Do I need to be FCA authorised? The perimeter explained

The general prohibition: why the perimeter matters

The starting point is section 19 of FSMA, known as the general prohibition. It states that no person may carry on a regulated activity in the United Kingdom unless they are either an authorised person or an exempt person. Everything about the perimeter flows from this single rule: if what you do is a regulated activity and none of the safety valves apply, you must be authorised or exempt before you begin.

Breaching the general prohibition is serious. Under section 23 of FSMA, carrying on a regulated activity without authorisation or exemption is a criminal offence that can carry up to two years' imprisonment and an unlimited fine. There is a defence if you can show you took all reasonable precautions and exercised all due diligence to avoid the offence, but relying on that after the event is not a wise strategy.

There are commercial consequences too. Sections 26 to 29 of FSMA can render agreements made by, or through, an unauthorised person unenforceable against the customer, so you may be unable to recover money and the customer may be entitled to recover what they paid. For credit agreements, section 26A provides a related regime. Because the stakes are high, the sensible approach is to work through the perimeter analysis carefully rather than assume you are outside it, since the FCA is clear in PERG 2.2 that the burden of understanding it rests with the person carrying on the activity.

The four-part test the FCA applies

The FCA frames the perimeter question as a structured analysis in PERG 2.2.3G. In broad terms, you need authorisation if you are carrying on an activity of a specified kind, by way of business, in relation to a specified investment (or specified property such as land in the case of mortgages), in the United Kingdom, and no exclusion or exemption removes you. The first element is the activity itself: the RAO lists specified activities such as accepting deposits, dealing, arranging, managing, advising and lending. If your activity is not on that list, it is not regulated, however financial it may feel commercially.

The second element is the business test under section 22 of FSMA: you only need authorisation if the activity is carried on by way of business. PERG 2.3.3G explains that the FCA weighs factors such as the degree of continuity, the existence of a commercial element, the scale of the activity and its proportion to your other activities. The Carrying on Regulated Activities by Way of Business Order 2001 modifies how this test applies to particular activities, so it is not a single uniform standard.

The third element is the investment: the activity must relate to a specified investment (or, for mortgages, to specified property). The fourth is a UK nexus: the activity must be carried on in the United Kingdom. Only when all four are present, and no exclusion applies, does the general prohibition bite.

Specified activities and specified investments

The RAO does the heavy lifting by naming both the activities and the investments they must touch. On the activity side, Part II of the RAO specifies kinds of activity including accepting deposits (article 5), effecting and carrying out contracts of insurance (article 10), dealing in investments as principal (article 14) or as agent (article 21), arranging deals in investments (article 25), managing investments (article 37), safeguarding and administering investments (article 40) and advising on investments (article 53).

On the investment side, Part III of the RAO specifies the investments those activities must relate to, including deposits (article 74), contracts of insurance (article 75), shares (article 76), debt instruments such as debentures (article 77) and units in collective investment schemes (article 81). Regulated mortgage contracts are treated separately because they relate to land rather than a conventional financial instrument.

The activity and the investment have to line up. Advising someone on the merits of a particular share brings you within article 53 read with article 76, whereas advising on a physical commodity or a piece of art generally does not, because those are not specified investments. This pairing is what makes the perimeter analysis precise rather than intuitive. Credit and mortgage lending sit within the same framework: consumer credit was brought into FSMA regulation in 2014, so lending under a regulated credit agreement, credit broking, debt counselling, debt adjusting and debt collecting each have their own RAO articles, covered in PERG 2.7.

Common activities: regulated or not?

It helps to see how the framework maps onto everyday activities. The table below summarises whether some common activities are typically regulated, based on the RAO and PERG. It is a general guide only: the by-way-of-business test, the specific facts and any exclusion can all change the outcome in a particular case.

Notice how fine the distinctions can be. A personal recommendation about a specific investment usually falls within article 53, while purely generic or educational material about investing typically does not, as the FCA explains in PERG 2.7 and PERG 2.8. Similarly, merely introducing a customer to an authorised firm can be excluded from arranging under article 33 of the RAO, whereas actively bringing about the transaction is more likely to be caught.

