Wholesale investment firm permissions

Find out which permissions to apply for in order to become authorised.

This page summarises the most common business models we anticipate an adviser/arranger of wholesale funds, an investment manager, an Alternative Investment Fund Manager and a UCITS Manager to conduct. It is aimed at UK firms only.

You need to satisfy yourself, taking independent advice where necessary, on which permissions you need to conduct your business.

The table below explains the permissions you might need, depending on your business activities. Beneath the table we explain some of the terms used.

We also have a chart that explains the differences between collective and individual portfolio management.

Type of wholesale investment firm

Adviser/ arranger of wholesale funds

Investment Manager

Alternative Investment Fund Manager (full-scope UK AIFM)

UCITS Management Company

Application fee £1,500 £5,000 £5,000 £5,000

Part 4A permissions that are often required

Advising on investments

Arranging (bringing about deals in investments)

Making arrangements with a view to transactions in investments

Agreeing to carry on regulated activities

Advising on investments

Arranging (bringing about deals in investments)

Making arrangements with a view to transactions in investments

Agreeing to carry on regulated activities

Dealing in investments as an agent

Managing investments

Controlling (but not holding) client money

Managing an Alternative Investment Fund (AIF)

This permission is broken down into managing:

As per FUND 1.4.2R, an internally managed AIF must not engage in any activities other than AIFM management functions in respect of that AIF.  

Managing a UCITS (Undertakings for Collective Investment in transferable securities)

Part 4A permissions that are sometimes required

Dealing in investments as an agent

Safeguarding and administering assets (accepting client assets)

Arranging the safeguarding and administration of assets

Managing a UCITS

Establishing, operating or winding up a collective investment undertaking

AIFM investment firm conducting MiFID top-up activities, e.g. individual portfolio management &  investment advice, see FUND 1.3.4G (4) and FUND 1.4.3R (3) to 1.4.3R (6)

Managing an AIF

Establishing, operating or winding up a collective investment undertaking

UCITS investment firm conducting MiFID top-up activities, e.g. investment advice, see COLL 6.9.9R

Additional information

If you're intending to act purely as a marketer, you will not require permission to advise on investments. You'll only need permission to 'make arrangements' and 'agree to carry out a regulated activity'.

 

As per PERG 2.9.22, activities carried on by the AIFM or UCITS manager in connection with, or for the purposes of, managing a UCITS or (as the case may be) managing an AIF, are excluded from being regulated activities (except the activities of managing an AIF and managing a UCITS themselves).

We think this is particularly likely to affect the following regulated activities: 1) dealing in investments as agent; 2) dealing in investments as principal; 3) arranging (bringing about) deals in investments; 4) managing investments; 5) arranging safeguarding and administration of assets; 6) advising on investments (except pension transfers and pension opt-outs); and 7) agreeing to carry on specified kinds of activity.

An AIFM must not provide only the AIFM management functions in point 2 of Annex I of AIFMD (see FUND 1.4.4(3)R).

Glossary of terms

Part 4A permissions: as defined in section 55A of the Act (Application for permission) a permission given by the FCA or PRA under Part 4A of the Act (Permission to carry on regulated activities), or having effect as if so given.

Adviser/ arranger of wholesale funds: an adviser/arranger may typically advise fund managers or other professional investors on the merits of investing in a particular fund, and then arrange for those investments to take place. They tend to offer advice to professional customers only. They can carry out deals on behalf of their customers (which means they require the ‘arranging deals in investments’ permission), but the decision to invest must be made by the customer. An adviser/arranger/marketer will provide information to investors on potential investment schemes, but may not offer advice on their merits.

Investment Manager: an investment manager, asset manager or portfolio manager could have just one client, such as a fund, or they could offer a separate account service for professional and/or retail investors. The Investment Manager’s Agreement (IMA) should list the services that correspond to their business plan and permissions that relate to the client(s).

Advising on investments: investment advice means providing personal recommendations to a client, either at their request or on your own initiative, in respect of one or more transactions relating to MiFID financial instruments (see PERG 13.3 Q.18 of our Handbook). Learn more about what a 'personal recommendation' is for the purposes of MiFID – see PERG 13.3 Q19, Q20 & Q21. PERG 8.24 - PERG 8.30 further elaborates on the concept of advising on investments.

Arranging (bringing about) deals in investments: this is aimed at arrangements that have the direct effect of concluding (i.e. bringing about) a particular transaction (see PERG 2.7.7BG). Generally speaking, only firms with permission to carry on the activity of arranging (bringing about) deals in investments in relation to securities and contractually-based investments which are financial instruments can provide the MiFID service of reception and transmission. This is because a service must bring about the transaction if it is to amount to reception and transmission of orders (see PERG 13 Annex 2 Annex 2).

Making arrangements with a view to transactions in investments: this relates to arrangements of an ongoing nature which aim to facilitate other parties entering into transactions (see PERG 2.7.7BG). This activity has a potentially broad scope and typically applies in one of two scenarios: where a person provides arrangements of some kind (1) to enable or assist investors to deal with or through a particular firm (such as the arrangements made by introducers), or (2) to facilitate the entering into of transactions directly by the parties (such as multilateral trading facilities of any kind other than those excluded under article 25(3) of the Regulated Activities Order, exchanges, clearing houses and service companies (for example, persons who provide communication facilities for the routing of orders or the negotiation of transactions)).

