[1] In Goldhill Finance Ltd v Smyth [2023] EWHC 362 (KB)('Goldhill'), essentially, these separate 'unfair relationship' provisions were not pleaded and not relied upon/an issue, at trial (paragraph 98), until it was too late (paragraph 122). The debtor, in essence, did not realise the distinction between challenging the: (a) fairness of the agreement terms; and (b) fairness of the relationship - see Plevin v. Paragon Personal Finance Ltd [2014] UKSC 61 per Lord Sumption at paragraph 9 on the unfair relationship provisions: 'First, what must be unfair is the relationship between the debtor and creditor'. - referred to in Goldhill, paragraphs 68 and 93. In Goldhill, Soole J said, at paragraph 93:

'True it is that one of the matters which s.140A directs the Court to consider is '(c) any of the terms of the agreement'. However it does not follow that a challenge to the fairness of the terms implicitly amounts to a challenge to the fairness of the relationship. This distinction is further emphasised by the reverse burden of proof which arises where an unfair relationship is alleged: s.140B(9).'

Separately, attention is drawn to a 'carve out'. Section 140A(5) of Consumer Credit Act 1974 states:

'An order under section 140B shall not be made in connection with a credit agreement which is an exempt agreement for the purposes of Chapter 14A of Part 2 of the Regulated Activities Order by virtue of article 60C(2) of that Order (regulated mortgage contracts and regulated home purchase plans).'

So, a credit agreement which is categorised as a exempt agreement by virtue of article 60C(2) of Regulated Activities Order (i.e. Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) ('2001/544 Order')), cannot be made subject to a s.140B Consumer Credit Act 1974 order.

There is also a provision for 'Bounce Back Loan Scheme' credit agreements (section 140A(6) of Consumer Credit Act 1974).

[1a] In Helden v Strathmore Ltd [2011] EWCA Civ 542, Court of Appeal (Lord Neuberger MR; Smith LJ; Elias LJ), under the heading 'Breach of FSMA' and subheading 'The Financial Services and Markets Act' Lord Neuberger (with whom Smith LJ; Elias LJ agreed), said, at paragraphs 64 to 70:

'Section 19 of FSMA bars anyone but an “authorised person” or an “exempt person” from carrying on a “regulated activity” in the United Kingdom (the “general prohibition”). Section 22(1) provides that an activity is a “regulated activity” if, among other things, it is “an activity of a specified kind which is carried on by way of business” and either (under section 22(1)(a)) “relates to an investment of a specified kind” or (under section 22(1)(b)) “in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind”. The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (“the Regulated Activities Order”) specifies kinds of activity for the purposes of section 22 of FSMA: see article 4. The activities specified include certain activities relating to “regulated mortgage contracts”. The expression “regulated mortgage contracts” is defined in article 61 in the following terms:

“(3) In this Chapter - (a) a contract is a ‘regulated mortgage contract’ if, at the time it is entered into, the following conditions are met - (i) the contract is one under which a person (‘the lender’) provides credit to an individual or to trustees (‘the borrower’); (ii) the contract provides for the obligation of the borrower to repay to be secured by a first legal mortgage on land (other than timeshare accommodation) in the United Kingdom; (iii) at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling by the borrower or (in the case of credit provided to trustees) by an individual who is a beneficiary of the trust, or by a related person; but such a contract is not a regulated mortgage contract if it is a regulated home purchase plan … (c) ‘credit’ includes a cash loan, and any other form of financial accommodation.”

By virtue of articles 73 and 88 of the Regulated Activities Order, “rights under a regulated mortgage contract” are investments specified for the purposes of section 22 of the Act.

Articles 25A, 53A and 61 of the Regulated Activities Order, among others, identify particular activities relating to “regulated mortgage contracts” as specified kinds of activity. Article 25A (which was inserted into the Regulated Activities Order by article 4 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 1) Order 2003 (SI 2003/1475)) provides:

“(1) Making arrangements-(a) for another person to enter into a regulated mortgage contract as borrower; or (b) for another person to vary the terms of a regulated mortgage contract entered into by him as borrower after the coming into force of article 61, in such a way as to vary his obligations under that contract, is a specified kind of activity.

“(2) Making arrangements with a view to a person who participates in the arrangements entering into a regulated mortgage contract as borrower is also a specified kind of activity.”

Article 53A (which, like article 25A, was added in 2003 (by article 13 of the 2003 Order)) states:

“(1) Advising a person is a specified kind of activity if the advice-(a) is given to the person in his capacity as a borrower or potential borrower; and (b) is advice on the merits of his doing any of the following-(i) entering into a particular regulated mortgage contract, or (ii) varying the terms of a regulated mortgage contract entered into by him after the coming into force of article 61 in such a way as to vary his obligations under that contract …”

Article 61 states as follows: “(1) Entering into a regulated mortgage contract as lender is a specified kind of activity. (2) Administering a regulated mortgage contract is also a specified kind of activity, where the contract was entered into by way of business after the coming into force of this article.”

The provisions relating to “regulated mortgage contracts” came into force on 31 October 2004. It is to be noted that articles 25A, 53A and 61 of the Regulated Activities Order had no equivalents in the Financial Services Act 1986, which FSMA replaced. The Financial Services Act 1986 did not extend to mortgages.

The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177) (“the Business Order”) limits the circumstances in which arranging and advising on regulated mortgage contracts will constitute a “regulated activity”. Article 3A of the Business Order (as inserted by article 25 of the 2003 Order) states as follows:

“A person is not to be regarded as carrying on by way of business an activity of the kind specified by (a) article 25A of the Regulated Activities Order (arranging regulated mortgage contracts); (b) article 53A of that order (advising on regulated mortgage contracts); or (c) article 64 of that order (agreeing), so far as relevant to any of the articles mentioned in sub-paragraphs (a) and (b), unless he carries on the business of engaging in that activity.”

In this context, as in some others within the financial services legislation, a distinction is drawn between (a) an activity “carried on by way of business” and (b) carrying on “the business of engaging in that activity”. Whereas arranging or advising on regulated mortgage contracts will be a specified activity only if the person in question “carries on the business of engaging in that activity” (within the meaning of article 3A of the Business Order ), “entering into a regulated mortgage contract as lender” or “administering a regulated mortgage contract” is a specified activity if the activity is merely “carried on by way of business” (within section 22 of the Act) (provided that, in the case of “administering a regulated mortgage contract”, the relevant contract was “entered into by way of business”: see article 61(2) of the Regulated Activities Order).

Section 26 of FSMA addresses the position where an unauthorised person enters into an agreement in breach of the “general prohibition” contained in section 19. Section 26 provides as follows:

“(1) An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.

“(2) The other party is entitled to recover - (a) any money or other property paid or transferred by him under the agreement; and (b) compensation for any loss sustained by him as a result of having parted with it.

“(3) ‘Agreement’ means an agreement - (a) made after this section comes into force; and (b) the making or performance of which constitutes, or is part of, the regulated activity in question.

“(4) This section does not apply if the regulated activity is accepting deposits.”

([counsel for lender] commented, with justification, that the way in which section 26(2) is framed is more obviously suited to a case in which the “other party” has made an investment than one where, as here, he has been lent money.)

Section 28 of FSMA deals with agreements made unenforceable by section 26 (or section 27 ) of the Act. It is in the following terms:

“(1) This section applies to an agreement which is unenforceable because of section 26 or 27.

“(2) The amount of compensation recoverable as a result of that section is-(a) the amount agreed by the parties; or (b) on the application of either party, the amount determined by the court.

“(3) If the court is satisfied that it is just and equitable in the circumstances of the case, it may allow(a) the agreement to be enforced; or (b) money and property paid or transferred under the agreement to be retained.

“(4) In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must-(a) if the case arises as a result of section 26, have regard to the issue mentioned in subsection (5); or (b) if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).

“(5) The issue is whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement.

“(6) The issue is whether the provider knew that the third party was (in carrying on the regulated activity) contravening the general prohibition.

“(7) If the person against whom the agreement is unenforceable-(a) elects not to perform the agreement, or (b) as a result of this section, recovers money paid or other property transferred by him under the agreement, he must repay any money and return any other property received by him under the agreement.

“(8) If property transferred under the agreement has passed to a third party, a reference in section 26 or 27 or this section to that property is to be read as a reference to its value at the time of its transfer under the agreement.

“(9) The commission of an authorisation offence does not make the agreement concerned illegal or invalid to any greater extent than is provided by section 26 or 27.”'

[1b] In Financial Conduct Authority v London Property Investments (UK) Ltd (t/a LPI Emergency Property Finance) [2024] EWHC 1276 (Ch)('LPI Emergency Property 1276'), under the heading 'Statutory jurisdiction relating to regulated activities under the Act', Fancourt J set out the law in this area, at paragraphs 17 to 36. However: (a) most readers will probably only benefit from reading until after the first sentence in paragraph 23; (b) the 'First Judgment' is reference to the judgment of Mr Recorder Richard Smith (as he then was) sitting as a Judge of the Chancery Division the on 11 November 2022 ([2022] EWHC 2862 (Ch)); (c) in the later paragraphs, there are facts from the case itself intermixed.

Paragraphs 17 to 36 of LPI Emergency Property 1276 reads:

'17. The "general prohibition" in s.19(1) of the Act is that:

"No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is –

(a) an authorised person; or

(b) an exempt person."

18. Under s.31 of the Act, an "authorised person" means someone who has permission from the FCA to carry on "regulated activities". Various persons qualify as exempt in various circumstances, which includes appointed representatives of authorised persons (s.39 of the Act).

19. A "regulated activity" is defined by s.22 of the Act:

"An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and –

(a) relates to an investment of a specified kind;

…"

It is therefore notable that dealing with specified investments is not a regulated activity unless it is carried on by way of business. The concept of carrying on an activity by way of business is generally widened by the terms of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business Order) ( SI 2001 No.1177) ("the CRAWB Order"), but in some relevant respects is narrowed (see the First Judgment at [27], [53], [54])

20. By s.22(5) of the Act, "specified" means specified in an order made by HM Treasury. The relevant order that specifies the regulated activities is the Financial Services and Markets Act 2000 (Regulated Activities) Order ( SI 2001 No.544) ("the RA Order").

21. Apart from the power of the FCA to seek remedial and restitution orders against a contravenor, the consequences of non-compliance with the general prohibition, as between the contravenor and the consumer, are specified in s.26 of the Act. It provides (so far as material):

"(1) An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.

(2) The other party is entitled to recover -

(a) any money or other property paid or transferred by him under the agreement; and

(b) compensation for any loss sustained by him as a result of having parted with it.

(3) 'Agreement' means an agreement -

(a) made after this section comes into force; and

(b) the making or performance of which constitutes, or is part of, the regulated activity in question."

22. By s.28(3) of the Act, the court is given power to allow the agreement to be enforced, or money or property paid or transferred under it to be retained, if satisfied that it is just and equitable to do so, having regard to whether the contravenor reasonably believed that he was not contravening the general prohibition by making the agreement (s.26(5)). Subsection (7) provides:

"If the person against whom the agreement is unenforceable -

(a) elects not to perform the agreement, or

(b) as a result of this section, recovers money paid or other property transferred by him under this agreement,

he must repay any money and return any other property received by him under the agreement."

The reference to "property" is to be read as the value of the property at the time of its transfer under the agreement if the property has passed to a third party.

23. Thus, where there has been a contravention of the general prohibition, the consumer can elect not to perform and recover money or property transferred under the agreement, but if they do so they must repay any money or property received under the agreement. These provisions are of some importance when it comes to deciding what remedial or restitution order is appropriate in the cases of the SRA Individuals, and I will return to them later in this judgment.

24. By art. 88 of the RA Order, a "regulated mortgage contract" is a "specified investment". What amounts to an RMC is specified in art. 61. It requires the credit (which includes a cash loan) to be provided to an individual or to trustees, and for the obligation to repay to be secured by a mortgage on land. At least 40% of the land must be used, or intended to be used, as or in connection with a dwelling, by anyone in the case of an individual, or by an individual who is a beneficiary of the trust or a related person (in the case of trustees) (art 61(3)(a)).

25. There are various "carve outs" to these RMC provisions specified in art. 61A(1) of the RA Order, which include "limited payment second charge bridging loans", "second charge business loans", "investment property loans" and "exempt consumer buy-to-let mortgage contracts". These loans are not RMCs and so are not specified investments.

26. These categories of exclusion were addressed by the Recorder and the definition of each of these types of lending is set out in para 35 of the First Judgment. It is unnecessary to repeat them here. The Recorder considered whether any loan fell within such an exclusion but found that none did. Only one of the loans in the 37 RMC cases that he had to address was not an RMC, but that was because it did not satisfy the 40% dwelling use threshold, not because it fell within any of the art. 61A(1) exclusions. All 37 RMC Original Individuals were entering into the agreements with LPI to attempt to save their own homes.

27. I will address in due course whether any of the loans made or agreed to be made to the Additional Individuals is not an RMC for any reason, including that it is a loan of one of these types of unregulated lending. In relation to these, the following conclusions are the important considerations:

i) For "investment property loans" and "second charge business loans", if the RMC contains a compliant declaration, the borrower is presumed or deemed to have entered into the agreement wholly or predominantly for the purpose of a business carried on by them (which is one of the criteria for such loans). There therefore needs to be a declaration in a prescribed form for the presumption to arise.

ii) The presumption is rebuttable. The deeming for an investment property loan does not apply where the borrower or a related person intends to occupy the mortgaged property as a dwelling. This is fundamental, as in each case bar one of the Additional Individuals, they intended to occupy the mortgaged property as their home. In the one exceptional case, the mortgaged property was to be occupied by the Additional Individual's son, a related person.

iii) In some cases, the consumers signed declarations that the loans were for the purposes of the business. But this is not conclusive, and in no cases was this in the prescribed form. As the Recorder found, the declaration was in any case untrue in all cases and was part of the way that LPI operated to conceal the true nature of the lending from the lender and make the lending appear to be unregulated.

iv) If it is the case that the lending is a re-mortgage by a borrower not acting for the purposes of business, where the borrower intends to live in the property, and it is secured by a first legal charge, none of the exclusions can apply. If one or more of these criteria were unsatisfied in a given case, closer scrutiny of the exclusions would be necessary.

28. Where the new lending is or would be an RMC, the following are specified activities pursuant to art. 25A of the RA Order:

i) Making arrangements for a person to enter into an RMC as borrower (art. 25A(1) RA Order);

ii) Making arrangements with a view to a person who participates in those arrangements entering into an RMC as borrower (art 25A(2));

iii) Advising a person as borrower or potential borrower on the merits of entering into a particular RMC (art. 53A(1)); iv) Agreeing to carry on a specified activity (art 64).

29. All of these activities are subject to a rather narrower "acting by way of business" test than generally applies, by virtues of art. 3A of the CRAWB Order: a person must be "carrying on the business of" carrying on these activities, which implies a regularity of business in so doing. The Recorder held this requirement to be satisfied in each case in the First Judgment. As the same business model is in operation in the cases of the arrangements made with the Additional Individuals, it is beyond real doubt that, to the extent that there are specified activities that were carried on by LPI in their cases, this narrower business test will be satisfied in their cases too.

30. The activities in art. 25A(1) and art. 25A(2) are not intended to be mutually exclusive, and the meaning of "arrangements" has been held to be deliberately wide: see paras 41, 42 of the First Judgment. Both specified activities can exist even though no RMC is in fact entered into. In most of the RMC cases that I have to consider in this judgment, as with some addressed in the First Judgment, no RMC was in fact made. But that does not exonerate the Defendants if there were nevertheless arrangements made for that to be brought about (or with a view to it) or an agreement to do so.

31. The specified activity in art. 25A(1) is subject to an additional causation requirement, in that art. 26 excludes from that category "arrangements which do not or would not bring about the transaction to which they relate". This has been described in the authorities as requiring the relevant arrangements to have "causal potency", whether there was actual causation (because an RMC was entered into) or only notional causation (where no RMC is in fact made). The arrangements must have had (or be such that they would have had) a significant role, but not necessarily amount to a direct cause of the RMC being made.

32. The specified activity in art. 25A(2) ("making arrangements with a view to …") is not subject to this causative exclusion: see [43]-[45] of the First Judgment. It is concerned with the purpose of the arrangements, whether or not the arranger has the ability to bring it about or influence the decision for an RMC to be made.

33. There are a number of further exclusions that operate in relation to both these specified activities: these are in arts. 27, 29, 33, 33A and 67 of the RAO Order. These are narrow exceptions, such as providing only the means by which one party to the RMC communicates with another, and arranging for the borrower to be advised by an authorised person where any commission or other advantage is disclosed to the borrower. The exact requirements of each exclusion are set out in [47] and [48] of the First Judgment. I shall consider in relation to each Additional Individual whether any of the exclusions applies, though the business model that LPI was operating was generally inconsistent with any of them applying, because LPI was intent on charging large fees for its referral services.

34. The specified activity in art. 53A(1) is advice given to a person as borrower or potential borrower, which is advice on the merits of entering into a particular RMC. FCA Guidance states that advice includes making a recommendation. The article therefore requires consideration of whether a recommendation of a particular RMC has been expressly or impliedly made, which itself is concerned with whether, on an objective analysis, some comment, value judgment, or element of evaluation or persuasion has been provided (see Rubenstein v HSBC Bank plc [2011] EWHC 2304 (QB) at [80]-[86] ). The assessment is to be made having regard to the regulatory regime and the course of dealing between the consumer and the defendant. In the First Judgment, the Recorder summarised the principles that emerge from the authorities at [129].

35. As none of the Additional Individuals entered into an SRA or made arrangements with the Defendants for doing so, it is unnecessary to consider here the regulations relating to SRAs. (They are set out at [55]-[60] of the First Judgment.)

36. In the First Judgment, the Recorder found that T Stevens and D Stevens were liable as accessories to LPI's and NPI's contraventions of the general prohibition, on the basis that they were knowingly concerned in those contraventions. I shall have to consider whether that is also the case in relation to the Additional Individuals where a contravention is proved. It requires that these Defendants knew of the facts that amounted to the contravention and were involved in it (whether fronting the business or in the back office). Whether such a person knows that the facts amount to a relevant contravention is irrelevant.'

[1c] In Financial Conduct Authority v London Property Investments (UK) Ltd (t/a LPI Emergency Property Finance) [2022] EWHC 2862 (Ch) ('LPI Emergency Property 2862', the FCA brought proceedings against 2 companies (LPI/NPI) for breaching the general prohibition in s.19 FSMA 2000 (and that LPI had also contravened the 'financial promotion restrictions' imposed by section 21 of FSMA) and 2 individuals (TS/DS) linked to the companies for being 'knowingly concerned' (within the meaning of sections 380 and 382 of FSMA) in such contraventions. Recorder Richard Smith, under the heading 'The Legislative Framework', from paragraphs 23 to 39 - so a long extract, said ('RMC' = regulated mortgage contract):

'Introduction

23. The 'general prohibition' in section 19(1) of FSMA provides that:-

"No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is–

(a) an authorised person; or

(b) an exempt person."

24. Under section 31 of FSMA, an 'authorised person' is one who has permission from the FCA under Part 4A of FSMA to carry on 'regulated activities'. Persons qualify as 'exempt', including by being appointed representatives of authorised persons under section 39 of FSMA.

25. The concept of 'regulated activity' is defined in section 22(1) of FSMA in the following terms:-

"(1) An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and–

(a) relates to an investment of a specified kind; …"

26. Section 22(5) of FSMA provides that 'specified' means specified in an order made by HM Treasury. The order in question is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001/544 (RAO).

