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The law takes a strict approach to the provision of financial services. The financial services market is one of the most regulated industries in the UK. The principal regulator is the Financial Conduct Authority or FCA. In most cases, you cannot provide financial services that are regulated activities without proper FCA authorisation. This article will provide an overview of the FCA and regulated activities so you can appreciate your obligations.
Overview of Financial Services
The law broadly defines financial services to include advising on, dealing in, and arranging investment products on behalf of another. The FCA, the primary regulator of financial services, takes a proactive approach to regulating most financial services. If you provide a financial service, odds are the FCA must supervise you.
What are Regulated Activities?
It is an offence to carry out a regulated activity in the UK unless the FCA authorises you or you are exempt. As a result, it is crucial to understand if the activity in question constitutes a regulated activity.
The general rule is that any financial service is regulated. The exception is if the activity in question is:
- a specified investment; and
- the law considers the activity a specified activity that it excludes under law or meets certain conditions.
We will consider this in more detail below.
Specified Investment
The law asks if the activity in question is a specified investment. Specified investments include:
- rights arising under an insurance contract;
- transactions involving company shares;
- transactions involving instruments that acknowledge or create indebtedness, such as bonds or loans; and
- residential mortgage contracts.
As you can see, the law broadly defines specified investments. If the activities fall within these categories, you must check if they are indeed specified.
Specified Activity
If the activity is a specified investment, the next question is if it is a specified activity. If it is, you must obtain FCA authorisation subject to the exclusions and certain conditions below. We have provided an explanation of the specified activities in the table below.
| Specified Activity | Explanation |
| Dealing with an investment as an agent or principal | This refers to if you buy, sell, or underwrite investment securities. |
| Arranging deals in investments | This is where you assist someone in buying or selling shares or arranging the transaction. |
| Managing investments | This describes you exercising discretion to enter into securities or contractually-based investments. |
| Safeguarding and administering investments | Safeguarding refers to physically controlling investments. Administering investments refers to settling transactions or managing dividends. It also includes carrying out corporate transactions. |
| Advising on the merits of an investment | This requires you to deliver an opinion about a prospective investment and then make a recommendation. You are telling someone else they should make a specific investment. |
Specific Exclusions and Conditions to Regulated Activities
If the activity in question is both a specified investment and specified activity, you cannot provide it as a service unless it is expressly excluded or meets certain conditions. However, situations where an otherwise regulated activity meets these exceptions or conditions are limited.
Even if you think you may be providing an exempt financial service, it is vital to obtain legal advice to ensure you are not providing a regulated activity. If you breach these regulations, you may face civil and criminal liability.
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Key Takeaways
The financial services market is among the most regulated in the UK. It is extremely unlikely that you can provide a financial service without proper supervision by the Financial Conduct Authority (FCA), the UK’s principal financial services regulator.
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Frequently Asked Questions
The FCA, or Financial Conduct Authority, is the principal regulator of financial services providers. They take a proactive approach to regulation and require businesses to obtain authorisation before providing their services to the public.
The law that governs regulated financial services activities is extremely complex. However, for practical purposes, nearly all activities involving giving others financial advice will likely be regulated.
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