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SUP 13A.1 Application and purpose

Application

SUP 13A.1.1 G RP
  1. (1)

    1This chapter applies to an EEA firm that wishes to exercise an entitlement to establish a branch in, or provide cross border services into, the United Kingdom under a Single Market Directive or the auction regulation7. (The Act refers to such an entitlement as an EEA right and its exercise is referred to in the Handbook as "passporting".) (See SUP App 3 (Guidance on passporting issues) for further guidance on passporting.)

  2. (2)

    This chapter also applies to:

    1. (a)

      a Treaty firm that wishes to exercise rights under the Treaty in respect of regulated activities, those rights6 not being 6 covered by passporting rights provided 6by the Single Market Directives,6 and qualifies6 for authorisation under Schedule 4 to the Act (Treaty Rights); and

      6
    2. (b)

      a UCITS qualifier, that is, an operator, trustee or depositary of a recognised collective investment scheme, constituted in another EEA State, and which qualifies for authorisation under Schedule 5 to the Act (Persons concerned in collective investment schemes).

  3. (3)

    The provisions implementing the Single Market Directives are within the coordinated field (see PERG 2.9.18G (1)). So, where an incoming ECA provider intends to provide electronic commerce activity that consists of activities that fall within one of the Single Market Directives, the passporting requirements on exercising an EEA right in this chapter will apply.

SUP 13A.1.2 G RP

This chapter does not apply to:

  1. (1)

    an EEA firm that wishes to carry on in the United Kingdom activities which are outside the scope of its EEA right and the scope of a permission granted under Schedule 4 to the Act; in this case the EEA firm requires a "top-up permission" under Part IV of the Act (see the FSA website "How do I get authorised":http://www.fsa.gov.uk/Pages/Doing/how/index.shtml3); or

    3
  2. (2)

    an EEA firm that carries on any insurance activity:

    1. (a)

      by the provision of services; and

    2. (b)

      pursuant to a community co-insurance operation in which the firm is participating otherwise than as leading insurer (see Article 11 of the Regulated Activities Order); or

  3. (3)

    a Treaty firm that wishes to provide electronic commerce activities into the United Kingdom; or5

    5
  4. (4)

    a market operator that operates a regulated market or an MTF in an EEA State other than the UK and wishes to make appropriate arrangements so as to facilitate access to and use of its system by remote users or participants in the UK. See SUP App 3.6.25 G for guidance.5

SUP 13A.1.3 G RP
  1. (1)

    Under the Gibraltar Order2 made under section 409 of the Act, a Gibraltar firm is treated as an EEA firm under Schedule 3 to the Act if it is:

    22
    1. (a)

      authorised in Gibraltar under the Insurance Directives; or

    2. (aA)

      authorised in Gibraltar under the Reinsurance Directive; or6

    3. (b)

      authorised in Gibraltar under the Banking Consolidation Directive; or2

      2
    4. (c)

      authorised in Gibraltar under the Insurance Mediation Directive; or2

    5. (d)

      authorised in Gibraltar under the MiFID4.2

      4
  2. (1A)

    Similarly, an EEA firm which:2

    1. (a)

      has satisfied the Gibraltar establishment conditions and has established a branch in the UK; or2

    2. (b)

      has satisfied the Gibraltar service conditions and is providing cross border services into the UK;2

    is treated as having satisfied the establishment conditions or service conditions (as appropriate) under Schedule 3 to the Act. Regulations 4 to 7 of the EEA Passport Rights Regulations will apply to the establishment of the branch or the provision of cross border services.2

  3. (2)

    Gibraltar insurance companies, credit institutions, insurance intermediaries and investment firms are 2allowed to passport their2 services into the United Kingdom if they comply2 with the relevant notification procedures. So, any references in this chapter to EEA State or EEA right include references to Gibraltar and the entitlement under the Gibraltar Order2 where appropriate.

    222222
  4. (3)

    [deleted]

    2

Purpose

SUP 13A.1.4 G RP
  1. (1)

    This chapter explains how an EEA firm and a Treaty firm can qualify for authorisation under Schedules 3 and 4 to the Act and how a UCITS qualifier is authorised under Schedule 5 to the Act.

  2. (2)

    This chapter also provides guidance on Schedule 3 to the Act for an incoming EEA firm that wishes to establish a branch in the United Kingdom instead of, or in addition to, providing cross border services into the United Kingdom or vice versa.

SUP 13A.1.5 G RP
  1. (1)

    EEA firms should note that this chapter only addresses the procedures which the FSA will follow under the Act.So, an EEA firm should consider this guidance in conjunction with the requirements with which it will have to comply in its Home State.

    6
  2. (2)

    The guidance in this chapter represents the FSA's interpretation of the Single Market Directives, the auction regulation,7 the Act and the secondary legislation made under the Act. The guidance is not exhaustive and should not be seen as a substitute for a person consulting the legislation or taking legal advice.

SUP 13A.2 EEA firms and Treaty firms

SUP 13A.2.1 G RP

A person will only be an EEA firm or a Treaty firm if it has its head office in an EEA State other than the United Kingdom. EEA firms and Treaty firms are entitled to exercise both the right of establishment and the freedom to provide services under the Treaty. The difference, however, is that an EEA firm has a right to passport under a Single Market Directive or the auction regulation2, whereas a Treaty firm carries on activities for which the right to carry on those activities does1 not fall within the scope of a Single Market Directive or the auction regulation2. An EEA firm may also be a Treaty firm if it carries on such activities. A person may be a Treaty firm, where, for example, it carries on business that includes regulated activities, the right to carry on which does not fall within the scope of the Single Market Directive or the auction regulation2 under which it is entitled to exercise an EEA right, for example, reinsurance in the case of a direct insurer to which the Insurance Directives apply.1

1 1
  1. (1)

    [deleted]1

    1
  2. (2)

    [deleted]1

    1
SUP 13A.2.2 G RP

An EEA firm may passport those activities which fall within the scope of the relevant Single Market Directive or the auction regulation2 as long as they are included in its Home State authorisation.

SUP 13A.3 Qualifications for authorisation under the Act

EEA firms

SUP 13A.3.1 G RP

Section 31 of the Act (Authorised persons) states that an EEA firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 3 to the Act (EEA Passport Rights). Under paragraph 12 of Part II of that Schedule, an EEA firm that is an EEA pure reinsurer, or an EEA firm that has received authorisation under article 18 of the auction regulation,75qualifies for authorisation without condition. Other than those two types of EEA firm, an7EEA firm qualifies for authorisation5 if:

7 7
  1. (1)

    it is seeking to establish a branch in the United Kingdom in exercise of an EEA right and satisfies the establishment conditions (see SUP 13A.4.1 G and SUP 13A.4.2 G); or

  2. (2)

    it is seeking to provide cross border services into the United Kingdom in exercise of an EEA right and satisfies the service conditions (see SUP 13A.5.3 G).

SUP 13A.3.1A G RP

3If an EEA MiFID investment firm seeks to use a tied agent established in the UK, the EEA MiFID investment firm will be treated as if it were seeking to establish a branch and must satisfy the establishment conditions (see SUP 13A.4.1 G).

SUP 13A.3.1B G

5A pure reinsurer with its head office in an EEA State that has not fully implemented the Reinsurance Directive may nevertheless be accepted as satisfying the conditions to be an EEA pure reinsurer if the firm provides satisfactory evidence that the prudential requirements of the Reinsurance Directive have been implemented by that EEA State and that they apply to the firm. The firm may then be deemed to be authorised under the Reinsurance Directive in that EEA State.

SUP 13A.3.1C G RP
  1. (1)

    6Under paragraph 15A(1) of Part II of Schedule 3 to the Act, an EEA UCITS management company intending to exercise an EEA right to provide collective portfolio management services for a UCITS scheme must, before it undertakes that activity, obtain the FSA's approval to manage that UCITS scheme. Firms should use the application form set out in SUP 13A Annex 3 R (EEA UCITS management companies: application for approval to manage a UCITS scheme established in the United Kingdom) for this purpose.

  2. (2)

    If the FSA refuses the application referred to in (1), it will give a notice to the firm and the firm'sHome State regulator in accordance with paragraph 15A of Part II of Schedule 3 to the Act. Before refusing an application, the FSA will consult with the firm'sHome State regulator.

  3. (3)

    Under paragraph 15B(1) of Part II of Schedule 3 to the Act, if any representations are made to the FSA by a firm to which the notice referred to in (2) has been given, the FSA is required to decide whether to withdraw that notice. If the FSA decides not to withdraw that notice it must give the firm a decision notice.

