Non-mainstream regulated activities

Part

PROF Professional Firms

Chapter

Non-mainstream regulated activities

Printed on: 29/10/2024

Rulebook at: 01/06/2005

PROF 5

Non-mainstream regulated activities

PROF 5.1

Application and purpose

01/12/2004

Application

PROF 5.1.1

This chapter applies to an authorised professional firm that carries on non-mainstream regulated activities.

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Purpose

PROF 5.1.2

This chapter:

(1) contrasts "exempt regulated activities" with "non-mainstream regulated activities";
(2) sets out the conditions which must be satisfied for a regulated activity of an authorised professional firm to constitute a non-mainstream regulated activity;
(3) refers to other parts of the Handbook in which provisions are disapplied or modified in relation to authorised professional firms when carrying on non-mainstream regulated activities;
(4) gives effect to the Distance Marketing Regulations with respect to the non-mainstream regulated activities of authorised professional firms.

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Exempt regulated activities contrasted with non-mainstream regulated activities

PROF 5.1.3

(1) The FSA's policy is designed to provide so far as possible a level playing field for authorised and unauthorised members of the professions in relation to the carrying on of similar activities.
(2) Subject to conditions (see PROF 2), members of designated professional bodies that are not authorised can carry on particular regulated activities, known as exempt regulated activities, and obtain the benefit of the exemption under section 327 of the Act from the general prohibition.
(3) In contrast, non-mainstream regulated activities are particular regulated activities carried on by an authorised professional firm. If the professional firm were not authorised under the Act, these same activities would be exempt regulated activities which, if the firm could meet the necessary conditions in section 327, would enable it to benefit from the section 327 exemption.
(4) Therefore, a number of provisions of the Handbook (see PROF 5.3) have been disapplied or modified in respect of these non-mainstream regulated activities of authorised professional firms.

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PROF 5.1.4

A "non-mainstream regulated activity" is defined in the Glossary as "a regulated activity of an authorised professional firm in relation to which the conditions in PROF 5.2.1 R are satisfied". Conditions (1) to (5) of PROF 5.2.1 R replicate section 327(1)(b)(i), (3), (4), (5) and (6) of the Act, as if those conditions applied to an authorised professional firm.

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PROF 5.2

Nature of non-mainstream regulated activities

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Conditions for non-mainstream regulated activity

PROF 5.2.1

A "non-mainstream regulated activity" is a regulated activity of an authorised professional firm in relation to which the following conditions are satisfied:

(1) the firm must not receive from a person other than his client any pecuniary reward or other advantage, for which he does not account to his client, arising out of the carrying on of the regulated activity;
(2) the manner of the provision by the firm of any service in the course of carrying on the regulated activity must be incidental to the provision by it of professional services (see PROF 5.2.2 R);
(3) the regulated activity must not be of a description, or relate to an investment of a description, specified in The Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities) Order 2001 (SI 2001/1227) or in any other order made by the Treasury under section 327(6) of the Act (see PROF 2 Annex 2 GG);
(4) there must not be in force any direction under section 328 of the Act (Directions in relation to the general prohibition) in relation to:

(a) a class of person which would have included the firm were it not an authorised person; or
(b) a description of regulated activity which includes the regulated activity the firm proposes to carry on; and

(5) the regulated activity must be an activity which exempt professional firms which are members of the same designated professional body as the authorised professional firm are permitted to carry on under rules made by that body as required by section 332(3) of the Act.

20/09/2001

PROF 5.2.2

In PROF 5.2.1 R (2), "professional services" means services:

(1) which do not constitute a regulated activity; and
(2) the provision of which is supervised and regulated by a designated professional body.

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PROF 5.3

Reference to other sourcebooks and manuals

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Introduction

PROF 5.3.1

The parts of the Handbook in which provisions are disapplied or modified in relation to authorised professional firms when carrying on non-mainstream regulated activities include those described in PROF 5.3.1A G to PROF 5.3.9 G

31/10/2004

General provisions

PROF 5.3.1A

4.3.5 R provides that 4.3.1 R (Disclosure in letters to private customers) does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

01/03/2003

Conduct of business sourcebook

PROF 5.3.2

COB 1.2.1 R (4) provides that COB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, except for:

(1) COB 2.1 (Clear, fair and not misleading communication), COB 3 (Financial promotion) and COB 4.2.1 R to COB 4.2.6 G, COB 4.2.9 R and COB 4.2.11 E (Content of terms of business); and
(2) (where these are insurance mediation activities) the IMD implementation provisions and COB 4.3.19 R to COB 4.3.25 R as if they also applied to a firm carrying out the activities in COB 4.3.19R (1)(a)-(c) with or on behalf of private customers, unless:

(a) the designated professional body of the firm has made rules which implement some or all of articles 12 and 13 of the IMD;
(b) those rules have been approved by the FSA under section 332(5) of the Act; and
(c) the firm is subject to the rules in the form in which they were approved;

in which case they are disapplied to the extent that articles 12 and 13 of the IMD are implemented by the rules of the designated professional body.
(3) COB 1.2.1A G provides that the effect of COB 1.2.1 R (4)(d) is that if the relevant designated professional body of an authorised professional firm does not make rules implementing articles 12 and 13 of the IMD applicable to authorised professional firms, those firms will need to comply with the IMD implementation provisions and COB 4.3.19 R to COB 4.3.25 R as if they also applied to a firm carrying out the activities in COB 4.3.19 (1)(a)-(c) with or on behalf of private customers.

