Financial Services and Markets Act 2000: recent developments

Consultation and Legislation: Bulletin 17

Bulletin number 17 from HM Treasury

This is the seventeenth bulletin covering developments on the Financial Services and Markets Act 2000 (FSMA). Previous bulletins can be found on the Treasury's website.

Laying of secondary legislation under the FSMA

We have made the following Regulation and Order which will appear on this site shortly (initially under draft statutory instruments) on the Statutory Instruments page.

SI No: 3729 The Friendly Societies Act 1974 (Seal of the Financial Services Authority) Regulations 2001
SI No: 3681 The Financial Services and Markets Act 2000 (Prescribed Markets and Qualifying Investments) (Amendment) Order 2001

Revised scope of permission notices

Bulletin 14 of 2 November noted that scope of permission notices sent to and agreed by firms currently regulated by the Personal Investment Authority contained a technical error. A number of similar problems have since been found with other technical aspects of notices which have already been agreed. These are listed in the annex.

Today we made the Financial Services and Markets Act 2000 (Scope of Permission Notices) Order 2001 allowing the FSA to revise these incorrect scope of permission notices to correct the specific errors involved before N2. The intention is to ensure that firms' permissions after N2 continue to reflect their existing entitlements, even though they may have inadvertently agreed to notices which were technically incorrect. However, firms can if they wish object to these revisions by 4 January 2002 in which case they will revert to the scope of permission notices which they previously agreed with the FSA.

ANNEX

a. The need to include own account dealing in contractually based investments by firms which were authorised under the Financial Services Act if their scope of permission notice does not already include it (we have already legislated for this activity in respect of firms which were not authorised under that Act).
b. A problem with firms which have been given permission to carry on specified activities in relation to specified investments, but which should also have included the separate investment category of "rights or interests" in the specified investments. In some cases the "rights or interests" were expressed at large rather than limited to the kind of investment in relation to which the activity could be carried on so that a limitation needs to be placed on the kinds of rights and interests included. In other cases "rights or interests" have not been included at all and so need to be added in to the permission conferred.
c. A problem with PIA and IMRO firms on which a requirement has been imposed not to hold or control client money. PIA firms which are life insurers or friendly societies will need to hold and control client money. For some IMRO firms, this requirement should have applied only to the actual holding (i.e. not control) of client money.
d. Problems with PIA and IMRO firms where a default investment limitation has been imposed on establishing etc a collective investment scheme (article 51) or stakeholder pension scheme (article 52). These activities should not have been limited to any investment category.
e. Problems with IMRO firms carrying on dealing as agent in respect of stock lending. The limitation incorrectly forbids stock lending of a government or public security.

HM Treasury

26 November 2001

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