  4. (4)

    For details of the FSA's procedures for the giving of notices see DEPP 2 (Statutory notices and allocation of decision making).

SUP 13A.3.2 G RP
  1. (1)

    On qualifying for authorisation, subject to SUP 13A.3.1C G (1),6 an EEA firm (except for an EEA firm that has received authorisation under article 18 of the auction regulation)7 will have permission to carry on each permitted activity (see (3) below) which is a regulated activity.

    6
  2. (2)

    6[deleted]

  3. (3)

    The permitted activities of an EEA firm (except for an EEA firm that has received authorisation under article 18 of the auction regulation)7 are those activities identified in the consent notice, regulator's notice or notice of intention. Those permitted activities7 may include activities that are within the scope of a Single Market Directive but which are unregulated activities in the United Kingdom.

    7
  4. (3A)

    7An EEA firm that received authorisation under article 18 of the auction regulation has permission to carry on bidding in emissions auctions.

  5. (4)

    The permission will be treated as being on terms equivalent to those appearing in the consent notice, regulator's notice,7 notice of intention or (in respect of an EEA firm that has received authorisation under article 18 of the auction regulation) to those appearing in the authorisation granted to the EEA firm under article 18 of the auction regulation7. For example, it will reflect any limitations or requirements which are included in the firm'sHome State authorisation.

SUP 13A.3.3 G RP

An EEA firm which has qualified for authorisation is referred to in the Handbook as an incoming EEA firm.

Treaty firms

SUP 13A.3.4 G RP

Under section 31 of the Act, a Treaty firm is authorised for the purposes of the Act if it qualifies for authorisation under Schedule 4 (Treaty Rights), that is:

  1. (1)

    the Treaty firm is seeking to carry on a regulated activity; and

  2. (2)

    the conditions set out in paragraph 3(1) of Schedule 4 to the Act are satisfied.

SUP 13A.3.5 G RP

On qualifying for authorisation a Treaty firm will have permission to carry on each permitted activity which is a regulated activity. This permission will be treated on the same terms as those which apply to the Treaty firm'sHome State authorisation. For example, it will reflect any limitations or requirements which are included in the firm'sHome State authorisation.

SUP 13A.3.6 G RP

The effect of paragraph 5(1) and 5(2) of Schedule 4 to the Act is that a Treaty firm which qualifies for authorisation under that Schedule must, at least seven days before it carries on any of the regulated activities covered by its permission, give the FSA written notice of its intention to do so. Failure to do so is a criminal offence under paragraph 6(1) of that Schedule.

SUP 13A.3.7 D RP
  1. (1)

    A written notice from a Treaty firm under paragraph 5(2) of Schedule 4 to the Act must be:

    1. (a)

      given to a member of, or addressed for the attention of , the Authorisation Department; and

    2. (b)

      delivered to the FSA by one of the methods in (2).

  2. (2)

    The written notice may be delivered by:

    1. (a)

      post to the address in SUP 13A.3.9 G below; or

    2. (b)

      leaving the application at the address in SUP 13A.3.9 G below and obtaining a time-stamped receipt; or

    3. (c)

      hand delivery to a member of the Authorisation Department.

SUP 13A.3.8 G RP

The written notice required by paragraph 5(2) of Schedule 4 to the Act should be accompanied by confirmation of the Treaty firm's authorisation from the Home State regulator, as referred to in paragraph 3(2) of Schedule 4 to the Act.

SUP 13A.3.9 G RP
  1. (1)

    For further information, a Treaty firm may contact the Authorisation Department:

    1. (a)

      telephone on +4420 7066 3954; or

    2. (b)

      write to: Authorisation Department, The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS; or

    3. (c)

      email corporate.authorisation@fsa.gov.uk.

SUP 13A.3.10 G RP
  1. (1)

    The guidance in PERG 2 is relevant to Treaty firms to help them determine if they require authorisation under the Act.

  2. (2)

    A Treaty firm which qualifies for authorisation is referred to in the Handbook as an incoming Treaty firm.

SUP 13A.3.11 G
  1. (1)

    An EEA firm that is carrying on both direct insurance and reinsurance5 business will be entitled to passport under Schedule 3 to the Act in relation to the direct insurance business. It will also have a Treaty right under Schedule 4 to the Act in relation to the reinsurance business if the firm has received Home State authorisation for the regulated activity of effecting and/or carrying out the relevant class of insurance business that includes reinsurance business for that class and the relevant provisions of the law of the Home State satisfy the conditions laid down by the Insurance Directives relating to the carrying on of that activity (see SUP App 3.10.13 G). 5

    55
  2. (1A)

    5An insurance company with its head office in an EEA State other than the United Kingdom that is carrying on pure reinsurance business in that State, and which has received authorisation (or is deemed to be authorised) under the Reinsurance Directive from its Home State (an EEA pure reinsurer), has an automatic EEA right to passport into the United Kingdom by establishing a branch in the United Kingdom or by the provision of cross border services. Under the General Protocol, Home State regulators have agreed to inform Host State regulators if a pure reinsurer carries on business through a branch in the Host State.

  3. (2)

    An insurance company with its head office in an EEA State other than the United Kingdom that is carrying on pure reinsurance5business in that State, and which wishes to carry on such business in the United Kingdom and is authorised by its Home State but not yet under the Reinsurance Directive,5 is advised to discuss its particular requirements with the Authorisation Department. It may be entitled to exercise a Treaty right provided it satisfies the conditions in paragraph 3(1) of Schedule 4 to the Act (see SUP 13A.3.4 G). Otherwise, it will have to seek a Part IV permission (see the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml2).

    52

UCITS qualifiers

SUP 13A.3.12 G RP

Under Schedule 5 to the Act (Persons concerned in collective investment schemes), a person who for the time being is an operator, trustee or depositary of a scheme which is a recognised scheme under section 264 of the Act is an authorised person. Such a person is referred to in the Handbook as a UCITS qualifier.

SUP 13A.3.13 G RP

A UCITS qualifier has permission under paragraph 2 of Schedule 5 to the Act, to carry on, as far as is appropriate to the capacity in which it acts in relation to the scheme:

  1. (1)

    the regulated activity of establishing, operating or winding up a collective investment scheme; and

  2. (2)

    any activity in connection with, or for the purposes of, the scheme.

SUP 13A.3.14 G RP

A UCITS qualifier should refer to COLLG or to the following sections of COLL for requirements for recognised schemes4:

4 4
  1. (1)

    COLL 9.2.1 G for guidance on notifications;

    4
  2. (2)

    COLL 9.2.1 G for guidance on information and documentation requirements; and

    4
  3. (3)

    COLL 9.4 which includes rules4on what facilities need to be maintained.

    44

SUP 13A.4 EEA firms establishing a branch in the United Kingdom

The conditions for establishing a branch

SUP 13A.4.1 G RP
  1. (1)

    Before an EEA firm5(other than an EEA pure reinsurer or an EEA firm that has received authorisation under article 18 of the auction regulation)53exercises an EEA right to establish a branch in the United Kingdom other than under the Insurance Mediation Directive, the Act requires it to satisfy the establishment conditions, as set out in paragraph 13(1) of Part II of Schedule 3 to the Act.

  2. (2)

    For the purposes of paragraph 13(1)(b)(iii) of Part II of Schedule 3 to the Act, the information to be included in the consent notice has been prescribed under regulation 2 of the EEA Passport Rights Regulations.

SUP 13A.4.1A G RP

4An EEA UCITS management company may not exercise an EEA right to provide collective portfolio management services for a UCITS scheme from a branch in the United Kingdom until approved by the FSA to do so (see SUP 13A.3.1C G).

SUP 13A.4.2 G RP

Where an EEA firm exercises its EEA right to establish a branch in the United Kingdom under the Insurance Mediation Directive, the Act requires it to satisfy the establishment conditions, as set out in paragraph 13(1A) of Part II of Schedule 3 to the Act.

SUP 13A.4.3 G RP

For the purposes of paragraph 13(2)(b) of Part II of Schedule 3 to the Act, the applicable provisions may include FSArules. The EEA firm is required to comply with relevant rules when carrying on a passported activity through a branch in the United Kingdom as well as with relevant UK legislation.