27. Although the phrase 'carried on by way of business' has been considered judicially, section 419 of FSMA confers on HM Treasury the power to make provision by order as to the circumstances in which a person who would not otherwise be regarded as carrying on a regulated activity by way of business is to be so regarded (and vice versa), so as to widen (or narrow) the ambit of that expression. The Treasury exercised this power in the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001/1177 (CRAWBO)

28. As to the consequences of non-compliance with the 'general prohibition', section 26(1) and (3) of FSMA provide that:-

"(1) An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party; ….

(3) Agreement" means an agreement–

(a) made after this section comes into force; and

(b) the making or performance of which constitutes, or is part of, the regulated activity in question."

29. The effect of section 26(1) and (3) is mitigated by section 28(3) of FSMA, which provides that, if the court is satisfied that it is 'just and equitable' in the circumstances of the case, it may allow the agreement to be enforced. Section 28(4)(a) and (5) of FSMA provide that, in considering whether to allow the agreement to be enforced, the court must have regard to whether the person carrying on the regulated activity reasonably believed that he was not contravening the 'general prohibition'. Section 28(7) of FSMA provides that, if a person against whom an agreement is unenforceable elects not to perform the agreement, he must repay any money and return any other property received by him under the agreement.

'Specified investments' - 'regulated mortgage contracts'

30. Article 88 of the RAO provides that a 'regulated mortgage contract' is a 'specified investment'. Article 61(3)(a) (as applicable at the material time) sets out the conditions to be met for a contract to qualify as an RMC:-

"a contract is a "regulated mortgage contract" if, at the time it is entered into, the following conditions are met:-

(i) the contract is one under which a person ("the lender") provides credit to an individual or to trustees ("the borrower");

(ii) the contract provides for the obligation of the borrower to repay to be secured by a mortgage on land in the EEA;

(iii) at least 40% of that land is used, or is intended to be used-

(aa) in the case of credit provided to an individual, as or in connection with a dwelling; or

(bb) in the case of credit provided to a trustee which is not an individual, as or in connection with a dwelling by an individual who is a beneficiary of the trust, or by a related person;

but such a contract is not a regulated mortgage contract if it falls within article 61A(1)…."

31. The term 'credit' is defined in article 61(3)(c) of the RAO to include " .. a cash loan ".

32. The term 'related person' is defined in article 61(4)(c) of the RAO to include spouses, civil partners (and others whose relationship has the characteristics of a husband or wife) and parents, grandparents, siblings, children and grandchildren.

33. Setting aside for one moment the 'carve-outs' from article 88 in article 61A(1) of the RAO (considered at [J34-38]), the definition in article 61(3)(a) therefore covers a wide range of loan contracts secured on residential property, specifically those which, at the time they are entered into, provide credit to:-

(a) an individual, secured by residential property within the EEA, whether or not the individual resides there; and

(b) a trustee (individual or corporate), secured by residential property within the EEA, occupied by an individual beneficiary of the trust or a member of the beneficiary's family.

Article 61A(1) 'carve-outs'

34. As to the 'carve-outs', article 61A(1) identifies a number of agreements which will not qualify as RMCs, including most relevantly to this case:-

(a) 'limited payment second charge bridging loans' (article 61A(1)(b));

(b) 'second charge business loans' (article 61A(1)(c));

(c) 'investment property loans' (article 61A(1)(d)); and

(d) 'exempt consumer buy-to-let mortgage contracts' (article 61A(1)(e)).

35. These are defined by article 61(A)(5) of the RAO as follows:-

(a) a 'limited payment second charge bridging loan ' is a contract that, at the time it is entered into, meets the conditions in paragraphs (i)-(iii) of article 61(3)(a) of the RAO (noted at [J30]) and the following further conditions:-

(i) it is a borrower-lender-supplier agreement financing the purchase of land;

(ii) it is used by the borrower as a temporary financing solution while transitioning to another financial arrangement for the land subject to the mortgage;

(iii) the mortgage ranks in priority behind one or more other mortgages affecting the land in question; and

(iv) the number of payments to be made by the borrower under the contract is not more than four.

(b) an 'investment property loan' is a contract that, at the time it is entered into, meets the conditions in paragraphs (i)-

(iii) of article 61(3)(a) of the RAO (noted at [J30]) and the following further conditions:-

(i) less than 40% of the land subject to the mortgage is used, or intended to be used, as or in connection with a dwelling by the borrower or by a related person; and

(ii) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

(c) a 'second charge business loan' is a contract that, at the time it is entered into, meets the conditions in paragraphs (i)-(iii) of article 61(3)(a) of the RAO (noted at [J30]) and the following further conditions:-

(i) the lender provides the borrower with credit exceeding £25,000;

(ii) the mortgage ranks in priority behind one or more other mortgages affecting the land in question; and

(iii) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

(d) an 'exempt consumer buy-to-let mortgage contract' is a contract that, at the time it is entered into, is a consumer buy-to-let mortgage contract within the meaning of article 4 of the Mortgage Credit Directive Order 2015 and:-

(i) is of a kind to which the Mortgage Credit Directive ( Directive 2014/17/EU) (MCD) does not apply by virtue of article 3(2) thereof; or

(ii) is a bridging loan.

Article 4 of the Mortgage Credit Directive Order 2015 defines a 'consumer buy-to-let contract' as a mortgage contract which provides that the land to which it relates cannot be occupied at any time by the borrower or by a related person and is to be occupied as a dwelling on the basis of a rental agreement and is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.

36. In relation to 'investment property loans' and 'second charge business loans', article 61A of the RAO contains certain provisions presuming (under article 61A(3)) or deeming (under article 61A(5)) the borrower to have entered into an RMC wholly or predominantly for the purpose of a business carried out by him. So, where the RMC includes a declaration with the relevant statements identified in article 61A(3), the presumption will be engaged...

37. Article 61A(5) of the RAO contains a number of conditions to be satisfied for borrowers to be regarded as having entered RMCs wholly or predominantly for the purposes of a business. However, for present purposes, it suffices to say that this provision is never engaged when the borrower (or a 'related person') intended to occupy the mortgaged property as a dwelling.

...

'Specified activities' in relation to RMCs

39. The RAO also identifies a number of 'specified' kinds of activity in relation to RMCs.'

Then Recorder Richard Smith in LPI Emergency Property 2862 descends into detail about:

(a) 'arranging RMCs' 

(b) 'Advising on RMCs'

(c) 'Agreeing to carry on a specified activity'

(d) 'Specified investments – 'sale and rent back agreements''

(e) ''Financial promotion restrictions''

(f) 'Accessory liability – 'knowingly concerned''

(some facts are left in the below quotation)

'Arranging' RMCs

40. Article 25A(1) and (2) of the RAO specify making arrangements for, and with a view to, the entry into of RMCs in the following terms:-

"(1) Making arrangements:-

(a) for another person to enter into a regulated mortgage contract as borrower… is a specified kind of activity.

(b) ….

(2) Making arrangements with a view to a person who participates in the arrangements entering into a regulated mortgage contract as borrower is also a specified kind of activity."

41. It is important to note that the word " arrangements " does not have a different meaning in article 25A(1) from that in 25A(2) and 'arrangements' falling under the first limb may also fall under the second if the differences in the other language of article 25A (explored at [J45-46]) can be navigated (see Personal Touch Financial Services Ltd v Simplysure Ltd [2016] EWCA Civ 461 (at [26]); Financial Conduct Authority v Avacade Limited & Ors [2021] EWCA Civ 1206 (at [49])).

42. In relation to the almost identically worded activity in article 25 of the RAO concerning securities, Sir Stanley Burnton held in Simplysure Ltd (at [26]) that its "wording and therefore scope…is deliberately wide". The potential breadth of article 25 (and, therefore article 25A), and of the term 'arrangements', had also been emphasised earlier by Jonathan Crow QC (sitting as a Deputy High Court Judge) in Re The Inertia Partnership [2007] EWHC 539 (Ch), observing (at [39]) of article 25(1) and 26 of the RAO that:-

"(1) the word 'arrangements' is, depending on the context, capable of having an extremely wide meaning, embracing matters which do not give rise to legally enforceable rights; (2) in articles 25 and 26, the word 'arrangements' is used in contradistinction to the word 'transaction'; (3) in article 26, the word 'transaction' is plainly a reference to the purchase, sale, etc of shares contemplated by article 25; (4) as such, a person may make 'arrangements' within article 25 even if his actions do not involve or facilitate the execution of each step necessary for entering into and completing the transaction (i.e. the purchase, sale, etc of the shares); (5) the availability of the exception in article 26 is essentially a question of fact: as a matter of causation, did the arrangements bring about the transaction (i.e. the purchase, sale, etc of the shares)?"

43. The activity of making 'arrangements' for another person to enter into an RMC as borrower (the 'first limb' of article 25A of the RAO) is also subject to the exclusion in article 26, which introduces a (notional or actual) causation test in the following terms:-

"There are excluded from article…25A(1)….arrangements which do not or would not bring about the transaction to which they relate."

44. The FCA's guidance (at PERG 4.5.4G) suggests that an 'arrangement' brings about, or would bring about, an RMC if its involvement in the chain of events leading to the transaction is of sufficient importance that, without such involvement, the transaction would not take place. In Adams v Options UK Personal Pensions [2021] EWCA Civ 474 (at [97]), Newey LJ considered it important to focus on the words "bring about" in article 26, implying the requirement for the relevant 'arrangements' to have "causal potency". This was not to be judged simply on a 'but for' basis of causation but nor was a " direct connection " between the 'arrangements' and the ultimate transaction inevitably required.

45. Article 25A(2) (the 'second limb' of article 25A) has certain significant differences from the 'first limb', considered by Popplewell LJ in Avacade (at [47]-[48]), albeit in the context of article 25(1) and (2) concerning securities:-

"There are three relevant differences between articles 25(1) and 25(2), each of which is concerned with "making arrangements" in relation to the buying and selling of securities (among other things). The first is that 25(1) applies to making arrangements "for" the buying and selling of securities, whereas 25(2) applies to making arrangements "with a view to" that activity. The second is that for article 25(1) the buying or selling may be conducted by anyone, whereas for article 25(2) it must involve a person who participates in the arrangements. I agree with the Trial Judge that both the language of the article ("a person") and the decision of this Court in SimplySure make clear that the relevant transactions contemplated need only involve one of the parties to the arrangements, not both. The third difference is that article 26 provides an exception to article 25(1) but not article 25(2).

Article 26 excludes from the operation of article 25(1) arrangements which do not or would not bring about the transactions to which the arrangements relate. The words "would not" make clear that even article 25(1) is not concerned only with arrangements which successfully result in a relevant transaction; a person may contravene article 25(1) by making arrangements "for" such a transaction which does not in fact take place. Nevertheless article 26 introduces an actual or notional test of causation ("bring about") in relation to arrangements for the purposes of article 25(1). In Adams the court held that the degree of causal potency required was that for arrangements to "bring about" a transaction they must play a role of significance but need not involve a direct connection (see [97]). Importantly, however, article 26 is expressly confined by its terms to article 25(1) and other articles; it does not apply to article 25(2), as this court confirmed in SimplySure at [26]. There is no need to introduce any test of causation into 25(2) by reference to the language of the inapplicable article 26 because by using the words "with a view to", article 25(2) makes clear that it is concerned with the purpose of the arrangements. An intended purpose, an end in view, must be that a relevant transaction take place, but the arrangements do not need to bring it about by way of an actual or notional test of causation. These are wide words which suggest that all that is necessary is that a relevant transaction is part of the purpose of making the arrangements. A person may have a relevant transaction as an end in view where the arrangements do no more than create or facilitate a situation which provides the opportunity for it to take place. That may be an intended result notwithstanding that the arranger is powerless to ensure that it takes place or even influence the decision which leads to it taking place. You cannot make the proverbial horse drink, but taking it to water involves making arrangements with a view to it drinking."

46. Accordingly, article 25(2) is not subject to the causation test in article 26 but is concerned with the purpose of the arrangements or the 'end in view', namely the occurrence of the relevant transaction, whether or not the arranger has the ability to procure this or even influence the decision leading to it taking place.

Exclusions to article 25A(1) and (2) of the RAO

47. Although article 26 is concerned only with the first limb of article 25A, the RAO contains further exclusions which operate in relation to both limbs:-

(a) Article 29 provides an exclusion where the transaction is (or is to be) entered into (i) with or through an authorised person and (ii) on the advice of an authorised person (or it is clear that the borrower has not sought advice on the merits of the transaction from the person making the arrangements), provided that (iii) the person making the arrangements does not receive from a third party any pecuniary reward or other advantage for which he does not account to the borrower; and

(b) Article 67 provides an exclusion where the relevant 'arrangements' (i) are undertaken in the course of any profession or business which does not otherwise consist of the conduct of regulated activities in the UK and (ii) may reasonably be regarded as a necessary part of other services provided in the course of that profession or business, provided that (iii) the making of those arrangements is not separately remunerated from other services and (iv) the person making the arrangements is not acting as a 'credit intermediary' within the meaning of the MCD. The FCA guidance (at PERG [4.10.3G]) suggests that, for 'arranging' to be a necessary part of other services, the provision of those other services must generally not be possible unless the arranging is present. This approach was endorsed in Financial Conduct Authority v Capital Alternatives & Ors [2018] 3 WLUK 623 (at [737]).

48. The RAO also contains further exclusions which operate in relation to the second limb of article 25A only:-

(a) Article 27 contains an exclusion where the person making the 'arrangements' merely provides a means by which one party to the RMC (or potential RMC) is able to communicate with other such parties. The FCA guidance (at PERG [4.5.6G]) suggests that this exclusion is to be construed narrowly, such as to internet service providers; and

(b) Articles 33 and 33A contain exclusions for the making of 'arrangements' under which the prospective borrower is introduced to (i) an authorised or exempt person, provided that the introduction is with a view to the provision of independent advice (or exercise of independent discretion) in relation to investments generally or any class of investments to which the arrangements relate (article 33) and (ii) an authorised person or appointed representative, provided that the introducer receives no money paid by the borrower for any RMC entered into as a result of the introduction (other than money payable to the introducer on his own account) and discloses (1) any fee or commission paid by the person to whom the introduction is made and (2) any other reward or advantage arising from the introduction (article 33A).

Advising on RMCs

49. Article 53A(1) of the RAO specifies advising on RMCs in the following terms:-

"Advising a person is a specified kind of activity if the advice–

(a) is given to the person in his capacity as a borrower or potential borrower; and

(b) is advice on the merits of his….

(i) entering into a particular regulated mortgage contract."

50. Article 53A is also subject to the exclusion in article 67 of the RAO (noted at [J47(b)]).

51. FCA guidance (at PERG [4.6.5G]) suggests that the key question in applying article 53A is whether a recommendation is made to a prospective borrower explicitly or implicitly steering them to a particular RMC. Rubenstein v HSBC Bank plc [2011] EWHC 2304 (QB) (at [80]-[86]) ) indicates that some comment, value judgment, element of evaluation or persuasion is required on the part of the person advising, the presence or absence of which is to be judged objectively by reference to whether an impartial observer, having due regard to the regulatory regime and guidance, and to what passed between the parties, would conclude that advice had been given.

Agreeing to carry on a specified activity

52. Article 64 of the RAO specifies agreeing to carry on a specified activity as a specified activity in its own right such that agreeing to make arrangements for RMCs under either or both limbs of article 25A is also a specified activity.

The 'business test' for specified activities in relation to RMCs

53. Article 3A of CRAWBO (noted at [J27]) provides that, to be acting by way of business in relation to arranging, or advising on, RMCs (or agreeing to do either), a person must be carrying on the 'business of' carrying on these activities. The FCA's guidance (at PERG [4.3.6G]) explains that this is a narrower test than the standard 'by way of business' test because it requires those activities to represent the carrying on of a business in their own right. PERG 4.3.7G suggests that the principal factor that might cause an activity to satisfy the standard 'by way of business', but not the 'carrying on the business', test is frequency or regularity such that some degree of regularity is required to meet the latter (narrower) test. Newey J cited with approval the FCA's related guidance in Helden v Strathmore [2010] EWHC 2012 (Ch) (at [84]-[85]).

54. PERG 4.3.8G refers to the situation in which a person arranges, or advises on, RMCs (or does both) on a regular basis in return for payment of some kind (from the borrower or a third party) as one in which the 'carrying on the business' test would likely be met. Adam Johnson QC (sitting as a Deputy High Court Judge) held in Financial Conduct Authority v Avacade Limited [2020] EWHC 1673 (Ch) (at [188]) that, if the arrangements in question were part of the defendant's business model and designed to generate income, it was beyond serious dispute that the 'carrying on the business' test was met.

Specified investments – 'sale and rent back agreements'

55. Article 88C of the RAO specifies 'sale and rent back agreements' as a 'specified investment', with article 63J(3)(a) setting out the conditions which must be satisfied for an 'arrangement' to be an SRA:-

"a "regulated sale and rent back agreement" is an arrangement comprised in one or more instruments or agreements, in relation to which the following conditions are met at the time it is entered into:-

(i) the arrangement is one under which a person (the "agreement provider") buys all or part of the qualifying interest in land (other than timeshare accommodation) from an individual or trustees (the "agreement seller"); and

(ii) the agreement seller (if the agreement seller is an individual) or an individual who is the beneficiary of the trust (if the agreement seller is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling, and intends to do so."

56. A "qualifying interest" in land includes a leasehold or freehold interest (article 63J(4)(a)(i) of the RAO). "[R] elated person" is defined in similar terms as for RMCs (noted at [J32]) (article 63J(4)(c) of the RAO).

57. The FCA point to three important aspects of the definition of SRAs, namely:-

(a) the breadth of the word " arrangement " which may encompass a number of agreements or instruments, not all of which are legally binding transactions (such breadth also reflected in " arrangements " within the meaning of article 25A of the RAO (see, for example, Inertia (noted at [J42]));

(b) the conditions set out in article 63J(3)(a)(i) and (ii) of the RAO must be satisfied at the time the 'arrangement' is entered into but an SRA may be comprised within several agreements or instruments such that the conclusion of an agreement for the sale of land at a different time from a tenancy agreement conferring the right to occupy that land will not preclude an SRA; and

(c) the wording relating to the right to occupy the land in article 63J(3)(a) (ii) of the RAO does not indicate that such right must be continuous or exercisable from the moment the arrangement comes into being. To the contrary, the FCA points to the reference to " timeshare accommodation " as strongly suggestive that a non-continuous right to occupation which is not exercisable at the moment the arrangement comes into being is capable of giving rise to an SRA.

Specified activities in relation to SRAs

58. Potentially relevant 'specified activities' in relation to SRAs are:-

(a) Making arrangements for another person to enter into an SRA as an agreement seller (article 25E(1));

(b) Making arrangements with a view to a person who participates in the arrangements entering into an SRA as agreement seller (article 25E(2));

(c) Agreeing to make arrangements with respect to SRAs (article 64);

(d) Advising on SRAs (article 53D);

(e) Entering an SRA as agreement provider (article 63(J)(1));

(f) Agreeing to enter an SRA as agreement provider (article 64); and

(g) Administering an SRA, including by notifying the agreement seller of changes in payments due or taking necessary steps for the purpose of collecting or recovering payments due under the agreement from the agreement seller (article 63J(3)(b)).

59. Article 25E(1) of the RAO is also subject to the exclusion at article 26. Articles 25E and 53D are subject to the exclusion at article 67.

The 'business test' for specified activities in relation to SRAs

60. CRAWBO specifies how the 'by way of business' test must be applied to certain regulated activities in relation to SRAs, namely:-

(a) For entering into an SRA, article 5 of CRAWBO provided (at the material times relevant to this case) that a person was to be regarded as carrying on the activity of entering into an SRA 'by way of business' if he carried on the activity of entering into an SRA (unless a 'related person' in relation to the agreement seller).

