Small e-money issuers

Part

ELM Electronic Money

Chapter

Small e-money issuers

Printed on: 13/12/2024

Rulebook at: 20/10/2005

ELM 8

Small e-money issuers

ELM 8.1

Application

01/12/2004

ELM 8.1.1

The effect of ELM 1.1.1 R and ELM 1.1.2 R is that this chapter applies to:

(1) an applicant for a small e-money issuer certificate; and
(2) a small e-money issuer.

27/04/2002

ELM 8.1.2

The provisions of ELM 8.3.11 G and ELM 8.3.12 G (Criminal offences relating to status) are relevant to a person who is not a small e-money issuer.

27/04/2002

ELM 8.2

Purpose

01/12/2004

ELM 8.2.1

This chapter, together with articles 9C to 9G of the Regulated Activities Order (Exclusions), implements the provisions of article 8 (Waiver) of the E-Money Directive by setting out the procedure for applying for, and revoking, a certificate (a small e-money issuer certificate).

27/04/2002

ELM 8.2.2

This chapter also contains provisions relating to the obtaining of information by the FSA from a small e-money issuer to ensure the exclusion provisions referred to in ELM 8.2.1 G are not abused.

27/04/2002

ELM 8.3

Introduction

01/12/2004

The small e-money issuer certificate

ELM 8.3.1

The holder of a small e-money issuer certificate (a small e-money issuer) is excluded from the regulated activity of issuing e-money.

27/04/2002

ELM 8.3.2

A small e-money issuer is not an exempt person within the meaning of the Act, that is a person who is carrying on a regulated activity but exempt from the need to be authorised. The small e-money issuer is not, as such, carrying on a regulated activity. This means, in particular, that:

(1) an authorised person can be a small money issuer (unless it is a full credit institution (see ELM 8.4.2 G); and
(2) a small e-money issuer does not benefit from the exclusion in article 16 of the Financial Promotion Order (Exempt persons).

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ELM 8.3.3

AUTH App 3.4 gives guidance on the restrictions on financial promotion in section 21 of the Act (Restrictions on financial promotion) in relation to e-money.

27/04/2002

ELM 8.3.4

A person who issues e-money on a limited scale may apply to the FSA for a small e-money issuer certificate. This chapter contains the provisions relating to the certificate in the following sections:

(1) ELM 8.4 gives guidance on the three conditions under which a certificate may be given;
(2) ELM 8.5 contains the direction on how to apply for a certificate and gives guidance on the application procedure;
(3) ELM 8.6 contains the direction on how to apply for a revocation of a certificate and gives guidance on how the FSA may revoke a certificate on its own initiative; and
(4) ELM 8.7 contains rules and guidance about the provision of information to the FSA, including the rules which require a small e-money issuer to give periodic reports and change reports to the FSA on Form ELM-SI (which is set out in ELM 8 Annex 2 R).

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ELM 8.3.5

The legislative provisions in respect of a small e-money issuer certificate are primarily contained in articles 9C to 9G of the Regulated Activities Order. The rules and guidance in this chapter are based on those provisions.

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Procedural provisions

ELM 8.3.6

Certain procedural provisions apply to an application for a small e-money issuer certificate as they apply to an application for a Part IV permission.

27/04/2002

ELM 8.3.7

The application must give the address of a place in the United Kingdom for service on the applicant of any notice or other document which is required or authorised to be served on him under the Act.

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ELM 8.3.8

The application must be made in the manner directed by the FSA (see ELM 8.5.1 D) and contain any information which the FSA reasonably requires. The FSA may require further information to enable it to determine the application.

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ELM 8.3.9

The application for a small e-money issuer certificate must be determined by the FSA within six months from when it receives the completed application or, if the application is incomplete, within 12 months. The applicant may withdraw his application by written notice. The FSA must give the applicant written notice of the grant of the application or a warning notice if it proposes to refuse the application. Guidance on the decision making procedures is given in DEC 2 (Statutory notice procedure: warning notice and decision notice procedure).

20/10/2005

ELM 8.3.10

An applicant who is aggrieved by the determination of the application may refer the matter to the Tribunal (see (The Tribunal)).

27/04/2002

Criminal offences relating to status

ELM 8.3.11

Article 9I of the Regulated Activities Order (False claims to be a certified person) provides that a person who is not a small e-money issuer is to be treated as guilty of an offence under section 24 of the Act (False claims to be authorised or exempt) if he describes himself (in whatever terms) as a small e-money issuer. It is also an offence for such a person to behave, or otherwise hold himself out, in a manner which indicates that he is a small e-money issuer.

