Regulatory Framework and Licensing Requirements
What the domain tests
This domain tests whether you can identify when an activity needs a licence, which instrument governs it, and what conditions attach to authorisation. Questions target the statutory perimeter, excluded activities, application evidence, fit-and-proper assessment, and post-authorisation obligations.
Core rules and concepts
- Primary legislation creates the prohibition; subsidiary rules and guidance set process and expectation. Guidance explains how to comply but does not itself create the prohibition.
- Permission is activity-and-instrument specific: advising, arranging, dealing, managing, safeguarding and operating a market are separate regulated activities.
- An application must demonstrate financial resources, governance, systems and controls, and the fitness of controllers and senior staff.
- Conditions can be imposed, varied or revoked. Material changes, such as a new activity or a change of control, normally require prior approval.
- The territorial reach of the regime depends on where the activity is performed and to whom, not merely where the firm is incorporated.
Worked example
A firm proposes to introduce clients to a third-party fund manager and receive a fee. Introducing alone may fall within an exclusion. If the firm also assesses suitability or handles subscription documents, it is likely arranging and possibly advising. The correct analysis is not “no licence because we never hold client money”; the test is whether a regulated activity is carried on by way of business. Map each step to the activity list and document any exclusion relied on.
Traps that cost marks
Treating registration or trade-body membership as a licence; assuming an overseas authorisation covers local activity; confusing guidance with a binding rule; ignoring change-of-control approval; and failing to distinguish arranging from advising.