Steve White explains how some businesses, such as vets, can avoid regulation
Regular readers of this section may recall coming across the term "perimeter guidance" but there still appears to be some confusion surrounding perimeter issues.
The need for FSA authorisation is determined by three factors, all of which need to apply. These are:
The FSA has published guidance on these factors in a legal instrument which can be read and downloaded from its website www.fsa.gov.uk/handbook/legal_instruments/2004/2004_01.pdf.The relevant section runs from page 126 to 183.
The regulated activities are now fairly well understood, but the available exclusions appear less so. There are several potential exclusions available, but three in particular generate the bulk of inquiries we see on this matter.
Article 28 (of the Regulated Activities Order, secondary legislation below the Financial Services and Markets Act 2000) provides an exclusion from the 'arranging activities' to a policyholder who arranges his own insurance. However, the exclusion is only available when the person making the arrangements is the "sole policyholder" and is not available when any other person(s) acquire rights under the contract.
Article 72B provides an exclusion for those selling "connected contracts" and is the exclusion that will be used by providers of travel arrangements, for example, travel agents, and non-motor warranties, such as high street retailers, to sit outside of regulation.
Article 72C provides an exclusion for those firms who, incidental to their main business, restrict their activities to just providing information to policyholders or potential policyholders. This is the exclusion that will be used by businesses like vets and dentists, where their activities are restricted in the manner described by the article.
Where a firm can take advantage of an exclusion, it is irrelevant whether they are remunerated.
The business test contains two elements. The first usually requires a degree of regularity, although one-off activity can still pass the 'test'. The second involves remuneration. The FSA, in guidance, defines remuneration in its widest sense, and so captures direct financial benefit, that is, commission, and indirect economic benefit, for example, more sales of a primary product by offering insurance.
Biba has been encouraging our members to familiarise themselves with FSA's 'perimeter guidance'. Sarah Wilson, director of the FSA's high street firms division, told the Biba conference last month: "We will certainly do some early work to police the perimeter."
Clearly this is an area firms must get up to speed with.