27/04/2002

ELM 8.3.12

ENF 15 (Prosecution of criminal offences) and DEC 4.6 (Decisions to apply to the civil courts and to prosecute criminal offences) contain guidance on the FSA's policy and procedures relating to the exercise of its powers to prosecute criminal offences, including offences under section 24 of the Act.

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ELM 8.3.13

See also ELM 8.7.18 G to ELM 8.7.20 G (Criminal offences relating to the provision of information).

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The Financial Services Compensation Scheme

ELM 8.3.14

No claim under the compensation scheme may be made against a small e-money issuer since the scheme pays compensation only in respect of claims made in connection with regulated activities (section 213 of the Act (The compensation scheme)).

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The FSA's public register

ELM 8.3.15

The FSA's public register maintained under section 347 of the Act (The record of authorised persons etc.) includes every small e-money issuer.

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ELM 8.4

The conditions for giving a small e-money issuer certificate

01/12/2004

Who may apply?

ELM 8.4.1

Only a body corporate, or a partnership, which has its head office in the United Kingdom may make an application for a small e-money issuer certificate. A sole trader may not apply.

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ELM 8.4.2

A full credit institution may not apply for a small e-money issuer certificate. If a bank or building society wishes to carry on the regulated activity of issuing e-money within the territorial scope of the Act, it will have to apply for permission to do so.

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The conditions

ELM 8.4.3

The FSA must give a small e-money issuer certificate to a person eligible to apply (see ELM 8.4.1 G and ELM 8.4.2 G) if it appears to it that any one or more of three paragraphs, set out in article 9C of the Regulated Activities Order (Persons certified as small issuers etc.), apply. This section gives guidance on those paragraphs but refers to them as 'conditions'. Similarly, where the Regulated Activities Order refers to a person to which a small e-money issuer certificate is given as a 'certified person', ELM refers to 'small e-money issuer'.

27/04/2002

ELM 8.4.4

The three conditions in article 9C of the Regulated Activities Order (Persons certified as small issuers etc.) are designed to restrict the certificate to small or local schemes. The first and second conditions follow, almost exactly, the corresponding provisions of the E-Money Directive. The third condition follows the E-Money Directive, but also adds some guidelines.

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ELM 8.4.5

In each of the conditions, references to amounts in euro include references to equivalent amounts in sterling.

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The first condition

ELM 8.4.6

The first condition applies if:

(1) the applicant does not issue e-money except on terms that the electronic device on which the monetary value is stored is subject to a maximum storage amount of not more than 150 euro; and
(2) the applicant's total liabilities with respect to issuing e-money do not (or will not) usually exceed 5 million euro and do not (or will not) ever exceed 6 million euro.

27/04/2002

ELM 8.4.7

As 'usually' is not defined, the application of this condition will depend on the exact facts of each case. In the FSA's view, the total liabilities should be measured over several different periods. Thus, where the total liabilities exceed 5 million euro on several occasions over a short period, the scheme is more likely to fail to meet this condition than where those occasions are spread evenly over a longer period.

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ELM 8.4.8

While rigid guidelines on what 'usually' means are not possible, in the FSA's view, a scheme that exceeds the limit no more than 5 days a month and 20 days a year will not necessarily breach this condition. But if the scheme exceeds either or both of those frequencies, that would call into question whether the scheme meets this condition. For this reason, the FSA will require a 'change report' if the total liabilities with respect to issuing e-money exceed 5 million euro (see ELM 8.7.3 R).

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The second condition

ELM 8.4.9

The second condition applies if:

(1) the condition in ELM 8.4.6 G (1) is met;
(2) the applicant's total liabilities with respect to the issuing of e-money do not (or will not) exceed 10 million euro; and
(3) e-money issued by the applicant is accepted as a means of payment only by:

(a) subsidiaries of the applicant which perform operational or other ancillary functions related to e-money issued or distributed by the applicant; or
(b) other members of the same group as the applicant (other than its subsidiaries).

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The third condition

ELM 8.4.10

The third condition applies if:

(1) the conditions referred to in ELM 8.4.6 G (1) and ELM 8.4.9 G (2) are met; and
(2) e-money issued by the applicant is accepted as a means of payment, in the course of business, by not more than one hundred persons where:

(a) those persons accept such e-money only at locations within the same premises or limited local area; or
(b) those persons have a close financial or business relationship with the applicant, such as a common marketing or distribution scheme.

