financial services and markets Citation, commencement and interpretation 1 1 These Regulations may be cited as the Financial Services and Markets Act 2000 (Markets in Financial Instruments) (Amendment) Regulations 2007. 2 These Regulations come into force— a on 1st April 2007— i for the purposes of enabling notices to be given in accordance with regulation 9A(3)(b) of the principal regulations (inserted by regulation 3) and enabling the Authority to give directions in accordance with that regulation as to the form of such notices, ii for the purposes of enabling notice to be given under regulation 9B(2), 9C(2) or 9D(2) of the principal regulations (inserted by regulation 4), iii for the purposes of regulation 9; and b for all other purposes, on 1st November 2007. 3 In these Regulations, “the principal regulations” means the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007 . Exempt investment firms 2 1 In regulation 2 of the principal regulations (interpretation) after the definition of “Part IV permission” insert— “regulated activity” has the meaning given in section 22 of the Act ; . 2 In Part 2 of the principal regulations (Part IV permission: investment firms)— a immediately before regulation 4, insert the heading— General restriction on giving Part IV permission ; b after regulation 4 insert— Applications to be an exempt investment firm 4A 1 A person may apply in accordance with section 40 of the Act for a Part IV permission to carry on regulated activities as an exempt investment firm. 2 An authorised person may become entitled to carry on regulated activities as an exempt investment firm only by applying for a variation of his Part IV permission in accordance with section 44 of the Act. 3 For the purposes of this regulation, and regulations 4B and 4C, “exempt investment firm” means an authorised person who— a is an investment firm within the meaning given in Article 4.1.1 of the markets in financial instruments directive, and b has a Part IV permission, but to whom Title II of the markets in financial instruments directive does not apply. 4 A person may only apply for a Part IV permission as mentioned in paragraph (1), and an authorised person may only apply for a variation of his Part IV permission as mentioned in paragraph (2), if the person or authorised person has his relevant office in the United Kingdom. 5 In paragraph (4) “relevant office” means— a in relation to a body corporate, its registered office or, if it has no registered office, its head office, and b in relation to a person or authorised person other than a body corporate, the person’s head office. Limitation on exempt investment firms 4B An exempt investment firm has no entitlement— a to establish a branch by making use of the procedures in paragraph 19 of Schedule 3, or b to provide any service by making use of the procedures in paragraph 20 of Schedule 3, in a case where the entitlement of the firm to do so would, but for this regulation, derive from the markets in financial instruments directive. Requirements to be applied to exempt investment firms 4C 1 If the Authority— a gives to a person who has applied as mentioned in regulation 4A(1) a Part IV permission to carry on regulated activities as an exempt investment firm, or b varies the Part IV permission of an authorised person who has applied as mentioned in regulation 4A(2) for a variation to permit him to carry on regulated activities as an exempt investment firm, the requirements specified in paragraph (3) (“the specified requirements”) shall be treated as being included in the permission by the Authority under section 43 of the Act. 2 Notwithstanding paragraph (1)— a the inclusion of the specified requirements in the Part IV permission does not— i amount, for the purpose of section 52(6) of the Act, to a proposal to exercise the power of the Authority under section 43(1) of the Act, ii amount, for the purpose of section 52(9) of the Act, to a decision to exercise the power of the Authority under section 43(1) of the Act, or iii entitle the person to refer a matter under section 55(1) of the Act; b the specified requirements shall not expire until the person ceases to be an exempt investment firm and, accordingly, section 43(5) shall not be treated as requiring the Authority to specify a period at the end of which they expire; and c no application under section 44 of the Act to vary the permission by cancelling or varying any of the specified requirements may be made by the person unless he informs the Authority when making the application that he wishes to cease to be an exempt investment firm. 3 The requirements are that the person— a does not hold clients’ funds or securities and does not, for that reason, at any time, place himself in debt with his clients; b does not provide any investment service other than— i the reception and transmission of orders in transferable securities and units in collective investment undertakings, and ii the provision of investment advice in relation to the financial instruments mentioned in paragraph (i); c in the course of providing the investment services mentioned in sub-paragraph (b), transmits orders only to— i investment firms authorised in accordance with the markets in financial instruments directive, ii credit institutions authorised in accordance with the banking consolidation directive, iii branches of investment firms or of credit institutions which are authorised in a third country and which are subject to and comply with prudential rules considered by the Authority to be at least as stringent as those laid down in the markets in financial instruments directive, the banking consolidation directive or Directive 2006/49/ EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions , iv collective investment undertakings authorised under the law of a Member State to market units to the public and to the managers of such undertakings, v investment companies with fixed capital, as defined in Article 15(4) of Second Council Directive 77/91/ EEC of 13 December 1976 on the coordination of safeguards required of public companies in respect of their formation and the maintenance and alteration of their capital , the securities of which are listed or dealt in on a regulated market in a Member State. 