EXPLANATORY NOTE
(This note is not part of the Order)
This Order makes amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (“the Regulated Activities Order”) in relation to the regulation of funeral plan contracts, such that funeral plan providers will generally need to be appropriately authorised under the Financial Services and Markets Act 2000 (“the Act”) (c.8) when entering into, or carrying out, such contracts. The Order also amends other secondary legislation made under the Act and makes various transitional modifications to the ombudsman scheme established under the Act.
The Regulated Activities Order specifies kinds of activities and investments for the purposes of the Act. When an activity of a specified kind is carried on by way of business in relation to an investment of a specified kind, it is a “regulated activity” for the purposes of the Act. Section 19 of the Act prohibits persons from carrying on any regulated activity in the United Kingdom, unless they are either authorised or exempt.
Article 21 of the Regulated Activities Order makes the dealing of relevant investments as agent a specified kind of activity, but excludes, amongst other things, funeral plan contracts. Article 2 of the Order amends article 21 to bring funeral plan contracts within its scope.
Article 59 of the Regulated Activities Order provides that entering as provider into a funeral plan contract is a specified kind of activity. However, article 60 excludes plans covered by insurance or trust arrangements from the definition of a funeral plan contract in article 59, such that a provider who enters into an insurance or trust backed plan that meets the criteria in article 60 does not need to be authorised. Article 2 of the Order amends article 59 of the Regulated Activities Order to make the carrying out of a funeral plan contract as provider a specified kind of activity. Article 2 also removes the exclusion in article 60, makes provision for any activity carried on by a local authority under article 59 to be excluded, and makes a consequential amendment to article 89(3).
Article 3 of the Order makes a consequential amendment to paragraph 18 of Schedule 1 to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (S.I. 2001/1062), which prescribes particular arrangements that do not amount to collective investment schemes for the purposes of section 235(5) of the Act.
The Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 (S.I. 2001/1217) (“the Appointed Representatives Regulations”) prescribe the descriptions of business which appointed representatives of authorised persons may carry on without themselves requiring authorisation under the Act. Pursuant to section 39 of the Act, a person who is an appointed representative is an exempt person for the purposes of section 19 of the Act. Article 4 of the Order amends the Appointed Representatives Regulations to provide that appointed representatives of authorised persons may carry on the activities specified in article 21(1) of the Regulated Activities Order to the extent that they relate to funeral plan contracts, without themselves requiring authorisation under the Act.
The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529) (“the Financial Promotion Order”) specifies the kinds of activities and investments which are controlled activities and controlled investments for the purposes of section 21 of the Act. Any invitation or inducement which is made in the course of business and which invites or induces someone either to enter, or to offer to enter, into an agreement the making or performance of which constitutes a controlled activity or to exercise rights conferred by a controlled investment is subject to the restriction imposed by section 21(1) of the Act. Section 21(1) precludes anyone from communicating such an invitation or inducement unless either they are an authorised person or the content of the communication is approved by an authorised person. Article 5 of the Order amends Schedule 1 to the Financial Promotion Order to make the carrying out of a funeral plan contract as provider and the buying, selling, subscribing for or underwriting of funeral plan contracts as principal or agent controlled activities.
Part 3 of the Order modifies Part 16 of, and Schedule 17, to the Act, which provide for the establishment of an ombudsman scheme, and makes provision for complaints made on or after the date specified in article 1(3) relating to acts or omissions that occurred before that date to be dealt with under the ombudsman scheme. These complaints would previously have been subject to the Funeral Planning Authority’s Code of Conduct and Rules. Articles 7 to 15 make various modifications to the ombudsman scheme insofar as it applies to such complaints. Copies of the Funeral Planning Authority’s Code of Conduct and Rules may be obtained from the Financial Ombudsman Service, Exchange Tower, Harbour Exchange, London E14 9SR or at www.financial-ombudsman.org.uk.
Part 4 of the Order relates to rules and guidance made by the Financial Conduct Authority and rules made by the Financial Ombudsman Service, so as to allow both organisations to take steps to prepare rules and, in the case of the Financial Conduct Authority, guidance before the date given in article 1(3).
Part 5 of the Order requires the Treasury to carry out a review of this Order at least every five years.
A de minimis impact assessment of the effect this Order will have on business and the voluntary sector is available from HM Treasury, 1 Horse Guards Road, London SW1A 2HQ or on www.gov.uk and is published alongside the Order on www.legislation.gov.uk.