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The third condition: locations

ELM 8.4.11

For the purposes of ELM 8.4.10 G (2)(a), locations are situated within the same premises or limited local area if they are situated within:

(1) a shopping centre, airport, railway station, bus station or campus of a university, polytechnic, college, school or similar educational establishment; or
(2) an area which does not exceed four square kilometres.

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ELM 8.4.12

ELM 8.4.11 G (1) and (2) are illustrative only and are not to be treated as limiting the scope of ELM 8.4.10 G (2)(a).

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ELM 8.4.13

If the e-money issued under a scheme is only accepted by businesses within the same four square kilometre area, the third condition will be met. However, if the scheme operates in two areas, each of one square kilometre, but the two areas are 100 kilometres apart, the scheme will not come within the illustrative provision referred to in ELM 8.4.11 G (2).

27/04/2002

ELM 8.4.14

If a scheme operates in an area that exceeds four square kilometres, the scheme can still meet ELM 8.4.10 G (2)(a). However, it will only do so if the area can be described as a limited local area for some reason in addition to the size of the area.

27/04/2002

ELM 8.4.15

The fact that a scheme is confined within the boundaries of a local authority is not, in the FSA's view, enough to bring it within ELM 8.4.10 G (2)(a) by itself. However, if the area covered by the scheme is defined by a local authority's boundaries, and the area's size is close to, but exceeds, four square kilometres, the combination of the size of the area and the fact that it only covers a particular local authority area may still be enough to meet ELM 8.4.10 G (2)(a).

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ELM 8.4.16

'Premises' includes a single building. It also includes a number of buildings on the same campus or site. It does not include premises of one institution split over several sites.

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The third condition: close financial or business relationship

ELM 8.4.17

If a scheme does not meet ELM 8.4.10 G (2)(a), it will still meet the third condition if the e-money issuer and the merchants who accept the e-money have a close financial or business relationship.

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ELM 8.4.18

Persons are not to be treated as having a close financial or business relationship with the applicant merely because they participate in arrangements for the acceptance of e-money issued by the applicant.

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ELM 8.4.19

If an e-money scheme that allows citizens to pay for bus or metro tickets together with a range of other things meets the third condition, it is likely to be because of the provisions referred to in ELM 8.4.10 G (2)(b) rather than ELM 8.4.10 G (2)(a).

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ELM 8.5

Application for a small e-money issuer certificate

01/12/2004

ELM 8.5.1

(1) An applicant for a small e-money issuer certificate, except in so far as the FSA may direct in an individual case, must apply in writing in the manner directed, and with the information required, on the form provided by the FSA.
(2) The application for a small e-money issuer certificate must be:

(a) given to a member of, or addressed for the attention of, the Authorisation Enquiries department of the FSA; and
(b) delivered to the FSA by one of the methods in (3).

(3) The application may be delivered by:

(a) post to the address in (4); or
(b) leaving the application at the address in (4) and obtaining a date-stamped receipt; or
(c) hand delivery to a member of the Authorisation Enquiries department.

(4) The address for applications is: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.
(5) Until the application has been determined, an applicant which submits an application for a small e-money issuer certificate must inform the FSA of any significant change to the information given in the application immediately it becomes aware of the change.

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ELM 8.5.2

There is no application fee, or subsequent fee, for a small e-money issuer certificate.

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ELM 8.5.3

The application form is available on www.fsa.gov.uk or from the Authorisation Enquiries department of the FSA. To contact the department:

(1) telephone on 020 7066 1000; or
(2) write to the Authorisation Enquiries department at the address in ELM 8.5.1 D (4); or
(3) email to AuthorisationEnquiries@fsa.gov.uk.

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ELM 8.5.4

If the application is granted, the applicant will be given a certificate in the form of the one shown in ELM 8 Annex 1 GG.

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ELM 8.6

Revocation of a small e-money issuer certificate

01/12/2004

Revocation on the FSA's own initiative

ELM 8.6.1

The FSA may revoke a small e-money issuer certificate if:

(1) it appears to it that the small e-money issuer does not meet the relevant conditions, or has failed to meet the relevant conditions at any time since the small e-money certificate issuer certificate was given; or
(2) the small e-money issuer has contravened any rule or requirement to which he is subject as a result of the provisions in ELM 8.7 (Provision of information).