So treat the table as a starting point rather than a substitute for your own analysis. Where an activity appears close to the line, checking the precise RAO article and relevant PERG chapter, and taking advice, is the safer course.

Exclusions: back outside the perimeter

Even where an activity looks regulated, the RAO contains exclusions that can take specific situations back outside the perimeter. The FCA collects these in PERG 2.8 and PERG 2.9, and they are often the difference between needing authorisation and not.

Several exclusions are widely relevant. The absence of holding out exclusion under article 15 can apply to some dealing as principal where you do not hold yourself out as making a market or regularly soliciting the public. The introducing exclusion under article 33 can take certain introductions outside arranging. The media exclusion under article 54 can apply to advice in newspapers, broadcasts or similar services where the principal purpose is not to give regulated advice.

There are also exclusions tied to the character of the person or business. Article 66 provides exclusions for activities carried on in the course of a profession or a business that does not otherwise consist of regulated activities, subject to conditions, and trustees, nominees and personal representatives benefit from exclusions across several regulated activities. Exclusions are narrow and condition-heavy, though: each has its own wording and limits in the RAO, and the FCA warns in PERG 2.8 and PERG 2.9 that they must be read carefully against the specific facts.

Exemptions: authorised, exempt or neither

The general prohibition is satisfied if you are an authorised person or an exempt person, so exemption is the other main route to operating lawfully without your own full authorisation. The FCA covers exempt persons in PERG 2.10.

The best-known route is the appointed representative regime under section 39 of FSMA. An appointed representative carries on certain regulated activities under a written contract with, and under the responsibility of, an authorised principal firm, and is exempt in respect of those activities. There are limits: one carrying on insurance distribution must be on the FCA register under article 93 of the RAO, and some credit-related activities cannot be conducted this way. PERG 2.10 also describes exemptions for recognised investment exchanges and clearing houses, supranational bodies, certain deposit-takers such as municipal banks and local authorities, and members of a designated professional body such as some solicitors and accountants.

If none of these routes fits and your activity is caught, the remaining path is to apply for authorisation. Getting the permissions right, and the supporting documentation in order, is where Nasara Authorise supports firms.

How to work through your own perimeter question

A disciplined approach beats guesswork. Start by writing down, in plain terms, exactly what you intend to do, for whom and how you will be paid, then map each element against the RAO and PERG rather than against a general impression of what feels regulated. Work through the four elements in order: is it a specified kind of activity, carried on by way of business, relating to a specified investment or property, and carried on in the United Kingdom? If any element is missing, the general prohibition does not bite. If all four are present, move on to exclusions and exemptions before concluding.

Document your reasoning as you go. If you conclude that you are outside the perimeter, a clear written record of why, with the specific articles and PERG references you relied on, is valuable evidence of the reasonable precautions and due diligence that section 23 recognises. Where the analysis is finely balanced, obtaining legal advice or seeking the FCA's general guidance is prudent.

The perimeter rewards precision. Small changes in how an activity is structured, such as whether you introduce or arrange, or advise on a specific product or speak generically, can move you across the line, so revisit the analysis whenever your model changes.

Conclusion

So, do I need FCA authorisation? The honest answer is that it depends on a structured legal analysis rather than a gut feeling. If you carry on a specified activity, by way of business, in relation to a specified investment, in the United Kingdom, and no exclusion or exemption applies, then the general prohibition in section 19 of FSMA means you must be authorised or exempt before you start. Getting this wrong risks criminal liability under section 23 and unenforceable contracts under sections 26 to 29.

The good news is that the framework is knowable. The RAO defines the activities and investments, and PERG explains how the pieces fit together, including the exclusions and exemptions that may apply. Work through the four-part test methodically, document your reasoning and take advice on borderline points. If your analysis shows you need permission, Nasara Authorise can guide you through preparing and submitting a robust FCA application.

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