Checklist: When does a firm need to be authorised by the FCA or the PRA (UK)

Introduction

This checklist will assist in-house counsel, private practice lawyers and risk and compliance teams in determining whether a firm needs to be authorised in the UK by the Financial Conduct Authority (FCA) and/or the Prudential Regulation Authority (PRA). It may also help foreign firms considering operating in the UK or non-financial firms with ancillary financial operations which may or may not require authorisation.

This checklist addresses the following steps:

1. Will you be carrying on any activities by way of business in the UK?
2. Is the firm carrying on, or does it intend to carry on, regulated activities?
3. Do any exclusions apply?
4. Have you considered whether an exemption applies?
5. Specific considerations for EEA and Gibraltar-based firms

It is presented as a list of requirements that you can tick off as they are addressed. At the end of the document there are explanatory and specific notes corresponding with each step in the checklist.

This checklist can be used in conjunction with the following How-to guides: Introduction to the UK financial regulators, The general prohibition – beware the consequences of breach, The appointed representatives regime explained – what it means in practice and Checklists: Preparing an application to the FCA or the PRA for a Part 4A permission, Preparing an application to vary a Part 4A permission at the request of a firm, Preparing an application to cancel a Part 4A permission at the request of a firm and Pre-appointment checks to consider when selecting an appointed representative.

Step 1 – Will you be carrying on any activities by way of business in the UK?

Step 2 – Is the firm carrying on, or does it intend to carry on, regulated activities?

Step 3 – Do any exclusions apply? 

Step 4 – Have you considered whether an exemption applies?

Step 5 – Specific considerations for EEA and Gibraltar-based firms

Explanatory notes

Overview – authorisation

Working out whether a business needs to be authorised under UK financial services law can be complex and even when firms are operating under similar business models, the regulatory conclusions can vary.

The financial services regulators are the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA). The PRA is responsible for the prudential regulation and supervision of approximately 1,500 banks, building societies, credit unions, insurers and major, systemically important investment firms. The FCA is responsible for the prudential supervision of all other firms carrying on regulated activities which are not covered by the PRA. The FCA also acts as the conduct regulator for all regulated firms, including PRA-authorised firms in the UK.  See How-to guide: Introduction to the UK financial services regulators.

An authorised person includes someone who has been authorised by either the FCA or the PRA and is granted specific permissions to carry on one or more regulated activities. Individuals, bodies corporate, partnerships and unincorporated associations are persons eligible to apply for authorisation (and such authorised persons are referred to as ‘firms’ in this checklist). Authorisation is commonly known as a Part 4A permission. See Checklist: Preparing an application to the FCA or the PRA for a Part 4A permission.

The Financial Services and Markets Act 2000 (as amended) (FSMA), is the foundational law that regulates the financial services industry. The range of regulated activities covered by the FSMA changes periodically as new activities fall under FCA and PRA regulation (eg, on 29 April 2025, the UK government published draft legislation and an explainer aimed at bringing cryptoassets (including stablecoins) within scope of UK regulation).  The draft legislation proposes to regulate a wide range of crypto-asset related activities.  The implementation timeline is currently unknown.

Crypto-asset service providers and custodian wallet providers need to be registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Recommendations 2017.

Firms wishing to carry on e-money or payment services will need to apply to the FCA under the Electronic Money Regulations 2011 or Payment Services Regulations 2017.

Legal framework

To assess the scope of possible authorisation requires examination of certain legislative and regulatory provisions. These include (among others):

• the Financial Services and Markets Act 2000 (as amended) (FSMA);
• the Financial Services and Markets Act 2023;
• the Financial Services and Markets Act 2000 (Regulated Activities Order) 2001 (as amended) (RAO);
• the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (as amended);
• the Financial Services and Markets Act 2000 (Exemption) Order 2001 (as amended) (Exemption Order);
• the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (as amended) (Business Order);
• the Payment Services Regulations 2017 (as amended); and
• the Electronic Money Regulations 2011 (as amended).

Both the FCA and the PRA also issue rules and guidance which are applicable to the firms that they regulate. For UK-regulated firms, the rules and guidance in the FCA Handbook and the PRA Rulebook are relevant.  These are maintained and updated to reflect changes in regulation, policies and guidelines.  It is also useful to consult the FCA’s Perimeter Guidance manual (PERG) for greater detail on the investments and services regulated.

