The list of investment services is set out in Part 3 of Schedule 2 to the Regulated Activities Order. It broadly corresponds to the list in Section A of Annex 1 of MiFID. The different kinds of financial instruments are listed in Part 1 of Schedule 2 to the Regulated Activities Order. The list of financial instruments broadly corresponds to the list of financial instruments in Section C of Annex 1 to MiFID.
Table 1 - Investment services and activities and the Part 4A permission regime
| Investment Services and Activities (references are to the applicable paragraph in Part 3 of Schedule 2 to the Regulated Activities Order and Section A of Annex 1 of MiFID) | Part 4A permission | Comments |
|---|---|---|
| Paragraph 1/A1- Reception and transmission of orders in relation to one or more financial instruments | Arranging (bringing about) deals in investments (article 25(1) RAO)
Bidding in emissions auctions (article 24A RAO) | Generally speaking, only firms with permission to carry on the activity of arranging (bringing about) deals in investments in relation to securities and contractually based investments which are financial instruments can provide the service of reception and transmission. This is because a service must bring about the transaction if it is to amount to reception and transmission of orders.
The activity of arranging (bringing about) deals in investments is wider than paragraph 1, so a firm carrying on this regulated activity will not always be receiving and transmitting orders.
See Q13, Q14 and Q34A for further guidance. |
| Paragraph 2/A2- Execution of orders on behalf of clients | Dealing in investments as agent (article 21 RAO)
Dealing in investments as principal (article 14 RAO) Bidding in emissions auctions (article 24A RAO) | Usually, where a firm executes orders on behalf of clients it will need permission to carry on the activity of dealing in investments as agent. Where a firm executes client orders on a true back-to-back basis or by dealing on own account, it also needs permission to carry on the activity of dealing in investments as principal.
See Q15, Q15A and 34A for further guidance. |
| Paragraph 3/A3- Dealing on own account | Dealing in investments as principal (article 14 RAO) | Where a firm is dealing on own account, it needs permission to carry on the activity of dealing in investments as principal.
See Q16 and 34A for further guidance. |
| Paragraph 4/A4- Portfolio management | Managing investments (article 37 RAO)
Dealing in investments as principal (article 14 RAO)
Dealing in investments as agent (article 21 RAO)
Arranging (bringing about) deals in investments (article 25(1) RAO)
Making arrangement with a view to transactions in investments (article 25(2)) | A firm performing the portfolio management service needs a permission to carry on the activity of managing investments.
Firms may also need permission to perform other regulated activities to enable them to give effect to decisions they make as part of their portfolio management (see adjacent column).
See Q6, Q6A, Q17 and Q43 for further guidance. |
| Paragraph 5/A5- Investment advice | Advising on investments (except P2P agreements) (article 53(1) RAO) | A firm providing investment advice will need permission to carry on the activity of advising on investments.
See Q18 and Q19 to Q21 for further guidance. |
| Paragraph 6/A6- Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis | Dealing in investments as principal (article 14 RAO)
Dealing in investments as agent (article 21 RAO) | Where a firm underwrites an issue of financial instruments and holds them on its books before they are sold or offered to third parties, it needs permission to carry on the activity of dealing in investments as principal.
Where an underwriting firm sells the relevant instruments as agent for the issuer and then purchases any remaining instruments as principal, it needs permission to carry on the activity of dealing in investments as agent in relation to its selling activity and of dealing in investments as principal in relation to its purchase of the remaining instruments.
See Q22 for further guidance. |
| Paragraph 7/A7- Placing of financial instruments without a firm commitment basis | Dealing in investments as agent (article 21 RAO)
Arranging (bringing about) deals in investments (article 25(1) RAO) | Where a firm arranges the placement of financial instruments with another entity, it needs permission to carry on the activity of arranging (bringing about) deals in investments.
Where a firm sells the relevant instruments on behalf of the issuer, it also needs permission to carry on the activity of dealing in investments as agent.
See Q22 for further guidance. |
| Paragraph 8/A8- Operation of Multilateral Trading Facilities | Operating a multilateral trading facility (article 25D RAO) | Firms performing this service will need permission to carry on the regulated activity of operating a multilateral trading facility.
Firms will not require permission to carry on any other regulated activities if all they do is operate a multilateral trading facility. If they carry on additional regulated activities, they should ensure that their permission properly reflects this.
