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How Important Is FCA Authorization?

Do you need to be authorised by the FCA to undertake corporate financial activities?

18Mar

A person must be authorized or registered with the FCA (or exempt from the need for authorization) if they carry on a regulated activity in the UK, as laid out by the Financial Services and Markets Act of 2000 (FSMA).

Some corporate firms may only need to be registered rather than authorized; this is generally because they operate in a lower-risk environment. Therefore the FCA does not need as much detail about their business, or to protect the funds they receive from customers for payment services. Examples of registered firms or societies include the following:

  • Some payment services providers
  • E-money institutions
  • Some friendly and registered societies (co-operative societies, community benefit societies, and societies previously referred to as industrial and provident societies)
  • Working men's clubs

Some types of company and certain individuals may not require authorization, and these include:

  • Appointed representatives (agents for the authorized principal firm). The principal is authorized and, providing the appointed representative conducts its activities within the parameters of the principal’s authorization, the appointed representative will not need to be authorized in its own right. The principal takes full responsibility for ensuring that the appointed representative complies with the FCA’s rules, and maybe liable in circumstances where the appointed representative fails to comply with the rules. You should consult your corporate solicitor who can advise on the terms of an agreement between the principal and appointed representative.
  • Professional firms like solicitors, accountants or actuaries that run regulated activities alongside their main business
  • Local authorities or some housing groups that run insurance mediation or mortgage activities.

In addition there are exclusions, which are conditions that turn normally regulated corporate activities into unregulated ones and, if a firm’s activities fall within an exclusion, then it won't need authorization to conduct those activities. Examples of exclusions include:

  • Introducer exclusion
  • Overseas persons exemption

Subject to any exclusions, the regulated UK financial activities, in respect of which FCA authorization is required, are fully explained in Part 2 of FSMA and include:

  • Accepting deposits
  • Issuing e-money
  • Carrying out or helping to administer insurance contracts (as a firm's principal)
  • Investments: dealing in or managing (as a principal or agent), arranging deals, safeguarding and administering, advising
  • Home finance: arranging, advising on, entering into and administering
  • Operating a multilateral trading facility
  • Sending dematerialised instructions (electronic transfer of title in investments like securities and contractually-based investments)
  • Setting up collective investment schemes
  • Providing basic advice on stakeholder products
  • Lloyd's market activities
  • Entering funeral plan contracts
  • Agreeing to do most of the above activities.

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