4 In paragraph (3)— a terms and expressions defined in Article 4 of the markets in financial instruments directive and used in the paragraph have the meanings given in that Article; b “the banking consolidation directive” means Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions ; c other terms and expressions used both in the paragraph and in Article 3 of or Annex 1 to the markets in financial instruments directive have the same meanings in the paragraph as in that Article or Annex; and d “Member State”, in sub-paragraph (c)(iv), includes an EEA State that is not a Member State. . 3 In regulation 10 of the principal regulations (interpretation of Part 3) omit the definitions of “regulated activity” and “Schedule 3”. Transitional provision in relation to exempt investment firms 3 In Part 3 of the principal regulations (transitional and saving provisions), after regulation 9, insert— Transitional provision: exempt investment firms 9A 1 Except where paragraph (3) applies, an authorised person who immediately before 1st November 2007— a is an investment firm within the meaning given in Article 4.1.1 of the markets in financial instruments directive, b has his relevant office in the United Kingdom, and c fulfils all the requirements set out in regulation 4C(3), becomes an exempt investment firm with effect from that day as if he had applied as mentioned in regulation 4A(2) for a variation of his Part IV permission to permit him to carry on regulated activities as an exempt investment firm and the Authority had so varied the permission on that day. 2 In paragraph (1) “relevant office” has the meaning given in regulation 4A(5). 3 This paragraph applies— a to an authorised person having a Part IV permission that, immediately before 1st November 2007— i includes no requirement having the effect of prohibiting the person from holding clients’ funds, or ii permits the person, in connection with the carrying on of regulated activities comprising any investment services and activities (excluding activities to which, by virtue of Article 2, the markets in financial instruments directive does not apply), to carry on the activity consisting of both the safeguarding of assets belonging to another and the administration of those assets; and b to an authorised person who, before 1st November 2007, gives the Authority notice, in such form as the Authority may direct, that he does not wish to become an exempt investment firm. 4 In paragraph (3)— a “clients’ funds”, in sub-paragraph (a)(i), has the same meaning as in Article 3 of the markets in financial instruments directive, and b sub-paragraph (a)(ii) is to be construed in accordance with section 22 of the Act, any relevant order made under that section and Schedule 2 to the Act. 5 The variation of a person’s Part IV permission effected by paragraph (1) does not amount to the grant of an application for variation of a Part IV permission for the purpose of section 52(4) of the Act or to the determination of an application under Part IV for the purpose of section 55(1) of the Act. . Transitional provision in relation to Part IV permissions 4 In Part 3 of the principal regulations, after regulation 9A (inserted by regulation 3), insert— Transitional provision: operators of alternative trading systems 9B 1 Any person who immediately before 1st November 2007— a had a Part IV permission to carry on an activity of the kind specified by article 14, 21 or 25 of the principal Order in relation to an investment of a particular kind; and b operated an alternative trading system (within the meaning of the Alternative Trading Systems Instrument 2003 (2003/45) made by the Authority under the Act on 19th June 2003), is, subject to regulation 9C, from 1st November 2007 to be treated as having a Part IV permission to carry on the kind of activity specified by article 25D of the principal Order (inserted by the 2006 Order ) in relation to an investment of the same kind which is a financial instrument. 2 Where the person concerned gave written notice to the Authority on or before 1st October 2007 to that effect, paragraph (1) shall not apply to him. Transitional provision for investment firms and credit institutions in relation to options, futures and contracts for differences 9C 1 Any person who immediately before 1st November 2007— a was an investment firm or a credit institution (in each case within the meaning of the principal Order as amended by the 2006 Order); and b had a Part IV permission to carry on an activity of the kind specified by article 14, 21, 25, 37 or 53 of the principal Order in relation to an investment specified in the first column in the table in Schedule 8, is from 1st November 2007 also to be treated as having a Part IV permission to carry on that kind of activity in relation to an investment specified in the second column of the table opposite that investment (in so far as he does not already have such permission). 