The Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014

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Excluded activities: general exceptionsU.K.

This section has no associated Explanatory Memorandum

6.—(1) A ring-fenced body does not carry on an excluded activity by entering into a transaction with another person (including a structured finance vehicle) if the sole or main purpose for which the ring-fenced body entered into the transaction, either by itself or in combination with other transactions, is that of limiting the extent to which—

(a)the ring-fenced body,

(b)any subsidiary undertaking of the ring-fenced body,

[F1(ba)another ring-fenced body within the same group as the ring-fenced body,

(bb)a related undertaking within the same group as the ring-fenced body,]

[F2(bc)any undertaking in which the ring-fenced body has a participating interest,]

(c)any sponsored structured finance vehicle of the ring-fenced body,

(d)any conduit vehicle of the ring-fenced body, or

(e)any combination of the undertakings referred to in sub-paragraphs (a), (b), [F3(ba), (bb),] (c) and (d),

will be adversely affected by any of the factors specified in paragraph (2).

(2) The factors specified in this paragraph are—

(a)changes in interest rates, exchange rates or commodity prices;

(b)changes in any index of retail prices or of residential or commercial property prices;

(c)changes in any index of the price of shares;

(d)default risk;

(e)liquidity risk;

[F4(f)longevity risk;

(g)mortality risk.]

(3) A ring-fenced body does not carry on an excluded activity by—

(a)buying, selling or subscribing for investments which are liquid assets for the purpose of managing its liquidity, or

(b)buying or subscribing for investments to provide collateral in connection with a transaction falling within paragraph (1), or selling investments acquired for that purpose.

(4) A ring-fenced body does not carry on an excluded activity by—

(a)acquiring shares, debentures or instruments giving an entitlement to shares or debentures from an issuer where—

(i)the shares, debentures or instruments concerned are issued by the issuer, and

(ii)the consideration for the acquisition is the release by the ring-fenced body or by a subsidiary undertaking of the ring-fenced body of part or all of a debt owed by the issuer or by another undertaking within the same group as that issuer to the ring-fenced body or the subsidiary undertaking of the ring-fenced body;

[F5(aa)acquiring shares, debentures or instruments giving an entitlement to shares or debentures from an issuer where—

(i)the shares, debentures or instruments concerned are issued by the issuer,

(ii)the acquisition of the shares, debentures or instruments concerned is undertaken as part of a restructuring of debt owed by the issuer or another undertaking (“the debtor”) to the ring-fenced body or a subsidiary undertaking of the ring-fenced body,

(iii)the restructuring is undertaken when the debtor has encountered, or is likely to encounter, financial difficulties which may affect their ability to carry on business as a going concern, and

(iv)the purpose of the restructuring is to prevent or mitigate the effect of those financial difficulties;

(ab)acquiring shares or debentures from an issuer through the exercise of rights granted in an instrument giving an entitlement to such shares or debentures where the acquisition of that instrument is permitted under sub-paragraph (a) or (aa);

(ac)acquiring further shares issued by an issuer whose shares they have acquired pursuant to sub-paragraph (a), (aa) or (ab) provided that the ring-fenced body does not acquire more shares in the new issue than are required to maintain the percentage of its shareholding in the issuer;]

(b)dealing in—

(i)debentures or instruments giving an entitlement to shares or debentures issued by the ring-fenced body or by a subsidiary of the ring-fenced body, or

(ii)debentures issued by a parent undertaking M1 of the ring-fenced body;

(c)acquiring a debenture where—

(i)the debenture is acquired from the issuer, and

(ii)the debenture relates to any loan, credit, guarantee or other similar financial accommodation made by the ring-fenced body or a subsidiary undertaking of the ring-fenced body to the issuer or to an undertaking in the same group as the issuer;

(d)acquiring shares in a company—

(i)which is, or following such acquisition becomes, a subsidiary undertaking of the ring-fenced body, or

(ii)in which the ring-fenced body has, or following the acquisition will have, a participating interest M2.

[F6(e)acquiring shares in—

(i)the operator of an inter-bank payment system F7...where ownership of such shares is a condition of participation in the inter-bank payment system operated by that operator;

(ii)a company whose principal business is the provision of electronically transmitted secure financial messaging services; F8...