SUP 13A.4.3A G RP

1 Guidance on the matters that are reserved to a firm'sHome State regulator is located in SUP 13A Annex 2.

The notification procedure

SUP 13A.4.4 G RP
  1. (1)

    When the FSA receives a consent notice from the EEA firm'sHome State regulator, it will, under paragraphs 13(2)(b), (c) and 13(3) of Part II of Schedule 3 to the Act, notify the applicable provisions (if any) to:

    1. (a)

      the EEA firm; and

    2. (b)

      in the case of an EEA firm passporting under the Insurance Directives, the Home State regulator;

    within two months of the notice2 date.

    2
  2. (1A)

    The notice date is:2

    1. (a)

      for a MiFID investment firm, the date on which the Home State gave the consent notice; and2

    2. (b)

      in any other case, the date on which the FSA received the consent notice.2

  3. (2)

    Although the FSA is not required to notify the applicable provisions to an EEA firm passporting under the Insurance Mediation Directive, these provisions are set out in SUP 13A Annex 1 (Application of the Handbook to Incoming EEA Firms).

Auction regulation bidding: notification rule and applicable provisions

SUP 13A.4.5 R RP

5An incoming EEA firm that is exercising an EEA right under the auction regulation to establish a branch in the United Kingdom must submit the form in SUP 13A Annex 4 R prior to its establishment of that branch or whenever possible thereafter.

SUP 13A.4.6 G RP

The sole purpose of the notification in SUP 13A.4.5 R is to enable the FSA to supervise the UK branch of the incoming EEA firm's compliance with the applicable provisions on an ongoing basis. The applicable provisions that apply to that branch are set out in SUP 13A Annex 1 G (Application of the Handbook to Incoming EEA Firms).

SUP 13A.5 EEA firms providing cross border services into the United Kingdom

Is the service provided within the United Kingdom?

SUP 13A.5.1 G RP

There is guidance for UKfirms in SUP Appendix 3.6 on when a service is provided cross border. EEA firms may find this of interest although they should follow the guidance of their Home State regulators.

SUP 13A.5.2 G RP

An EEA firm3(other than an EEA pure reinsurer or an EEA firm that received authorisation under article 18 of the auction regulation)31should note that the requirement under the Single Market Directives to give a notice of intention to provide cross border services applies whether or not:

  1. (1)

    it has established a branch in the United Kingdom; or

  2. (2)

    those cross border services are regulated activities.

The conditions for providing cross border services into the United Kingdom

SUP 13A.5.3 G RP
  1. (1)

    Before an EEA firm (other than an EEA pure reinsurer1 or an EEA firm that has received authorisation under article 18 of the auction regulation)3 exercises an EEA right to provide cross border services into the United Kingdom, the Act requires it to satisfy the service conditions, as set out in paragraph 14 of Part II of Schedule 3 to the Act.

  2. (2)

    For the purposes of paragraph 14(1)(b) of Part II of Schedule 3 to the Act, the information to be contained in the regulator's notice has been prescribed under regulation 3 of the EEA Passport Rights Regulations.

  3. (3)

    An EEA UCITS management company may not exercise an EEA right to provide collective portfolio management services for a UCITS scheme on a cross border services basis until approved by the FSA to do so (see SUP 13A.3.1C G).2

  4. (4)

    3An EEA firm that has received authorisation under article 18 of the auction regulation is not subject to the service conditions in its exercise of an EEA right under the auction regulation to provide services in the United Kingdom. The notification procedure in SUP 13A.5.4 G does not apply to it and it does not need to notify the FSA prior to providing services into the United Kingdom because there are presently no applicable provisions that apply in these circumstances. Instead, its provision of these services is supervised by its Home State regulator.

The notification procedure

SUP 13A.5.4 G RP
  1. (1)

    Unless the EEA firm3(other than an EEA pure reinsurer or an EEA firm that received authorisation under article 18 of the auction regulation)331is passporting under the Insurance Mediation Directive, if the FSA receives a regulator's notice or, where no notice is required (in the case of an EEA firm passporting under the Banking Consolidation Directive), is informed of the EEA firm's intention to provide cross border services into the United Kingdom, the FSA will, under paragraphs 14(2)(b) and 14(3) of Part II of Schedule 3 to the Act, notify the EEA firm of the applicable provisions (if any) within two months of the day on which the FSA received the regulator's notice or was informed of the EEA firm's intention.

  2. (2)

    Although the FSA is not required to notify the applicable provisions to an EEA Firm passporting under the Insurance Mediation Directive, these provisions are set out in SUP 13A Annex 1 (Application of the Handbook to Incoming EEA Firms).

SUP 13A.5.5 G RP

An EEA firm (other than an EEA UCITS management company)2 that has satisfied the service conditions in paragraph 14 of Part II of Schedule 3 to the Act is entitled to start providing cross border services into the United Kingdom. In the case of an EEA UCITS management company, FSA approval must first be obtained, as explained in SUP 13A.5.3 G (see also SUP 13A.3.1C G).2 However, an EEA firm that wishes to start providing cross border services but has not yet received notification of the applicable provisions may wish to contact the FSA's Passport Notifications Unit (see SUP 13A.8.1G (2)).

SUP 13A.6 Which rules will an incoming EEA firm be subject to?

SUP 13A.6.1 G RP
2
  1. (1)

    SUP 13A Annex 1 summarises how the Handbook applies to incoming EEA firms.2

  2. (2)

    SUP 13A Annex 2 summarises the matters that are reserved to a firm'sHome State regulator.2

SUP 13A.6.2 G RP

An incoming EEA firm (other than an EEA pure reinsurer or an EEA firm that has received authorisation under article 18 of the auction regulation and only provides services in the United Kingdom5) 4or incoming Treaty firm carrying on business in the United Kingdom must comply with the applicable provisions (see SUP 13A.4.4 G, SUP 13A.4.6 G,5 and SUP 13A.5.4 G) and other relevant UK legislation. For example where the business includes:

  1. (1)

    business covered by the Consumer Credit Act 1974, then an incoming EEA firm or incoming Treaty firm must comply with the provisions of that Act, as modified by paragraph 15(3) of Schedule 3 to the Act; or

  2. (2)

    effecting or carrying out contracts covering motor vehicle third party liability risks as part of direct insurance business, then an incoming EEA firm or incoming Treaty firm is required to become a member of the Motor Insurers' Bureau.

SUP 13A.6.3 G RP

In particular, an EEA firm (other than an EEA pure reinsurer) 4or Treaty firm must comply with the applicable provisions in SUP 10 (Approved persons). An EEA firm or Treaty firm should also refer to SUP 10.1 (Application) which sets out the territorial provisions of the approved persons regime.

1
SUP 13A.6.4 G RP

Under the EEA Passport Rights Regulations, references in section 60 of the Act (applications for approval for persons to perform controlled functions) to "the authorised person concerned" include:3

3
  1. (1)

    an EEA MiFID investment firm whose Home State regulator has given a consent notice under paragraph 13 of Schedule 3 to the Act (see SUP 13A.4.1G (1) and SUP 13A.4.2 G) or a regulator's notice under paragraph 14 of that Schedule (see SUP 13A.5.3G (1)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule; and3

  2. (2)

    any other EEA firm with respect to which the FSA has received a consent notice or regulator's notice under paragraph 13 of Schedule 3 to the Act (see SUP 13A.4.1G (1) and SUP 13A.4.2 G) or a regulator's notice under paragraph 14 of that Schedule (see SUP 13A.5.3G (1)), and which will be the authorised person concerned if the EEA firm qualifies for authorisation under that Schedule.3

SUP 13A.6.5 G

SUP 13A Annex 1 does not apply to incoming ECA providers acting as such2.

2

SUP 13A.7 Top-up permission

SUP 13A.7.1 G RP

If a person established in the EEA:

  1. (1)

    does not have an EEA right;

  2. (2)

    does not have permission as a UCITS qualifier; and

  3. (3)

    does not have, or does not wish to exercise, a Treaty right (see SUP 13A.3.4 G to SUP 13A.3.11 G);

to carry on a particular regulated activity in the United Kingdom, it must seek Part IV permission from the FSA to do so (see the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml1). This might arise if the activity itself is outside the scope of the Single Market Directives, or where the activity is included in the scope of a Single Market Directive but is not covered by the EEA firm'sHome State authorisation. If a person also qualifies for authorisation under Schedules 3, 4 or 5 of the Act as a result of its other activities, the Part IV permission is referred to in the Handbook as a top-up permission.