See Q24 for further guidance. |
| Paragraph 9/A9- Operation of organised trading facilities | Operating an organised trading facility (article 25DA RAO) | Firms performing this service will need permission to carry on the regulated activity of operating an organised trading facility. Firms will not require permission to carry on any other regulated activities if all they do is operate an organised trading facility. If they carry on additional regulated activities, they should ensure that their permission properly reflects this. See Q24A for further guidance. |
| Note: The activity of bidding in emissions auctions can form part of paragraph 1, 2 or 3. In terms of the permission regime, bidding in emissions auctions does not form part of any other regulated activity (see PERG 2.7.7CG) and so a firm must have a separate permission to undertake that activity. | ||
Table 2: Financial instruments and the Part 4A permission regime
| Financial instrument (references are to the applicable paragraph in Part 1 of Schedule 2 to the Regulated Activities Order and Section C of Annex 1 of MiFID) | Part 4A permission category | Commentary |
|---|---|---|
| Paragraph 1/C1- Transferable securities | share (article 76)
debenture (article 77)
alternative debenture (article 77A)
government and public security (article 78)
warrant (article 79)
certificate representing certain securities (article 80)
unit (article 81)
option (excluding a commodity option and option on a commodity future)
future (excluding a commodity future and a rolling spot forex contract)
contract for differences (excluding a spread bet, a rolling spot forex contract and a binary bet)
spread bet | The permission investment categories in column (2) (Part 4A permission category) are wider than the definition of transferable securities, as they comprise both securitised and non-securitised instruments. An instrument is not a transferable security if it is not negotiable on the capital market. Therefore an investment listed in column (2) will not always be a transferable security. Firms with permissions containing any of the Part 4A permission investment categories in column (2) will fall outside the MiFID optional exemption, where they provide investment services in relation to financial instruments which are non-securitised investments (for example, OTC derivatives concluded by a confirmation under an ISDA master agreement). It is possible in theory that options, futures and contracts for differences under the RAO that are not mentioned in column (2) could be a transferable security. However column (2) includes the main RAO derivatives that the FCA thinks may in practice be transferable securities. For further guidance on the MiFID optional exemption see Q49; for further guidance on transferable securities see Q28. |
| Paragraph 2/C2- Money market instruments | debenture (article 77)
alternative debenture (article 77A)
government and public security (article 78)
certificate representing certain securities (article 80) | Money market instruments are classes of instruments normally dealt in on the money markets.
For further guidance on money market instruments see Q28A. |
| Paragraph 3/C3- Units in a collective investment undertaking | unit (article 81)
shares (article 76) | This type of financial instrument includes units in regulated and unregulated collective investment schemes. This category also includes closed-ended corporate schemes, such as investment trust companies (hence the reference to shares in the adjacent column). For further guidance, see Q29. |
| Paragraph 4/C4- Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, emission allowances or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash | option (excluding a commodity option and an option on a commodity future)
commodity option and option on a commodity future
future (excluding a commodity future and a rolling spot forex contract)
rolling spot forex contract
contract for differences (excluding a spread bet, a rolling spot forex contract and a binary bet)
spread bet
binary bet | This type of financial instrument includes in our view derivatives relating to commodity derivatives, for example options on commodity futures. For further guidance, see Q31A to Q31S. Note that for the purposes of the permission regime, commodity options and options on commodity futures are treated as a single permission category. (see PERG 2 Annex 2 G Table 2). |
| Paragraph 5/C5- Options, futures, swaps, forwards and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event) | commodity option and option on a commodity future
commodity future
contract for differences (excluding a spread bet, a rolling spot forex contract and a binary bet)
binary bet | This type of financial instrument is generally a contract for differences. Where this type of financial instrument provides for the possibility of physical settlement, it may also be either a commodity future or commodity option, depending on its structure. For further guidance see Q33A. |
| Paragraph 6/C6- Options, futures, swaps, and any other derivative contracts relating to commodities that can be physically settled provided that they are traded on a United Kingdom regulated market, a UK MTF or a UK OTF | commodity option and option on a commodity future
commodity future
contract for differences (excluding spread bet, a rolling spot forex contract and a binary bet)
binary bet | This type of financial instrument will generally be either a commodity future or a commodity option, depending on its structure. Those instruments with a cash settlement option may also be contracts for differences. For further guidance see Q33B. |
| Paragraph 7/C7- Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in paragraph 6. This category does not include spot contracts or contracts that meet certain conditions that are designed to exclude contracts for commercial purposes | commodity option and option on a commodity future
commodity future
contract for differences (excluding spread bet, a rolling spot forex contract and a binary bet)
binary bet |
For further guidance see Q33C. |
| Paragraph 8/C8- Derivative instruments for the transfer of credit risk | option (excluding a commodity option and an option on a commodity future)
contract for differences (excluding spread bet, a rolling spot forex contract and a binary bet)
spread bet
rolling spot forex contract | Derivatives of this type are financial instruments designed to transfer credit risk, often referred to as credit derivatives. For further guidance see Q31. |
| Paragraph 9/C9- Financial contracts for differences | contract for differences (excluding spread bet, a rolling spot forex contract and a binary bet)
spread bet
rolling spot forex contract | In our view, derivatives of this type could include those contracts for differences with a financial underlying, for example the FTSE index. |
| Paragraph 10/C10- Options, futures, swaps, forward rate agreements and any other derivative contracts relating to various specified underlyings that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event) This category does not include contracts that meet certain conditions designed to exclude non-financial derivative instruments. | option (excluding commodity option and option on a commodity future)
future (excluding a commodity future and a rolling spot forex contract)
contract for differences (excluding spread bet, a rolling spot forex contract and a binary bet)
spread bet
binary bet |
For further guidance see Q34. |
| Paragraph 11/C11- Emission allowances | Emission allowances | See Q34A |
Note: In our view, the categories of financial instrument are not mutually exclusive, so a financial instrument may fall within more than one category. For example, an interest in an investment trust company falls within paragraph 1 and paragraph 3. | ||