(b) For a person to be acting 'by way of business' in relation to arranging or advising on SRAs (or agreeing to do either), article 3D of CRAWBO provides that a person must be carrying on the business of carrying on those activities (as for the corresponding specified activities in relation to RMCs (noted at [J53])).

'Financial promotion restrictions'

61. The FCA also claims that LPI has contravened the 'financial promotion restrictions' under section 21 of FSMA which provides that:-

(1) "A person ("A") must not, in the course of business, communicate an invitation or inducement to engage in….investment activity.

(2) But subsection (1) does not apply if-

(a) A is an authorised person; or

(b) the content of the communication is approved for the purposes of this section by an authorised person."

62. "[E] ngage in an investment activity" is defined in section 21(8) and (9) of FSMA as meaning to enter, or offer to enter, into an agreement the making or performance of which by either party is a 'controlled activity', being an activity of a 'specified kind' relating to an investment of a 'specified kind'. Section 21(15) provides that 'specified' means specified by an order made by HM Treasury. The relevant order is the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005/1529 (FPO).

63. Paragraph 10A of Schedule 1 to the FPO specifies the making of arrangements for another person to enter as borrower into an agreement for the provision of qualifying credit as a 'controlled activity', 'qualifying credit' being credit provided pursuant to an agreement under which the lender is a person who carries on the regulated activity specified in article 61 of the RAO (entering into RMCs as lender) and the borrower's repayment obligation is secured (in whole or in part) on land.

64. The FCA points to aspects of the 'financial promotion restrictions' which it says are potentially significant, namely:-

(a) The "in the course of business" language in section 21(1) of FSMA is less stringent than the "carried on by way of business" test (noted at [J27]);

(b) Section 21(13) of FSMA makes clear that to "communicate" includes to cause a communication to be made; and

(c) The effect of article 6 of the FPO is that communications may be addressed to specific persons orally or in writing or to persons generally, for example, through a website.

65. Finally, the FCA also referred in this context to the Court of Appeal decision in Financial Conduct Authority v Ferreira [2022] EWCA Civ 397 concerning the exception in section 21(2) where the content of the relevant communication is approved by an authorised person. Although there is no suggestion of such approval in this case, the FCA fairly pointed out that the Defendants might argue that Ferreira gives rise to broader considerations for TS' and DS' potential accessory liability (considered at [J193-196]).

Accessory liability – 'knowingly concerned'

66. As to such accessory liability, the FCA says that the third and fourth (individual) defendants, respectively TS and DS, are liable as being " knowingly concerned " (within the meaning of sections 380(2) and 382(1) of FSMA) in LPI's contraventions of the 'financial promotion restrictions' and LPI's and NPI's contraventions of the 'general prohibition'. Financial Conduct Authority v Capital Alternatives & Ors [2018] 3 WLUK 623 (at [797]-[810]) provides a helpful distillation of what is meant by "knowingly concerned":-

(a) Proof of actual knowledge is a necessary, but insufficient, requirement for being 'knowingly concerned'. Actual involvement in the contravention must also be established;

(b) The concept of 'involvement' is a broad one, covering those who 'pull the strings' at directorial and/ or managerial level (including the most obvious example of the 'moving light' in the contravening entity);

(c) The authorities do not rely on the accessory being a de jure director or even a de facto or shadow director of the contravening entity; the question is whether the individual has the requisite knowledge and involvement;

(d) Such involvement could, in an appropriate case, include those at a lower level depending on the extent of their knowledge and participation in the contravention;

(e) The word 'concerned' can cover both the 'front' and 'back office' functions performed with the necessary knowledge;

(f) It is too narrow a view to say that the individual has to have actual involvement in the primary contravention since it would fail to capture the person, including the 'moving light', who directs others from a distance but 'keeps his own hands clean';

(g) The relevant knowledge is knowledge of the facts on which the contravention depends; it is irrelevant whether the individual knows that such facts constitute a relevant contravention -ignorance of the law is no defence; and

(h) It is a fact sensitive enquiry to determine whether a person was 'knowingly concerned' in the contravention of a relevant requirement of FSMA. Each case must be considered on its own unique facts.'

[2] Financial Services and Markets Act 2000, section 22, entitled 'Regulated Activities' reads in full:

'(1) An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and -

(a) relates to an investment of a specified kind; or

(b) in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.

(1A) An activity is also a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and relates to-

(a) information about a person's financial standing, or

(c) administering a benchmark.

(1B) An activity is also a regulated activity for the purposes of this Act if it is an activity of a specified kind which-

(a) is carried on by way of business in Great Britain, and

(b) is, or relates to, claims management services.

(2) Schedule 2 makes provision supplementing this section.

(3) Nothing in Schedule 2 limits the powers conferred by subsections (1) to (1B).

(4) “Investment” includes any asset, right or interest (including where an asset, right or interest is, or comprises or represents, a cryptoasset)

(5) “Specified” means specified in an order made by the Treasury.

(6A) For the purposes of subsection (1A)(c), "benchmark" has the meaning given by Article 3 of the EU Benchmarks Regulation 2016, and "administering" a benchmark means acting as an administrator of that benchmark within the meaning of that Article.'

[2a] Financial Services and Markets Act 2000, Schedule 2 is entitled 'Regulated Activities' and reads:

'1. General

The matters with respect to which provision may be made under section 22(1) in respect of activities include, in particular, those described in general terms in this Part of this Schedule.

2. Dealing in investments

(1) Buying, selling, subscribing for or underwriting investments or offering or agreeing to do so, either as a principal or as an agent.

(2) In the case of an investment which is a contract of insurance, that includes carrying out the contract.

3. Arranging deals in investments

Making, or offering or agreeing to make-

(a) arrangements with a view to another person buying, selling, subscribing for or underwriting a particular investment;

(b) arrangements with a view to a person who participates in the arrangements buying, selling, subscribing for or underwriting investments.

4. Deposit taking

Accepting deposits.

5. - Safekeeping and administration of assets

(1) Safeguarding and administering assets belonging to another which consist of or include investments or offering or agreeing to do so.

(2) Arranging for the safeguarding and administration of assets belonging to another, or offering or agreeing to do so.

6. Managing investments

Managing, or offering or agreeing to manage, assets belonging to another person where–

(a) the assets consist of or include investments; or

(b) the arrangements for their management are such that the assets may consist of or include investments at the discretion of the person managing or offering or agreeing to manage them.

7. Investment advice

Giving or offering or agreeing to give advice to persons on–

(a) buying, selling, subscribing for or underwriting an investment; or

(b) exercising any right conferred by an investment to acquire, dispose of, underwrite or convert an investment.

8. Establishing collective investment schemes

Establishing, operating or winding up a collective investment scheme, including acting as–

(a) trustee of a unit trust scheme;

(b) depositary of a collective investment scheme other than a unit trust scheme; or

(c) sole director of a body incorporated by virtue of regulations under section 262.

9. - Using computer-based systems for giving investment instructions

(1) Sending on behalf of another person instructions relating to an investment by means of a computer-based system which enables investments to be transferred without a written instrument.

(2) Offering or agreeing to send such instructions by such means on behalf of another person.

(3) Causing such instructions to be sent by such means on behalf of another person.

(4) Offering or agreeing to cause such instructions to be sent by such means on behalf of another person.

9A Activities of reclaim funds

(1) The matters with respect to which provision may be made under section 22(1) in respect of activities include, in particular, any of the activities of a reclaim fund.

(2) “Reclaim fund” has the meaning given by section 5(1) of the Dormant Bank and Building Society Accounts Act 2008.

10. General

The matters with respect to which provision may be made under section 22(1) in respect of investments include, in particular, those described in general terms in this Part of this Schedule.

11. - Securities

(1) Shares or stock in the share capital of a company.

(2) “Company” includes–

(a) any body corporate (wherever incorporated), and

(b) any unincorporated body constituted under the law of a country or territory outside the United Kingdom, other than an open-ended investment company.

12. Instruments creating or acknowledging indebtedness

Any of the following–

(a) debentures;

(b) debenture stock;

(c) loan stock;

(d) bonds;

(e) certificates of deposit;

(f) any other instruments creating or acknowledging a present or future indebtedness.

13. - Government and public securities

(1) Loan stock, bonds and other instruments–

(a) creating or acknowledging indebtedness; and

(b) issued by or on behalf of a government, local authority or public authority.

(2) “Government, local authority or public authority” means–

(a) the government of the United Kingdom, of Northern Ireland, or of any country or territory outside the United Kingdom;

(b) a local authority in the United Kingdom or elsewhere;

(c) any international organisation the members of which include the United Kingdom

14. - Instruments giving entitlement to investments

(1) Warrants or other instruments entitling the holder to subscribe for any investment.

(2) It is immaterial whether the investment is in existence or identifiable.

15. Certificates representing securities

Certificates or other instruments which confer contractual or property rights–

(a) in respect of any investment held by someone other than the person on whom the rights are conferred by the certificate or other instrument; and

(b) the transfer of which may be effected without requiring the consent of that person.

16. - Units in collective investment schemes

(1) Shares in or securities of an open-ended investment company.

(2) Any right to participate in a collective investment scheme.

17. Options

Options to acquire or dispose of property.

18. Futures

Rights under a contract for the sale of a commodity or property of any other description under which delivery is to be made at a future date.

19. Contracts for differences

Rights under–

(a) a contract for differences; or

(b) any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in-

(i) the value or price of property of any description; or

(ii) an index or other factor designated for that purpose in the contract.

20. Contracts of insurance

Rights under a contract of insurance, including rights under contracts falling within head C of Schedule 2 to the Friendly Societies Act 1992.

21. - Participation in Lloyd's syndicates

(1) The underwriting capacity of a Lloyd's syndicate.

(2) A person's membership (or prospective membership) of a Lloyd's syndicate.

22. Deposits

Rights under any contract under which a sum of money (whether or not denominated in a currency) is paid on terms under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it.

23 Loans and other forms of credit

(1) Rights under any contract under which one person provides another with credit.

(2) “Credit” includes any cash loan or other financial accommodation.

(3) “Cash” includes money in any form.

(4) It is immaterial for the purposes of sub-paragraph (1) whether or not the obligation of the borrower is secured on property of any kind.

23A Other finance arrangements involving land

(1) Rights under any arrangement for the provision of finance under which the person providing the finance either–

(a) acquires a major interest in land from the person to whom the finance is provided, or

(b) disposes of a major interest in land to that person, as part of the arrangement.

(2) References in sub-paragraph (1) to a “major interest” in land are to–

(a) in relation to land in England or Wales–

(i) an estate in fee simple absolute, or

(ii) a term of years absolute,

whether subsisting at law or in equity;

(b) in relation to land in Scotland–

(i) the interest of an owner of land, or

(ii) the tenant's right over or interest in a property subject to a lease;

(c) in relation to land in Northern Ireland–

(i) any freehold estate, or

(ii) any leasehold estate,

whether subsisting at law or in equity.

(3) It is immaterial for the purposes of sub-paragraph (1) whether either party acquires or (as the case may be) disposes of the interest in land–

(a) directly, or

(b) indirectly.

23B Contracts for hire of goods

(1) Rights under a contract for the bailment or (in Scotland) hiring of goods to a person other than a body corporate.

(2) “Goods” has the meaning given in section 61(1) of the Sale of Goods Act 1979.

(3) It is immaterial for the purposes of sub-paragraph (1) whether the rights of the person to whom the goods are bailed or hired have been assigned to a body corporate.

24. Rights in investments

Any right or interest in anything which is an investment as a result of any other provision made under section 22(1).

24A The matters with respect to which provision may be made under section 22(1A)(a) include, in particular, those described in general terms in this Part of this Schedule.

24B Furnishing persons with information that -

(a) is relevant to the financial standing of persons other than bodies corporate, and

(b) is collected for that purpose by the person furnishing it.

24C

(1) Taking steps on behalf of a person other than a body corporate in connection with information relevant to that person's financial standing that is or may be held by a person who is carrying on a regulated activity.

24D Giving advice to a person other than a body corporate in relation to the taking of any steps of the kind mentioned in paragraph 24C(1).

25. - The order-making power

(1) An order under section 22(1) to (1B) may–

(a) provide for exemptions;

(b) confer powers on the Treasury or either regulator;

(c) authorise the making of regulations or other instruments by the Treasury for purposes of, or connected with, any relevant provision;

(d) authorise the making of rules or other instruments by either regulator for purposes of, or connected with, any relevant provision;

(e) make provision in respect of any information or document which, in the opinion of the Treasury or either regulator, is relevant for purposes of, or connected with, any relevant provision;

(f) make such consequential, transitional or supplemental provision as the Treasury consider appropriate for purposes of, or connected with, any relevant provision, including provision which applies (with or without modification) provision in this Act or other primary or subordinate legislation that relates to investment activity or financial services to a regulated activity that does not relate to investment activity or financial services.

(2) Provision made as a result of sub-paragraph (1)(f) may amend any primary or subordinate legislation, including any provision of, or made under, this Act.

(3) “Relevant provision” means any provision–

(a) of section 22 or this Schedule; or

(b) made under that section or this Schedule.

26 Parliamentary control

(1) This paragraph applies to any order made under section 22(1) to (1B) which contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be that an activity which is not a regulated activity would become a regulated activity.

(2) No order to which this paragraph applies may be made unless -

(a) a draft of the order has been laid before Parliament and approved by a resolution of each House, or

(b) sub-paragraph (4) applies.

(3) Sub-paragraph (4) applies if an order to which this paragraph applies also contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without a draft being so laid and approved.

(4) Where this sub-paragraph applies the order -

(a) must be laid before Parliament after being made, and

(b) ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without that affecting anything done under the order or the power to make a new order).

(5) The “relevant period” is a period of 28 days beginning with the day on which the order is made.

(6) In calculating the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.

27. - Interpretation

(1) In this Schedule–

“buying” includes acquiring for valuable consideration; “offering” includes inviting to treat; “property” includes currency of the United Kingdom or any other country or territory; and “selling” includes disposing for valuable consideration.

(2) In sub-paragraph (1) “disposing” includes–

(a) in the case of an investment consisting of rights under a contract-

(i) surrendering, assigning or converting those rights; or

(ii) assuming the corresponding liabilities under the contract;

(b) in the case of an investment consisting of rights under other arrangements, assuming the corresponding liabilities under the contract or arrangements;

(c) in the case of any other investment, issuing or creating the investment or granting the rights or interests of which it consists.

(3) In this Schedule references to an instrument include references to any record (whether or not in the form of a document).'

[3] The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) preamble reads:

'Approved by both Houses of Parliament

Made: 26 February 2001 

Laid before Parliament: 27 February 2001 

Coming into force in accordance with article 2

'The Treasury, in exercise of the powers conferred on them by sections 22(1) and (5), 426 and 428(3) of, and paragraph 25 of Schedule 2 to, the Financial Services and Markets Act 2000, hereby make the following Order:'

[4] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.3 is entitled 'Interpretation' and reads:

'(1) In this Order “the Act” means the Financial Services and Markets Act 2000;

“acting as an insolvency practitioner” is to be read with section 388 of the Insolvency Act 1986 or, as the case may be, article 3 of the Insolvency (Northern Ireland) Order 1989 3 and, in any provision of this Order which provides for activities to be excluded from a specified activity, references to things done by a person acting-

(a) as an insolvency practitioner, or

(b) in reasonable contemplation of that person's appointment as an insolvency practitioner, include anything done by the person's firm in connection with that person so acting;

 “agreement provider” has the meaning given by article 63J(3); “agreement seller” has the meaning given by article 63J(3);

 “AIFM” has the meaning given by regulation 4 of the Alternative Investment Fund Managers Regulations 2013;

"aircraft operator" has the meaning given in article 6 of the trading scheme order;

“alternative investment fund managers directive” means Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers;

“annuities on human life” does not include superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged, or who have been engaged, in any particular profession, trade or employment, or of the dependants of such persons; “assignment”, in relation to a credit agreement, has the meaning given by article 60L; “auction platform” means a platform on which auctions of greenhouse gas emissions allowances are held in accordance with the emission allowance auctioning regulation[ or the UK auctioning regulations; “borrower” -

(a) in relation to a credit agreement other than a regulated mortgage contract, an article 36H agreement (within the meaning given by article 36H) or an agreement that is a green deal plan, has the meaning given by article 60L;

(b) in relation to an article 36H agreement (within the meaning given by that article) other than a regulated mortgage contract, has the meaning given by article 36H;

(c) in relation to a credit agreement that is a green deal plan, has the meaning given by article 60LB;

“buying” includes acquiring for valuable consideration; “close relative” in relation to a person means-

(a) his spouse or civil partner;

(b) his children and step children, his parents and step-parents, his brothers and sisters and his step-brothers and stepsisters; and

(c) the spouse or civil partner of any person within sub-paragraph (b);

“the Commission Regulation” means Commission Regulation Commission Delegated Regulation of 25.4.2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;  “consumer hire agreement” has the meaning given by article 60N; “contract of general insurance” means any contract falling within Part I of Schedule 1;

“contract of insurance” means any contract of insurance which is a contract of long-term insurance or a contract of general insurance, and includes-

(a) fidelity bonds, performance bonds, administration bonds, bail bonds, customs bonds or similar contracts of guarantee, where these are-

(i) effected or carried out by a person not carrying on a banking business;

(ii) not effected merely incidentally to some other business carried on by the person effecting them; and

(iii) effected in return for the payment of one or more premiums;

(b) tontines;

(c) capital redemption contracts or pension fund management contracts, where these are effected or carried out by a person who-

(i) does not carry on a banking business; and

(ii) otherwise carries on a regulated activity of the kind specified by article 10(1) or (2);

(d) contracts to pay annuities on human life;

(e) contracts of a kind referred to in Article 2(3)(b)(v) of the Solvency 2 Directive; and

(f) contracts relating to the length of human life that are regulated by or under any enactment relating to social security, in so far as they are effected or carried out at their own risk by undertakings with permission to effect or carry out contracts of long-term insurance as principals;

but does not include a funeral plan contract; “contract of long-term insurance” means any contract falling within Part II of Schedule 1; “contractually based investment” means-

(a) rights under a qualifying contract of insurance;

(b) any investment of the kind specified by any of articles 83, 84, 85 and 87; or

(c) any investment of the kind specified by article 89 so far as relevant to an investment falling within (a) or (b);

“credit agreement” -

(a) in relation to an agreement other than a green deal plan, has the meaning given by article 60B;

(b) in relation to a green deal plan, has the meaning given by article 60LB;

“deposit” has the meaning given by article 5 except where the definition given in article 60L applies;

“electronic money” has the meaning given by regulation 2(1) of the Electronic Money Regulations 2011;

“emission allowance auctioning regulation” means Commission Regulation (EU) No 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to the emission allowance trading directive; “emission allowance trading directive” means Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowances trading within the Community;

“financial instrument” means any instrument listed in Part 1 of Schedule 2 read with Articles 5 to 8, 10 and 11 of the Commission Regulation (the text of which is set out in Part 2 of Schedule 2);

“full-scope UK AIFM” has the meaning given by regulation 2(1) of the Alternative Investment Fund Managers Regulations 2013;

“funeral plan contract” has the meaning given by article 59; “green deal plan” has the meaning given by section 1 of the Energy Act 2011;

“greenhouse gas emissions allowances” mean “allowances” as defined in Article 3(a) of the emission allowance trading directive or in article 4(1) of the trading scheme order;

“hire-purchase agreement” has the meaning given by article 60L; “hirer” is to be read with the definition of “consumer hire agreement” in article 60N;

"home State" -

(a) in relation to a qualifying credit institution, means the State in which the institution has been granted authorisation;

