Qualifying for authorisation under the Act

Part

SUP Supervision manual

Chapter

Qualifying for authorisation under the Act

Printed on: 06/11/2024

Rulebook at: 31/12/2006

SUP 13A

Qualifying for authorisation under the Act

SUP 13A.1

Application and purpose

01/02/2006

Application

SUP 13A.1.1

(1) This 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. (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) This chapter also applies to:

(a) a Treaty firm that wishes to exercise rights under the Treaty in respect of regulated activities not covered by the Single Market Directives and qualify for authorisation under Schedule 4 to the Act (Treaty Rights); and

(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) 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.

01/02/2006

SUP 13A.1.2

This chapter does not apply to:

(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 and should refer to AUTH 3 (Applications for Part IV permission)); or
(2) an EEA firm that carries on any insurance activity:

(a) by the provision of services; and
(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) a Treaty firm that wishes to provide electronic commerce activities into the United Kingdom.

01/02/2006

SUP 13A.1.3

(1) Under the Gibraltar Order 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:

(a) authorised in Gibraltar under the Insurance Directives; or
(b) authorised in Gibraltar under the Banking Consolidation Directive; or
(c) authorised in Gibraltar under the Insurance Mediation Directive; or
(d) authorised in Gibraltar under the Investment Services Directive.

(1A) Similarly, an EEA firm which:

(a) has satisfied the Gibraltar establishment conditions and has established a branch in the UK; or
(b) has satisfied the Gibraltar service conditions and is providing cross border services into the UK;

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) Gibraltar insurance companies, credit institutions, insurance intermediaries and investment firms are allowed to passport their services into the United Kingdom if they comply 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 Order where appropriate.
(3) [deleted]

06/10/2006

Purpose

SUP 13A.1.4

(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) 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.

01/02/2006

SUP 13A.1.5

(1) EEA firms should note that this chapter only addresses the procedures which the FSA will follow under the Act after it has received a consent notice or been notified of an EEA firm's intentions by its Home State regulator. So, an EEA firm should consider this guidance in conjunction with the requirements with which it will have to comply in its Home State.

(2) The guidance in this chapter represents the FSA's interpretation of the Single Market Directives, 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.

01/02/2006

SUP 13A.2

EEA firms and Treaty firms

01/02/2006

SUP 13A.2.1

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, whereas a Treaty firm carries on activities which do not fall within the scope of a Single Market Directive. 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:

(1) comprises regulated activities, such as reinsurance, which are not covered by any Single Market Directive; or

(2) includes regulated activities which do not fall within the scope of the Single Market Directive under which it is entitled to exercise an EEA right.

01/02/2006

SUP 13A.2.2

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

01/02/2006

SUP 13A.3

Qualifications for authorisation under the Act

01/02/2006

EEA firms

SUP 13A.3.1

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 firmqualifies for authorisation if:

(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) 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).

01/02/2006

SUP 13A.3.2

(1) On qualifying for authorisation, subject to SUP 13A.3.2G (2), an EEA firmwill have permission to carry on each permitted activity (see (3) below) which is a regulated activity.

(2)

(a) Paragraph (1) does not apply to the activity of dealing in units in a collective investment scheme in the United Kingdom where:

(i) the firm is an EEA UCITS management company;

(ii) the firm satisfies the establishment conditions in SUP 13A.4.1 G; and

(iii) the FSA notifies the EEA firm and the EEA firm's Home State regulator that the way in which it intends to market a relevant scheme in the United Kingdom does not comply with the law in force in the United Kingdom.

(b) The FSA's notice under (2)(a)(iii) has to be given to the EEA firm within two months of receiving the consent notice (see paragraph 13(1) of Part II of Schedule 3 to the Act) and will be similar to a warning notice.

(c) For details of the FSA's procedures for the giving of warning noticesand references to the Tribunal, see DEC 2.2 (Statutory notice procedure: Warning notice and decision notice procedure) and DEC 5 (References to the Tribunal, publication and services of notices).

(3) The permitted activities of an EEA firmare those activities identified in the consent notice, regulator's notice or notice of intention. Permitted activities may include activities that are within the scope of a Single Market Directive but which are unregulated activities in the United Kingdom.

(4) The permission will be treated as being on terms equivalent to those appearing in the consent notice, regulator's notice or notice of intention. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

01/02/2006

SUP 13A.3.3

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

01/02/2006

Treaty firms

SUP 13A.3.4

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

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

01/02/2006

SUP 13A.3.5

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's Home State authorisation. For example, it will reflect any limitations or requirements which are included in the firm's Home State authorisation.

01/02/2006

SUP 13A.3.6

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.

01/02/2006

SUP 13A.3.7

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

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

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

(2) The written notice may be delivered by:

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

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

01/02/2006

SUP 13A.3.8

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.

