On May 17, 2016, the UK Court of Appeal issued a ruling (the Decision) in the case of Personal Touch Financial Services v Simplysure, which significantly broadens the meaning of “arranging deals” and also by consequence, the scope of regulated activities in the United Kingdom.
In its Decision, the Court of Appeal analysed the regulated activity of “arranging deals in investments” under Article 25 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (the RAO).
Article 25(1) and (2) of the RAO specify that:
(1) Making arrangements for another person (whether as principal or agent) to buy, sell, subscribe for or underwrite a particular investment which is—
(a) a security;
(b) a contractually based investment; or
(c) an investment of the kind specified by article 86, or article 89 so far as relevant to that article,
is a specified kind of activity.
(2) Making arrangements with a view to a person who participates in the arrangements buying, selling, subscribing for or underwriting investments falling within paragraph (1)(a), (b) or (c) (whether as principal or agent) is also a specified kind of activity.
The Court of Appeal noted that the wording and scope of Article 25 is “deliberately wide.” In the Decision, the Court of Appeal found that merely assisting a potential customer to complete a standard form in connection with a specific investment was within the scope of both Articles 25(1) and 25(2) RAO.
The implications of the Decision will be significant for many Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) regulated firms operating in the United Kingdom—and also for unregulated firms who thought that they were outside of the scope of regulation. Firms would be advised to ensure that they understand what their staff is doing for customers and potential customers—since in a business context, simply helping a customer complete an application form or conducting other administrative tasks could now be considered to be a regulated activity.
A copy of the Decision is available here.