(b) in relation to a legal person (other than a qualifying credit institution) that has a registered office under the person's national law, means the State in which that office is located;

(c) in relation to any other person, means the State in which the person's head office is located;

“home purchase provider” has the meaning given by article 63F(3); “home purchaser” has the meaning given by article 63F(3);

“instrument” includes any record whether or not in the form of a document;

"investment firm" means a person whose regular occupation or business is the provision or performance of investment services and activities on a professional basis, other than-

(a) a person excluded by Schedule 3, read with the Commission Regulation and with Commission Delegated Regulation (EU) 2017/592 of 1 December 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business;

(b) a person whose home State is not the United Kingdom and who would be excluded by Schedule 3, read with the Commission Regulation and with Commission Delegated Regulation (EU) 2017/592, if the person's registered office (or head office, in the case of a person that is not a body corporate or a person that is a body corporate but has no registered office) was in the United Kingdom;

“joint enterprise” means an enterprise into which two or more persons (“the participators”) enter for commercial purposes related to a business or businesses (other than the business of engaging in a regulated activity) carried on by them; and, where a participator is a member of a group, each other member of the group is also to be regarded as a participator in the enterprise;

“lender” -

(c) in relation to a credit agreement other than a regulated mortgage contract, an article 36H agreement (within the meaning given by article 36H ) or an agreement that is a green deal plan, has the meaning given by article 60L;

(d) in relation to an article 36H agreement (within the meaning given by that article) other than a regulated mortgage contract, has the meaning given by article 36H;

(e) in relation to a credit agreement that is a green deal plan, has the meaning given by article 60LB;

“local authority” means-

(a) in England and Wales, a local authority within the meaning of the Local Government Act 1972, the Greater London Authority, the Common Council of the City of London or the Council of the Isles of Scilly;

(b) in Scotland, a local authority within the meaning of the Local Government (Scotland) Act 1973;

(c) in Northern Ireland, a district council within the meaning of the Local Government Act (Northern Ireland) 1972;

"management company" has the meaning given by section 237(2) of the Act;

“managing agent” means a person who is permitted by the Council of Lloyd's in the conduct of his business as an underwriting agent to perform for a member of Lloyd's one or more of the following functions-

(a) underwriting contracts of insurance at Lloyd's;

(b) reinsuring such contracts in whole or in part;

(c) paying claims on such contracts; “markets in financial instruments directive” means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (recast); “markets in financial instruments regulation” means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments as it forms part of assimilated law;

"market operator" means-

(a) a person that manages or operates the business of a UK regulated market (including a person who does so as the UK regulated market itself), or

(b) a person that would fall within paragraph (a) if the person had its registered office (or, if it does not have one, its head office) in the United Kingdom, other than a person falling within paragraph (1A);

"multilateral trading facility" or "MTF" means-

(a) a UK multilateral trading facility (within the meaning of Article 2.1.14A of the markets in financial instruments regulation) operated by an investment firm, a qualifying credit institution or a market operator, or

(b) a facility which-

(i) is operated by an investment firm, qualifying credit institution or market operator whose home State is not the United Kingdom, and

(ii) if its operator's home State was the United Kingdom, would be a UK multilateral trading facility (within the meaning of Article 2.1.14A of the markets in financial instruments regulation);

“occupational pension scheme” has the meaning given by section 1 of the Pension Schemes Act 1993 55 but with paragraph (b) of the definition omitted;

“operator” has the same meaning as in the trading scheme order;

"organised trading facility" or "OTF" means-

(a) a UK organised trading facility (within the meaning of Article 2.1.15A of the markets in financial instruments regulation) operated by an investment firm, a qualifying credit institution or a market operator, or

(b) a facility which-

(i) is operated by an investment firm, qualifying credit institution or market operator whose home State is not the United Kingdom, and

(ii) if its operator's home State was the United Kingdom, would be a UK organised trading facility (within the meaning of Article 2.1.15A of the markets in financial instruments regulation);

“overseas person” means a person who-

(a) carries on activities of the kind specified by any of articles 14, 21, 25, 25A, 25B, 25C, 25D, 25DA, 25E, 37, 39A, 40, 45, 51ZA, 51ZB, 51ZC, 51ZD, 51ZE,, 52,53, 53A, 53B, 53C, 53D61, 63B, 63F and 63J or, so far as relevant to any of those articles, article 64 (or activities of a kind which would be so specified but for the exclusion in article 72); but

(b) does not carry on any such activities, or offer to do so, from a permanent place of business maintained by him in the United Kingdom;

“owner”, in relation to a hire purchase agreement, has the meaning given by article 60N;

“pension fund management contract” means a contract to manage the investments of pension funds (other than funds solely for the benefit of the officers or employees of the person effecting or carrying out the contract and their dependants or, in the case of a company, partly for the benefit of officers and employees and their dependants of its subsidiary or holding company or a subsidiary of its holding company); and for the purposes of this definition, “subsidiary” and “holding company” are to be construed in accordance with section 1159 of the Companies Act 2006; “the person's firm”, in relation to a person acting as an insolvency practitioner or in reasonable contemplation of that person's appointment as an insolvency practitioner, means-

(a) the person's employer;

(b) where the person is a partner in a partnership other than a limited liability partnership, that partnership;

(c) where the person is a member of a limited liability partnership, that partnership;

“personal pension scheme” means a scheme or arrangement which is not an occupational pension scheme or a stakeholder pension scheme and which is comprised in one or more instruments or agreements, having or capable of having effect so as to provide benefits to or in respect of people-

(a) on retirement,

(b) on having reached a particular age, or

(c) on termination of service in an employment;

“plan provider” has the meaning given by paragraph (3) of article 63B, read with paragraphs (7) and (8) of that article;

"portfolio management" has the meaning given by Article 2.7 of the Commission Regulation;

“property” includes currency of the United Kingdom or any other country or territory; “qualifying contract of insurance” means a contract of long-term insurance which is not-

(a) a reinsurance contract; nor

(b) a contract in respect of which the following conditions are met-

(i) the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;

(iii) the contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium; and

(iv) the contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with any of the above conditions;

"qualifying credit institution" means a credit institution which-

(a) is a person who-

(i) has Part 4A permission to carry on the regulated activity of accepting deposits, or

(ii) satisfies the conditions for being given permission under Part 4A to carry on that activity, or

(iii) is a body corporate incorporated in the United Kingdom and would satisfy those conditions(aa) were its head office in the United Kingdom, or (bb) if it has a registered office, were its registered office, or its registered office and its head office, in the United Kingdom,

(b) is not a friendly society,

(c) is not a society registered as a credit union under-

(i) the Co-operative and Community Benefit Societies Act 2014,

(ii) the Credit Unions (Northern Ireland) Order 1985, or

(iii) the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969, and

(d) is not a person excluded from the definition of "investment firm" by Schedule 3, read with the Commission Regulation and with Commission Delegated Regulation (EU) 2017/592 of 1 December 2016 supplementing Directive 2014/65/EU of the European Parliament and the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business;

“reception”, “transmission” and “submission” have the same meaning in relation to a bid at an auction for an investment of the kind specified in article 82A as in the emission allowance auctioning regulation or the UK auctioning regulations;

“regulated consumer hire agreement” has the meaning given by article 60N; 

“regulated credit agreement” has the meaning given by article 60B;

“regulated home purchase plan” has the meaning given by article 63F(3); 

“regulated home reversion plan” has the meaning given by article 63B(3);

“regulated mortgage contract” has the meaning given by article 61(3); 

“regulated sale and rent back agreement” has the meaning given by article 63J(3);

“relevant investment” means-

(a) rights under a qualifying contract of insurance;

(b) rights under any other contract of insurance;

(c) any investment of the kind specified by any of articles 83, 84, 85 and 87; or

(d) any investment of the kind specified by article 89 so far as relevant to an investment falling within (a) or (c);

“relevant recipient of credit” has the meaning given by article 60L; “restricted-use credit agreement” has the meaning given in article 60L;

“reversion seller” has the meaning given by article 63B(3);

“security” means (except where the context otherwise requires) any investment of the kind specified by any of articles 76 to 82 or by article 82B or, so far as relevant to any such investment, article 89; 

"securitisation repository" means a person registered with the FCA under regulation 17 of the Securitisation Regulations 2024;

“selling”, in relation to any investment, includes disposing of the investment for valuable consideration, and for these purposes “disposing” includes-

(a) in the case of an investment consisting of rights under a contract-

(i) surrendering, assigning or converting those rights; or

(ii) assuming the corresponding liabilities under the contract;

(b) in the case of an investment consisting of rights under other arrangements, assuming the corresponding liabilities under the arrangements; and

(c) in the case of any other investment, issuing or creating the investment or granting the rights or interests of which it consists;

“small registered UK AIFM” has the meaning given by regulation 2(1) of the Alternative Investment Fund Managers Regulations 2013;

“stakeholder pension scheme” has the meaning given by section 1 of the Welfare Reform and Pensions Act 1999

in relation to Great Britain and has the meaning given by article 3 of the Welfare Reform and Pensions (Northern Ireland) Order 1999 in relation to Northern Ireland;

“structured deposit” means a deposit which is fully repayable at maturity on terms under which interest or a premium will be paid or is at risk, according to a formula involving factors such as-

(a) an index or combination of indices, excluding variable rate deposits whose return is directly linked to an interest rate index such as Euribor or Libor;

(b) a financial instrument or combination of financial instruments;

(c) a commodity or combination of commodities or other physical or non-physical non-fungible assets; or

(d) a foreign exchange rate or combination of foreign exchange rates;

“syndicate” means one or more persons, to whom a particular syndicate number has been assigned by or under the authority of the Council of Lloyd's, carrying out or effecting contracts of insurance written at Lloyd's;

“trade repository” means-

(a) a person registered with [the FCA] 79 under Article 55 of Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories or a person recognised by the FCA under Article 77 of that Regulation; or

(b) a person registered with [the FCA] 79 under Article 5 of the SFT regulation or a person recognised by the FCA under Article 19 of that Regulation;

"trading scheme order" means the Greenhouse Gas Emissions Trading Scheme Order 2020 81;

"UK auctioning regulations" means the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021;

"UK regulated market" has the meaning given by Article 2.1.13A of the markets in financial instruments regulation; "UK UCITS" has the meaning given by section 237(3) of the Act;

“voting shares”, in relation to a body corporate, means shares carrying voting rights attributable to share capital which are exercisable in all circumstances at any general meeting of that body corporate.

(1A) A person falls within this paragraph if-

(a) the person is excluded from the definition of "investment firm" by Schedule 3, read with the Commission Regulation and with Commission Delegated Regulation (EU) 2017/592 of 1 December 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business, or

(b) the person is one whose home State is not the United Kingdom and who would be excluded from that definition by Schedule 3, read with the Commission Regulation and with Commission Delegated Regulation (EU) 2017/592, if the person had its registered office (or, if it does not have one, its head office) in the United Kingdom.

(2) For the purposes of this Order, a transaction is entered into through a person if he enters into it as agent or arranges, in a manner constituting the carrying on of an activity of the kind specified by article 25(1), 25A(1), 25B(1), 25C(1) or 25E(1), for it to be entered into by another person as agent or principal.

(3) For the purposes of this Order, a contract of insurance is to be treated as falling within Part II of Schedule 1, notwithstanding the fact that it contains related and subsidiary provisions such that it might also be regarded as falling within Part I of that Schedule, if its principal object is that of a contract falling within Part II and it is effected or carried out by an authorised person who has permission to effect or carry out contracts falling within paragraph I of Part II of Schedule 1.

(4) In this Order any reference to a sourcebook is to a sourcebook in the Handbook of Rules and Guidance published by the FCA containing rules made by the FCA under the Act, as the sourcebook has effect on exit day.

[5] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) contains art.4, entitled 'Specified activities: general', which reads in its entirety:

'(1) The following provisions of this Part specify kinds of activity for the purposes of section 22(1) of the Act (and accordingly any activity of one of those kinds, which is carried on by way of business, and relates to an investment of a kind specified by any provision of Part III and applicable to that activity, is a regulated activity for the purposes of the Act).

(2) The kinds of activity specified by articles 51ZA, 51ZB, 51ZC, 51ZD, 51ZE, 52 and 63N are also specified for the purposes of section 22(1)(b) of the Act (and accordingly any activity of one of those kinds, when carried on by way of business, is a regulated activity when carried on in relation to property of any kind).

(2A) The kinds of activity specified by Part 3A are specified for the purposes of section 22(1A)(a) of the Act (and accordingly any activity of one of those kinds, when carried on by way of business, is a regulated activity).

(2B) The kinds of activity specified in Part 3B are specified for the purposes of section 22(1B) of the Act (and accordingly any activity of one of those kinds, when carried on by way of business in Great Britain, is a regulated activity).

(3) Subject to paragraph (4), each provision specifying a kind of activity is subject to the exclusions applicable to that provision (and accordingly any reference in this Order to an activity of the kind specified by a particular provision is to be read subject to any such exclusions).

(4) Where an investment firm or qualifying credit institution -

(a) provides or performs investment services and activities on a professional basis, and

(b) in doing so would be treated as carrying on an activity of a kind specified by a provision of this Part but for an exclusion in any of articles 15, 16, 18, 19, 22, 23, 29, 34, 38, 67, 68, 69, 70 and 72E, that exclusion is to be disregarded and, accordingly, the investment firm or qualifying credit institution is to be treated as carrying on an activity of the kind specified by the provision in question.

(4A) Where a person

(a) for remuneration, takes up or pursues insurance distribution, or reinsurance distribution, in relation to a risk or commitment located in the United Kingdom, and

(b) in doing so would be treated as carrying on an activity of a specified kind by a provision of this Part but for an exclusion in any of articles 30, 66, 67 and 72AA, that exclusion is to be disregarded (and accordingly that person is to be treated as carrying on an activity of the kind specified by the provision in question).

(4AA) In its application to any activity relating to a contract of insurance entered into before IP completion day, paragraph (4A)(a) has effect as if "or an EEA State" were inserted after "the United Kingdom.".

(4B) Where-

(a) a person is a mortgage creditor or a mortgage intermediary; and

(b) in acting as a mortgage creditor or a mortgage intermediary in respect of an agreement entered into, or to be entered into, on or after 21st March 2016, that person would be treated as carrying on an activity of a kind specified by article 25A (arranging regulated mortgage contracts), 36A (credit broking), 53A (advising on regulated mortgage contracts), 53DA (advising on regulated credit agreements for the acquisition of land), 60B (regulated credit agreements) or 61 (entering into and administering regulated mortgage contracts), but for an exclusion or exemption provided for by this Order, that exclusion or exemption is to be disregarded (and accordingly that person is to be treated as carrying on an activity of the kind specified by the provision in question) to the extent that such exclusion or exemption neither relates to an agreement to which section 423A(3) of the Act applies nor falls within the scope of any of the derogations set out in Article 3(3) of the mortgages directive (as it had effect immediately before IP completion day).

(5) In this article-

"insurance distribution" means any regulated activity of the kind specified by article 21, 25(1) or (2), 39A, 53, or, so far as relevant to any of those articles, article 64, which is carried on in relation to a contract of insurance; and

"reinsurance distribution" means any regulated activity of the kind specified by article 21, 25(1) or (2), 39A, 53, or, so far as relevant to any of those articles, article 64, which is carried on in relation to a reinsurance contract.'

[6] For completeness, Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) contains art.3, entitled 'Interpretation', and in art.3(1), there is:

'"regulated credit agreement” has the meaning given by article 60B;'

'“credit agreement” -

(a) in relation to an agreement other than a green deal plan, has the meaning given by article 60B;

...'

[6a] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001/544, article 60LB is entitled 'Green deal plans' and reads (in force since 15.7.14):

'(1) A green deal plan is to be treated as a credit agreement for the purposes of this Order if (and only if)-

(a) the property in relation to the plan is a domestic property at the time when the plan is commenced, or

(b) if sub-paragraph (a) does not apply, the occupier or owner of the property who makes the arrangement for the plan is an individual or relevant recipient of credit.

(2) In the application of this Order to a green deal credit agreement-

(a) the lender is to be treated as being-

(i) the green deal provider (within the meaning of Chapter 1 of Part 1 of the Energy Act 2011) for the plan, or

(ii) a person who exercises or has the right to exercise the rights and duties of the green deal provider under the plan,

(b) credit is to be treated as advanced under the agreement of an amount equal to the amount of the improvement costs, and

(c) the advance of credit is to be treated as made on the completion of the installation of the energy efficiency improvements to the property (but this sub-paragraph is subject to any term of the green deal plan providing that part of the advance is to be treated as made on completion of any part of the installation).

(3) A reference in a provision of this Order listed in the first column of the table in Schedule 4A to the borrower is, in the application of the provision in relation to a green deal credit agreement, to be read as a reference to-

(a) a person who at the relevant time falls (or fell) within the description or descriptions specified in the corresponding entry in the second column of the table, or

(b) if more than one description is specified and at the relevant time different persons fall (or fell) within the descriptions, each of those persons, and except as provided by this paragraph, a person is not and is not to be treated as the borrower in relation to the agreement.

(4) References in Schedule 4A to the “improver”, “first bill payer”, “current bill payer” and “previous bill payer” are to be read as follows-

(a) a person is the “improver” if the person-

(i) is the owner or occupier of the property, and

(ii) is the person who makes (or has made or proposes to make) the arrangement for the green deal plan;

(b) a person is the “first bill payer” if the person is liable to pay the energy bills for the property at the time when the green deal plan is commenced;

(c) a person is the “current bill payer” if the person is liable by virtue of section 1(6)(a) of the Energy Act 2011 to pay instalments under the plan as a result of being for the time being liable to pay the energy bills for the property;

(d) a person is a “previous bill payer” if, as a result of previously falling within sub-paragraph (c) for an earlier period, the person has an outstanding payment liability under the plan in respect of that period.

(5) In this article-

“domestic property” means a building or part of a building that is occupied as a dwelling or (if not occupied) is intended to be occupied as a dwelling; “energy bill” has the same meaning as in section 1 of the Energy Act 2011; “energy efficiency improvements” has the meaning given by section 2(4) of the Energy Act 2011; “green deal credit agreement” means a green deal plan that is to be treated as a credit agreement for the purposes of this Order by virtue of paragraph (1); “improvement costs”, in relation to a green deal plan, are the costs of the energy efficiency improvements to the property which are to be paid by instalments under the plan after the time when credit is to be treated as being advanced by virtue of paragraph (2) (but ignoring any interest or other charges for credit in determining those costs); “occupier” and “owner” have the same meanings as in Chapter 1 of Part 1 of the Energy Act 2011; “property”, in relation to a green deal plan, means the property to which the energy efficiency improvements under the plan are or are intended to be made.

(6) For the purposes of this article-

(a) a green deal plan is commenced when-

(i) the occupier or owner of the property signs in the prescribed manner a document in relation to the plan in accordance with section 61(1) of the Consumer Credit Act 1974 (requirements as to form and content of regulated agreements), or

(ii) if the occupier or owner of the property does not sign such a document, the green deal plan is made;

(b) a person is liable to pay the energy bills for a property at any time if the person would be treated as the bill payer for the property at that time for the purposes of Chapter 1 of Part 1 of the Energy Act 2011 (see section 2(3) and (10)).'

[7] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.60C is entitled 'Exempt agreements: exemptions relating to the nature of the agreement' and presently reads:

'(1) A credit agreement is an exempt agreement for the purposes of this Chapter in the following cases.