General prohibition

If a firm is carrying on regulated activities (ie, an activity of a specified kind) with respect to a specified investment by way of business in the UK it needs to be authorised under section 19, FSMA unless an exclusion or an exemption applies. This is commonly known as the general prohibition. Failure to do so carries significant penalties. See How-to guide: The general prohibition – beware the consequences of breach.

In summary, the general prohibition applies if the regulated activity is:

• carried on by way of business;
• in the UK;
• in relation to an investment of a specified kind; and
• not excluded or exempt.

Step 1 – Will you be carrying on any activities by way of business?

1.1 Do the activities fall within scope of the Business Order?

HM Treasury has powers to specify the circumstances in which a person is or is not to be regarded as carrying on regulated activities by way of business (section 419, FSMA). The Business Order modifies the business test for certain activities. Whether or not an activity will be carried on by way of business will depend largely on the individual facts and the activity in question.  For example, for investment-related activities, the business test is not satisfied unless the person carries on the business of engaging in one or more regulated activities that fall within the investment business categories as detailed (see article 3, Business Order).

PERG 2.3.2G provides further clarification as to how the business element differs depending on the particular activity in question.  It states this is a narrower test than that of carrying on regulated by way of business as required by section 22, FSMA (see 1.2 below), as it requires the regulated activities to represent the 'carrying on of business in their own right.'

1.2 Is the ‘by way of business’ test satisfied in practice – is the activity a one-off or is there an element of continuity to it? Is the activity being done for profit?

Section 22(1), FSMA provides that for an activity to be considered a regulated activity it must be carried on by way of business. For some, the question of carrying on activity by way of business will be obvious – for example, where the activities are commercial in nature, or as set out at section 1.1 above where particular activities and their requirements are detailed in the Business Order.

The term ‘by way of business’ is not defined in FSMA or the RAO, and guidance on interpretation falls to the general wording of FSMA, FCA guidance as set out in PERG 2.3, PERG 5.4.8G (in relation to insurance distribution activities) and guidance from the courts.

1.2.1 FCA guidance on ‘by way of business’

PERG 2.3.3G provides a starting point for the analysis and states that whether an activity is carried on by way of business is ‘ultimately a question of judgement that takes account of several factors (none of which is likely to be conclusive)’. These factors include:

• the degree of continuity;
• the existence of a commercial element;
• the scale of the activity;
• the proportion which the activity bears to other activities carried on by the same person but which are not regulated; and
• the nature of the regulated activity.

1.2.2 Specific considerations in relation to mortgage lending

Further specific guidance in relation to mortgage lending is set out at PERG 4.3.3-4.3.9G. There are three different forms of business test applied to regulated mortgage activities. Note that PERG 4.3.7G states that under the ‘by way of business’ test in section 22, FSMA could be satisfied by an activity undertaken on an isolated occasion. It follows that whether any particular person may be carrying on a regulated mortgage activity by way of business will depend on the individual circumstances. Some typical examples where the business test is unlikely to be satisfied are as follows:

• when an individual enters into or administers a one-off mortgage providing a loan to a friend or member of his family whether at market interest rates or not; or
• when a person provides a service without any expectation of reward or payment of any kind (eg, advice given by a voluntary sector organisation such as Citizens Advice (in contrast with PERG 4.3.8G(3) where payment is received for advice (on a regular basis)).

1.2.3 Guidance from case law and the courts

There have also been judgments in the courts on what amounts to ‘by way of business’. One example involved debate as to whether a loan was part of the lender’s business (within the meaning of section 22, FSMA) or just a private arrangement. In Helden v Strathmore Ltd [2010] EWHC 2012 the court held that Strathmore had acted in the course of business. Some of the factors that the court held to tip the balance as satisfying the business test were the monetary value and regularity of the loans, the fact that the loans were secured and solicitors were instructed, and that Strathmore was conducting business as a limited company with likely commercial objectives.

