily, hold client assets

Market Conduct sourcebook (MAR)

MAR 1 (Market Abuse4), MAR 2 (Stabilisation4) and MAR 4 (Endorsement of the Takeover Code) apply to service companies.

MAR 5 (Multilateral Trading Facilities), MAR 6 (Systematic Internalisers) and MAR 7 (Disclosure of information on certain trades undertaken outside a regulated market or MTF) do not apply to service companies.

Training and Competence sourcebook (TC)

TC does not apply to service companies as they do not carry on activities for retail clients. But they are subject to the competent employees rule in SYSC 5.

Regulatory processes

[deleted]

[deleted]

Supervision manual (SUP)

This applies, with the following qualifications:

(a) in SUP 3 (Auditors), only sections 3.1, 3.2, and 3.7 apply to a service company (and only if it has an auditor) and only sections 3.1, 3.2 and 3.8 apply to its auditor (if it has one): see SUP 3.1.2 R;

(b) SUP 4 (Actuaries) does not apply: see SUP 4.1.1 R;

(c) in SUP 10 (Approved persons), if a service company's principal purpose is to carry on activities other than regulated activities, then the scope of the significant influence functions is restricted to the required functions: see 5SUP 10A.1.18 R5 - 5SUP 10A.1.19 G5;

(d) SUP 13 (Exercise of passport rights by UK firms) does not apply because service companies do not conduct investment services and activities.

(e) SUP 14 (Incoming EEA firms changing details and cancelling qualification for authorisation) does not apply because a service company cannot be an incoming EEA firm (see explanation in (d));

(f) in SUP 16 (Reporting requirements), sections 16.4 - 16.6 do not apply and in section 16.7, only SUP 16.7.20 R - SUP 16.7.21 R apply: see SUP 16.1.1 R;

(g) SUP 17 (Transaction reporting) does not apply: see SUP 17.1.1 R; and

(h) SUP App 2 (Insurers: Scheme of operations) does not apply.

Decision Procedure and Penalties Manual (DEPP)

This applies.

Redress

Dispute resolution: the Complaints sourcebook (DISP)

All firms are subject to the Compulsory Jurisdiction of the Financial Ombudsman Service.

However, a firm which does not, and notifies the FCA under DISP 1.1.12 R that it does not, conduct business with eligible complainants (persons eligible to have a complaint considered under the Financial Ombudsman Service, as defined in DISP 2.4) will be exempt from the rules on treating complainants fairly (DISP 1.2 to DISP 1.11) and from the Financial Ombudsman Funding rules (FEES 5.1 to FEES 5.7).

The definition of a service company means that a service company will qualify for these exemptions if it applies for them: see DISP 2.4.3 R (2)(a).

Compensation sourcebook (COMP)

COMP does not apply to service companies, which are not participant firms under the compensation scheme, and are exempt from funding it.

Complaints against the FCA (COAF)

This applies to service companies, although it contains no requirements for service companies.

Specialist sourcebooks

[deleted]

[deleted]

Collective Investment Schemes sourcebook (COLL)

None of the specialist sourcebooks applies.

3

3Investment Funds sourcebook (FUND)

Professional firms sourcebook (PROF)

Deleted

Recognised Investment Exchange and Recognised Clearing House sourcebook (REC)

Special guides

Special guide for service companies (SERV)

This applies.

Special guide for energy market participants (EMPS)

This does not apply because an energy market participant is defined to exclude a service company.

Special guide for small friendly societies (FREN)

This does not apply.

Special guide for oil market participants (OMPS)

This does not apply because an oil market participant is defined to exclude a service company.

Summary schedules

Record keeping requirements

Notification requirements

Fees and other required payments

Powers exercised in making the Handbook

Rights of action for damages

Rules that can be waived

Releases

These apply, but only to the extent that the sourcebook or manual to which they relate applies.

Schedules

This applies.

Glossary of definitions

This applies.

The following Regulatory Guides may also be relevant to service companies:

1. Enforcement Guide (EG)