(2) A credit agreement is an exempt agreement if-

(a) by entering into the agreement as lender, a person is or was carrying on an activity of a kind specified by article 61(1) (entering into regulated mortgage contracts);

(b) by entering into the agreement as home purchase provider, a person is or was carrying on an activity of a kind specified by article 63F(1) (entering into regulated home purchase plans); or

(c) by administering the agreement on 21st March 2016 a person is carrying on an activity of a kind specified by article 61(2) (administering regulated mortgage contracts).

(3) A credit agreement is an exempt agreement if-

(a) the lender provides the borrower with credit exceeding £25,000, and

(b) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

(4) A credit agreement is an exempt agreement if-

(a) the lender provides the borrower with credit of £25,000 or less,

(b) the agreement is entered into by the borrower wholly for the purposes of a business carried on, or intended to be carried on, by the borrower, and

(c) the agreement is a green deal plan made in relation to a property that is not a domestic property (as defined by article 60LB).

(4A) A credit agreement is an exempt agreement if-

(a) the lender provides the borrower with credit of £25,000 or less,

(b) the agreement is entered into by the borrower wholly for the purposes of a business carried on, or intended to be carried on, by the borrower, and

(c) the agreement is entered into by the lender and the borrower under the Bounce Back Loan Scheme.

(4B) For the purposes of paragraph (4A), "Bounce Back Loan Scheme" means the scheme of that name operated from 4th May 2020 by the British Business Bank plc on behalf of the Secretary of State.

(4C) An agreement exempt under paragraph (4A) may not also be an article 36H agreement by virtue of paragraph (4) of that article.

(5) For the purposes of paragraph (3), if an agreement includes a declaration which-

(a) is made by the borrower,

(b) provides that the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower, and

(c) complies with rules made by the FCA for the purpose of this article,

the agreement is to be presumed to have been entered into by the borrower wholly or predominantly for the purposes specified in sub-paragraph (b) unless paragraph (6) applies.

(6) This paragraph applies if, when the agreement is entered into-

(a) the lender (or, if there is more than one lender, any of the lenders), or

(b) any person who has acted on behalf of the lender (or, if there is more than one lender, any of the lenders) in connection with the entering into of the agreement, knows or has reasonable cause to suspect that the agreement is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

(7) Paragraphs (5) and (6) also apply for the purposes of paragraph (4) but with the omission of the words “or predominantly”.

(8) A credit agreement is an exempt agreement if it is made in connection with trade in goods or services-

(a) between the United Kingdom and a country outside the United Kingdom,

(b) within a country outside the United Kingdom, or

(c) between countries outside the United Kingdom, and

the credit is provided to the borrower in the course of a business carried on by the borrower.'

[8] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.60D is entitled 'Exempt agreements: exemption relating to the purchase of land for non-residential purposes' and presently reads:

'(1) A credit agreement is an exempt agreement for the purposes of this Chapter if, at the time it is entered into, any sums due under it are secured by a legal or equitable mortgage on land and the condition in paragraph (2) is satisfied.

(2) The condition is that less than 40% of the land is used, or is intended to be used, as or in connection with a dwelling-

(a) by the borrower or a related person of the borrower, or

(b) in the case of credit provided to trustees, by an individual who is a beneficiary of the trust or a related person of a beneficiary.

(3) For the purposes of paragraph (2)-

(a) the area of any land which comprises a building or other structure containing two or more storeys is to be taken to be the aggregate of the floor areas of each of those stories;

(b) “related person” in relation to a person (“B”) who is the borrower or (in the case of credit provided to trustees) a beneficiary of the trust, means-

(i) B's spouse or civil partner,

(ii) a person (whether or not of the opposite sex) whose relationship with B has the characteristics of the relationship between husband and wife, or

(iii) B's parent, brother, sister, child, grandparent or grandchild.

(4) This article does not apply to an agreement if-

(a) the agreement is entered into on or after 21st March 2016,

(b) under the agreement a mortgage creditor grants or promises to grant a credit in the form of a deferred payment, loan or other similar financial accommodation,

(c) the credit is granted or promised to an individual who is acting for purposes outside those of any trade, business or profession carried on by the individual,

(d) the purpose of the agreement is to acquire or retain property rights in land or in an existing or projected building, and

(e) the agreement does not meet the conditions in paragraphs (i) to (iii) of article 61(3)(a) (regulated mortgage contracts).

(5) A reference in paragraph (4)(d) to any land or building-

(a) in relation to an agreement entered into before IP completion day, is a reference to any land or building in the United Kingdom or within the territory of an EEA State;

(b) in relation to an agreement entered into on or after IP completion day, is a reference to any land or building in the United Kingdom.'

[9] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.60E is entitled 'Exempt agreements: exemptions relating to the nature of the lender' and presently reads:

'(1) A credit agreement is an exempt agreement for the purposes of this Chapter in the following cases.

(2) Subject to article 60HA, a relevant credit agreement relating to the purchase of land is an exempt agreement if the lender is-

(a) specified, or of a description specified, in rules made by the FCA under paragraph (3), or

(b) a local authority.

(3) The FCA may make rules specifying any of the following for the purpose of paragraph (2)-

(a) an authorised person with permission to effect or carry out contracts of insurance;

(b) a friendly society;

(c) an organisation of employers or organisation of workers;

(d) a charity;

(e) an improvement company (within the meaning given by section 7 of the Improvement of Land Act 1899);

(f) a body corporate named or specifically referred to in any public general Act;

(g) a body corporate named or specifically referred to in, or in an order made under, a relevant housing provision;

(h) a building society (within the meaning of the Building Societies Act 1986);

(i) an authorised person with permission to accept deposits.

(4) Rules under paragraph (3) may-

(a) specify a particular person or class of persons;

(b) be limited so as to apply only to agreements or classes of agreement specified in the rules.

(5) Subject to article 60HA, a relevant credit agreement is an exempt agreement if it is-

(a) secured by a legal or equitable mortgage on land,

(b) that land is used or is intended to be used as or in connection with a dwelling, and

(c) the lender is a housing authority.

(6) A credit agreement is an exempt agreement if-

(a) the lender is an investment firm or a qualifying credit institution, and

(b) the agreement is entered into for the purpose of allowing the borrower to carry out a transaction relating to one or more financial instruments.

(7) In this article-

“housing authority” means-

(a) in England and Wales, the Homes and Communities Agency, the Welsh Ministers, a company which is a wholly-owned subsidiary of the Welsh Ministers, a registered social landlord within the meaning of Part 1 of the Housing Act 1996, or a private registered provider (within the meaning of Part 2 of the Housing and Regeneration Act 2008);

(b) in Scotland, the Scottish Ministers or a registered social landlord (within the meaning of the Housing (Scotland) Act 2010;

(c) in Northern Ireland, the Northern Ireland Housing Executive or a housing association within the meaning of Part 2 of the Housing (Northern Ireland) Order 1992 10; “relevant credit agreement relating to the purchase of land” means-

(a) a borrower-lender-supplier agreement financing-

(i) the purchase of land, or

(ii) provision of dwellings on land,

and secured by a legal or equitable mortgage on that land,

(b) a borrower-lender agreement secured by a legal or equitable mortgage on land, or

(c) a borrower-lender-supplier agreement financing a transaction which is a linked transaction in relation to-

(i) an agreement falling within sub-paragraph (a), or

(ii) an agreement falling within sub-paragraph (b) financing 

(aa) the purchase of land, 

(bb) the provision of dwellings on land,

and secured by a legal or equitable mortgage on the land referred to in sub-paragraph (a) or the land referred to in paragraph (ii); 

“relevant housing provision” means any of the following-

(a) section 156(4) or 447(2)(a) of the Housing Act 1985,

(b) section 156(4) of that Act as it has effect by virtue of section 17 of the Housing Act 1996 (the right to acquire), or

(c) article 154(1)(a) of the Housing (Northern Ireland) Order 1981.

(7A) In paragraph (7), in the definition of “housing authority”, in paragraph (a), 

“wholly-owned subsidiary” has the same meaning as in section 1159 (meaning of “subsidiary” etc.) of the Companies Act 2006.

(7B) For the purpose of paragraph (7A), the Welsh Ministers are to be treated as a body corporate.

(8) For the purposes of the definition of “relevant credit agreement relating to the purchase of land”, a transaction is, unless paragraph (9) applies, a “linked transaction” in relation to a credit agreement (“the principal agreement”) if-

(a) it is (or will be) entered into by the borrower under the principal agreement or by a relative of the borrower,

(b) it does not relate to the provision of security,

(c) it does not form part of the principal agreement, and

(d) one of the following conditions is satisfied-

(i) the transaction is entered into in compliance with a term of the principal agreement;

(ii) the principal agreement is a borrower-lender-supplier agreement and the transaction is financed, or to be financed, by the principal agreement;

(iii) the following conditions are met

(aa) the other party is a person to whom paragraph (10) applies, 

(bb) the other party initiated the transaction by suggesting it to the borrower or the relative of the borrower, and

(cc) the borrower or the relative of the borrower enters into the transaction to induce the lender to enter into the principal agreement or for another purpose related to the principal agreement or to a transaction financed or to be financed by the principal agreement.

(9) This paragraph applies if the transaction is-

(a) a contract of insurance,

(b) a contract which contains a guarantee of goods, or

(c) a transaction which comprises, or is effected under-

(i) an agreement for the operation of an account (including any savings account) for the deposit of money, or

(ii) an agreement for the operation of a current account, under which the customer (“C”) may, by means of cheques or similar orders payable to C or to any other person, obtain or have the use of money held or made available by the person with whom the account is kept.

(10) The persons to whom this paragraph applies are-

(a) the lender;

(b) the lender's associate;

(c) a person who, in the negotiation of the transaction, is represented by a person who carries on an activity of the kind specified by article 36A (credit broking) by way of business who is or was also a negotiator in negotiations for the principal agreement;

(d) a person who, at the time the transaction is initiated, knows that the principal agreement has been made or contemplates that it might be made.'

[10] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.60F is entitled 'Exempt agreements: exemptions relating to number of repayments to be made' and presently reads:

'(1) A credit agreement is an exempt agreement for the purposes of this Chapter in the following cases.

(2) A credit agreement is an exempt agreement if-

(a) the agreement is a borrower-lender-supplier agreement for fixed-sum credit, other than a green deal plan,

(b) the number of payments to be made by the borrower is not more than twelve,

(c) those payments are required to be made within a period of 12 months or less (beginning on the date of the agreement),

(d) the credit is-

(i) secured on land, or

(ii) provided without interest or other charges, and

(e) paragraph (7) does not apply to the agreement.

(3) A credit agreement is an exempt agreement if-

(a) the agreement is a borrower-lender-supplier agreement for running-account credit,

(b) the borrower is to make payments in relation to specified periods which must be, unless the agreement is secured on land, of 3 months or less,

(c) the number of payments to be made by the borrower in repayment of the whole amount of credit provided in each such period is not more than one,

(d) the credit is-

(i) secured on land, or

(ii) provided without interest or other significant charges, and

(e) paragraph (7) does not apply to the agreement.

(4) Subject to article 60HA, a credit agreement is an exempt agreement if-

(a) the agreement is a borrower-lender-supplier agreement financing the purchase of land,

(b) the number of payments to be made by the borrower is not more than four, and

(c) the credit is-

(i) secured on land, or

(ii) provided without interest or other charges.

(5) A credit agreement is an exempt agreement if-

(a) the agreement is a borrower-lender-supplier agreement for fixed-sum credit,

(b) the credit is to finance a premium under a contract of insurance relating to land or anything on land,

(c) the lender is the lender under a credit agreement secured by a legal or equitable mortgage on that land,

(d) the credit is to be repaid within the period (which must be 12 months or less) to which the premium relates,

(e) in the case of an agreement secured on land, there is no charge forming part of the total charge for credit under the agreement other than interest at a rate not exceeding the rate of interest from time to time payable under the agreement mentioned at sub-paragraph (c),

(f) in the case of an agreement which is not secured on land, the credit is provided without interest or other charges, and

(g) the number of payments to be made by the borrower is not more than twelve.

(6) A credit agreement is an exempt agreement if-

(a) the agreement is a borrower-lender-supplier agreement for fixed-sum credit,

(b) the lender is the lender under a credit agreement secured by a legal or equitable mortgage on land,

(c) the agreement is to finance a premium under a contract of whole life insurance which provides, in the event of the death of the person on whose life the contract is effected before the credit referred to in sub-paragraph (b) has been repaid, for payment of a sum not exceeding the amount sufficient to meet the amount which, immediately after that credit has been advanced, would be payable to the lender in respect of that credit (including interest from time to time payable under that agreement),

(d) in the case of an agreement secured on land, there is no charge forming part of the total charge for credit under the agreement other than interest at a rate not exceeding the rate of interest from time to time payable under the agreement mentioned at sub-paragraph (b),

(e) in the case of an agreement which is not secured on land, the credit is provided without interest or other charges, and

(f) the number of payments to be made by the borrower is not more than twelve.

(7) This paragraph applies to-

(a) agreements financing the purchase of land;

(b) agreements which are conditional sale agreements or hire-purchase agreements;

(c) agreements secured by a pledge (other than a pledge of documents of title or of bearer bonds).

(8) In this article, “payment” means any payment which comprises or includes-

(a) the repayment of capital, or

(b) the payment of interest or any other charge which forms part of the total charge for credit.'

[11] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.60G is entitled 'Exempt agreements: exemptions relating to the total charge for credit' and presently reads:

'(1) A credit agreement is an exempt agreement for the purposes of this Chapter in the following cases.

(2) A credit agreement is an exempt agreement if-

(a) it is a borrower-lender agreement,

(b) the lender is a credit union and the rate of the total charge for credit does not exceed 42.6 per cent, and

(c) paragraph (2A) applies to the agreement.

(2A) This paragraph applies to the agreement if-

(a) the agreement is not one to which subsection (2) of section 423A of the Act applies;

(b) the agreement is one to which that subsection applies and-

(i) the agreement is one to which subsection (3) of that section applies,

(ii) the agreement is a bridging loan, or

(iii) in relation to the agreement

(aa) the borrower receives timely information on the main features, risks and costs of the agreement at the precontractual stage, and 

(bb) any advertising of the agreement is fair, clear and not misleading; or

(c) the agreement was entered into before 21st March 2016.

(3) Subject to paragraph (8), a credit agreement is an exempt agreement if-

(a) it is a borrower-lender agreement,

(b) it is an agreement of a kind offered to a particular class of individual or relevant recipient of credit and not offered to the public generally,

(c) it provides that the only charge included in the total charge for credit is interest,

(d) interest under the agreement may not at any time be more than the sum of one per cent and the highest of the base rates published by the banks specified in paragraph (7) on the date 28 days before the date on which the interest is charged, and

(e) paragraph (5) does not apply to the agreement.

(4) Subject to paragraph (8), a credit agreement is an exempt agreement if-

(a) it is a borrower-lender agreement,

(b) it is an agreement of a kind offered to a particular class of individual or relevant recipient of credit and not offered to the public generally,

(c) it does not provide for or permit an increase in the rate or amount of any item which is included in the total charge for credit,

(d) the total charge for credit under the agreement is not more than the sum of one per cent and the highest of the base rates published by the banks specified in paragraph (7) on the date 28 days before the date on which the charge is imposed, and

(e) paragraph (5) does not apply to the agreement.

(5) This paragraph applies to an agreement if-

(a) the total amount to be repaid by the borrower to discharge the borrower's indebtedness may vary according to a formula which is specified in the agreement and which has effect by reference to movements in the level of any index or other factor, or

(b) the agreement-

(i) is not

(aa) secured on land, or 

(bb) offered by a lender to a borrower as an incident of the borrower's employment with the lender or with an undertaking in the same group as the lender; and

(ii) does not meet the general interest test.

(6) For the purposes of paragraphs (5) and (8), an agreement meets the general interest test if-

(a) the agreement is offered under an enactment with a general interest purpose, and

(b) the terms on which the credit is provided are more favourable to the borrower than those prevailing on the market, either because the rate of interest is lower than that prevailing on the market, or because the rate of interest is no higher than that prevailing on the market but the other terms on which credit is provided are more favourable to the borrower.

(7) The banks specified in this paragraph are-

(a) the Bank of England;

(b) Bank of Scotland;

(c) Barclays Bank plc;

(d) Clydesdale Bank plc;

(e) Co-operative Bank Public Limited Company;

(f) Coutts & Co;

(g) National Westminster Bank Public Limited Company;

(h) the Royal Bank of Scotland plc.

(8) A credit agreement to which subsection (2) of section 423 A of the Act applies which is entered into on or after 21st March 2016 is an exempt agreement pursuant to paragraph (3) or (4) only if-

(a) the agreement meets the general interest test;

(b) the borrower receives timely information on the main features, risks and costs of the agreement at the pre-contractual stage; and

(c) any advertising of the agreement is fair, clear and not misleading.

(9) In this article "bridging loan" means a mortgage agreement that-

(a) is of no fixed duration or is due to be repaid within 12 months, and

(b) is used by a consumer, within the meaning given by section 423A(4) of the Act, as a temporary financing solution while transitioning to another financial arrangement for the immovable property concerned.'

[12] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art.60H is entitled 'Exempt agreements: exemptions relating to the nature of the borrower' and presently reads:

'(1) A credit agreement is an exempt agreement for the purposes of this Chapter if-

(a) the borrower is an individual,

(b) the agreement is either-

(i) secured on land, or

(ii) for credit which exceeds £60,260 and, if entered into on or after 21st March 2016, is for a purpose other than-

(aa) the renovation of residential property,

(c) the agreement includes a declaration made by the borrower which provides that the borrower agrees to forgo the protection and remedies that would be available to the borrower if the agreement were a regulated credit agreement and which complies with rules made by the FCA for the purposes of this paragraph,

(d) a statement has been made in relation to the income or assets of the borrower which complies with rules made by the FCA for the purposes of this paragraph,

(e) the connection between the statement and the agreement complies with any rules made by the FCA for the purposes of this paragraph (including as to the period of time between the making of the statement and the agreement being entered into), and

(f) a copy of the statement was provided to the lender before the agreement was entered into.

(1A) Article 4(4B) does not apply to an agreement which is exempt under paragraph (1), the purpose of which is to acquire or retain property rights in land or in an existing or projected building, and-

(a) a declaration has been made by the borrower which either-

(i) provides that the borrower is UK resident, or

(ii) provides that the borrower is treated as present in the United Kingdom,

(b) a copy of that declaration was provided to the lender before the agreement was entered into, and

(c) the agreement is entered into on or after 21st July 2022.

(1B) For the purposes of paragraph (1A), a borrower is "UK resident" if-

(a) the borrower is present in the United Kingdom on at least 183 days during the continuous period of 365 days ending with the date the agreement is entered into, or

(b) the spouse or civil partner of the borrower-

(i) is living with the borrower on the date the agreement was entered into, and

(ii) is present in the United Kingdom on at least 183 days during the continuous period of 365 days ending with the date the agreement is entered into.

(1C) For the purposes of paragraph (1A), a borrower is treated as present in the United Kingdom if, on the date the agreement was entered into, the borrower-

(a) is in Crown employment, and

(b) is present in a country or territory outside the United Kingdom for the purpose of performing activities in the course of that employment, or

(c) is the spouse or civil partner of an individual who-

(i) is in Crown employment,

(ii) is present in a country or territory outside the United Kingdom for the purpose of performing activities in the course of that employment, and

(d) is living with their spouse or civil partner.

(1D) References in this article to a borrower being present in the United Kingdom on a day are to the borrower being present in the United Kingdom at the end of that day.

(1E) Individuals who are married to, or are civil partners of, each other are treated, for the purposes of this article, as living together unless-

(a) they are separated under an order of a court of competent jurisdiction,

(b) they are separated by deed of separation, or

(c) they are in fact separated in circumstances in which the separation is likely to be permanent.