27/04/2002

ELM 8.6.2

For the purposes of ELM 8.6.1 G (1), the small e-money issuer meets 'the relevant conditions' at any time if, at that time, the conditions referred to in ELM 8.4.6 G, ELM 8.4.9 G or ELM 8.4.10 G apply. In this chapter, the relevant conditions (the phrase used in the Regulated Activities Order) are referred to as 'the conditions referred to in ELM 8.4'.

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Revocation for failure to meet the conditions referred to in ELM 8.4

ELM 8.6.3

When determining whether it is appropriate to use the power referred to in ELM 8.6.1 G (1), the FSA will take account of all the relevant circumstances of the case. The FSA may consider that it is not appropriate to revoke where, for example, the failure to meet the conditions:

(1) was inadvertent;
(2) lasted for a short period only; and
(3) was not serious in nature.

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Revocation for contravention of a rule or requirement

ELM 8.6.4

In determining whether to revoke a small e-money issuer certificate under the power referred to in ELM 8.6.1 G (2), the FSA will consider all the relevant circumstances, including the nature and seriousness of the contravention or failure to provide information or produce documents. Amongst other factors, the FSA may consider:

(1) whether there is information which suggests the contravention or failure was deliberate or reckless;
(2) the length of any delay in providing a report, document or other required information;
(3) the seriousness of any factual inaccuracies or other deficiencies in the information provided to the FSA;
(4) whether the small e-money issuer has previously failed to comply with a rule or requirement;
(5) the record of its compliance with the conditions referred to in ELM 8.4.

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Procedure

ELM 8.6.5

If the FSA proposes to revoke a small e-money issuer certificate otherwise than at the request of the small e-money issuer, it must give him a warning notice (see DEC 2.2 (Warning notice procedure)). Similarly, if it decides to revoke the certificate, it must give him a decision notice (see DEC 2.3 (Decision notice procedure)).

27/04/2002

ELM 8.6.6

A small e-money issuer who is aggrieved at the decision to revoke the small e-money issuer certificate may refer the matter to the Tribunal (see DEC 5.1 (The Tribunal)).

27/04/2002

Revocation on request

ELM 8.6.7

A small e-money issuer may apply to the FSA for his certificate to be revoked. The FSA must then revoke it and give the small e-money issuer written notice that it has done so.

27/04/2002

ELM 8.6.8

An application for a small e-money issuer certificate to be revoked must be made on the form for this purpose (which may be obtained from the Authorisation Enquiries department of the FSA) in the manner directed in ELM 8.5.1 D.

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ELM 8.6.9

An application for revocation may be associated with an application for a Part IV permission to carry on the regulated activity of issuing e-money (or for a variation of an existing permission to add that activity). If so, the revocation will, if the small e-money issuer requests it on making the application, be conditional on the granting of the application.

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ELM 8.7

Provision of information

01/12/2004

Periodic reports

ELM 8.7.1

A small e-money issuer must:

(1) complete a Form ELM-SI (see ELM 8 Annex 2 R) as at the end of each financial year and half financial year; and
(2) within 10 business days of that date, deliver it to the FSA in the manner indicated in the form.

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Change reports

ELM 8.7.2

If none of the conditions referred to in ELM 8.4 continue to apply to a small e-money issuer, it must, within two business days of the change occurring:

(1) complete a Form ELM-SI; and
(2) deliver it to the FSA in the manner indicated in the form.

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ELM 8.7.3

(1) If the total liabilities of a small e-money issuer with respect to issuing e-money exceed 5 million euro, it must, within two business days of the excess occurring:

(a) complete a Form ELM-SI; and
(b) deliver it to the FSA in the manner indicated in the form.

(2) ELM 8.7.3 R (1) applies only if neither of the conditions referred to in ELM 8.4.9 G and ELM 8.4.10 G (that is the second and third conditions) apply to the small e-money issuer.

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FORM ELM-SI

ELM 8.7.4

Form ELM-SI may be obtained from the Authorisation Enquiries department of the FSA. For details on how to contact the department, see ELM 8.5 (Application for a small e-money issuer).

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ELM 8.7.5

Form ELM-SI is set out at ELM 8 Annex 2 RR.

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Other powers

ELM 8.7.6

The FSA may also, by notice in writing given to a small e-money issuer, require him to provide specified information (or information of a specified description) or produce specified documents (or documents of a specified description).

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ELM 8.7.7

The information or documents referred to in ELM 8.7.6 G must be reasonably required by the FSA for the purpose of determining whether the small e-money issuer meets, or has met, any one or more of the conditions referred to in ELM 8.4.