1
SUP 13A.7.2 G RP

Where the FSA grants a top-up permission to an incoming EEA firm to carry on regulated activities for which it has neither an EEA right nor a Treaty right, the FSA is responsible for the prudential supervision of the incoming EEA firm, to the extent that the responsibility is not reserved to the incoming EEA firm'sHome State regulator.

SUP 13A.7.3 G

2[deleted]

2
SUP 13A.7.4 G RP

For guidance on how to apply for Part IV permission under the Act, see the FSA website "How do I get authorised": http://www.fsa.gov.uk/Pages/Doing/how/index.shtml.1 If an EEA firm or Treaty firm wishes to make any subsequent changes to its top-up permission, it can make an application for variation of that permission (see SUP 6 (Applications to vary and cancel Part IV permission)).

1

SUP 13A.8 Sources of further information

SUP 13A.8.1 G RP

For further information on UK regulation, an EEA firm, a Treaty firm or a UCITS qualifier should contact the Perimeter Guidance team at the FSA. Questions about the passporting notification procedures can be addressed to the Passport Notifications Unit.

  1. (1)

    To contact the Perimeter Guidance team:

    1. (a)

      telephone on +44 20 7066 0082 or fax on +44 20 7066 9719;

    2. (b)

      write to: Perimeter Guidance team, The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.

  2. (2)

    To contact the Passport Notifications Unit:

    1. (a)

      telephone on +44 20 7066 1000 or fax on +44 20 7066 9798;

    2. (b)

      write to: Passport Notifications Unit, The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS;

    3. (c)

      email: passport.notifications@fsa.gov.uk.

SUP 13A.9 The precautionary measure rule for incoming EEA firms

Application

SUP 13A.9.1 R
  1. (1)

    1The precautionary measure rule (SUP 13A.9.2 R) applies to an incoming EEA firm which:

    1. (a)

      is authorised by a home state regulator with respect to its MiFID business; or

    2. (b)

      has a top-up permission which covers MiFID business;

    but which is not subject to provisions adopted by the Home State which transpose, in full, MiFID or the MiFID implementing Directive.

  2. (2)

    The precautionary measure rule applies:

    1. (a)

      with respect to the regulated activities carried on by the firm in the United Kingdom; and

    2. (b)

      to the extent that the firm is not subject to provisions which are comparable to provisions transposing MiFID or the MiFID implementing Directive.

  3. (3)

    This section (SUP 13A.9) is effective from 1 November 2007 until 31 October 2008.

The precautionary measure rule

SUP 13A.9.2 R
  1. (1)

    A firm must comply with standards which are comparable to those required by the provisions of MiFID and the MiFID implementing Directive specified in rows (1) and (4) of the table in SUP 13A.9.3 R.

  2. (2)

    An MTF must also comply with standards in row (2).

  3. (3)

    The following firms must also comply with standards in row (3):

    1. (a)

      a systematic internaliser;

    2. (b)

      a firm, which, either on its own account or on behalf of clients, concludes transactions in shares admitted to trading on a regulated market outside a regulated market or MTF (see MAR 7.1.2 R).

SUP 13A.9.3 R

Table: MiFID provisions for incoming EEA firms

Articles of MiFID or the MiFID implementing directive

1

Articles 13(3) and (6), 18 to 22 and 24 and Annex II of MiFID

2

Articles 12, 14, 26, 29 and 30 of MiFID

3

Articles 27 and 28 of MiFID

4

All related Articles of MiFID and the MiFID implementing Directive
SUP 13A.9.4 E
  1. (1)

    A firm should comply with the provisions of the Handbook which transpose the provisions of MiFID and the MiFID implementing Directive referred to in SUP 13A.9.3 R (even if they are expressed not to apply to an incoming EEA firm).

  2. (2)

    Compliance with (1) may be relied upon as tending to establish compliance with the precautionary measure rule.

SUP 13A.9.5 G RP
  1. (1)

    The purpose of the precautionary measure rule is to ensure that an incoming EEA firm is subject to the standards of MiFID and the MiFID implementing Directive to the extent that the Home State has not transposed MiFID or the MiFID implementing Directive by 1 November 2007. It is to 'fill a gap'.

  2. (2)

    The rule is made in the light of the duty of the United Kingdom under Article 62 of MiFID to adopt precautionary measures to protect investors.

  3. (3)

    The rule will be effective for 12 months only; it reflects the scope of the Regulated Activities Order (including, for example, the overseas persons exclusion); and it allows for the possibility of a partial transposition by the Home State.

  4. (4)

    An indication of the Handbook provisions which transpose MiFID and the MiFID implementing Directive can be found in the websites http://www.hm-treasury.gov.uk/media/C/7/transfinal1b120707.pdf and http://www.hm-treasury.gov.uk/media/C/E/transfinal2b120707.pdf. For the purposes of the precautionary measure rule, the principal provisions are the rules in COBS (including in particular those relating to inducements in COBS 2.3) and the conflicts and record keeping provisions in SYSC.

  5. (5)

    The provisions applying to an incoming EEA firm are set out in SUP 13A Annex 1. The effect of SUP 13A.9.4E (1) is that some of the provisions which are expressed as not applying may need to be applied by a firm in order to meet a MiFID standard.

SUP 13A Annex 1 Application of the Handbook to Incoming EEA Firms

G

1. The table below summarises the application of the Handbook to an incoming EEA firm. Where the table indicates that a particular module of the Handbook may apply, its application in relation to any particular activity is dependent on the detailed application provisions in that module. The table does not apply to incoming ECA providers. These should refer to COBS 1 Annex 1 Part 3 section 710 for guidance on howCOBS10 applies to them. The table does not apply to EEA pure reinsurers or to an EEA firm in relation to its exercise of an EEA right under the auction regulation to provide services in the United Kingdom.2519

10 10 25

2. In some cases, the application of the Handbook depends on whether responsibility for a matter is reserved under an EU17 instrument to the incoming EEA firm'sHome State regulator. Guidance on the reservation of responsibility is contained inSUP 13A Annex 210 (Matters reserved to a Home State regulator). Guidance on the territorial application of MiFID is contained in PERG 13.6 and PERG 13.7 and SUP 13A Annex 2.10

17 10

3. For an incoming EEA firm which has permission for cross-border services only, many parts of the Handbook apply only if the firm carries on regulated activities in the United Kingdom. Those parts of the Handbook will therefore not apply if the firm confines its activities to those within the overseas persons exclusions in article 72 of the Regulated Activities Order, or which would not be regarded as carried on in the United Kingdom. Further guidance may be found in PERG 2.4 (Link between activities and the United Kingdom) and PERG 2.9.15 G to PERG 2.9.17 G (Overseas persons).

254. An EEA firm that exercises an EEA right under the auction regulation to establish a branch in the United Kingdom to provide auction regulation bidding is subject to a limited set of requirements in the Handbook that apply to that activity. These are the rules listed in paragraph 2.6A of SYSC 1 Annex 1, GEN 4 and SUP (in particular, the money laundering reporting function in SUP 10 and requirements to notify the FSA). Aside from this note, the table does not apply to those firms.

255. An EEA firm that exercises an EEA right under MiFID to carry on MiFID business bidding is subject to the applicable provisions relating to its carrying on of MiFID business.

(1) Module of Handbook

(2) Potential application to an incoming EEA firm with respect to activities carried on from an establishment of the firm (or its appointed representative) in the United Kingdom

(3) Potential application to an incoming EEA firm with respect to activities carried on other than from an establishment of the firm (or its appointed representative) in the United Kingdom

PRIN

The Principles apply only in so far as responsibility for the matter in question is not reserved by an EU17 instrument to the firm'sHome State regulator (PRIN 3.1.1 R (1)).

For an incoming EEA firm which is a BCD credit institution without a top-up permission, Principle 4 applies only in relation to the liquidity of a branch established in the United Kingdom (PRIN 3.1.1 R (2)).

17

The Principles do not apply if the firm has permission only for cross-border services and does not carry on regulated activities in the United Kingdom (PRIN 3.1.1 R (2)).

The Principles have limited application for activities which are not carried on from a UK establishment (see PRIN 3.1.1 R).

Otherwise, see column (2).