01/12/2004

Training and Competence sourcebook

PROF 5.3.3

TC 2.1.1 R (2) provides that TC 2, which imposes the substantive training and competence requirements, does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

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PROF 5.3.4

ML 8.1.3 R provides that the Money Laundering sourcebook does not apply to authorised professional firms when carrying on non-mainstream regulated activities.

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Supervision manual

PROF 5.3.5

SUP 10.1.18 R provides that SUP 10 (Approved persons) does not apply (except in respect of the required functions) to an authorised professional firm in respect of its non-mainstream regulated activities. So a person such as a partner, whose only regulated activities are incidental to his professional services, in an authorised professional firm whose principal purpose is to carry on activities other than regulated activities, need not be an approved person.

01/12/2001

Dispute resolution: Complaints sourcebook

PROF 5.3.6

DISP 1.1.1 R (1)(c) provides that DISP 1 (Complaint handling procedures for firms) does not apply to an authorised professional firm in so far as its non-mainstream regulated activities are concerned. DISP 2.6.7 R further provides that a complaint about an authorised professional firm cannot be handled under the Compulsory Jurisdiction of the Financial Ombudsman Service if it relates solely to non-mainstream regulated activity and can be handled by a designated professional body. This is because such a complaint will be handled by the relevant professional body.

20/09/2001

Market Conduct sourcebook

PROF 5.3.7

MAR 4.4.1 R (3) provides that MAR 4, which deals with the endorsement of the City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisitions of Shares, does not have effect in relation to an authorised professional firm in respect of non-mainstream regulated activity.

20/09/2001

Mortgages: Conduct of business sourcebook

PROF 5.3.8

MCOB 1.2.4 G provides that MCOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities except for MCOB 2.2 (Clear, fair and not misleading communication), MCOB 3 (Financial promotion) and to a limited extent MCOB 4.4 (Initial disclosure requirements).

31/10/2004

PROF 5.3.9

CASS 1.2.4 R provides that CASS 2, CASS 3 and CASS 4 do not apply to authorised professional firms when carrying on non-mainstream regulated activities. CASS 1.2.5 R further provides that if the non-mainstream regulated activities are insurance mediation activity, CASS 5 does not apply to an authorised professional firm, if the firm's designated professional body has rules applicable to the firm which implement the IMD and which are in the form approved by the FSA under section 332(5) of the Act.

14/01/2005

Insurance: Conduct of Business sourcebook

PROF 5.3.10

(1) ICOB 1.2.10 R provides that ICOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, except for:

(a) ICOB 2.2 (Clear, fair and not misleading communication);
(b) ICOB 3 (Financial promotion);
(c) ICOB 4.2.2 R in relation to the information for customers in table ICOB 4.2.8 R items numbered (8), (9) and Note 4 covering complaints and compensation; and
(d) those sections in ICOB which implement articles 12 and 13 of the IMD, unless:

(i) the designated professional body of the firm has made rules which implement articles of the IMD;
(ii) those rules have been approved by the FSA under section 332(5) of the Act; and
(iii) the firm is subject to the rules in the form in which they were approved.

(2) ICOB 1.2.11 G (2) provides that the effect of ICOB 1.2.10 R (4) is that if the relevant designated professional body of an authorised professional firm does not make rules implementing articles 12 and 13 of the IMD applicable to authorised professional firms those authorised professional firms will need to comply with those sections of ICOB which implement articles 12 and 13 of the IMD, namely ICOB 4.1 to ICOB 4.4 (but not ICOB 4.2.20 R to 4.2.28G), and ICOB 4.8.

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PROF 5.4

Application of the Distance Marketing Regulations

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PROF 5.4.1

(1) In addition to those provisions of the Distance Marketing Regulations which apply directly (see COB 1.9.2 G (3)), an authorised professional firm must, with respect to its non-mainstream regulated activities, comply with regulations 7 to 11 and 15 of the Distance Marketing Regulations. Those regulations have effect to cancel distance contracts the making or performance of which by such firms constitutes a non-mainstream regulated activity.
(2) Paragraph (1) does not apply in relation to regulations 7 to 8 and 15 if the designated professional body of the authorised professional firm has rules equivalent to some or all of those regulations and:

(a) those rules have been approved by the FSA under section 332(5) of the Act; and
(b) the authorised professional firm is subject to those rules in the form in which they have been approved;

in which case those regulations are disapplied to the extent that they are implemented by the rules of the designated professional body.

14/01/2005

PROF 5.4.2

The effect of PROF 5.4.1 R is that it allows designated professional bodies to make rules which allow an authorised professional firm to comply with the Distance Marketing Regulations in respect of its non-mainstream regulated activities in the same way as an exempt professional firm which is a member of the same designated professional body in respect of its exempt regulated activities.

09/10/2004