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ELM 8.7.8

The following sections in the Act apply to a requirement referred to in ELM 8.7.6 G (see article 9G(9) of the Regulated Activities Order) (Obtaining information from certified persons etc.):

(1) section 175 (Information and documents: supplemental provisions);
(2) section 176 (Entry of premises under warrant), the reference in section 176(3)(a) to an authorised person being read as a reference to a small e-money issuer; and
(3) section 177 (Offences).

27/04/2002

ELM 8.7.9

The information or documents. referred to in ELM 8.7.6 G must be provided or produced before the end of the reasonable period, and at the place, specified by the FSA. The FSA may require the information to be provided in such form as it may reasonably require. The FSA may require the information to be verified, and the document authenticated, in such manner as it may reasonably require (see article 9G(6) of the Regulated Activities Order and section 165 of the Act (Obtaining information from certified persons etc.). The FSA may use the power to require information and documents from small e-money issuers in support of its enforcement functions.

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ELM 8.7.10

The FSA may by notice in writing to a small e-money issuer require him to provide a report by a skilled person on any matter about which the FSA has required or could require the provision of information or production of documents under the powers referred to in ELM 8.7.8 G and ELM 8.7.9 G.

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ELM 8.7.11

The FSA may appoint one or more competent persons to carry out an investigation if it appears to it that there are circumstances suggesting that a small e-money issuer may not meet any of the conditions referred to in ELM 8.4. The FSA may also use this power if the small e-money issuer may not have met any of these conditions at any time since the small e-money issuer certificate was given. ENF 2 (Information gathering and investigation powers) contains guidance on the FSA's policies relating to the use of its investigation powers.

27/04/2002

Accurate and complete reports

ELM 8.7.12

A small e-money issuer must take reasonable steps to ensure that all information it gives to the FSA on its activities relating to e-money is:

(1) factually accurate or, in the case of estimates and judgements, fairly and properly based after appropriate enquiries have been made by the small e-money issuer; and
(2) complete, in that it should include anything of which the FSA would reasonably expect notice.

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Correcting information which has been provided

ELM 8.7.13

(1) If a small e-money issuer becomes aware, or has information that reasonably suggests that it has or may have provided the FSA with information which was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a material particular, it must notify the FSA immediately.
(2) The notification must include:

(a) details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;
(b) an explanation why such information was or may have been provided; and
(c) the correct information;

unless ELM 8.7.14 R applies.

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Availability of information

ELM 8.7.14

If the information in ELM 8.7.13 R (2) cannot be submitted with the notification (because it is not immediately available), it must be submitted as soon as possible afterwards.

27/04/2002

ELM 8.7.15

The FSA may request the small e-money issuer to provide revised documentation containing the correct information, if appropriate.

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Unobtainable information

ELM 8.7.16

If a small e-money issuer is unable to obtain the information required by the FSA, it should inform the FSA that the scope of the information provided is, or may be, limited.

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Administrative and civil enforcement powers

ELM 8.7.17

Where a small e-money issuer contravenes a rule in ELM 8.7 (Provision of information), or a requirement imposed under the powers referred to in ELM 8.7.6 G to ELM 8.7.11 G, the FSA may, among its other enforcement powers:

(1) apply to the courts for an injunction (see ENF 6 (Injunctions));
(2) apply to the courts for a restitution order (see ENF 9 (Restitution and redress)); and
(3) revoke the small e-money issuer certificate (see ELM 8.6).

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Criminal offences relating to the provision of information

ELM 8.7.18

A person who knowingly or recklessly provides the FSA with information which is false or misleading in a material particular, in purported compliance with a requirement imposed by or under the Act, commits an offence (section 398 of the Act (Misleading the Authority: residual cases)).

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ELM 8.7.19

An offence by a body corporate or partnership may be attributed to an officer or certain other persons (section 400 of the Act (Offences by bodies corporate etc)).

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ELM 8.7.20

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ELM 8.7.21

See also ELM 8.3.11 G and ELM 8.3.12 G (Criminal offences relating to status).

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ELM 8 Annex 1

Small E-Money Issuer Certificate

01/12/2004

This annex consists only of one or more forms. Forms are to be found through the following address:

Small E-Money Issuer Certificate - FSA/docs/elm/elm_8_annex1g.pdf

27/04/2002

ELM 8 Annex 2

FORM ELM-SI Provision of information from a small electronic money issuer

01/12/2004

This annex consists only of one or more forms. Forms are to be found through the following address:

FORM ELM-SI Provision of information from a small electronic money issuer - FSA/docs/elm/elm_8_annex2r.pdf

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