(iii)a recognised clearing houseF9... or a third country central counterparty where ownership of such shares is a condition of membership of any such body;[F10 or

(iv)a recognised CSD, an EEA CSD or a third country CSD where ownership of such shares is a condition of membership of any such body;]

(f)dealing in investments as principal in order to comply with an obligation imposed upon it by a recognised clearing house F11... pursuant to Article 37 of Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories.]

(5) A ring-fenced body does not carry on an excluded activity by

[F12(a)] selling shares, debentures or instruments giving an entitlement to shares or debentures acquired or held by the ring-fenced body in accordance with paragraph (4)(a), [F13, (aa), (ab), (ac),][F14(b), (d), (e) or (f)]

[F15(b)selling debentures acquired or held by the ring-fenced body in accordance with paragraph (4)(c), provided that the debenture is sold together with the loan, credit, guarantee or other similar financial accommodation referred to in paragraph (4)(c)(ii) to which the debenture relates.]

(6) A ring-fenced body does not carry on an excluded activity by—

(a)taking or granting a security interest over investments, or realising a security interest held over investments (including selling the investment over which the security is held), or

(b)entering into a title transfer collateral arrangement in relation to investments, acquiring equivalent investments in accordance with the arrangement or enforcing the arrangement (including by selling the investments which are subject to that arrangement).

[F16(7) A ring-fenced body does not carry on an excluded activity by dealing in investments as principal when acting as trustee [F17or in Scotland, as a nominee,] for or on behalf of any individual, minor, charity or CIO.]

[F18(8) A ring-fenced body does not carry on an excluded activity by dealing in investments as principal—

(a)to remedy or prevent the failure of a transaction which it has or would have entered into as agent for a customer where the failure is or would have been due to a systems or operating error, provided that the investment concerned can be allocated to the customer and is so allocated as soon as practicable after the transaction, or

(b)to remedy a trade made by the ring-fenced body—

(i)as agent for a customer, and

(ii)as a result of an error of the ring-fenced body.

(9) A ring-fenced body does not carry on an excluded activity by dealing in investments as principal where—

(a)the ring-fenced body proposes to—

(i)launch a new product or service, or

(ii)make changes to an existing product or service,

(b)the ring-fenced body enters into a transaction to buy or sell a relevant security as principal,

(c)the only purpose of the transaction is to test the new or changed product or service, and

(d)the transaction concerns—

(i)a single relevant security, or

(ii)if it is not possible to buy or sell a single unit of the relevant security in question, the minimum amount of the relevant security which it is possible to buy or sell.

(10) In paragraph (9), “relevant security” means a security or contractually based investment, other than investments specified by article 87 or 89 of the Regulated Activities Order 2001, and for these purposes, “contractually based investment” has the meaning given in article 3(1) of the Regulated Activities Order 2001.]

Textual Amendments

F1Art. 6(1)(ba)(bb) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(4)(a)(i)

F2Art. 6(1)(bc) inserted (4.2.2025) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2025 (S.I. 2025/30), arts. 1(2), 9(1)(a)

F3Words in art. 6(1)(e) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(4)(a)(ii)

F4Art. 6(2)(f)(g) inserted (4.2.2025) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2025 (S.I. 2025/30), arts. 1(2), 9(1)(b)

F5Art. 6(4)(aa)-(ac) inserted (4.2.2025) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2025 (S.I. 2025/30), arts. 1(2), 9(1)(c)

F6Art. 6(4)(e)(f) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(4)(b)

F7Words in art. 6(4)(e) omitted (30.11.2017) by virtue of The Banking Act 2009 (Service Providers to Payment Systems) Order 2017 (S.I. 2017/1167), arts. 1(2), 5(3)

F8Word in art. 6(4)(e)(ii) omitted (28.11.2017) by virtue of The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), reg. 1, Sch. para. 41(4)(a) (with regs. 7(4), 9(1))

F9Words in art. 6(4)(e)(iii) omitted (31.12.2020) by virtue of The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/632), regs. 1(3), 192(4)(a) (with savings in S.I. 2019/680, reg. 11 (as amended by S.I. 2019/1212, regs. 1(3), 22(3)); 2020 c. 1, Sch. 5 para. 1(1)