SYSC

SYSC 1 and SYSC 1 Annex 1 (Application of SYSC 2 and SYSC 3) contain 13application provisions only. SYSC 2 and SYSC 3 apply only to an insurer, a managing agent and the Society13as set out in SYSC 1 Annex 1.1.1R , which include the following exceptions:13

(1) SYSC 2.1.1 R (1) and SYSC 2.1.2 G do not apply;

(2) SYSC 2.1.3 R to SYSC 2.2.3 G apply, but only in relation to allocation of the function in SYSC 2.1.3 R (2) and only in so far as responsibility for the matter in question is not reserved by an EU17 instrument to the firm'sHome State regulator; and

(3) SYSC 3 applies, but only in so far as responsibility for the matter in question is not reserved by an EU17 instrument to the firm'sHome State regulator. SYSC 1.1.7 R (Where?) further restricts the territorial application of SYSC 1 to SYSC 3 for an incoming EEA firm. Further guidance is contained in SYSC 2.1.6 G, Question 12. SYSC 18410applies to the extent that the Public Interest Disclosure Act 1998 applies to the firm.

The common platform requirements in SYSC 4 - 10 apply as set out in Part 2 of SYSC 1 Annex 1 (Application of the common platform requirement).13

SYSC 1 Annex 1.2.7G reminds 13EEA MiFID investment firms that they 13must comply with the common platform record-keeping requirements in relation to a branch in the United Kingdom.

SYSC 1 Annex 1 , Part 2, 2.7AG provides guidance on the application of the common platform requirements to the UKbranch of an EEA UCITS management company.22

SYSC 9 applies to activities carried on from an establishment in the United Kingdom, unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case the common platform record-keeping requirements apply with that wider scope in relation to the activity described in that rule (SYSC 1 Annex 1.2.17R).13

SYSC 12 does not apply (SYSC 12.1.3 R).

SYSC 13 does not apply (SYSC 13.1.1 G).

SYSC 14 does not apply (SYSC 14.1.1 R).

SYSC 15 does not apply (SYSC 15.1.1 G).

SYSC 16 does not apply (SYSC 16.1.1 G).

SYSC 17 does not apply (SYSC 17.1.1 G).

SYSC 18 applies.10

SYSC 19A 20 does not apply.16

13 17 17 13 13 13 18 20 20

SYSC 2 and13SYSC 3 do not apply if the firm has permission only for cross-border services and does not carry on regulated activities in the United Kingdom (SYSC 1 Annex 1.1.1 R). 13SYSC 2 and13SYSC 3 have limited application for activities which are not carried on from a UK establishment (see SYSC 1 Annex 1.1.1 R (2A)).13

Otherwise, see column (2).

The common platform requirements in SYSC 4 - SYSC 10 apply as set out in SYSC 1 Annex 1.2.2R.13

SYSC 11 - SYSC 17 do not apply.

SYSC 18 applies.

SYSC 19A 20 does not apply.16

13 13 13 13 13 13 20

COND

COND does not apply if the firm does not have, or apply for, a top-up permission.

Otherwise, only threshold conditions 1, 3, 4 and 5 apply and only in so far as relevant to:

(1) an application for a top-up permission under Part IV of the Act (that is, a permission to carry on regulated activities in addition to those permitted through its authorisation under Schedule 3 to the Act (EEA Passport Rights)); and

(2) the exercise of the FSA's own-initiative power in relation to the top-up permission. (COND 1.1.1 G.)

As column (2).

APER

APER applies to approved persons (APER 1.1.1 G). See below under SUP 10 as to whether controlled functions are performed, and approval therefore required.

Not relevant because SUP 10 does not apply.

FIT

FIT applies to a firm wishing to establish a branch in the United Kingdom or to apply for a top-up permission in respect of any application that it makes for the approval of a person to perform a controlled function (FIT 1.1). See under SUP 10 below as to whether such approval is required.

FIT applies in a limited way in relation to an incoming MiFID investment firm (see FIT 1.2.4A G). 10

Does not apply.

GEN

GEN applies (GEN 1.1, GEN 2.1,GEN 3.1, GEN 4.1, GEN 5.1 and GEN 6.1). However, (a) GEN 4 does not apply to the extent that the firm is subject to equivalent rules imposed by its Home State (GEN 4.1.1 R (3)), and (b) GEN 6 only applies to business that can be regulated under section 138 of the Act (General rule-making power). It does not therefore apply if, or to the extent that, responsibility has been reserved to an incoming firm'sHome State regulator by an EU17 instrument. Only GEN 4.5 applies14 in relation to MiFID or equivalent third country business (see GEN 4.1.1 R).10

17 14

GEN 4 does not apply if the firm has permission only for cross-border services and does not carry on regulated activities in the United Kingdom (see GEN 4.1.1 R).12

The general licence to use or reproduce the FSA logo in GEN 5 Annex 1 G does not apply (see 3.1(1) of GEN 5 Annex 1 G). 12

Otherwise, as column

(2).

5 GENPRU

Does not apply.18

18

Does not apply if the firm has permission only for cross border services and does not carry on regulated activities in the United Kingdom.

5 BIPRU

EEA firms are subject to the prudential standards of their home state regulator (BIPRU 1.1.7 R and BIPRU 1.1.9 G). However, BIPRU 12 applies to an EEA firm as respects the activities of its UKbranch, but in relation to liquidity risk only.18

18

Does not apply if the firm has permission only for cross border services and does not carry on regulated activities in the United Kingdom.

MIPRU 5

5

MIPRU 1 (Application and general provisions) does not apply unless the firm has a top-up permission.5

MIPRU 2 5 (Responsibility for insurance mediation activity) does not apply unless the firm has a top-up permission.

MIPRU 3 (Requirement to hold professional indemnity insurance)5 does not apply unless the firm has a top-up permission.

MIPRU 4 (Requirement to hold capital resources)5 does not apply unless the firm has a top-up permission.

See MIPRU 4.1.2 G5 for more detailed guidance.

MIPRU 5 5 (Insurance undertakings and mortgage lenders using insurance or mortgage mediation services) does not apply unless the firm has a top-up permission.

5 5 5 5 5 5

As column (2)

5 INSPRU

INSPRU does not apply unless the firm is an insurer to which INSPRU 1.5.33R applies.

IPRU(BANK)

Only the following apply, and only if the firm is a credit institution (IPRU(BANK) 3.2.1R):

(1) IPRU(BANK) 3.5.1R; and

(2) IPRU(BANK) chapters LM and LS.5

23 5 5

Does not apply. But if the firm is a credit institution whose notification to the FSA of its intention to provide services in the United Kingdom covers services provided through a branch, see column (2).

IPRU(BSOC)

Does not apply because an incoming EEA firm cannot be a building society (IPRU(BSOC) X.2.1R).

Does not apply because an incoming EEA firm cannot be a building society (IPRU(BSOC) X.2.1R).

IPRU(FSOC)

Does not apply because an incoming EEA firm cannot be a friendly society (IPRU(FSOC) 1.1).

Does not apply because an incoming EEA firm cannot be a friendly society (IPRU(FSOC) 1.1).

IPRU(INS)

[deleted]9

9

[deleted]9

9

IPRU(INV)

IPRU(INV) does not apply unless the firm:

(1) has a top-up permission;

(2) is an authorised professional firm, investment management firm, members' adviser, personal investment firm, securities and futures firm, service company or underwriting agent; and

(3) is not a lead regulated firm, a media firm or a BIPRU investment firm.5

(IPRU(INV) 1.1.1R and 1.2R)

5

As column (2).10

10 COBS

Guidance on the territorial application of COBS is contained in COBS 1 Annex 1 Part 3.

Guidance on the territorial application of COBS is contained in COBS 1 Annex 1 Part 3.11

11 ICOBS

ICOBS applies except to the extent necessary to be compatible with European law. Guidance on the territorial application of ICOBS is contained in ICOBS 1 Annex 1 Part 4.21

ICOBS 8.4 applies except to the extent necessary to be compatible with European law. Other chapters of21ICOBS do21 not apply, except to the extent necessary to be compatible with European law. Guidance on the territorial application of ICOBS is contained in ICOBS 1 Annex 1 Part 4.21

21

MCOB

Applies where the activity is carried on with or for a customer resident in the United Kingdom or another EEA State at the time that the activity is carried on, but see the territorial scope in MCOB 3.3 (Application: where?).

Applies where the activity is carried on with or for a customer resident in the United Kingdom at the time that the activity is carried on but see MCOB 1.3.4 R (Distance contracts entered into from an establishment in another EEA State) and MCOB 3.3 (Application: where?).

CASS

CASS does not apply with respect to the firm'spassported activities unless the firm is an insurer (CASS 1.2.3 R (2)).

As column (2).