See also Financial Services Authority v Anderson [2010] EWHC 599 and R v Napoli [2012] EWCA Crim 1129, which consider the regulated activity of deposit-taking, the specific test under article 2 of the Business Order, and whether the acceptance of deposits had been ‘by way of business’, and Jackson V Ayles and another [2021] EWHC 995 (Ch), where the court held that entering into a loan was an activity carried on by way of business within the meaning of section 22(1) FSMA, and as the lender was not authorised, and no exemption applied, they were in breach of the general prohibition rendering the loan unenforceable under section 26(1), FSMA.

1.3 Is the activity being carried on in the UK?

Carrying on a regulated activity only infringes the general prohibition if the regulated activity is carried on in the UK. What amounts to ‘in the UK’ varies from one regulated activity to another and has been given a broad interpretation. This is a particular consideration where financial services are provided on a cross-border basis where a customer is based outside the UK, or where some of the activity happens outside the UK, or where a non-UK firm provides a service to a UK person.

Even with a cross-border element a person may still be carrying on an activity in the UK – for example, a person who is situated in the UK and who is safeguarding and administering investments will be carrying on activities in the UK even though their client may be overseas. It is not always clear cut and an assessment should be made on a case-by-case basis. For further discussion on this, see How-to guide: The general prohibition – beware the consequences of breach.

Whether or not an activity is regarded as being carried on in the UK can depend on many factors which are set out in section 418, FSMA.

Section 418 prescribes cases where a person who is carrying on a regulated activity but would not otherwise be regarded as carrying it on in the UK, is to be regarded as doing so for the purposes of FSMA. Some examples are as follows:

• where a regulated activity is carried on a by a UK-based person and the day-to-day management of the activity is the responsibility of an establishment in the UK; or
• where a regulated activity is carried on by a person who is not based in the UK but is carried on from an establishment in the UK. This might occur, for example, in relation to managing investments where each of the different stages of decision-making takes place in different countries.

‘Establishment’ means, in relation to a person, their head office or a branch eg, the branch of an overseas company (section 105(9)), FSMA).

It is also useful to consult PERG 2.4 which concerns the ‘link between activities and the United Kingdom’; PERG 2.4.5G which provides further analysis of the issue of territoriality including, for example, in relation to deposit-taking; and PERG 2.4.6G which considers the provision of cross-border services using the internet or telephone.

Whether or not an activity is regarded as being carried on in the UK can depend on consideration of the location of both the client and the provider, and the type and location of the activity being undertaken – for example, advising is considered to take place where the client is located and the advice is received whereas persons arranging contracts of insurance will normally be considered as carrying on the arranging in the location where the activities take place.

See also discussion of the overseas person exclusion at section 3.1.

A further barrier that firms may face when doing business in the UK is the financial promotion restriction in section 21, FSMA. This restriction applies even if the firm in question is not regarded as carrying on a regulated activity in the UK. See Q&A: Financial promotions and How-to guide: Overview of the financial promotion regime. 

Step 2 – Is the firm carrying on, or does it intend to carry on, regulated activities?

2.1 What is considered to be a regulated activity?

Generally, an activity is regulated in the UK if it is as follows:

• of a specified kind;
• relates to a specified investment or to property of any kind;
• carried on by way of business;
• conducted in the UK (section 22, FSMA); and
• neither an exemption nor an exclusion applies.

The definition has been extended to include certain activities, including:

• activities relating to information about a person’s financial standing (see articles 89A and 89B of the RAO);
• an activity (in Great Britain only) related to claims management activities;
• an activity related to administering a benchmark such as the Sterling Overnight Index Average (SONIA) (see article 63S RAO).

Any of the activities noted above will be considered regulated activities and it is therefore necessary to consider whether these apply to your business as if so, authorisation will be required.

There is some useful guidance on regulated activities in the FCA’s PERG. It provides guidance across all different activity types (eg, for discussion on the scope of the FCA regulatory perimeter related to investment in connection with contracts of insurance, see PERG 5). More detailed information on the scope of regulated activities and associated specified investments is in PERG 2 Annex 2.

Whilst section 22, FSMA summarises the kinds of specified activities and investments in general terms, a definitive list of the specified activities and investments is set out in the RAO which is explored in more detail below.

