PRIN 3 Rules about application

PRIN applies to every firm, except that it does not apply to a firm in relation to its carrying on of auction regulation bidding.

PRIN also applies:

1. (1)

   to an electronic money institution, an authorised payment institution, a small payment institution or a registered account information service provider; and

2. (2)

   [deleted]

1. (1)

   Principle 7 applies to a registered person communicating a financial promotion relating to one or more qualifying cryptoassets (in reliance on the exemption in article 73ZA of the Financial Promotion Order) as it applies to an authorised person communicating a financial promotion relating to one or more qualifying cryptoassets (PRIN 3.2.2R), disregarding the effect of PRIN 3.2.10R.

2. (2)

   For the purpose of (1), relevant references in this sourcebook to a firm include reference to a registered person.

A firm will not be subject to a Principle or PRIN 2A to the extent that it would be contrary to the requirements of an EU measure passed or made before IP completion day, to the extent that those requirements continue to have effect after IP completion day under the EUWA.

PRIN applies to a TP firm, except that Principle 4 only applies to the extent that a TP firm is subject to rules relating to capital adequacy.

1. (1)

   Only Principles 1, 2, 3, 9, 11, 12 and PRIN 2A apply to a TP UCITS qualifier, and only with respect to the activities in PRIN 3.2.2R (Communication and approval of financial promotions).

2. (2)

   Where Principle 12 and PRIN 2A do not apply, Principle 7 also applies to a TP UCITS qualifier with respect to the activities in PRIN 3.2.2R.

Principle 12 and PRIN 2A only apply where a client is a retail customer, or there is distribution chain which involves a retail customer.

Principle 12 and PRIN 2A apply to:

1. (1)

   a TP firm; and

2. (2)

   a Gibraltar-based firm.

PRIN (other than Principle 12 and PRIN 2A) applies with respect to the carrying on of:

1. (1)

   regulated activities;

2. (2)

   activities that constitute dealing in investments as principal, disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc);

3. (3)

   ancillary activities in relation to designated investment business, home finance activity, regulated funeral plan activity, credit-related regulated activity, insurance distribution activity, regulated pensions dashboard activity and accepting deposits; and

4. (4)

   activities directly arising from insurance risk transformation.

Other than with respect to a firm that is a credit union, PRIN also applies with respect to:

1. (1)

   the provision of payment services;

2. (2)

   issuing of electronic money (where not the activity of issuing electronic money specified in article 9B of the Regulated Activities Order); and

3. (3)

   activities connected to the provision of payment services and to the issuing of electronic money (whether or not the activity of issuing electronic money specified in article 9B of the Regulated Activities Order).

PRIN also applies with respect to the communication and approval of financial promotions which:

1. (1)

   if communicated by an unauthorised person without approval would contravene section 21(1) of the Act (Restrictions on financial promotion); and

2. (2)

   may be communicated by a firm without contravening section 238(1) of the Act (Restrictions on promotion of collective investment schemes).

Subject to PRIN 3.2.4R, Principles 3, 4 and (in so far as it relates to disclosing to the FCA) 11 (and this chapter) also:

1. (1)

   apply to firms with respect to the carrying on of unregulated activities (for Principle 3 this is only in a prudential context); and

2. (2)

   for firms and other persons that are subject to the Principles, take into account any activity of other members of a group of which the firm is a member.

In relation to an Annex II benchmark administrator which:

1. (1)

   administers only benchmarks which are subject to Annex II to the benchmarks regulation; and

2. (2)

   does not have permission to carry on any other regulated activities in relation to which Principle 11 applies,

Principle 11 (in so far as it relates to disclosing to the FCA) applies only to the regulated activity of administering a benchmark.

1. (1)

   Principle 12 and PRIN 2A apply to a firm’s retail market business, including in respect of existing products and closed products.

2. (2)
   1. (a)

      Subject to (b), Principle 12 and PRIN 2A apply to a firm with respect to the communication or approval of a financial promotion (see PRIN 3.2.2R), but only if the financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail customer.

   2. (b)

      Principle 12 and PRIN 2A do not apply to the communication or approval of a financial promotion to the extent that the financial promotion relates to an activity that is excluded from the definition of retail market business by virtue of limbs (1) to (6) of that definition.

3. (3)

   If the firm is a credit union, and except insofar as Principle 12 and PRIN 2A apply by virtue of (2), then Principle 12 and PRIN 2A do not apply to the following activities:

   1. (a)

      payment services and activities connected to the provision of payment services, except where the activity is an ancillary activity in relation to a regulated activity other than issuing electronic money; and

   2. (b)

      activities connected to or ancillary activities in relation to issuing electronic money, but only insofar as the activity is not an ancillary activity in relation to another regulated activity.

Where Principle 12 and PRIN 2A apply to the activities of a firm operating in a distribution chain, Principle 12 and PRIN 2A apply only to the extent that the person is responsible in the course of carrying out those activities for determining or materially influencing retail customer outcomes.

Subject to PRIN 3.2.7R, Principle 12 and PRIN 2A do not apply to activities to the extent that those activities are not included in a rule which sets out the scope of protections offered to retail customers by COBS, ICOBS, MCOB, BCOBS, CMCOB, FPCOB, PROD or CONC.

Principles 6 and 7 do not apply to a firm’s activities to the extent that Principle 12 and PRIN 2A apply.

PRIN 3.3.1R applies to electronic money institutions, payment institutions and registered account information service providers as if the references to a firm were references to a person within that description, and references to an appointed representative were to an agent of such a person within the meaning of the Payment Services Regulations.

Notwithstanding PRIN 3.3.1R, PRIN applies to:

1. (1)

   a TP firm with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom;

2. (2)

   a TP firm with respect to services provided into the United Kingdom by the firm (or its appointed representative) from an establishment in an EEA State; and

3. (3)

   a TP UCITS qualifier with respect to the firm’s activities in relation to the AIF or scheme in question, in the United Kingdom.

PRIN 3.4.1R, PRIN 3.4.2R and PRIN 1 Annex 1 do not apply with respect to:

1. (1)

   credit-related regulated activities; or

2. (2)

   regulated claims management activities; or

3. (3)

   regulated funeral plan activities; or

4. (4)

   payment services; or

5. (4A)

   regulated pensions dashboard activity; or

6. (5)

   the issuing of electronic money (where not a regulated activity).

For business other than MiFID or equivalent third country business, the only requirement of Principle 7 relating to eligible counterparties is that a firm must communicate information to eligible counterparties in a way that is not misleading.

For the purposes of PRIN, a firm intending to carry on, or carrying on, activities that do not involve designated investment business, may treat a client as an eligible counterparty in accordance with PRIN 1 Annex 1 R.

1. (1)

   Paragraph (2) applies in relation to an individual who:

   1. (a)

      has provided, or is to provide, a guarantee or an indemnity (or both) in relation to a regulated credit agreement, a regulated consumer hire agreement or a P2P agreement; and

   2. (b)

      is not the borrower or the hirer.

2. (2)

   If the individual is not a customer, they are to be treated as if they were a customer for the purposes of Principles 6 and 7 and as if they were a retail customer for the purposes of Principle 12 and PRIN 2A.

3. (3)

   For the purposes of this rule, a guarantee does not include a legal or equitable mortgage or a pledge.

A contravention of the rules in PRIN does not give rise to a right of action by a private person under section 138D of the Act (and each of those rules is specified under section 138D(3) of the Act as a provision giving rise to no such right of action).

Where Principle 11 refers to regulators, this means, in addition to the FCA, other regulators with recognised jurisdiction in relation to regulated activities, payment services and electronic money whether in the United Kingdom or abroad.