(1F) For the purposes of this article, "Crown employment" means employment under or for the purposes of a government department or any officer or body exercising on behalf of the Crown functions conferred by a statutory provision.'

[12a] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001/544, art.61A is entitled 'Mortgage contracts which are not regulated mortgage contracts' and art.61A(1) and (2) read:

'(1) A contract falls within this paragraph if it is-

(a) a regulated home purchase plan;

(b) a limited payment second charge bridging loan;

(c) a second charge business loan;

(d) an investment property loan;

(e) an exempt consumer buy-to-let mortgage contract;

(f) an exempt equitable mortgage bridging loan; or

(g) an exempt housing authority loan.

(2) A contract falls within this paragraph if-

(a) it is a limited interest second charge credit union loan;

(b) the borrower receives timely information on the main features, risks and costs of the contract at the pre-contractual stage; and

(c) any advertising of the contract is fair, clear and not misleading.'

For completeness, the rest of art.61A of Financial Services and Markets Act 2000 (Regulated Activities) Order 2001/544 is set out below:

'(3) For the purposes of this article, if an agreement includes a declaration which-

(a) is made by the borrower, and

(b) includes-

(i) a statement that the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower,

(ii) a statement that the borrower understands that the borrower will not have the benefit of the protection and remedies that would be available to the borrower under the Act if the agreement were a regulated mortgage contract under the Act, and

(iii) a statement that the borrower is aware that if the borrower is in any doubt as to the consequences of the agreement not being regulated by the Act, then the borrower should seek independent legal advice, the agreement is to be presumed to have been entered into by the borrower wholly or predominantly for the purposes specified in sub-paragraph (b)(i) unless paragraph (4) applies.

(4) This paragraph applies if, when the agreement is entered into-

(a) the lender (or, if there is more than one lender, any of the lenders), or

(b) any person who has acted on behalf of the lender (or, if there is more than one lender, any of the lenders) in connection with the entering into of the agreement, knows or has reasonable cause to suspect that the agreement is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

(5) For the purposes of this article a borrower is to be regarded as entering into an agreement for the purposes of a business carried on, or intended to be carried on, by the borrower if the agreement is a buy-to-let mortgage contract and-

(a)

(i) the borrower previously purchased, or is entering into the contract in order to finance the purchase by the borrower of, the land subject to the mortgage;

(ii) at the time of the purchase the borrower intended that the land would be occupied as a dwelling on the basis of a rental agreement and would not at any time be occupied as a dwelling by the borrower or by a related person, or where the borrower has not yet purchased the land the borrower has such an intention at the time of entering into the contract; and

(iii) where the borrower has purchased the land, since the time of the purchase the land has not at any time been occupied as a dwelling by the borrower or by a related person; or

(b) the borrower is the owner of land, other than the land subject to the mortgage, which is-

(i) occupied as a dwelling on the basis of a rental agreement and is not occupied as a dwelling by the borrower or by a related person; or

(ii) secured by a mortgage under a buy-to-let mortgage contract.

(6) For the purposes of this article-

“borrower” and “lender” have the meaning set out in article 61(3) (regulated mortgage contracts); “borrower-lender agreement”, “borrower-lender-supplier agreement”, “credit union” and “total charge for credit” have the meanings set out in article 60L (interpretation of Chapter 14A);

“bridging loan” has the meaning given by article 60G(9); “buy-to-let mortgage contract” has the meaning given in article 4 of the Mortgage Credit Directive Order 2015 (interpretation of Part 3); “exempt consumer buy-to-let mortgage contract” is a contract that, at the time it is entered into, is a consumer buy-to-let mortgage contract within the meaning of article 4 of the Mortgage Credit Directive Order 2015 and-

(a) is an agreement to which section 423A(3) of the Act applies; or

(b) is a bridging loan;

“exempt equitable mortgage bridging loan” is a contract that-

(a) is a bridging loan;

(b) is secured by an equitable mortgage on land; and

(c) is an exempt agreement within the meaning of article 60B(3) (regulated credit agreements) by virtue of article 60E(2) (exempt agreements: exemptions relating to the nature of the lender);

“exempt housing authority loan” is a contract that-

(a) provides for credit to be granted by a housing authority within the meaning of article 60E (exempt agreements: exemptions relating to the nature of the lender); and

(b) if it is entered into on or after 21st March 2016-

(i) is an agreement to which section 423A(3) of the Act applies,

(ii) is a bridging loan, or

(iii) is a restricted public loan within the meaning of article 60HA (exempt agreements: provision qualifying articles 60E, 60F and 60H), in respect of which the borrower receives timely information on the main features, risks and costs at the pre-contractual stage, and any advertising is fair, clear and not misleading;

“investment property loan” is a contract that, at the time it is entered into, meets the conditions in paragraphs (i) to (iii) of article 61(3)(a) and the following conditions-

(a) less than 40% of the land subject to the mortgage is used, or intended to be used, as or in connection with a dwelling by the borrower or (in the case of credit provided to trustees) by an individual who is a beneficiary of the trust, or by a related person; and

(b) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower; “limited payment second charge bridging loan” is a contract that, at the time it is entered into, meets the conditions in paragraphs (i) to (iii) of article 61(3)(a) and the following conditions-

(a) it is a borrower-lender-supplier agreement financing the purchase of land;

(b) it is used by the borrower as a temporary financing solution while transitioning to another financial arrangement for the land subject to the mortgage;

(c) the mortgage ranks in priority behind one or more other mortgages affecting the land in question; and

(d) the number of payments to be made by the borrower under the contract is not more than four;

“limited interest second charge credit union loan” is a contract that, at the time it is entered into, meets the conditions in paragraphs (i) to (iii) of article 61(3)(a) and the following conditions-

(a) it is a borrower-lender agreement;

(b) the mortgage ranks in priority behind one or more other mortgages affecting the land in question;

(c) the lender is a credit union; and

(d) the rate of the total charge for credit does not exceed 42.6 per cent;

“payment” has the meaning set out in article 60F(8) (exempt agreement: exemptions relating to number of repayments to be made);

“regulated home purchase plan” has the meaning set out in article 63F(3)(a) (entering into and administering regulated home purchase plans);

“related person” in relation to the borrower or (in the case of credit provided to trustees) a beneficiary of the trust, means-

(a) that person's spouse or civil partner;

(b) a person (whether or not of the opposite sex) whose relationship with that person has the characteristics of the relationship between husband and wife; or

(c) that person's parent, brother, sister, child, grandparent or grandchild;

“second charge business loan” is a contract that, at the time it is entered into, meets the conditions in paragraphs (i) to (iii) of article 61(3)(a) and the following conditions-

(a) the lender provides the borrower with credit exceeding £25,000;

(b) the mortgage ranks in priority behind one or more other mortgages affecting the land in question; and

(c) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.'

[13] For a brief article on statutory interpretation, click here.

[14] Financial Services and Markets Act 2000, section 419 is entitled 'Carrying on regulated activities by way of business' and reads:

'(1) The Treasury may by order make provision-

(a) as to the circumstances in which a person who would otherwise not be regarded as carrying on a regulated activity by way of business is to be regarded as doing so;

(b) as to the circumstances in which a person who would otherwise be regarded as carrying on a regulated activity by way of business is to be regarded as not doing so.

(2) An order under subsection (1) may be made so as to apply-

(a) generally in relation to all regulated activities;

(b) in relation to a specified category of regulated activity; or

(c) in relation to a particular regulated activity.

(3) An order under subsection (1) may be made so as to apply-

(a) for the purposes of all provisions;

(b) for a specified group of provisions; or

(c) for a specified provision.

(4) “Provision” means a provision of, or made under, this Act.

(5) Nothing in this section is to be read as affecting the provisions of section 428(3).'

[15] The non-statutory Explanatory Note, accompanying Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177), states:

'This Order makes provision as to circumstances in which persons are, or are not, to be regarded as carrying on regulated activities by way of business for the purposes of the Financial Services and Markets Act 2000 (“the Act”). An activity is a “regulated activity” for the purposes of the Act if it is an activity of a specified kind, and is carried on by way of business in relation to an investment of a specified kind. The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) specified kinds of activity and kinds of investment for these purposes. Section 19 of the Act prohibits persons who are not authorised or exempt from carrying on any regulated activity in the United Kingdom. Contravention of that prohibition is a criminal offence.

Articles 2 and 3 make provision as to the circumstances in which a person who accepts deposits, or carries on certain kinds of dealing and other investment activities, is not to be regarded as doing so by way of business. Article 4 provides that a person who manages the assets of an occupational pension scheme is to be regarded as doing so by way of business except in certain specified circumstances.'

[16] The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177) ('2001/1177 Order') contains art.1 'interpretation' then 9 substantive articles:

(1) art. 2, entitled 'Deposit taking business';

(2) art. 3, entitled 'Investment business';

(3) art. 3A, entitled 'Arranging and advising on regulated mortgage contracts' (written out below);

(4) art. 3B, entitled 'Arranging and advising on regulated home reversion plans';

(5) art. 3C, entitled 'Arranging and advising on regulated home purchase plans';

(6) art. 3D, entitled 'Arranging and advising on regulated sale and rent back agreements';

(7) art. 3E, entitled 'Debt adjusting, debt-counselling etc. by not-for-profit bodies';

(8) art. 4, entitled 'Managing investments: occupational pension schemes';

(9) art. 4A, entitled 'Administering a benchmark'.

As stated, the 2001/1171 Order does not seem relevant to the focus of this article, but it is noted here that:

(1) the FCA has issued guidance on these: in its Perimeter Guidance manual (PERG); 

(2) art.3A of 2001/1177 Order could perhaps have some marginal relevance. Art3A is entitled 'Arranging and advising on regulated mortgage contracts' and reads:

'A person is not to be regarded as carrying on by way of business an activity of the kind specified by-

(a) article 25A of the Regulated Activities Order (arranging regulated mortgage contracts);

(b) article 53A of that Order (advising on regulated mortgage contracts); or

(c) article 64 of that Order (agreeing), 

so far as relevant to any of the articles mentioned in sub-paragraphs (a) and (b), unless he carries on the business of engaging in that activity.'

The 'Regulated Activities Order' is defined in 2001/1177 Order. In 2001/117 Order, art.1, entitled 'Citation, commencement and interpretation', there is art.1(2), which contains the following (so far as material):

'(2) In this Order-

(a) the “Regulated Activities Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001'

Lord Neuberger (with whom Smith LJ; Elias LJ agreed) in Helden v Strathmore Ltd [2011] EWCA Civ 542 said, at paragraph 67:

'The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177) (“the Business Order”) limits the circumstances in which arranging and advising on regulated mortgage contracts will constitute a “regulated activity”. Article 3A of the Business Order (as inserted by article 25 of the 2003 Order) states as follows:

“A person is not to be regarded as carrying on by way of business an activity of the kind specified by (a) article 25A of the Regulated Activities Order (arranging regulated mortgage contracts); (b) article 53A of that order (advising on regulated mortgage contracts); or (c) article 64 of that order (agreeing), so far as relevant to any of the articles mentioned in sub-paragraphs (a) and (b), unless he carries on the business of engaging in that activity.”'

[17] In the Court of Appeal (Lord Neuberger MR; Smith LJ; Elias LJ) in Helden v Strathmore Ltd [2011] EWCA Civ 542; [2011] Bus. L.R. 1592, an appeal by the borrower against Newey J's first instance decision, was dismissed, save in respect to an irrelevant (for present purposes) point about costs (contractual indemnity costs vs normal standard costs being appropraite)

[18] In Helden v Strathmore Ltd [2010] EWHC 2012, High Court, Newey J reached this conclusion at paragraph 85, during this discussion on the width/meaning of the component /phrase 'carried on by way of business'. Newey J said, at paragraphs 83 to 86:

'The parties referred me, too, to the FSA's Perimeter Guidance Manual (PERG). As is stated in the manual itself, this merely represents the FSA's views and does not bind the courts. Comments made in the manual are still of interest. With regard to whether an activity is “carried on by way of business”, the FSA expresses the following view (in PERG 2.3.3G):

“Whether or not an activity is carried on by way of business is ultimately a question of judgment that takes account of several factors (none of which is likely to be conclusive). These include the degree of continuity, the existence of a commercial element, the scale of the activity and the proportion which the activity bears to other activities carried on by the same person but which are not regulated. The nature of the particular regulated activity that is carried on will also be relevant to the factual analysis.”

As for when a person “carries on the business of engaging in” an activity, PERG 4.3.6G states as follows:

“The ‘carrying on the business’ test in the Business Order is a narrower test than that of carrying on regulated activities ‘by way of business’ in section 22 of the Act as it requires the regulated activities to represent the carrying on of a business in their own right. Whether or not the business test is satisfied in any particular case is ultimately a question of judgment that takes account of a number of factors (none of which is likely to be conclusive). The nature of the particular regulated activity that is carried on will also be relevant to the factual analysis. The relevant factors include: (1) the degree of continuity; (2) the existence of a commercial element; and (3) the scale of the activity and, for the ‘by way of business’ test, the proportion which the activity bears to the other activities carried on by the same person but which are not regulated. In the case of the ‘carrying on the business’ test, these factors will need to be considered having regard to all the activities together.”

The FSA suggests (in PERG 4.3.3G) that the difference between the two tests “should have little practical effect”. However, it goes on to note (in PERG 4.3.7G) as follows:

“The main factor that might cause an activity to satisfy the ‘by way of business’ test in section 22 but not the narrower ‘carrying on the business’ test in the Business Order is that of frequency or regularity. As a general rule, the activity would need to be undertaken with some degree of frequency or regularity to satisfy the narrower ‘carrying on the business’ test. Conversely, the ‘by way of business’ test in section 22 could be satisfied by an activity undertaken on an isolated occasion (provided that the activity would be regarded as done by ‘way of business’ in all other respects).”

Taken in isolation, it may be that the phrase “an activity of a specified kind which is carried on by way of business”, as used in section 22(1) of FSMA, could be taken to refer to carrying on the “activity of a specified kind” as a business and, hence, to apply only where the activity of itself represents a business. Such a construction would, however, mean that there was no real distinction between (a) an activity “carried on by way of business” (within section 22(1) ) and (b) carrying on “the business of engaging in that activity” (within, say, article 3A of the Business Order ). Yet I agree with the FSA that the “carrying on the business test” in the Business Order is supposed to be “a narrower test than that of carrying on regulated activities ‘by way of business’ in section 22 ”. As the FSA observes, the former test “requires the regulated activities to represent the carrying on of a business in their own right”. The section 22 test, in contrast, cannot be intended to mean that the relevant activity should itself represent a business. Section 22 must extend to cases where an “activity of a specified kind” is carried on in the course of a wider business, not limited to undertaking that activity.

Suppose, to take an example with similarities to the present case, that a money lender whose dealings did not normally fall within FSMA (say, because most loans were to companies) entered into “regulated mortgage contracts” from time to time. It seems to me that section 22 would be capable of applying to the “regulated mortgage contract” transactions. That view is, as I see it, consistent with the FSA's comment (see para 84 above) that “the ‘by way of business’ test in section 22 could be satisfied by an activity undertaken on an isolated occasion”. There may possibly be a tension between that comment and the fact that the FSA identifies (see para 83 above) “the proportion which the [regulated] activity bears to the other activities carried on by the same person but which are not regulated” as a factor for the “by way of business” test. Be that as it may, I doubt whether “the proportion which the [regulated] activity bears to the other activities carried on by the same person but which are not regulated” would be of importance in a case such as I am assuming in this paragraph.'

[19] In Helden v Strathmore Ltd [2011] EWCA Civ 542, Lord Neuberger MR, under the heading 'The effect of the 2000 Act on the loans: “carried on by way of business', said, at paragraph 37:

'Article 3A of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177) (as inserted by article 25 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 1) Order 2003 ), provides that a “person is not to be regarded as carrying on by way of business an activity … unless he carries on the business of engaging in that activity”. As the judge explained [2011] Bus LR 59, para 68:

“In this context, as in some others within the financial services legislation, a distinction is drawn between (a) an activity ‘carried on by way of business’ and (b) carrying on ‘the business of engaging in that activity’. Whereas arranging or advising on regulated mortgage contracts will be a specified activity only if the person in question ‘carries on the business of engaging in that activity’ (within the meaning of article 3A …), ‘entering into a regulated mortgage contract as lender’ or ‘administering a regulated mortgage contract’ is a specified activity if the activity is merely ‘carried on by way of business’ (within section 22 of the Act) (provided that, in the case of ‘administering a regulated mortgage contract’, the relevant contract was ‘entered into by way of business’: see article 61(2) …).”

[20] In Helden v Strathmore Ltd [2010] EWHC 2012 ('Strathmore HC'), High Court, Newey J held that 'the lending to [the borrower] was “carried on by way of business” within the meaning of section 22' (paragraph 89). He said his reasons for so holding, were (separated out into bullet points as separate paragraphs):

(Mr Helden was the claimant borrower property developer; Strathmore Ltd was the defendant lender - whose only shareholders were Peter Ashton and Pauline Ashton; Mr Ashton also set up Sandworth Ltd; Mr Jordan was an experienced house builder and property developer, who joined Mr Helden; Mr Helden borrowed money from Strathmore to fund the purhcase of a residential property (58 Chelsea Crescent); in the Court of Appeal in Helden v Strathmore Ltd [2011] EWCA Civ 542, Lord Neuberger MR, at paragraph 40, recorded an acceptance by Strathmore's counsel, that '...the issue had to be judged by treating the Ashtons, Strathmore and Sandworth as a composite unit.'; Mr Helden/Mr Jordan held the shares in C & J Construction Ltd ('C&J') 50/50)

'(i) Even excluding loans to members of the Ashton family, Strathmore/Sandworth made a sizeable number of loans. Loans made to Mr Helden, Mr Jordan and companies associated with them are detailed earlier in this judgment. Mr Harrison explained that he was assisted with the purchase of around 100 properties, albeit that many of the properties were acquired in portfolios of up to 25 properties. 

(ii) The loans were made over a period of years and with some regularity. The first loan to Mr Harrison dates from 2002. Thereafter ... Mr Ashton ... “made a series of very short term loans to [Mr Harrison] to assist him to build up a buy to let portfolio”. Money was advanced to Mr Helden, Mr Jordan and companies associated with them between 2004 and 2006. 

(iii) Substantial amounts of money were advanced. Sandworth lent as much as £5.4m in connection with the purchase of 63, Eaton Square. C & J came to owe upwards of £3m on the security of 23 Catherine Place. Mr Helden was lent more than £1m. Mr Harrison reckoned that he never owed more than about £1m at any time, but £1m is a considerable amount. 

(iv) The loans were made with a view to profit. ... Mr Ashton referred more than once to having tried to get the best possible return on his money. He also spoke of using spare funds to obtain a better rate of interest than he would obtain by leaving the money in a bank. 

(v) Mr Ashton came to meet Mr Helden and Mr Jordan because they were seeking funding. The Ashtons' friendship with Mr Helden and Mr Jordan grew out of their financial relationship, not the other way round. Likewise, the relationship between Mr Harrison and the Ashtons began as a “purely professional” one ...

(vi) It is possible to exaggerate the informality with which matters were conducted. Solicitors were often instructed. The loans were generally secured. Mr Ashton kept a record, even if in manuscript, of the transactions. In any case, informality is not necessarily inconsistent with business. 

(vii) The loans to Mr Helden formed part of a chain of not dissimilar transactions, albeit that they were the only ones involving “activity of a specified kind”.

(viii) Strathmore is a limited company with.. commercial objects.'