MAR

MAR 1 (Code of market conduct)

Applies if the firm is seeking guidance as to whether or not behaviour amounts to market abuse (MAR 1.1.1 G).

MAR 1 (Code of market conduct)

As column (2).

MAR 2 (Price stabilising rules)

Applies if the firm undertakes stabilising action and wishes to show that it has acted in conformity with price stabilising rules, or that its behaviour conforms with rules in accordance with section 118A(5)(a) of the Act (Market abuse) (MAR 2.1 Application).

MAR 2 (Price stabilising rules)

Only applies in so far as the firm undertakes stabilising action and wishes to rely on a defence that it has acted in conformity with price stabilising rules, or that its behaviour conforms with rules in accordance with section 118A(5)(a) of the Act (Market abuse) (MAR 2.1 and in particular MAR 2.1.3 R).

[deleted]10

10

[deleted]10

10

MAR 4 (Endorsement of the Take-over Code)

Applies to firms whose permission includes, or ought to include, any designated investment business, except as set out in MAR 4.4.1 R.

MAR 4 (Endorsement of the Take-over Code)

Does not apply (MAR 4.4.1 R (4)(b)).

MAR 5 (Multilateral Trading Facilities6)

Does not apply (MAR 5.1.1 R).

6

MAR 5 (Multilateral Trading Facilities) 6

Does not apply (MAR 5.1.1 R).

6

TC

TC applies, but only in so far as responsibility for any matter it covers is not reserved by an EU17 instrument to the firm'sHome State regulator.

17

TC Appendix 1 sets out the activities to which TC applies.7

TC Appendix 2 sets out the sourcebook's territorial scope.7

TC Appendix 3 sets out the limitations on TC App 2.7

7 7 7 7

SUP

SUP 1 (The FSA's approach to supervision)

Applies, but contains only guidance.

SUP 1 (The FSA's approach to supervision)

As column (2).

SUP 2 (Information gathering by the FSA on its own initiative)

The application of this chapter is the same as for Principle 11 (see under PRIN above).

SUP 2 (Information gathering by the FSA on its own initiative).

As column (2)

SUP 3 (Auditors)

Applies to the firm (and its auditor) only if the firm has a top-up permission.

SUP 3 (Auditors)

As column (2)

SUP 4 (Actuaries)

Does not apply.

SUP 4 (Actuaries)

Does not apply.

SUP 5 (Skilled persons)

Applies only if the firm is required by the FSA to provide a report under section 166 of the Act (Reports by skilled persons).

SUP 5 (Skilled persons)

As column (2).

SUP 6 (Applications to vary and cancel Part IV permission)

Applies only if the firm has a top-up permission

SUP 6 (Applications to vary and cancel Part IV permission)

As column (2).

SUP 7 (Individual requirements)

Applies only if the firm has a top-up permission. It contains only guidance on the exercise of the FSA'sown-initiative power to vary that permission. The FSA has similar, but more limited, powers of intervention under Part XIII of the Act in relation to the permission of the firm under Schedule 3 to the Act (see ENF 4).

SUP 7 (Individual requirements)

As column (2).

SUP 8 (Waiver and modification of rules)

Applies only if the firm wishes to apply for, or consent to, or has been given, a waiver of the FSA's rules (SUP 8.1.1 R).

SUP 8 (Waiver and modification of rules)

As column (2).

SUP 9 (Individual guidance)

Applies only if the firm wishes to obtain individual guidance from the FSA or if the FSA gives the firm individual guidance on its own initiative (SUP 9.1.1 G).

SUP 9 (Individual guidance)

As column (2).

SUP 10 (Approved persons)

Applies, but the applicable controlled functions are limited. See SUP 10.1 (Application) for more detailed guidance.

SUP 10 (Approved persons)

Does not

apply (SUP 10.1.6 R).

SUP 11 (Controllers and close links)

Does not apply (SUP 11.1.1 R (2)).

SUP 11 (Controllers and close links)

Does not apply (SUP 11.1.1 R (2)).

SUP 12 (Appointed representatives)

Applies only if the firm has permission to carry on designated investment business, insurance mediation activity or mortgage mediation activity and wishes to appoint, or has appointed, an appointed representative (SUP 12.1.1 R (1)).

SUP 12 (Appointed representatives)

As column (2).

SUP 13 (Exercise of passport rights by UK firms)

Does not apply.

SUP 13 (Exercise of passport rights by UK firms)

Does not apply.

SUP 13A (Qualifying for authorisation under the Act)

SUP 13A applies to the firm if it:

(1) is considering carrying on activities in the United Kingdom which may fall within the scope of the Act and is seeking guidance on whether it needs a top-up permission; or

(2) is, or is considering, applying to the FSA to carry on regulated activities in the United Kingdom under a top-up permission; or

(3) is, or is considering, establishing a branch or providing cross-border services into the United Kingdom using EEA rights.

SUP 13A (Qualifying for authorisation under the Act)

As column (2).

SUP 14 (Incoming EEA Firms: Changing detail and cancelling qualifications for authorisation)

Applies.

SUP 14 (Incoming EEA Firms: Changing detail and cancelling qualifications for authorisation)

Applies.

SUP 15 (Notifications to the FSA)

Applies in full if the firm has a top-up permission. Otherwise, the application is modified as set out in SUP 15 Annex 1.

SUP 15 (Notifications to the FSA)

Does not apply if the firm has permission only for cross border services and does not carry on regulated activities in the United Kingdom (SUP 15 Annex 1).

Otherwise, as column (2).

SUP 16 (Reporting requirements)

Parts of this chapter may apply if the firm has a top-up permission or if the firm is:

(a) a bank; or

(b) a depositary of an ICVC; or

(c) an OPS firm; or

(d) a trustee of an AUT; or

(e) an insurer with permission to effect or carry out life policies; or

(f) a firm with permission to establish, operate or wind up a personal pension scheme or a stakeholder pension scheme;2 or

(g) a firm with permission to advise on investments, arrange (bring about) deals in investments, make arrangements with a view to transactions in investments, or arrange safeguarding and administration of assets.

(SUP 16.1)

2

SUP 16 (Reporting requirements)

Parts of this chapter may apply if the firm has a top-up permission or if the firm is:

(a) a depositary of an ICVC; or

(b) an OPS firm; or

(c) a trustee of an AUT; or

(d) an insurer with permission to effect or carry out life policies; or

(e) a firm with permission to establish, operate or wind up a personal pension scheme or a stakeholder pension scheme;2 or

(f) a firm with permission to advise on investments, arrange (bring about) deals in investments, make arrangements with a view to transactions in investments, or arrange safeguarding and administration of assets.

(SUP 16.1)

2

SUP 17 (Transaction reporting)

Applies to UK branches of incoming EEA firms which are MiFID investment firms in respect of reportable transactions executed in the course of services provided, whether within in the United Kingdom and outside. (SUP 17.1.2 G and SUP 17.1.3A G)10

10 10 10

SUP 17 (Transaction reporting)

Applies as appropriate to incoming EEA firms which are MiFID investment firms in respect of reportable transactions. (SUP 17.1.1 R and SUP 17.1.4 R).10

10

SUP 18 (Transfers of business)

SUP 18.4 does not apply. SUP 18.1, SUP 18.2 and SUP 18.3 may be relevant if the firm proposes to transfer the whole or part of its business by an insurance business transfer scheme or to accept such a transfer or proposes to accept certain transfers of insurance business taking place outside the United Kingdom.

SUP 18 (Transfers of business)

As column (2).

SUP 20 (Fees Rules)

Applies (SUP 20.1.1 R) but modified (SUP 20.4.7 G to SUP 20.4.10 R).

SUP 20 (Fees Rules)

As column (2).

SUP App 1 (Prudential categories)

Applies and provides guidance on the prudential categories used in the Handbook.

SUP App 1 (Prudential categories)

As column (2).

SUP App 2 (Insurers: Scheme of operations)

Does not apply (SUP App 2.1.1 R).

SUP App 2 (Insurers: Scheme of operations)

Does not apply (SUP App 2.1.1 R).8

DEPP 8

8

DEPP applies and contains a description of the FSA's procedures for taking statutory notice decisions, the FSA's policy on the imposition and amount of penalties and the conduct of interviews to which a direction under section 169(7) of the Act has been given or the FSA is considering giving.8

8

DEPP applies and contains a description of the FSA's procedures for taking statutory notice decisions, the FSA's policy on the imposition and amount of penalties and the conduct of interviews to which a direction under section 169(7) of the Acthas been given or the FSA is considering giving.8

8

DISP

Applies (DISP 1.1.1 G) and appliesbut in a limited way in relation to MiFID business10.