01/02/2006

SUP 13A.3.9

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

(a) telephone on +4420 7066 3954; or

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

01/02/2006

SUP 13A.3.10

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

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

01/02/2006

SUP 13A.3.11

(1) An EEA firm that is carrying on both direct insurance and reinsurance 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. Such EEA firms are advised to discuss their particular circumstances with the Authorisation Department before sending in their notification under paragraph 5(2) of Schedule 4 to the Act (see SUP 13A.3.6 G).

(2) An insurance company with its head office in an EEA State other than the United Kingdom that is carrying on pure reinsurancebusiness in that State, and which wishes to carry on such business in the United Kingdom, 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 AUTH 3 (Applications for Part IV Permission)).

01/02/2006

UCITS qualifiers

SUP 13A.3.12

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.

01/02/2006

SUP 13A.3.13

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

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

01/02/2006

SUP 13A.3.14

A UCITS qualifier should refer to COLLG or to the following sections of COLLand CISfor requirements for recognised schemes:

(1) COLL 9.2.1 G and CIS 16.1.8 G for guidance on notifications;

(2) COLL 9.2.1 G and CIS 17.2 for guidance on information and documentation requirements; and

(3) COLL 9.4 and CIS 17.4 which includes guidance on what facilities need to be maintained.

01/02/2006

SUP 13A.4

EEA firms establishing a branch in the United Kingdom

01/02/2006

The conditions for establishing a branch

SUP 13A.4.1

(1) Before an EEA firmexercises 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) 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.

01/02/2006

SUP 13A.4.2

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.

01/02/2006

SUP 13A.4.3

For the purposes of paragraph 13(2)(b) of Part II of Schedule 3 to the Act, the applicable provisions may include FSA rules. 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.

01/02/2006

The notification procedure

SUP 13A.4.4

(1) When the FSA receives a consent notice from the EEA firm's Home 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:

(a) the EEA firm; and

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

within two months of the date on which the FSA received the consent notice.

(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).

01/02/2006

SUP 13A.5

EEA firms providing cross border services into the United Kingdom

01/02/2006

Is the service provided within the United Kingdom?

SUP 13A.5.1

There is guidance for UK firms 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.

01/02/2006

SUP 13A.5.2

An EEA firmshould 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) it has established a branch in the United Kingdom; or

(2) those cross border services are regulated activities.

01/02/2006

The conditions for providing cross border services into the United Kingdom

SUP 13A.5.3

(1) Before an EEA firm 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) 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.

01/02/2006

The notification procedure

SUP 13A.5.4

(1) Unless the EEA firmis 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) 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).

01/02/2006

SUP 13A.5.5

An EEA firm 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. 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)).

01/02/2006

SUP 13A.6

Which rules will an incoming EEA firm be subject to?

01/02/2006

SUP 13A.6.1

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

01/02/2006

SUP 13A.6.2

An incoming EEA firmor incoming Treaty firm carrying on business in the United Kingdom must comply with the applicable provisions (see SUP 13A.4.4 G and SUP 13A.5.4 G) and other relevant UK legislation. For example where the business includes:

(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) 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.

01/02/2006

SUP 13A.6.3

In particular, an EEA firmor Treaty firm must comply with the applicable provisions in SUP 10 (Approved persons). An EEA firm or Treaty firm should read AUTH 6 (Approved persons) but also refer to SUP 10.1 (Application) which sets out the territorial provisions of the approved persons regime.

01/02/2006

SUP 13A.6.4

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 an 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.

01/02/2006

SUP 13A.6.5

SUP 13A Annex 1 does not apply to incoming ECA providers. Such persons should refer to ECO for information on how the Handbook applies to them.

01/02/2006

SUP 13A.7

Top-up permission

01/02/2006

SUP 13A.7.1

If a person established in the EEA:

(1) does not have an EEA right;

(2) does not have permission as a UCITS qualifier; and

(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 AUTH 3 ). 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's Home 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.

01/02/2006

SUP 13A.7.2

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's Home State regulator.

01/02/2006

SUP 13A.7.3

Top-up permission will be required, for example, for designated investment business activities carried on in relation to commodity derivatives.

01/02/2006

SUP 13A.7.4

For guidance on how to apply for Part IV permission under the Act, see AUTH 3 (Applications for Part IV permission). 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)).

01/02/2006

SUP 13A.8

Sources of further information

01/02/2006

SUP 13A.8.1

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) To contact the Perimeter Guidance team:

(a) telephone on +44 20 7066 0082 or fax on +44 20 7066 9719;

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

(2) To contact the Passport Notifications Unit:

(a) telephone on +44 20 7066 1000 or fax on +44 20 7066 9798;

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

01/02/2006

SUP 13A Annex 1

Application of the Handbook to Incoming EEA Firms

01/02/2006