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HMRC internal manual

Banking Manual

Bank compensation restriction: definition of banking company: excluded companies - companies carrying on a second line of business - example

Company A has two lines of business:  the first is asset management and the second is stockbroking.  It is possible for a company to undertake these lines of business without having any of the regulated permissions described under the activity test in BKM207400.  The regulatory permissions it requires will depend on what activities it is undertaking as part of each line of business.   

The nature of Company A’s asset management business means that it is categorised as an IFPRU 730K firm and full scope IFPRU investment firm by the Financial Conduct Authority (see BKM207100). 

Company A does not need permission to deal on its own account or to underwrite/place financial instruments to undertake its stockbroking business.

If Company A was carrying on relevant regulated activities for its asset management business and was not carrying on any relevant regulated activities other than asset management activities (BKM207650) it would be an excluded company.  However the company is also carrying on relevant regulated activities for its stockbroking business.

Company A will still be an excluded company if the relevant regulated activities it carries on as part of its stockbroking business do not include deposit taking and would not be enough on their own to make it an IFPRU 730K firm and full scope IFPRU investment firm.  

Company A’s stockbroking activities do not include permission to deal on its own account or underwrite/place financial instruments. This means if Company A’s only line of business was stockbroking it would be categorised as an IFPRU Limited Licence Firm rather than an IFPRU730K firm and full scope IFPRU investment firm. Company A is therefore an excluded company.

If Company A changes the nature of the activities undertaken as part of the stockbroking business and it requires permission to deal on its own account, it will be a matter of fact whether those permissions bring it into the definition of a IFPRU Limited Activity Firm (restricted permission to deal on its own account) or make it an IFPRU 730K firm and full scope IFPRU investment firm.  In the latter case it would cease to be an excluded company.