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A guide to key resources: regulated activities
Practical Law UK Practice Note Overview 6-505-5843 (Approx. 15 pages)
A guide to key resources: regulated activities
| Maintained • United Kingdom |
A guide to Practical Law's materials on regulated activities. It includes information about the general prohibition, which is set out in section 19 of the Financial Services and Markets Act 2000 (FSMA), and the specified investments and activities set out in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO).
Scope of this note
It is important for a firm to establish if it is carrying on a regulated activity as, if it is, it will need to be authorised by the FCA or the PRA. This note provides a guide to Practical Law's materials on regulated activities.
General prohibition
Section 19 of the Financial Services and Markets Act 2000 (FSMA) states that a person (which includes a body corporate) must not carry on a regulated activity in the UK, or purport to do so, unless they are an authorised or exempt person. This is referred to as the general prohibition. Carrying on a regulated activity in breach of the general prohibition is a criminal offence and may result in certain agreements being unenforceable.
For more information about the general prohibition, see Practice note, Section 19 of FSMA: the general prohibition.
Regulated activities
Generally, an activity is a regulated activity if it is an activity of a specified kind that is carried on by way of business and relates to a specified investment or property of any kind (section 22, FSMA). The definition is extended to include certain activities relating to, among others, benchmarks and claims management companies.
A specified activity or investment is one that has been specified as such in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO). For an overview of the RAO, see Practice note, Regulated Activities Order: overview.
For flowcharts relating to whether an activity is regulated, see:
Specified activities
Specified activities are set out in Part II of the RAO. For more information, see Practice note, Specified activities in the RAO.
Specified investments
Specified investments are set out in Part III of the RAO. For more information, see Practice note, Specified investments in the RAO.
Exclusions to regulated activities
Exclusions are conditions that turn normally regulated activities into unregulated ones. Therefore, if a firm falls within scope of a regulated activity's exclusion, it will not need authorisation to carry on that regulated activity.
Generally, there are two types of exclusion:
- Exclusions that apply to particular regulated activities (see Practice note, Specific exclusions in the RAO).
- Exclusions that apply to multiple regulated activities (see Practice note, General exclusions in the RAO).
Business test
For an activity to be a regulated activity under FSMA, it must be carried on by way of business (section 22, FSMA). This is commonly referred to as the business test.
Under section 419 of FSMA, HM Treasury has the power to modify the business test as it applies to regulated activities, including deeming activities to be business activities. This has been done through the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177) (Business Order).
For more information about the business test and the Business Order, see Practice note, Carrying on regulated activities by way of business.
Territorial scope
Generally, only regulated activities carried on in the UK fall within the territorial scope of FSMA. For more information, see Practice note, Territorial scope of regulated activities.
Exempt persons and exempt professional firms
Exempt persons
An exempt person is exempt from the general prohibition in relation to one or more regulated activities. The following are exempt persons as set out in section 417(1) of FSMA:
- Persons exempt as a result of an exemption order.
- Appointed representatives and introducer appointed representatives (see Practice notes, Appointed representatives and FCA registered tied agents and Introducer appointed representatives).
- Recognised investment exchanges.
- Recognised clearing houses.
- Certain central counterparties and central securities depositories.
For more information about exempt persons, see Practice note, Section 19 of FSMA: the general prohibition: Exempt persons.
Exempt professional firms
Under section 327 of FSMA, professional firms may carry on certain regulated activities (referred to as exempt regulated activities) without breaching the general prohibition provided that certain conditions are satisfied. For example, the firm must be a member of a profession or controlled or managed by one or more such members.
For more information on professional firms, see Practice note, Designated professional bodies.
Authorised persons
If a person is carrying on a regulated activity, by way of business, in the UK and they do not fall within an exclusion or exemption, they must be authorised by the FCA or the PRA.
For information about applying to the FCA or the PRA for authorisation, or varying or cancelling a firms' permission under FSMA, see:
Future developments relating to regulated activities
For information about key ongoing developments relating to regulated activities, see Practice note, Regulated Activities Order: overview: Key future changes relating to regulated activities and investments.