Agreeing to carry on regulated activities: see PERG 5.9 for further details.

Dealing in investments as an agent: this is defined in terms of 'buying, selling, subscribing for or underwriting certain investments' (see PERG 2.7.6G). These investments are securities, structured deposits and relevant investments. Usually, where a firm executes orders on behalf of clients it will need permission to carry on the activity of dealing in investments as agent (see PERG 13 Annex 2 Annex 2).

Managing investments: this is defined in PERG 2.7.8 of our HandbookPERG 2.8.7 and PERG 2.9 outline the exclusions applicable to the regulated activity of managing investments in certain circumstances. Portfolio management is managing portfolios in accordance with mandates given by clients on a discretionary client-by-client basis where such portfolios include one or more MiFID financial instruments. If there is only a single financial instrument in a portfolio, you may be carrying on portfolio management even if the rest of the portfolio consists of other types of assets, such as real estate. Portfolio management includes acting as a third-party manager of the assets of a fund, where discretion has been delegated to the manager by the operator or manager of the fund. In the case of management of a collective investment undertaking, however, an exemption may be available to the operator. See PERG 13.5 Q43 for further details. The advisory agent who keeps clients’ portfolios under review and provides advice to enable the client to make investment decisions (but does not exercise discretion to take investment decisions himself) is not carrying on portfolio management but may be providing other investment services such as investment advice under MiFID (PERG 13.3, Q17).

Controlling (but not holding) client money: article 3 MiFID exempt firms are not permitted to hold client money in relation to MiFID business.

Managing an Alternative Investment Fund (AIF): this is the regulated activity as specified in article 51ZC (2) of the Regulated Activities Order (RAO) of performing at least portfolio management and risk management of an AIF. As per article 51ZC (3) of the RAO a person does not manage an AIF if the functions they perform for the AIF have been delegated to it by another person, provided that such other person is not an AIFM that has delegated such functions to the extent that it is a letter-box entity. A person performing only one of the activities (i.e. risk management or portfolio management) is still managing an AIF (see PERG 16.3 Q3.2). However, an AIFM is not permitted to be authorised to manage an AIF on that basis (see FUND 1.4.4 R (4)).

Authorised AIF: this is an AIF which is an authorised fund. Other than in FEES 6 and COMP, an authorised fund is an ICVC, ACS or an AUT.

Internally managed AIF: this is defined in Regulation 4(3)(b) of the Alternative Investment Fund Managers Regulations 2013. See PERG 16 Question 3.6 for further clarification on the distinction between an external AIFM and an internally managed AIF.

Managing a UCITS: this is when someone carries on collective portfolio management of a UCITS. A UCITS is a type of collective investment scheme which is authorised by a competent authority in an EEA State as meeting the requirements under the UCITS Directive. For more information see PERG 2.7.13BG and article 51ZA of the RAO.

Safeguarding and administering assets (accepting client assets): as per PERG 2.7.9G (1) safeguarding is acting as custodian of the property, for example, holding any documents evidencing the investments such as the share certificate (although it is worth noting that there is express provision that an uncertificated investment may be safeguarded and administered). (2) Administration covers services provided to the owner or manager of the property, such as settlement of sale transactions relating to an investment, dealing with income arising from the investment and carrying out corporate actions such as voting. The nature of administration services must be such that the custodian has no discretion (otherwise he is likely to be caught by the regulated activity of managing investments (see PERG 2.7.8 G)). PERG 2.7.10G further specifies that the property that is safeguarded and administered must belong beneficially to another person. It must consist of (or include) securities or contractually-based investments. Alternatively, safeguarding and administration will generally be caught if it is possible that the property could consist of (or include) such securities or investments. This is the case even if the property in question has never consisted of (or included) such securities or investments, as long as there have been representations that it would do. In each case, both the elements of safeguarding and administering must be present before a person will be said to carry on the activity.

Arranging the safeguarding and administration of assets: this part of safeguarding and administering investments consists solely of arranging for one or more other persons to carry on both (a) the safeguarding of assets belonging to another, and (b) the administration of those assets.

Establishing, operating or winding up a collective investment undertaking: a full-scope UK AIFM is also permitted to carry on the activity of establishing, operating and winding up a collective investment scheme (Art 51ZE of the Regulated Activities Order). PERG 16.5 provides guidance on the overlap between this activity and the managing an AIF activity.

Establishing, operating or winding up a collective investment undertaking: A UCITS management company is also permitted to carry on the activity of establishing, operating and winding up a collective investment scheme (Art 51ZE of the Regulated Activities Order). See COLL 6.9.9R for a list of activities a UCITS Management Company may engage in.

AIFM investment firm conducting MiFID top-up activities: PERG 13 Annex 2 Annex 2 maps the MiFID Investment Services and activities to the Part 4A permission regime. Firms should note that in order to carry on the activities in FUND 1.4.3R (4), (5), or (6) in respect of investments which are financial instruments they must also be authorised to carry on the activity in FUND 1.4.3R(3) (discretionary portfolio management). See PERG 16.5 Q5.5 for examples of how the regulated activities specific to AIFs interact with other regulated activities.

UCITS investment firm conducting MiFID top-up activities: PERG 13 Annex 2 Annex 2 maps the MiFID Investment Services and activities a UCITS investment firm is allowed to conduct as per COLL 6.9.9R to the Part 4A permission regime.

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