Does not apply (DISP 1.1.1 G).

COMP

Applies, except in relation to the passported activities of an MiFID investment firm10 or a BCD credit institution (see the definition of "participant firm") other than an electronic money institution within the meaning of article 1(3)(a) of the E-Money Directive that has the right to benefit from the mutual recognition arrangements under the Banking Consolidation Directive. However, an MiFID investment firm10or BCD credit institution may be able to apply for top-up cover in relation to its passported activities (see COMP 14 (Participation by EEA Firms)).

10 10

Does not apply in relation to the passported activities of an MiFID investment firm10 ora BCD credit institution (see the definition of "participant firm"). Otherwise, COMP may apply, but the coverage of the compensation scheme is limited for non-UK activities (see COMP 5).

10

COAF

Applies if the firm wishes to bring a complaint under the complaints scheme, provided the complaint meets the requirements of the complaints scheme (COAF 1.2).

As column (2).

COLL

15

The following provisions of COLL apply to an EEA UCITS management company providing collective portfolio management services for a UCITS scheme:

(a) COLL 6.6A.2 R (Duties of AFMs of UCITS schemes and EEA UCITS schemes to act in the best interests of the scheme and its Unitholders);

(b) COLL 6.6A.4 R (Due diligence requirements of AFMs of UCITS schemes and EEA UCITS schemes);

(c) COLL 6.6A.5 R (Compliance with the regulatory requirements applicable to the conduct of business activities of a UCITS management company);

(d) COLL 12.3.4 R (Provision of documentation to the FSA: EEA UCITS management companies);

(e) the fund application rules (see COLL 12.3.5 R (COLL fund rules under the management company passport: the fund application rules);

(f) COLL 12.3.6 R (Requirement to make information available to the public or the FSA);

(g) COLL 12.3.7 G (EEA UCITS management companies: compliance with FSA rules); and

(h) COLL 12.3.8 G (EEA UCITS management companies: conduct of business rules).

An EEA UCITS management company providing collective portfolio management services for a UCITS scheme should be aware that it will be expected to comply with the above rules in relation to all aspects of the functioning of the relevant UCITS scheme where, for example, the firm:22

(a) [deleted]22

(b) wishes to apply for an authorisation order to establish an AUT or ICVCas a UCITS scheme;22 or

(ba) is the management company of a UCITS scheme that wishes to exercise an EEA right to market its units in another EEA State; or22

(c) is the operator of a recognised scheme.22

15 22 22 22

As column (2)(d), (e), (f) and (g) and the other parts of COLL specified.22

CREDS 24

24

Does not apply.

Does not apply.

[deleted]10

10

[deleted]10

10

[deleted]1023

PROF

PROF applies only if the firm is an authorised professional firm.

As column (2).

REC

Does not apply.

Does not apply.

LR

LR (Listing Rules)

May apply if the firm is applying for listing in the United Kingdom, is a listedissuer in the United Kingdom, is a sponsor or is applying for approval as a sponsor.

LR (Listing Rules)

As column (2).

PR

PR (Prospectus Rules)

May apply if the firm makes an offer of transferable securities to the public in the United Kingdom or is seeking the admission to trading of transferable securities on a regulated market situated or operating in the United Kingdom.

PR (Prospectus Rules)

As column (2).

DTR

DTR (Disclosure Rules and Transparency Rules)

May apply if the firm is an issuer, any class of whose financial instruments have been admitted to trading on a regulated market, or are the subject of an application for admission to trading on a regulated market, other than issuers who have not requested or approved admission of their financial instruments to trading on a regulated market.

DTR (Disclosure Rules and Transparency Rules)

As column (2).

8 EG describes the FSA's approach to exercising the main enforcement powers given to it by FSMA and by regulation 12 of the Unfair Terms Regulations. EG is a Regulatory Guide and as such does not form part of the Handbook.

SUP 13A Annex 2 Matters reserved to a Home State regulator

G

1Introduction

1.

The application of certain provisions in the Handbook to an incoming EEA firm or incoming Treaty firm depends on whether responsibility for the matter in question is reserved to the firm's Home State regulator. This annex contains guidance designed to assist such firms in understanding the application of those provisions. This annex is not concerned with the FSA's rights to take enforcement action against an incoming EEA firm or an incoming Treaty firm, which are covered in the Enforcement Guide (EG), or with the position of a firm with a top-up permission.

Requirements in the interest of the general good

2.

The Single Market Directives, and the Treaty (as interpreted by the European Court of Justice) adopt broadly similar approaches to reserving responsibility to the Home State regulator. To summarise, the FSA, as Host State regulator, is entitled to impose requirements with respect to activities carried on within the United Kingdom if these can be justified in the interests of the "general good" and are imposed in a non-discriminatory way. This general proposition is subject to the following in relation to activities passported under the Single Market Directives:

(1)

the Single Market Directives expressly reserve responsibility for the prudential supervision of a MiFID investment firm, BCD credit institution, UCITS management company or passporting insurance undertaking to the Firm's Home State regulator. The Insurance Mediation Directive reaches the same position without expressly referring to the concept of prudential supervision. Accordingly, theFSA, as Host State regulator, is entitled to regulate only the conduct of the firm's business within the United Kingdom;

(2)

there is no "general good" provision in MiFID. Rather, MiFID states exactly what the Host State regulator regulates (see paragraphs 8 - 10);

(3)

for a BCD credit institution, the FSA, as Host State regulator, is jointly responsible with the Home State regulator under article 41of the Banking Consolidation Directive for supervision of the liquidity of a branch in the United Kingdom;

(4)

for a MiFID investment firm including a BCD credit institution which is a MiFID investment firm), the protection of clients' money and clients' assets is reserved to the Home State regulator under MiFID; and

(5)

responsibility for participation in compensation schemes for BCD credit institutions and MiFID investment firm is reserved in most cases to the Home State regulator under the Deposit Guarantee Directive and the Investor Compensation Directive.

3.

It is necessary to refer to the case law of the European Court of Justice to interpret the concept of the "general good". To summarise, to satisfy the general good test, Host State rules must come within a field which has not been harmonised at EU3 level, satisfy the general requirements that they pursue an objective of the general good, be non-discriminatory, be objectively necessary, be proportionate to the objective pursued and not already be safeguarded by rules to which the firm is subject in its Home State.

3

Application of SYSC 2 and SYSC 3

4.

SYSC 2 and SYSC 3 only apply to an insurer, a managing agent and the Society.2 See paragraph 8 below for a discussion of how the common platform requirements apply. SYSC 2.1.1 R and SYSC 2.1.2 G do not apply for a relevant incoming Treaty firm.2 The FSA considers that it is entitled, in the interests of the general good, to impose the requirements in SYSC 2.1.3 R to SYSC 2.2.3 G (in relation to the allocation of the function in SYSC 2.1.3 R (2)) and SYSC 3 on an incoming EEA firm and an incoming Treaty firm; but only in so far as they relate to those categories of matter responsibility for which is not reserved to the firm's Home State regulator.

2 2

5.

Should the FSA become aware of anything relating to an incoming EEA firm or incoming Treaty firm (whether or not relevant to a matter for which responsibility is reserved to the Home State regulator), the FSA may disclose it to the Home State regulator in accordance with any directive and the applicable restrictions in Part XXIII of the Act (Public Record, Disclosure of Information and Co-operation).

2

6.

This Annex represents the FSA's views, but a firm is also advised to consult the relevant EU3 instrument and, where necessary, seek legal advice. The views of the European Commission in the banking and insurance sectors are contained in two Commission Interpretative Communications (Nos. 97/C209/04 and C(1999)5046).

3

7.

[deleted]2

2

Application of the common platform requirements in SYSC to EEA MiFID investment firms2

8.

Whilst the common platform requirements (located in SYSC 4 - SYSC 10) do not generally apply to incoming EEA firms (but for EEA UCITS management companies, see 8A below),4EEA MiFID investment firms must comply with the common platform record-keeping requirements in relation to a branch in the United Kingdom.4

Application of SYSC to EEA UCITS management companies

48A.

SYSC 1 Annex 1 (Detailed application of SYSC), Part 2, 2.7AG provides guidance on the application of the common platform requirements to the UKbranch of an EEA UCITS management company.

