The Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2001

Explanatory Note

(This note is not part of the Order)

This Order amends Orders previously made under the Financial Services and Markets Act 2000 (c. 8) (“FSMA”) and also makes miscellaneous additional provision needed for the implementation of FSMA.

Part I provides for commencement and interpretation. Most of the provisions come into force on 1st December 2001 when the main provisions of FSMA, in particular section 19 (the general prohibition) come into force: see Financial Services and Markets Act 2000 (Commencement No. 7) Order 2001 (S.I. 2001/3538 (C. 115)).

Part II contains amendments to earlier Orders made, most of which themselves come into force on 1 December 2001.

Article 2 amends the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (S.I. 2001/1062) which sets out the arrangements which are not to be regarded as collective investment schemes for the purposes of FSMA. Paragraph 9(1) of that Schedule excludes schemes entered into for commercial purposes related to a business. It is a condition of this exclusion that each participant in the scheme carries on a business which does not involve investment activities. The amendment made by article 2(2) of this Order provides that the activities in question are regulated activities, ie ones falling within certain provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) which are carried on by way of business. The amendment made by article 2(3) ensures that unregulated as well as regulated funeral plan contracts are excluded from the definition of collective investment scheme and article 2(4) amends paragraph 21 of the Schedule to the earlier Order to provide that limited liability partnerships are capable of being collective investment schemes.

Article 3 amends the Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities) Order 2001 (S.I. 2001/1227), which specifies certain regulated activities as falling outside the exemption accorded to members of the professions under Part XX of FSMA. Among the activities so specified were entering into a regulated mortgage contract or administering such a contract. Article 3 provides that those activities do not fall outside the Part XX exemption where they are carried on by a person acting in this capacity as a trustee or personal representative, and the borrower under the relevant regulated mortgage contract is a beneficiary under the trust, will or intestacy.

Articles 4 and 5 of this Order amend the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (S.I. 2001/1335). Article 4 provides that appointed representatives are exempt in respect of any unsolicited real time communications they make in the course of the business for which their principal accepts responsibility. The exemption applies provided that the communication complies with any rules which would apply to the principal if he made the communication himself. Article 5 narrows the kinds of rights and interests specified by paragraph 29 of Schedule 1 to the earlier Order as a controlled investment. Interests in an investment other than a funeral plan contract (such as an insurance policy) that are acquired as a result of entering into a funeral plan, are not controlled investments, whether or not the funeral plan is itself a qualifying one for the purposes of the Schedule.

Articles 6 to 10 amend the Financial Services and Markets Act 2000 (Transitional Provisions) (Authorised Persons etc.) Order 2001 (S.I. 2001/2636). Articles 6 to 9 confer additional permissions on persons who are treated as having Part IV permissions under the Act. These provide that banks and building societies who were previously excluded from the need for authorisation under the Insurance Companies Act 1982 (c. 50) because of section 2(4) of that Act have a Part IV permission to continue to carry on any insurance business they were carrying on in reliance on that exclusion. Further, firms who were not authorised under the Financial Services Act 1986 and were therefore able to rely on the exclusion in paragraph 17(4) of Schedule 1 to that Act (being unauthorised persons for the purposes of that paragraph) are granted permission to carry on that same business because, being authorised persons for the purposes of FSMA, they will not be able to rely on the exclusion in article 16 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Article 10 carries forward the effect of section 103 of the Financial Services Act 1986 in relation to people who were disqualified under section 59 of that Act and whose disqualification is carried forward as a prohibition order under section 56 of FSMA. Information about the disqualification will be included on the record maintained in accordance with section 347 of FSMA but it will not be made available for inspection, nor will a copy of it be provided, unless it is specifically requested.

Articles 11 and 12 amend the Financial Services and Markets Act 2000 (Transitional Provisions) (Controllers) Order 2001 (S.I. 2001/2637). This provides that where a person has been approved before commencement by a recognised self regulating organisation but has not yet taken the step which makes him a controller, that approval is carried forward as an approval under FSMA so that he does not need to reapply for approval.

Part III of the Order makes miscellaneous provisions other than amendments. Articles 14 and 15 modify section 367 of FSMA (winding up petitions) so that where a body is in default on sums due and payable under a relevant agreement concluded before commencement, it is to be treated as unable to pay its debts. Relevant agreements are “investment agreements” within the meaning of the Financial Services Act 1986 (article 14), and those involving the acceptance of deposits for the purposes of the Banking Act 1987 (article 15). Article 16 makes transitional provision in relation to provisions in the Financial Services Act 1986, the Banking Act 1987 and the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (S.I. 1975/1023) that confer an exception from the Rehabilitation of Offenders Act 1974. To the extent that these provisions confer an exception for proceedings under the existing regulatory regimes, those provisions continue to have effect after 1st December 2001 in relation to such proceedings. Article 17 retains in effect provisions regarding the disqualification from political office of members of the Financial Services Tribunal since that Tribunal continues to have functions after commencement. Article 18 makes transitional savings of certain enactments which oblige auditors to communicate certain matters to the regulator.

Article 19 provides that the Authority must fulfil its reporting obligations under the Financial Services Act 1986 and the Banking Act 1987 by including the relevant information in the first report it makes of its activities under FSMA. Article 20 contains similar provision in relation to the Treasury’s report under the Insurance Companies Act.

Articles 21 and 22 provide for the Authority to devise a scheme for the transfer of the property, rights and liabilities of the self-regulating organisations. All liabilities for pre-commencement acts and omissions by these bodies are transferred to the Authority by article 22 and the Authority is, by article 23, substituted for the organisation in any legal proceedings pending at commencement. Article 24 deals with immunity from liability in damages in relation to actions before commencement or under repealed enactments. Article 25 extends the Authority’s power to charge fees to expenditure incurred in the exercise of certain of its functions. Article 26 makes provision for fees that have been paid to the Treasury under the Insurance Companies Act 1982 and fees which would have been payable to the Treasury under that Act after 1st December 2001, but for the repeal of that Act, that relate to the cost of the regulation of insurance companies for the period from 1st April 2001 to 31st March 2002. Article 27 requires the Financial Services Authority to make rules which require authorised persons who have permission under Part IV of the Act to effect and carry out contracts of insurance to pay fees to the Authority. These funds are to be repaid to the Treasury. The funds raised in this way must not exceed the deficit which the Treasury have incurred in exercising functions under the Insurance Companies Act 1982. Article 28 revokes with savings the Contracting Out (Functions in Relation to Insurance) Order 1998 (S.I. 1998/2842).

Articles 29 and 30 concern corrections to scope of permission notices sent out to persons before commencement under the Financial Services and Markets Act 2000 (Transitional Provisions) (Authorised Persons etc.) Order 2001.