2 Where the person concerned gave written notice to the Authority on or before 1st October 2007 to that effect, paragraph (1) shall not apply to him. Transitional provision for management companies in relation to options, futures and contracts for differences 9D 1 Any person who immediately before 1st November 2007— a was a management company (within the meaning of the principal Order as amended by the 2006 Order); b was providing, in accordance with Article 5.3 of Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities , the investment service specified in paragraph 4 or 5 of Section A, or the ancillary service specified in paragraph 1 of Section B, of Annex I to the markets in financial instruments directive; and c had a Part IV permission to carry on an activity of the kind specified by article 14, 21, 25, 37, 40 or 53 of the principal Order in relation to an investment specified in the first column in the table in Schedule 8, is from 1st November 2007 also to be treated as having a Part IV permission to carry on that kind of activity in relation to an investment specified in the second column of the table opposite that investment (in so far as he does not already have such permission). 2 Where the person concerned gave written notice to the Authority on or before 1st October 2007 to that effect, paragraph (1) shall not apply to him. . 5 In regulation 10 of the principal regulations, before the definition of “ancillary service” insert— “the principal Order ” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ; “the 2006 Order” means the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment No. 3) Order 2006 ; . 6 After Schedule 7 to the principal regulations, insert— SCHEDULE 8 TRANSITIONAL PROVISION FOR PART IV PERMISSIONS Regulations 9C and 9D TABLE Investment in relation to which the person has Part IV permission immediately before 1st November 2007 Additional investments to which the person’s Part IV permission is extended from 1st November 2007 (1) “Commodity” is amended by the CRD (Consequential Amendments) Instrument 2006 and the Handbook Administration (No 4) Instrument 2006 (2006/64) made by the Authority under the Act on 21st December 2006. (2) “Rolling spot forex contract” is defined in the 2001 Instrument . (3) The definition of “future” in the 2001 Instrument is from 1st November 2007 affected by the amendment made to article 84 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ( S.I. 2001/544 ) by article 27 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment No. 3) Order 2006 ( S.I. 2006/3384 ). (4) “Spread bet” is defined in the 2001 Instrument.. Option (excluding commodity options and options on a commodity future) within the meaning of the General Provisions and Glossary Instrument 2001 (2001/7) made by the Authority under the Act on 21st June 2001(“the 2001 Instrument”) as amended by the Handbook Administration (No 3) Instrument 2006 (2006/21) made by the Authority under the Act on 22nd June 2006 and the CRD (Consequential Amendments) Instrument 2006 (2006/53) made by the Authority under the Act on 23rd November 2006 Those options within the meaning of the 2001 Instrument as last amended by the Glossary (MIFID) Instrument 2007 (2007/1) made by the Authority under the Act on 25th January 2007 (“the 2007 Instrument ”) which are options falling within paragraph 10 of Section C of Annex I to the markets in financial instruments directive (“Section C”) Commodity option within the meaning of the 2001 Instrument Those commodity options within the meaning of the 2001 Instrument as last amended by the 2007 Instrument which are options falling within paragraphs 4, 5, 6 and 7 of Section C Option on a commodity future within the meaning of the 2001 Instrument Those options on a commodity future within the meaning of the 2001 Instrument as last amended by the 2007 Instrument which are options falling within paragraphs 4, 5, 6 and 7 of Section C Future (excluding commodity futures and rolling spot forex contracts ) within the meaning of the 2001 Instrument Those futures (excluding commodity futures and rolling spot forex contracts) which are futures falling within paragraph 10 of Section C Commodity future within the meaning of the 2001 Instrument Those commodity futures within the meaning of the 2001 Instrument as last amended by the 2007 Instrument which are futures falling within paragraphs 5, 6 and 7 of Section C Contract for differences (excluding spread bets and rolling spot forex contracts) within the meaning of the 2001 Instrument Those contracts for differences (excluding spread bets and rolling spot forex contracts) within the meaning of the 2001 Instrument as last amended by the 2007 Instrument which are derivative instruments for the transfer of credit risk falling within paragraph 8 of Section C . Amendment of the Appointed Representatives Regulations 7 In the Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 , after regulation 3 insert— Transitional provision in relation to contracts 4 Regulation 3(6) does not apply in relation to a contract made on or before 31st October 2007. . Amendment of the EEA Passport Rights Regulations 8 In regulation 1(2) of the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 , in paragraph (a) of the definition of “ UK investment firm”, after “investment firm” insert “(within the meaning of section 424A of the Act)”. Amendment of the Disclosure of Confidential Information Amendment Regulations 9 In regulation 1(2) of the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) (Amendment) Regulations 2006 — a at the end of sub-paragraph (a) omit “and”; b after sub-paragraph (a) insert— aa for the purposes of regulation 6(a) on 1st April 2007; and . Frank Roy Claire Ward Two of the Lords Commissioners of Her Majesty’s Treasury 8th March 2007