2.2 Are you, or will you be, carrying on a regulated activity?

Part II RAO sets out a complete list of specified activities. The following activities (among others), when performed in relation to specified investments, are regulated activities in the UK:

• accepting deposits;
• issuing e-money;
• insurance-related activities, including effecting and carrying out a contract of insurance (eg, life insurance) and assisting in the administration and performance of contracts of insurance;
• investment activities, including:
  • arranging deals in investments;
  • advising on investments (eg, merits of acquiring or disposing of particular investments);
  • dealing in investments (as principal or agent);
  • safeguarding and administering investments (custody);
  • managing investments; and
  • establishing, operating or winding up a collective investment scheme;
• arranging or advising on regulated mortgage contracts and regulated home-reversion plans;
• consumer credit regulated activities (eg, consumer lending, crowdfunding and debt collection on behalf of third parties);
• claims management activities;
• funeral plan contracts; and
• other miscellaneous activities, such as establishing a stakeholder pension scheme, specified financial benchmark administration activities, bidding in emissions auctions and certain activities in relation to the Lloyd’s insurance market.

Agreeing to carry on most regulated activities (via a legally binding agreement), is also itself a regulated activity (see PERG 4.9). See also PERG 2.7 for guidance on specified activities (including PRA-regulated activities).

2.3 Are you, or are you likely to be, involved with specified investments?

For the purposes of the FSMA regime, specified investments include:

• deposits;
• e-money;
• contracts of insurance;
• shares;
• debt instruments (eg, bonds and notes);
• alternative finance investment bonds;
• government and public securities;
• instruments giving entitlement to investments;
• certificates representing certain securities;
• units in a collective investment scheme;
• rights under a pension scheme;
• options;
• futures;
• contracts for differences (CFDs);
• Lloyd’s syndicate capacity and syndicate membership;
• funeral plan contracts;
• regulated mortgage contracts;
• rights under consumer credit and consumer hire agreements; and
• rights to, or interests in investments.

For a full list of specified investments, see Part III of the RAO and the FCA glossary definition of specified investment.

2.3.1 FCA guidance on specified investments

The FCA provides guidance on ‘specified investments’ at PERG 2.6.

Whether a product or investment falls within the scope of the RAO will depend on a variety of different factors.

For example, advising on investments is covered by article 53, RAO. To fall within article 53, the advice must relate to one of the following types of specified investments:

• securities (eg, shares, debentures and warrants);
• structured deposits; or
• relevant investments (eg, options, futures, various derivatives products and rights under a contract of insurance).

Advice must be communicated to an investor (or potential investor) or alternatively to their agent. The context in which something is communicated may also have an impact – for example, if a person provides information that selling shares now will earn a profit based on current share price, this may well constitute advising on investments.

It is your responsibility to establish whether your firm’s proposed business requires you to apply for authorisation to carry on regulated activities. If in doubt, please consider seeking independent legal or compliance advice.

Step 3 – Do any exclusions apply? 

Some regulated activities are subject to exclusions contained in the RAO itself. Where an exclusion applies the general prohibition does not apply and the activity effectively becomes ‘unregulated’ or, in simple terms, removed from the scope of regulation. The exclusions can be categorised into general exclusions (that apply across multiple regulated activities) and specific exclusions (that apply to particular regulated activities) but the exact scope of each exclusion needs to be examined very closely.  Where a firm intends to rely on an exclusion, it must ensure that the specific conditions of the exclusion are met, the firm is not holding itself out to be authorised and the firm understands the scope and limits of the exclusion.  Getting it wrong is a criminal offence under FSMA and specialised legal advice about the application of exclusions is strongly recommended.

3.1 General exclusions

There are a number of general exclusions that apply in certain circumstances to several regulated activities under FSMA.  The different categories of general exclusions are detailed at Chapter XVII, articles 66-72J, RAO and PERG 2.9.  The requirements of each general exclusion will need to be considered carefully to determine whether authorisation is required or not.

A useful general exclusion may apply to overseas persons (ie, a person that carries on certain regulated activities but does not do so or offer to do so, from a permanent place of business maintained in the UK) – see the definition of an overseas person in article 3(1), RAO. This is commonly known as the overseas person exclusion (OPE).  The OPE is a long-established exclusion in the UK (for those established outside the UK) wishing to provide financial services in the UK (in the absence of authorisation).

