Does your business model need FCA authorisation?

Why the business model matters

Section 19 of the Financial Services and Markets Act 2000 (FSMA) prohibits anyone from carrying on a regulated activity in the UK by way of business unless they are authorised or exempt. The regulated activities are set out in the Regulated Activities Order, and each one is defined by reference to a particular activity and a particular kind of investment, product or agreement. So the question is never simply whether you are in financial services. It is whether something your business does, as a matter of fact, matches an activity in the Order and is not taken out of it by an exclusion.

Your business model is where those facts sit. Many of the perimeter questions we are asked do not come from firms that set out to provide a financial service. They come from businesses that touch money, credit, insurance or investment at one point in what they do: a software company whose platform moves funds, an adviser who passes clients to a lender, a developer raising money for a project from people they know.

The same model can fall either side of the line

A label such as broker, platform or introducer is a useful starting point, but it does not settle anything. The factors that most often move a model across the line are these.

• Who the customers are. Lending to or broking for a limited company is usually outside the consumer credit regime. Doing the same for a sole trader or a partnership of two or three partners can be regulated.
• What the product is. Introducing someone to a business loan, a mortgage, an insurance policy or a share issue engages different activities, different exclusions and sometimes different legislation altogether.
• How the money flows. Who holds customer funds, who pays whom and whether investors’ money is pooled can turn a technology or property business into a payment service, a lending platform or a collective investment scheme.

A change in any of these can change the answer. A business that was outside the perimeter at launch can drift inside it by adding a product, taking on a new type of customer or changing how it is paid. That is why a view on your position is only as good as the facts it was based on.

What each activity page covers

Each page takes one common business model and explains the regulated activities it is most likely to engage, the exclusions and exemptions that are usually relevant, the misunderstandings that come up most often and the points a solicitor would want to look at. The pages explain the rules and the factors. They do not reach a conclusion about your business, because that depends on your contracts, your customer journey and how you actually operate day to day.

• Business lending →When lending to businesses is regulated and when it is not.
• Loan introducers →When introducing borrowers to lenders is credit broking or arranging.
• Commercial finance brokers →How the perimeter applies to commercial finance brokers.
• Lead generation →When lead generation for financial products becomes a regulated activity.
• Investment introductions →When introducing investors or clients to investment firms needs permission.
• Property and investment schemes →When a property syndicate or pooled investment becomes a collective investment scheme.
• Fintech software and platforms →When software and platform businesses are carrying on regulated activities themselves.
• Buy now pay later →How the rules on deferred payment credit apply to buy now pay later products.
• Insurance introductions →When introducing customers to insurers or brokers is insurance distribution.
• Cryptoassets →Where cryptoasset businesses sit today and what changes under the new FCA regime.

Two tests for every model

Every model on these pages raises two separate questions. The first is whether what you do is a regulated activity. The second is whether the way you market it is a financial promotion under section 21 of FSMA. Passing the first does not clear the second. A business that needs no authorisation for its operations can still have a website, adverts, emails or investor materials that need to be approved by an authorised firm or fall within an exemption.

When general information is not enough

If a bank, investor, advertising platform or commercial partner needs to see that your model sits outside the perimeter, a general explanation will not satisfy them. A written legal opinion from a solicitor applies the rules to your documents and your facts. Your first call with us is not charged and carries no obligation. If an opinion would help, we introduce you to one of the solicitors we work with, who will quote before any work starts and charge you directly. If you turn out to be inside the perimeter, we can introduce you to specialists in authorisation or appointed representative arrangements. The firms we introduce you to pay us an introduction fee. How written opinions work