More widely, Newey J in Strathmore HC went on to hold, at paragraph 90, that:

'In the circumstances, I take the view that the lending to [the borrower] did involve breach of the “general prohibition”. As a result, the relevant agreements must be unenforceable by Strathmore unless relief is granted under section 28(3) of FSMA.'

In the Court of Appeal in Helden v Strathmore Ltd [2011] EWCA Civ 542, Lord Neuberger MR (with whom Smith LJ and Elias LJ agreed) said, at paragraphs 40 to 42:

'The judge's conclusion on this issue is to be found at [2011] Bus LR 59, paras 87–89. In the first two of those paragraphs the judge set out a concession and the principal submissions made on behalf of Strathmore on this point, and repeated before us. [counsel for the defendant] realistically accepted that the issue had to be judged by treating the Ashtons, Strathmore and Sandworth as a composite unit. However, he pointed out (i) that, apart from the loans to Mr Helden, no other regulated activity had been carried on by them, (ii) that those to whom they lent money were friends and family, (iii) that all such transactions were conducted informally, (iv) that there was no business “set-up”, and (v) that Mr Ashton saw himself as making personal investments rather than carrying on a business.

The judge none the less concluded, at para 89, that the making of each of the three loans to Mr Helden involved the “[carrying] on by way of business” within the meaning of section 22 of the 2000 Act, for the following reasons:

“(i) Even excluding loans to members of the Ashton family, Strathmore/Sandworth made a sizeable number of loans … Mr Harrison explained that he was assisted with the purchase of around 100 properties, albeit that many of the properties were acquired in portfolios of up to 25 properties. (ii) The loans were made over a period of years and with some regularity. The first loan to Mr Harrison dates from 2002. Thereafter, as Mr Ashton said in his witness statement, he ‘made a series of very short term loans to [Mr Harrison] to assist him to build up a buy to let portfolio’. Money was advanced to Mr Helden, Mr Jordan and companies associated with them between 2004 and 2006. (iii) Substantial amounts of money were advanced. Sandworth lent as much as £5.4 million in connection with the purchase of [Belgravia]. C & J came to owe upwards of £3m on the security of … Catherine Place. Mr Helden was lent more than £1m. Mr Harrison reckoned that he never owed more than about £1m at any time, but £1m is a considerable amount. (iv) The loans were made with a view to profit. During his oral evidence, Mr Ashton referred more than once to having tried to get the best possible return on his money … (v) Mr Ashton came to meet Mr Helden and Mr Jordan because they were seeking funding. The Ashtons' friendship with Mr Helden and Mr Jordan grew out of their financial relationship, not the other way round. Likewise, the relationship between Mr Harrison and the Ashtons began as a ‘purely professional’ one … (vi) It is possible to exaggerate the informality with which matters were conducted. Solicitors were often instructed. The loans were generally secured. Mr Ashton kept a record, even if in manuscript, of the transactions. In any case, informality is not necessarily inconsistent with business. (vii) The loans to Mr Helden formed part of a chain of not dissimilar transactions, albeit that they were the only ones involving ‘activity of a specified kind’. (viii) Strathmore is a limited company with, I understand, commercial objects.”

No attack has been, or I think could be, made on the accuracy of the eight factors which the judge identified in that passage. It is, in my opinion, impossible in those circumstances to conclude that the judge was wrong, or at least not entitled as a matter of law, to conclude that, taking Strathmore together with Sandworth and the Ashtons, the making of the main loan and the 2006 charge were “an activity carried on by way of business”, on the ground that Strathmore “carrie[d] on the business of engaging in that activity”.' [bold added].

[21] In Jackson v Ayles [2021] EWHC 995 (Ch); [2021] BPIR 816 ('Jackson'), Chief ICC Judge Briggs said, at paragraphs 35:

'Although the relationship between bank and customer is that of debtor-creditor, [the lender's] analogy between lending money to the [the borrowers] and placing money on deposit is disingenuous. First, [the lender] described in cross-examination how he would carry out his own investigations as to the viability of the building project [one of the borrowers] was embarking on before lending. [The lender] would not do the same of a bank which would use the deposit for its own purpose. He would not lend if he thought he would not receive the bargained return from the building project. Secondly, he only lent on a secured basis. He would not obtain security from a bank. Thirdly, he was able to negotiate or insist on the terms of the bargain. He would have not have been able to do so when making a deposit. Lastly he insisted on compound interest returns. The investigations, negotiations and taking of security are all indicators that part of his business was making a profit on loans made.'

As a result, overall, Chief ICC Judge Briggs in Jackson said, at paragraphs 36:

'Accordingly, as [the lender] was not an 'authorised person' or an 'exempt person' he was therefore barred from carrying on a 'regulated activity', did carry on a 'regulated activity' in the course of a wider business and was in breach of the general prohibition. It follows that the Weymouth Loan is 'unenforceable' pursuant to section 26(1) FSMA.' 

Chief ICC Judge Briggs in Jackson then went on to consider, at paragraphs 37 to 56, under the heading 'Just and Equitable in the circumstances', a s.28(3) of FSMA 2000 application (which was rejected - paragraph 58). 

[21a] Financial Services and Markets Act 2000, s. 31 is entitled 'Authorised persons' and reads:

'(1) The following persons are authorised for the purposes of this Act-

(a) a person who has a Part 4A permission to carry on one or more regulated activities;

...

(d) a person who is otherwise authorised by a provision of, or made under, this Act.'

(2) In this Act “authorised person” means a person who is authorised for the purposes of this Act.'

Financial Services and Markets Act 2000, s. 39 is entitled 'Exemption of appointed representatives.' and reads:

'(1) If a person (other than an authorised person)-

(a) is a party to a contract with an authorised person (“his principal”) which-

(i) permits or requires him to carry on business of a prescribed description, and

(ii) complies with such requirements as may be prescribed, and

(b) is someone for whose activities in carrying on the whole or part of that business his principal has accepted responsibility in writing, he is exempt from the general prohibition in relation to any regulated activity comprised in the carrying on of that business for which his principal has accepted responsibility.

(1ZA) But a person is not exempt as a result of subsection (1) if subsection (1A), (1AA) or (1BA) applies to the person.

(1A) This subsection applies to a person -

(a) if his principal is an investment firm, a qualifying credit institution, or a firm which has a Part 4A permission to carry on regulated activities as an exempt investment firm within the meaning of regulation 8 of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), and

(b) so far as the business for which his principal has accepted responsibility is investment services business, unless he is entered on the applicable register.

(1AA) This subsection applies to a person-

(a) if the person's principal is an investment firm or a qualifying credit institution, and

(b) so far as the business for which the person's principal has accepted responsibility is selling, or advising clients on, structured deposits, unless the person is entered on the applicable register.

(1B) In subsections (1A) and (1AA) the “applicable register” is the record maintained by the FCA by virtue of section 347(1)(ha).

(1BA) This subsection applies to a person (“A”)

(a) if A's principal is a mortgage intermediary, and

(b) so far as the business for which A's principal has accepted responsibility is of a kind that

(i) is specified in article 25A (arranging regulated mortgage contracts), article 36A (credit broking), article 53A (advising on regulated mortgage contracts) or article 53DA (advising on regulated credit agreements the purpose of which is to acquire land) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; and

(ii) relates to mortgage agreements entered into on or after 21st March 2016,

unless A meets the requirements of subsection (1BB).

(1BB) The requirements of this subsection are-

(a) that A is entered on the record maintained by the FCA by virtue of section 347(1)(hb);

(b) that A's principal is a person who has a Part 4A permission to carry on one or more of the regulated activities mentioned in subsection (1BA)(b)(i); and

(c) that A's principal is not a tied mortgage intermediary.

(1C) Subsection (1D) applies where an authorised person (“A”) -

(a) has permission under Part 4A, or permission resulting from any other provision of this Act, only in relation to one or more qualifying activities,

(b) is a party to a contract with another authorised person (A's “principal”) which-

(i) permits or requires A to carry on business of a prescribed description (“the relevant business”), and

(ii) complies with such requirements as may be prescribed, and

(c) is someone for whose activities in carrying on the whole or part of the relevant business A's principal has accepted responsibility in writing.

(1D) Sections 20(1) and (1A) and 23(1A) do not apply in relation to the carrying on by A of a relevant additional activity.

(1E) In subsections (1C) and (1D) -

(a) “qualifying activity” means a regulated activity which is of a prescribed kind and relates -

(i) to rights under a contract of the kind mentioned in paragraph 23 of Schedule 2, other than one under which the obligation of the borrower to repay is secured on land, or

(ii) to rights under a contract of the kind mentioned in paragraph 23B of that Schedule;

(b) “relevant additional activity” means a regulated activity which -

(i) is not one to which A's permission relates, and

(ii) is comprised in the carrying on of the business for which A's principal has accepted responsibility.

(2) In this Act “appointed representative” means -

(a) a person who is exempt as a result of subsection (1), or

(b) a person carrying on a regulated activity in circumstances where, as a result of subsection (1D), sections 20(1) and (1A) and 23(1A) do not apply.

(3) The principal of an appointed representative is responsible, to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility.

(4) In determining whether an authorised person has complied with -

(a) a provision contained in or made under this Act,

(aa) a provision contained in or made under the Securitisation Regulations 2024, or

(b) a qualifying provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order,

anything which a relevant person has done or omitted as respects business for which the authorised person has accepted responsibility is to be treated as having been done or omitted by the authorised person.

(5) “Relevant person” means a person who at the material time is or was an appointed representative by virtue of being a party to a contract with the authorised person.

(6) Nothing in subsection (4) is to cause the knowledge or intentions of an appointed representative to be attributed to his principal for the purpose of determining whether the principal has committed an offence, unless in all the circumstances it is reasonable for them to be attributed to him.

(7) A person carries on "investment services business" if, under the full and unconditional responsibility of only one investment firm on whose behalf the person acts, the person -

(a) promotes investment services or ancillary services to the firm's clients or prospective clients,

(b) receives and transmits instructions or orders from clients in respect of investment services or financial instruments,

(c) places financial instruments, or

(d) provides advice to clients or prospective clients in respect of investment services or financial instruments.

(8) In this section -

"ancillary services" means any of the services and activities listed in Part 3A 25 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);

"financial instruments" means those instruments specified in Part 1 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

"investment services" means any of the services and activities listed in Part 3 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, relating to any of the instruments listed in Part 1 of that Schedule;

"structured deposit" has the meaning given by Article 2.1.23 of the markets in financial instruments regulation.'

[22] Financial Services and Markets Act 2000, s. 20 is entitled 'Authorised persons acting without permission' and reads:

'(1) If an authorised person other than a PRA-authorised person carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission-

(a) given to that person under Part 4A, or

(b) resulting from any other provision of this Act,

he is to be taken to have contravened a requirement imposed on him by the [FCA] 3 under this Act.

(1A) If a PRA-authorised person carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission given to the person under Part 4A or resulting from any other provision of this Act, the person is to be taken to have contravened-

(a) a requirement imposed by the FCA, and

(b) a requirement imposed by the PRA.

(2) A contravention within subsection (1) or (1A)-

(a) does not, except as provided by section 23(1A), make a person guilty of an offence,

(b) does not, except as provided by section 26A, make any transaction void or unenforceable, and

(c) does not, except as provided by subsection (3), give rise to any right of action for breach of statutory duty.

(3) In prescribed cases a contravention within subsection (1) or (1A) is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.

(4) Subsections (1) and (1A) are subject to section 39(1D).

(5) References in this Act to an authorised person acting in contravention of this section are references to the person acting in a way that results in a contravention within subsection (1) or (1A).'

[23] FSMA 2000, s.23, entitled 'Contravention of the general prohibition or section 20(1) or (1A)' and provides:

'(1) A person who contravenes the general prohibition is guilty of an offence and liable–

(a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;

(b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.

(1A) An authorised person (“A”) is guilty of an offence if A carries on a credit-related regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission-

(a) given to that person under Part 4A, or

(b) resulting from any other provision of this Act.

(1B) In this Act “credit-related regulated activity” means a regulated activity of a kind designated by the Treasury by order. 

(1C) The Treasury may designate a regulated activity under subsection (1B) only if the activity involves a person-

(a) entering into or administering an agreement under which the person provides another person with credit,

(b) exercising or being able to exercise the rights of the lender under an agreement under which another person provides a third party with credit, or

(c) taking steps to procure payment of debts due under an agreement under which another person is provided with credit. (1D) But a regulated activity may not be designated under subsection (1B) if the agreement in question is one under which the obligation of the borrower is secured on land.

(1E) “Credit” includes any cash loan or other financial accommodation.

(1F) A person guilty of an offence under subsection (1A) is liable-

(a) on summary conviction, to imprisonment for a term not exceeding the applicable maximum term or a fine not exceeding the statutory maximum, or both;

(b) on conviction on indictment, to imprisonment for a term not exceeding two years, or a fine, or both.

(1G) The “applicable maximum term” is-

(a) in England and Wales, the general limit in a magistrates' court (or 6 months, if the offence was committed before 2 May 2022);

(b) in Scotland, 12 months;

(c) in Northern Ireland, 6 months.

(2) In this Act “an authorisation offence” means an offence under this section.

(3) In proceedings for an authorisation offence it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(4) Subsection (1A) is subject to section 39(1D).

(5) No proceedings may be brought against a person in respect of an offence under subsection (1A) in a case where either regulator has taken action under section 205, 206 or 206A in relation to the alleged contravention within section 20(1) or (1A).'

[24] FSMA 2000 s. 24, is entitled 'False claims to be authorised or exempt' and reads (for England and Wales; Scotland and Northern Ireland is different):

'(1) A person who is neither an authorised person nor, in relation to the regulated activity in question, an exempt person is guilty of an offence if he -

(a) describes himself (in whatever terms) as an authorised person;

(b) describes himself (in whatever terms) as an exempt person in relation to the regulated activity; or

(c) behaves, or otherwise holds himself out, in a manner which indicates (or which is reasonably likely to be understood as indicating) that he is–

(i) an authorised person; or

(ii) an exempt person in relation to the regulated activity.

(2) In proceedings for an offence under this section it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(3) A person guilty of an offence under this section is liable on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding level 5 on the standard scale, or both.'

[25] Two separate passages to quote here from R v Gopee (Dharam) [2019] EWCA Crim 601 ('Gopee'):

(a) trial judge's sentencing remarks. Flaux J for the Court of Appeal in Gopee recalled the trial judge's sentencing remarks. Flaux J said, at paragraphs 42 and 43:

'In sentencing the appellant, the judge set out the facts of the offending and the appellant's conduct, which he described as deliberately flouting the law. The judge found that when the appellant had lost his appeal to the First-tier Tribunal in July 2012 he had known that he could not lawfully carry on the money lending business. He had sought to deal with that situation in two ways: continuing to engage in litigation to enforce loan agreements which he knew were unenforceable, whereas his borrowers did not; and then subsequently constructing a dishonest scheme in an attempt to unlawfully circumvent the regulation. His conduct had involved one dishonest contrivance after another and he had exploited the weaknesses and vulnerabilities of many desperate and vulnerable people.

The figures involved were staggering. Between 2012 and 2015, £1 million or so was lent, £1 million recovered and £1 million still owed by people who believed he had a hold on their homes. The judge said that the offending was separate in relation to counts 1 and 2 on the one hand and 3 and 4 on the other, the later offending being more serious and consumers would have been terrified about losing their homes, not knowing that the appellant could not enforce the agreements in court. The judge noted the evidence at trial about the consequences on the individuals who had been exposed to the appellant's lending. The judge had regard to totality but concluded that the offences were also very distinct from the contempt and so it would not offend justice if they were consecutive to that sentence. The appellant had no credit for plea, but the judge took into account his good character and his wife's medical problems. The judge concluded that the appellant was a deeply flawed individual who thought of no one except himself and his obsession with making money.'

(b) refusing leave to appeal the imposition of the Serious Crime Prevention Order, was reasoned in a separate paragraph, paragraph 65. Flaux J in Gopee, adopted the reasoning given by the single judge in refusing, initially, the application for leave to appeal sentence. At paragraph 65, Flaux J said:

'Likewise we cannot improve on what the single judge said in dismissing the application in relation to the Serious Crime Prevention Order:

"1. The application for the SCPO was authorised by a person holding the rank of Deputy Chief Crown Prosecutor, who had properly delegated authority to make it.

2. Although it may perhaps have been better if the judge had spelt out in terms that he found that the offence was sufficiently serious to be treated as if it was specified under the Act, it is quite clear from the submissions made to them, both orally and in writing, and from the context of his other sentencing remarks, that he had so found.

3. The judge was quite entitled to make the Order without a pre-sentence report. In nearly every case involving consumer credit frauds of this sophistication, the trial judge would be in a far better position than a probation officer to assess the risk presented by the offender.

4. The judge was justified in finding that the applicant presented a high risk of re-offending to the prejudice of vulnerable borrowers having regard to:

(a) The fact that he ignored previous warnings as to his conduct.

(b) That he sought to evade the consequences of losing his licence by devising an ingenious and devious scheme.

(c) Even previous convictions and sentences for contempt had not discouraged him from continuing to operate his schemes. Whereas it might be said that for many defendants, a sentence of immediate imprisonment might offer some prospect of reforming his conduct, his track record made this very unlikely in his case.

(d) His obsessive character, as found by the judge, gave rise to an unusual risk that he would continue to prey upon the public in the future.

(e) In the circumstances, the judge would have been failing to protect the public if he had not made the Order."'

[26] For completeness, FSMA 2000 s. 26, entitled 'Agreements made by unauthorised persons', provides (in its entirety)

''(1) An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.

(2) The other party is entitled to recover-

(a) any money or other property paid or transferred by him under the agreement; and

(b) compensation for any loss sustained by him as a result of having parted with it.

(3) “Agreement” means an agreement-

(a) made after this section comes into force; and

(b) the making or performance of which constitutes, or is part of, the regulated activity in question.

(4) This section does not apply if the regulated activity is accepting deposits.'

[27] In Financial Services and Markets Act 2000, s.27 is entitled 'Agreements made through unauthorised persons' and reads:

'(1) This section applies to an agreement that-

(a) is made by an authorised person (“the provider”) in the course of carrying on a regulated activity,

(b) is not made in contravention of the general prohibition,

(c) if it relates to a credit-related regulated activity, is not made in contravention of section 20, and

(d) is made in consequence of something said or done by another person (“the third party”) in the course of-

(i) a regulated activity carried on by the third party in contravention of the general prohibition, or

(ii) a credit-related regulated activity carried on by the third party in contravention of section 20.

(1ZA) But this section does not apply to a regulated credit agreement or a regulated consumer hire agreement unless the provider knows before the agreement is made that the third party had some involvement in the making of the agreement or matters preparatory to its making.

(1A) An agreement to which this section applies is unenforceable against the other party.

(2) The other party is entitled to recover–

(a) any money or other property paid or transferred by him under the agreement; and

(b) compensation for any loss sustained by him as a result of having parted with it.

(3) “Agreement” means an agreement -

(a) made after this section comes into force; and

(b) the making or performance of which constitutes, or is part of, the regulated activity in question carried on by the provider.

(4) This section does not apply if the regulated activity is accepting deposits.

(5) For the purposes of subsection (1ZA) -

“regulated consumer hire agreement” has the meaning given by article 60N of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);

“regulated credit agreement” has the meaning given by article 60B of that Order.'

[28] Similar to the above, Chief ICC Judge Briggs in Jackson v Ayles [2021] EWHC 995 (Ch); [2021] BPIR 816, summarised s.28 of FSMA 2000 as providing:

'(1) This section applies to an agreement which is unenforceable because of section 26 …

(2) [Deals with the amount of compensation].

(3) If the court is satisfied that it is just and equitable in the circumstances of the case, it may allow -

(a) the agreement to be enforced; or

(b) money and property paid or transferred under the agreement to be retained.