The OPE applies, in specified circumstances, to a wide range of regulated activities, including dealing in investments as principal or agent, arranging deals in investments, and agreeing to carry on those activities (as more specifically detailed under article 72, RAO).  See also PERG 2.9.15G.

If the exclusion applies, it is generally available (other than activities that relate to home finance transactions) where one of the following two conditions is satisfied:

• the regulated activity is done ‘with or through’ an authorised or exempt person – for example, entering into a transaction ‘with’ an authorised or exempt person as a counterparty, or ‘through’ an authorised person or exempt person as an agent or arranger; or
• the regulated activity is carried on as a result of a ‘legitimate approach’ which is an approach to, by or on behalf of an overseas person that is not in breach of section 21, FSMA (the restriction on financial promotions).

The rules around the OPE are complex and caution is required. Firms must carefully analyse whether they are able to rely on the OPE and whether and how it applies in respect of the activity they are carrying on.  See also articles 72(8)-(11A), RAO for examples of when the OPE does not apply.  

3.2 Specific exclusions

Specific exclusions may apply to particular regulated activities. For instance, the regulated activity of arranging deals in investments (article 25, RAO) is subject to exclusions in articles 26 to 36, RAO. Article 29, for instance, excludes arrangements made for, or with a view to be entered into by a person with or through authorised persons if specified conditions as to advice and remuneration are satisfied, and the transaction does not relate to a contract of insurance.

Similarly, a person will not be considered to be carrying on the regulated activity of advising on investments (article 53(1), RAO) if a relevant exclusion applies.  The main exclusion is where the advice is contained in a newspaper (whether hard copy or electronic), and the principal purpose of the publication is not the provision of regulated investment advice or to lead or enable persons to deal in securities or contractually based investments (see PERG 7.4.1G, and article 54, RAO and more generally PERG 7. Caution is required in making the determination whether authorisation is required, an exemption applies or whether you can rely on an exclusion.

See also PERG 2.8 for guidance on the application of specific exclusions to particular regulated activities.

Step 4 – Have you considered whether an exemption applies?

In the case of some regulated activities, it is also worth considering whether an exemption applies. Exemptions remove an activity from the scope of regulation and are discussed in greater detail below.

4.1 Determine whether the firm qualifies as an ‘exempt person’

Section 417(1), FSMA provides several exemptions from the general prohibition for ‘exempt persons’ in respect of the activities they carry on. The following are examples of exempt persons:

• recognised investment exchanges (eg, the London Stock Exchange (LSE)) and clearing houses (eg, the London Clearing House (LCH));
• the Bank of England and various international organisations including the International Monetary Fund; and
• appointed representatives.

A full list of exempt persons in respect of any regulated activity other than insurance business is detailed in Part I of the schedule to the Exemption Order. Further, municipal banks and local authorities are exempt in respect of accepting deposits (see Part II of the schedule to the Exemption Order).

Note, the general prohibition does not apply to members of Lloyd’s (except for advising on Lloyd’s participation or managing underwriting) and members of designated professional bodies that represent professional firms, such as solicitors, accountants, actuaries or chartered surveyors carrying on certain regulated activities. These are known as exempt professional firms and can conduct regulated activities without authorisation provided these activities are incidental to their main business activity and not a major part of the firm’s practice (see section 327, FSMA).

4.1.1 Appointed representatives

The most common type of exempt person is a person who is an appointed representative. An appointed representative (AR) is a party to a contract with an authorised person (the principal) and is appointed as a representative of that authorised person. The principal is responsible for ensuring that the AR is fit and proper and complies with the regulatory regime. The AR is exempt from authorisation, provided that:

• the requirements set out in section 39, FSMA are complied with; and
• the business being carried out by the AR is one of those specified in the Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 (as amended).

Although the AR will not need to be authorised, they will be required to follow the instructions of the principal in complying with the regulatory regime. This could be a problem for some firms. It may also be that your activities are not eligible for AR treatment or that you cannot find a principal willing to take you on. Also, you cannot be an AR for one purpose and an authorised person for another purpose. If you want to do that you will have to use two distinct entities.