Requirements under MiFID

9.

Article 31(1) of MiFID prohibits Member States3 from imposing additional requirements on a MiFID investment firm in relation to matters covered by MiFID if the firm is providing services on a cross-border basis. Such firms will be supervised by their Home State regulator.

3

10.

Article 32 of MiFID requires the FSA as the Host State regulator to apply certain obligations to an incoming EEA firm with an establishment in the UK. In summary, these are Articles:

(1)

19 (conduct of business obligations);

(2)

21 (execution of orders on terms most favourable to the client);

(3)

22 (client order handling);

(4)

25 (upholding the integrity of markets, reporting transactions and maintaining records);

(5)

27 (making public firm quotes); and

(6)

28 (post-trade disclosure).

The remaining obligations under MiFID are reserved to the Home State regulator.

11.

MiFID is more highly harmonising than other Single Market Directives. Article 4 of the MiFID implementing Directive permits Member States to impose additional requirements only where certain tests are met. The FSAhas made certain requirements that fall within the scope of Article 4. These requirements apply to an EEA MiFID investment firm with an establishment in the United Kingdom as they apply to a UK MiFID investment firm.4

Requirements under the UCITS Directive

411A

Article 19(8) of the UCITS Directive prohibits an EEA State from imposing additional requirements on a management company providing collective portfolio management services for a UCITS in its territory on a cross-border basis by establishing a branch or under the freedom to provide cross border services in respect of the subject matter of the UCITS Directive, except in the cases expressly permitted (see 11C below).

411B

A management company which provides collective portfolio management services on a cross-border basis by establishing a branch in another EEA State or under the freedom to provide services must comply with the rules of the UCITS Home State which relate to the constitution and functioning of the UCITS. Where the UCITS Home State is the United Kingdom, the applicable rules that the EEA UCITS management company must comply with are as follows:

(1)

COLL 12.3.4 R (Provision of documentation to the FSA:EEA UCITS management companies);

(2)

the fund application rules (see COLL 12.3.5 R (COLL fund rules under the management company passport: the fund application rules)); and

(3)

COLL 12.3.6 R (Requirement to make information available to the public or the FSA).

411C

A management company, however, which provides collective portfolio management services from a branch in another EEA State, is obliged under article 17(4) to comply with the applicable rules of the Host State regulator drawn up under article 14(1) that require a management company to:

(1)

act honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market;

(2)

act with due skill, care and diligence, in the best interests of the UCITS it manages and the integrity of the market;

(3)

have and employ effectively the resources and procedures that are necessary for the proper performance of its business activities;

(4)

try to avoid conflicts of interests and, when they cannot be avoided, to ensure that the UCITS it manages is fairly treated; and

(5)

comply with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its investors and the integrity of the market.

411D

The rules implementing the requirements set out in paragraph 11C (1) to (5) are as follows:

(1)

SYSC, to the extent indicated in column A+ (Application to management company) of Part 3 of SYSC 1 Annex 1 (Detailed application of SYSC); and

(2)

COBS, to the extent indicated at paragraph 9.1 of Part 3 of COBS 1 Annex 1 (Application).

(3)

COLL 6.6A.2 R (Duties of AFMs of UCITS schemes and EEA UCITS schemes to act in the best interests of the scheme and its Unitholders) (branch only);

(4)

COLL 6.6A.4 R (Due diligence requirements of AFMs of UCITS schemes and EEA UCITS schemes) (branch only); and

(5)

COLL 6.6A.5 R (Compliance with the regulatory requirements applicable to the conduct of business activities of a UCITS management company) (branch only).

4Territorial application of the Handbook

The auction regulation

511E

Where an incoming EEA firm exercises an EEA right under the auction regulation to provide services or establish a branch in the United Kingdom, it is carrying on auction regulation bidding. Authorisation and supervision of a firm under the auction regulation are almost exclusively matters reserved to the Home State regulator. The only requirements which the FSA has applied as Host State regulator under the auction regulation in respect of auction regulation bidding is on a UKbranch in relation to safeguards against money laundering and financial crime as well as a statutory status disclosure obligation and requirements to notify the FSA (see Note 4 of SUP 13A Annex 1 G).

511F

An incoming EEA firm that carries on MiFID business bidding is exercising an EEA right under MiFID and is subject to the applicable provisions relating to its carrying on of MiFID business. The respective responsibilities of the Home State regulator and Host State regulator are the same as under MiFID.

11L

Under article 34(2) of the MCD, ensuring compliance with the obligations in articles 7(1), 8, 9, 10, 11, 13, 14, 15, 16, 17, 20, 22 and 39 of the MCD by incoming EEA branches is the responsibility of the Host State. Responsibilities for ensuring compliance with all other obligations are the responsibility of the Home State.

11M

Ensuring compliance with the obligations in articles 7(1), 8, 9, 10, 11, 13, 14, 15, 16, 17, 20, 22 and 39 of the MCD by EEA firms providing cross border services is the responsibility of the Home State.

12.

Further guidance on the territorial application of the Handbook can be found at PERG 13.6 and PERG 13.7.

213.

Examples of how SYSC 3 and/or the common platform provisions apply in practice.

(1)

The Prudential Standards part of the Handbook (with the exception of INSPRU 1.5.33 R on the payment of financial penalties and the Interim Prudential sourcebook (insurers) (IPRU(INS)) (rules 3.6 and 3.7) do not apply to an insurer which is an incoming EEA firm. Similarly, SYSC 3 does not require such a firm:

(a)

to establish systems and controls in relation to financial resources (SYSC 3.1.1 R); or

(b)

to establish systems and controls for compliance with that Prudential Standards part of the Handbook (SYSC 3.2.6 R); or

(c)

to make and retain records in relation to financial resources (SYSC 3.2.20 R and SYSC 9.1.1 R to 9.1.4 G).

(2)

The Conduct of Business sourcebook (COBS) applies to an incoming EEA firm. Similarly, SYSC 3 and SYSC 4-10 do require such a firm:

(a)

to establish systems and controls in relation to those aspects of the conduct of its business covered by applicable sections of COBS (SYSC 3.1.1 R and SYSC 4.1.1 R);

(b)

to establish systems and controls for compliance with the applicable sections of COBS (SYSC 3.2.6 R and SYSC 6.1.1 R); and

(c)

to make and retain records in relation to those aspects of the conduct of its business (SYSC 3.2.20 R and SYSC 9.1.1 R to 9.1.4 G).

See also Question 12 in SYSC 2.1.6 G for guidance on the application of SYSC 2.1.3 R (2)

SUP 13A Annex 3 EEA UCITS management companies: application for approval to manage a UCITS scheme established in the United Kingdom

R

1Under paragraph 15A(1) of Part II of Schedule 3 to the Act, an EEA UCITS management company intending to exercise an EEA right to provide collective portfolio management services for a UCITS scheme must, before it undertakes that activity, obtain the FSA's approval to manage that UCITS scheme. Firms should use the application form below for this purpose. Firms may cross refer to other sources where the information has already been provided to the FSA.

Application by an EEA UCITS management company to manage one or more UCITS schemes established in the United Kingdom (paragraph 15A(1) of Part II of Schedule 3 to the Financial Services and Markets Act 2000).

Name and registered address of management company:

Contact details for the person submitting the application (including telephone number and email address):

EEA State in which management company is authorised:

Details of competent authority providing authorisation of the management company:

Set out details of the scope of authorisation of the management company including the type of funds for which authorisation to manage has been obtained and any limitations that apply to the authorisation:

Name of each UCITS scheme to which this application for approval relates:

Is the management company authorised to manage the type of UCITS scheme to which this approval relates? If not provide details:

Has the management company submitted the information required by COLL 12.3.4 R (Provision of documentation to the FSA:EEA UCITS management companies), including the depositary agreement and information on delegation arrangements? Provide details:

Signed by:

Title:

Dated:

When completed send this form to:

CIS Authorisations

The Financial Services Authority

25 the North Colonnade

London. E14 5HS

Or electronically to: cis@fsa.gov.uk

SUP 13A Annex 4 Passporting: Emissions Trading. Notice of intention to exercise the right of establishment in the United Kingdom

R

1This annex consists of only one or more forms. Forms can be completed online now by visiting: http://www.fsa.gov.uk/Pages/doing/index.shtml

The forms are also to be found through the following address: Passporting: Emissions Trading. Notice of intention to exercise the right of establishment in the United Kingdom - SUP 13A Annex 4 R