More detail on the relationship between principals and appointed representatives, and the legal and compliance requirements is available on the FCA website. See also How-to guide: The appointed representatives regime explained – what it means in practice. 

4.1.2 Application of the exemptions

Provided that an exemption applies, an exempt person will not breach the general prohibition so long as they are exempt in relation to that activity. Appointed representatives and the persons exempt under miscellaneous provisions cannot be exempt in relation to some regulated activities and authorised in relation to others.

4.2 Consider taking specialised legal or compliance advice

If you are unsure or require further clarification on the application of the exemptions or the exclusions, you should consider whether you require specialised legal or compliance advice to discuss the best options for your business model.

Step 5 – Specific considerations for EEA and Gibraltar-based firms

5.1 Are you dealing with an EEA firm?

Until Brexit took final effect on 1 January 2020 UK financial firms could passport their services into other EU member states and vice versa. Following Brexit, UK financial institutions no longer have access to this passport, though the passport regime still applies within the member states of the EEA. A temporary permissions regime (TPR) was established to enable EEA firms to continue to operate in the UK on a cross-border or branch basis in accordance with their permissions before exit day. From exit day, all TPR firms were treated as UK-authorised firms. You can find out more about this here.

The UK’s TPR ended on 31 December 2023, however there are arrangements in place to enable firms to wind down their business in an orderly manner using the Financial Services Contracts Regime (FSCR). The FSCR allows firms five years to run off existing contracts (or 15 years for insurance contracts). Firms in the FSCR cannot write new business and can only perform services in relation to pre-existing contracts.

A temporary marketing permissions regime (TMPR) that currently permits certain EEA-based investment funds that were passporting into the UK at the end of the Brexit transition period to continue to be marketed in the UK has been extended until 31 December 2026. This is to be replaced by the Overseas Fund Regime.

The Overseas Funds Regime creates a streamlined process for overseas funds to gain recognition in the UK provided their home regulatory regime is deemed equivalent to UK standards.  The UK confirmed on 30 January 2024 that EEA UCITS funds (including the EU Member States) but excluding those authorised as money market funds meet this requirement.  This means they can apply to the FCA to market to UK retail investors. 

The FCA published its final rules and guidance in PS24/7 'Implementing the Overseas Funds Regime' and the new Handbook rules and guidance has been in force since 31 July 2024.  Funds currently operating under the TMPR must apply for recognition by the end of 2026 to ensure uninterrupted access to the UK market.  The Overseas Funds Regime was opened to new schemes (ie, those not in the TMPR) from 30 September 2024. See FCA webpage Overseas Funds Regime: Update for firms and FCA roadmap which provides guidance for firms navigating the changes.

5.2 Are you dealing with a Gibraltar-based firm?

Since Brexit, the passporting regime is no longer available except for firms that wish to 'passport' between the UK and Gibraltar. So, Gibraltar firms wanting to operate in the UK can do so with the minimum of formalities. This outcome was achieved from within the UK by the Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019. The regulations have since been renewed on a yearly basis and currently these transitional arrangements are in place to 31 December 2025 although this may be extended. See passporting between the UK and Gibraltar on FCA website.

Additional resources

FCA - How to apply for authorisation or registration
FCA - Authorisation
FCA - Crytoassets: How to  apply for registration
PRA - New firm authorisation

Related Lexology Pro content

How-to guides:

Introduction to the UK financial regulators
The general prohibition – beware the consequences of breach
The appointed representatives regime explained – what it means in practice

Checklists:

Preparing an application to the FCA or the PRA for a Part 4A permission
Preparing an application to vary a Part 4A permission at the request of a firm
Preparing an application to cancel a Part 4A permission at the request of a firm
Pre-appointment checks to consider when selecting an appointed representative

Reliance on information posted:

While we use reasonable endeavours to provide up to date and relevant materials, the materials posted on our site are not intended to amount to advice on which reliance should be placed. They may not reflect recent changes in the law and are not intended to constitute a definitive or complete statement of the law. You may use them to stay up to date with legal developments but you should not use them for transactions or legal advice and you should carry out your own research. We therefore disclaim all liability and responsibility arising from any reliance placed on such materials by any visitor to our site, or by anyone who may be informed of any of its contents.