(4) In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must -

(a) if the case arises as a result of section 26, have regard to the issue mentioned in subsection (5); …

(5) The issue is whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement.

…

(7) If the person against whom the agreement is unenforceable-

(a) elects not to perform the agreement, or

(b) as a result of this section, recovers money paid or other property transferred by him under the agreement,

he must repay any money and return any other property received by him under the agreement'

[29] In Barons Finance Ltd v Makanju [2013] EWHC 153 (QB), HHJ Mackie QC in High Court of Justice Queen's Bench Division London Mercantile Court, after recording the claimant Barons Finance contended that no extension of time ought to be granted to the defendant/would-be appellant, because of the 'interests of finality', the Judge said, at paragraph 27:

'While that is an important principle it seems to me to have little weight in the unusual circumstances of this category of case. This is a category where it appears that defendants who have started at the disadvantage of not receiving information which the law required to be provided at the time of the loan, receiving loans in breach of the legal requirements designed to protect them, from a lender who is unlicensed potentially in breach of the criminal law, are then put through a legal process where the lender does not disclose to the Court matters which any lawyer would feel bound to draw to its attention.'

With the prospects of success on the appeal viewed as better than the threshold of a 'real prospect of success' (see paragraphs 18 to 23), an extension of time to appeal, and permission to appeal, were granted.

[30] In Jackson v Ayles [2021] EWHC 995 (Ch); [2021] BPIR 816 ('Jackson'), Chief ICC Judge Briggs said, at paragraphs 20 to 26 (Mr Heldon was the borrower; Strathmore the lender):

'20. It is instructive to see how the Court in Strathmore dealt with the 'just and equitable issue'.

21. The Court found that Strathmore did not appreciate FSMA applied and that it was reasonable for it not to have done so. In this respect the Judge took account of the recent introduction of the provision. He concluded that the lack of appreciation was an important factor in considering the exercise of discretion but not the only factor. Newey J (and the Court of Appeal) reached the conclusion that it was just and equitable to permit enforcement as:

21.1. Mr Helden had benefitted from the use of the property which Strathmore's loans enabled him to buy without making any interest payments or paying any rent;

21.2. The other side of the above coin was that Strathmore received no return for the £1m loan made. It is likely that it could have received some return if a performing investment had been made elsewhere;

21.3. The property had increased substantially in value which would afford Mr Helden a profit (£800,000 gross);

21.4. Strathmore was not willing to make the loan on an unsecured basis;

21.5. Mr Helden had been a mortgage broker and was experienced in property matters. He had not been taken advantage of. The arrangements had been to his advantage since he was able to make lump sum repayments without incurring a penalty;

21.6. Mr Helden preferred not to pursue alternative funding because of his concern that he should be able to make lump sum repayments without penalty …;

21.7. He failed to identify respects in which he would have been better placed if Strathmore had been an 'authorised person' for FSMA purposes; and

21.8. It was not reasonable for the lender to realise that FSMA could apply.

22. It is apparent from these indicators that Court was weighing the respective sophistication and experience of the parties, whether the borrower was taken advantage of, motivation for the borrowing and if he benefited from the transaction. Importantly to my mind, and something I canvassed with counsel in closing submissions, is the language 'just and equitable' in the context of unregulated lending and FSMA. In my judgment Newey J had this in mind when (i) directly addressing the issue of whether Strathmore reasonably believed it was not contravening FSMA and (ii) if the borrower would have been better served if the lender had been an 'authorised person'.

23. In the Court of Appeal Lord Neuberger considered the meaning of "reasonably believed" and indicated that ignorance is unlikely to avail a person relying on section 28(3) FSMA. In doing so he hinted that he might disagree with the approach adopted by Newey J: [47]

"Believing that one is not doing something is simply not the same thing as not believing one is doing something: to believe wrongly that one is not committing an act requires a degree of knowledge as to what that act is or entails, whereas wrongly not believing one is committing an act requires a degree of absence of knowledge, which renders it easier to contend that it would apply where one is ignorant of the existence of the act."

24. Although he thought there was 'considerable force' in that analysis he considered (by contrast) that there was 'some force' [48]:

"In the point that it is unlikely that Parliament could have intended that a person who wrongly, but reasonably, believes that he is not contravening a statute should be better off than a person who was reasonably unaware that the statute applied.

Having said that the answer to that point may be that people who carry on regulated activity and are ignorant of the law, even if reasonably so, should be more at risk because they are more of a danger to the public…"

25. He declined to decide the point because it was unnecessary for him to do so.

26. This is the legal framework within which this application is made.'

Chief ICC Judge Briggs in Jackson went on to state, at paragraph 26 (the last two being relevant for present purposes):

'It will be apparent that there are three questions for the court:

26.1. Was the making of the Weymouth Loan an activity "carried on by way of business" within section 22(1) FSMA;

26.2. If the consequences of section 26(1) FSMA apply is it "just and equitable" to allow the Weymouth Loan to be enforced; and if so

26.3. how should the court exercise its discretion.''

[31] In Jackson v Ayles [2021] EWHC 995 (Ch); [2021] BPIR 816 ('Jackson'), Chief ICC Judge Briggs said, at paragraphs 41 to 46 

(Mr Ayles and Mrs Ayles were the husband and wife borrowers; Mrs Jackson was Mr Ayles trustee in bankruptcy/applicant; Mr Pumphrey was the lender/respondent)

'41. [counsel for the trustee in bankruptcy for Mr Ayles] submits two other factors should be weighed: (i) unsecured creditors now have an interest in the estate of Mr Ayles; and (ii) Mr Pumphrey may have other remedies available to him if he cannot enforce the security. Neither of these are contested. In relation to the first of these I do not find it a powerful factor as the Trustee-in-Bankruptcy merely stands in the shoes of the bankrupt. If the security in favour of Mr Pumphrey made the proceeds of sale in the Weymouth Property unavailable to Mr Ayles it makes it equally unavailable to the Trustee.

42. In my judgment it is not the case, as I think [counsel for the lender] accepted in closing, that Mr and Mrs Ayles have benefited from an increase in the value of properties subject to loans made by Mr Pumphrey. As I have found, Mr Pumphrey benefited disproportionately in respect of Canada Road and Anne Howard Gardens. Mr Ayles will not benefit from any increase in market value in respect of the Weymouth Property due to the compound interest obligation in the Weymouth Loan and the bankruptcy.

43. If the Court permits enforcement of the Weymouth Loan the entire proceeds of sale enures for the benefit of Mr Pumphrey.

44. The respective sophistication and experience of the parties is an important factor. If one stands back from the situation it is hard to see how, with the long build or renovation times for each project, it was ever likely that Mr Ayles would make a profit on a building venture funded by Mr Pumphrey. That may be particularly so when Mr Pumphrey asked Mr Ayles to assist on a building site of his own while working on the Canada Road site. Each month that passed reduced the chance of a fair outcome for Mr Ayles.

45. Factually, Mr Ayles has not profited from any of the building ventures funded by Mr Pumphrey. Mr Pumphrey would say that Mr Ayles knew of the bargain and any delays were his. That is not the whole story, as the Canada Road site venture demonstrates. These are finely balanced matters.'

[32] In Barons Finance Limited v Ul Haq [2003] EWCA Civ 595, a permission to appeal hearing before Dyson LJ in the Court of Appeal, Mr Gopee, employee of Barons Finance Ltd, argued for Barons Finance Limited, that Barons Finance Limited should be granted permission to appeal, despite the existance of Dimond v Lovell [2000] 2 All ER 897, because

'...everything changed with the coming into force of the Human Rights Act 1998, so that, as I understand his submission, the decision in Dimond v Lovell is no longer good law, particularly having regard to the declaration of incompatibility granted in Wilson v First County Trust.' (paragraph 9)

On this, Dyson LJ said, at paragraph 10:

'In my judgment, that argument is misconceived. The decision remains good law. The principle enunciated by Lord Hoffmann holds as well today as it did before the coming into force of the Human Rights Act 1998. In any event, as I have indicated, the declaration of incompatibility has no force: see section 4(6) of the 1998 Act. The relevant provisions of the 1974 Act continue to have full force and effect until and unless Parliament decides to amend them.'

[33] Similarly, in Barons Finance Limited v Makanju [2013] EWHC 153 (QB) Queen's Bench Division (Mercantile Court) (London), HHJ Mackie QC was considering whether to grant permission to appeal to a homeowner, against a possession order ('judgments obtained') in favour of Barons Finance Limited. The point had arise whether Barons Finance Limited was operating an unauthorised (that is, without a licence) money lending business, contrary to the then in force and governing Consumer Credit Act 1974 (contrary to s.21 and s.39 of the Consumer Credit Act 1974). Under the heading 'Unjust enrichment', the Judge said, at paragraph 28 (the claimant was Barons Finance Limited):

'Another argument put forward by the Claimant in these cases is that it would be without purpose to reopen judgments obtained, despite their Consumer Credit Act difficulties, because Barons will in any event be able to recover what it says is owed by bringing an action for unjust enrichment. That argument was rejected by the District Judge in Ul Haq:

“on the basis that to have allowed it would in effect have meant that the strict statutory requirements of the Consumer Credit Act could be easily circumvented and in effect had little or no force. Whilst it may be thought that the Claimants suffer an injustice to allow the claim where the Consumer Credit Act requirements have not been met simply could not be correct.”

That view was approved both by the circuit judge and by Lord Justice Dyson and I have informed Mr Gopee before that my own view is precisely the same.'

The Dyson LJ case referred to is Barons Finance Limited v Ul Haq [2003] EWCA Civ 595 (referred to in the footnote above)

In Ghana Commercial Finance Ltd v Sawyer [2014] EWCA Civ 489 ('Sawyer), Christopher Clarke LJ refused two of Mr Gopee's companies (Barons Finance Ltd and Ghana Commercial Finance Ltd (formerly called Ghana Commercial Bunks Ltd) permission to bring a second appeal. On a first appeal, the borrowers' appeals had been allowed and the companies had had their claims for unpaid loan sums + possession orders, dismissed as: 'firstly, that the agreement for a loan secured by a mortgage was a regulated agreement pursuant to section 8 of the Consumer Credit Act 1974. Secondly...the claimants were not acting as agents for Reddy Corporation which did have a licence. Thirdly...Ghana Commercial Bunks and Barons Finance, were either unlicensed lenders or unlicensed credit brokers and, unless they obtained an order under section 65 of the Act from the court, or under section 40 of the Act from the Office of Fair Trading, the court had no power to make a possession order or a money judgment.' (Christopher Clarke LJ, paragraph 9)

One of the issues in Sawyer was whether the Judge had been wrong to refuse permission to amend a pleading, to plead unjust enrichment. Christopher Clarke LJ said, at paragraphs 14 and 15 (reference is made to Dyson LJ's judgment in Barons Finance and Reddy Corporation v Amir Ul Haq [2003] EWCA Civ 595 ('Ul Haq')):

'14. Complaint is made that the judge refused to allow an amendment to make a claim in unjust enrichment and denied any such claim. In this respect, the appellants face the difficulty pointed out by Lewison LJ in refusing leave on paper that, in the case of Dimond v Lovell [2002] 1 AC 384, where a similar argument was rejected, Lord Hoffmann, with whom the other members of the House agreed on this issue, said at page 906F:

"The real difficulty, as it seems to me, is that to treat Mrs Dimond as having been unjustly enriched would be inconsistent with the purpose of section 61(1). Parliament intended that if a consumer credit agreement was improperly executed, then subject to the enforcement powers of the court, the debtor should not have to pay. This meant that Parliament contemplated that he might be enriched and I do not see how it is open to the court to say that this consequence is unjust and should be reversed by a remedy at common law."

Dyson LJ recorded that the judge in that case had held that this decision of the House of Lords barred any claim based on unjust enrichment where the circumstances fell within sections 61(1) and 127(3) of the 1974 Act. He also recorded Mr Gopee's submission that everything had changed with the coming into force of the Human Rights Act so that, it was submitted, the decision of Dimond and Lovell, was no longer good law. He described that argument as misconceived. Such a conclusion as it seems to me applies with even greater force in a case where the agreement is not merely improperly executed but is one made with a creditor who lacks the requisite licence. In the Ul Haq case, Dyson LJ refused Barons Finance and Reddy Corporation permission to appeal.

15. In Wilson v County Trust [2003] All ER 229 the Court of Appeal declared that the provisions of section 127(3) of the 1974 Act, insofar as they prevented a court from making an enforcement order under section 75(1), unless a document containing all the prescribed terms had been signed by the debtor, were incompatible with the rights granted to a creditor by article 6(1) of the Convention and article 1(1) of the first protocol. In Ul Haq Mr Gopee had submitted to Dyson LJ that it was in the light of that decision that Dimond v Lovell was no longer good law. As I say, Dyson LJ had regarded this argument as misconceived, and added:

"In any event, as I have indicated, the declaration of incompatibility has no force (see section 4(6) of the 1998 Human Rights Act). The relevant provisions of the 1974 Act continue to have full force and effect until and unless Parliament decides to amend them."

This observation seems to me to apply with even more force, given that there has been no decision of which I am aware that section 40 of the 1974 Act is incompatible with the Act.'

[33a] In Financial Conduct Authority v London Property Investments (UK) Ltd (t/a LPI Emergency Property Finance) [2024] EWHC 1276 (Ch) ('LPI Emergency Property'), Fancourt J in the High Court, under the heading 'Jurisdiction and law relating to remedies' said, at paragraphs 71 to 76:

'71. Section 380 of the Act provides, so far as material:

"(2) If on the application of the appropriate regulator or the Secretary of State the court is satisfied -

(a) that any person has contravened a relevant requirement, and

(b) that there are steps which could be taken for remedying the contravention,

The court may make an order requiring that person, and any other person who appears to have been knowingly concerned in the contravention, to take such steps as the court may direct to remedy it.

…….

(5) In subsection (2), references to remedying a contravention include references to mitigating its effect."

This type of order is generally known as a "remedial order". Subsection (5) clearly has the effect of widening the power that the court has to make a remedial order. The mitigation provision did not exist in the predecessor statute, the Financial Services Act 1986.

72. Section 382 of the Act provides, so far as material:

"(1) The court may, on the application of the appropriate regulator or the Secretary of State, make an order under subsection (2) if it is satisfied that a person has contravened a relevant requirement, or been knowingly concerned in the contravention of such a requirement, and -

(a) that profits have accrued to him as a result of the contravention; or

(b) that one or more persons have suffered loss or been otherwise adversely affected as a result of the contravention.

(2) The court may order the person concerned to pay to the regulator concerned such sum as appears to the court to be just having regard -

(a) in a case within paragraph (a) of subsection (1), to the profits appearing to the court to have accrued;

(b) in a case within paragraph (b) of that subsection, to the extent of the loss or other adverse effect;

(c) in a case within both of those paragraphs, to the profits appearing to the court to have accrued and to the extent of the loss or other adverse effect.

(3) Any amount paid to the regulator concerned in pursuance of an order under subsection (2) must be paid by it to such qualifying person or distributed by it among such qualifying persons as the court may direct.

………"

This kind of order is generally known as a "restitution order", following the side note to the section, as enacted.

73. For losses to "result from" a contravention, the infringing conduct must have been "an efficient cause but it need not have been the sole or dominant cause": The Financial Conduct Authority v Avacade Ltd [2021] EWCA Civ 1206, per Popplewell LJ at [76]. The amount of any restitution order made is not necessarily the amount of the relevant loss or value of the adverse effect resulting from the contravention, nor the amount of any profit accruing, if that is identifiable – but the amount of the restitution order, which is required to be "just", must have regard to these matters, if known.

74. However, the default position ought to be that the sum specified in a restitution order includes all proven losses, if that is just: The Financial Conduct Authority v Capital Alternatives Ltd [2018] 3 WLUK 623 (Ch) at [1327(4)].

75. Importantly, remedial and restitution orders are not mutually exclusive categories. The facts of a given case might be appropriate for either: The Financial Services Authority v Martin [2005] EWCA Civ 1422, per Sir Andrew Morritt at [20]. Equally, there is no obstacle to making a remedial order and a restitution order in relation to the case of a particular consumer, or consumers, provided of course that it does not amount to a double benefit or double counting. A remedial order may well be appropriate where it is still possible to unwind the transaction that amounted to the contravention, or to remove its effect or mitigate its effect (other than by monetary compensation). However, as recognised by s.28(7), if a consumer elects to treat an agreement as unenforceable, they must repay money and property received by them under the agreement. A remedial order, if granted, should in my view respect the same quasi- restitutio in integrum principle, and may therefore be inappropriate where such restitution of benefits obtained can no longer be achieved.'

Readers would be well advised to read the whole judgment.

[34] In Gopee v Numerous Defendants [2015] EWCA Civ 944, Gloster LJ said, recorded HHJ Mackie's: (1) first order - dated 19.7.12; and (2) extended order - dated 29.1.24, against which, Mr Gopee sought permission to appeal. 

(1) the first order: 

'i) that Mr Gopee, whether by himself, his employees, agents or otherwise howsoever be restrained from taking any steps to bring or continue any legal proceedings in any county court to recover money due or seek possession of any property arising out of or in connection with any loan, whether brought in the name of Mr Gopee or any company or partnership in which he had any interest or control or over which Mr Gopee had any power or management, including but not limited to Reddy Corporation, Ghana Commercial Banks, Ghana Commercial Finance, Barons Bridging 1 Ltd, Pangold and any company with a similar name without first obtaining an Order from the London Mercantile Court permitting Mr Gopee to do so;

ii) that Mr Gopee forthwith do seek to have transferred to the London Mercantile Court all existing proceedings which fall within the definition in paragraph i) above;

iii) that within 14 days lodge Mr Gopee do lodge with the London Mercantile Court a list containing details, (including date of issue, issue number, names of parties and name of Court) of all current County Court proceedings within the definition paragraph i) above;

iv) that Mr Gopee might apply to the Mercantile Court to seek to vary or discharge the order within 7 days of it coming to his attention; but that any such application had to be supported by a witness statement lodged not less than 72 hours before the hearing and by skeleton argument lodge not less than 24 hours before the hearing; the judge advising Mr Gopee but not requiring him to have legal representation on any such application; and

v) that such order was to remain in force, notwithstanding any such application, unless it was varied or discharged by the Mercantile Court.'

(2) the extended order:

'i) Mr Gopee, whether by himself, his employees, agents or otherwise howsoever take no steps to bring or continue any legal proceedings in any County Court to recover money due or to seek possession of any property arising out of or in connection with any loan, or any proceeding relating in any way whatsoever to any such loan or such property (including without limitation any dealing with or use of such property and whether brought against the borrower, tenant, occupier or anyone else) whether brought in the name of Mr Gopee or of any company or partnership in which Mr Gopee had any interest or control or over which he had any power of management, including but not limited to Reddy Corporation, Ghana Commercial Banks, Ghana Commercial Finance, Barons Bridging 1 Ltd, Pangold, Barons Finance 2 Ltd, Moneylink Finance Limited, Pangold Properties Limited, Agni Investments Limited, Speedy Bridging Finance, Euro Bridging Finance and any company with a similar name without first obtaining an order from the London Mercantile Court permitting Mr Gopee to do so; (the order referred to the words in bold type as an addition to the 19 July 2013 Order and stated that it “should be considered carefully”);

ii) Mr Gopee forthwith seek to have transferred to the London Mercantile Court all existing proceedings which fall within the definition in paragraph i) above; (the extended order stated that this repeated the terms of the 19 July 2013 order to which Mr Gopee had been subject since 19 July 2013);

iii) that by 4:30 PM on 28 February 2014 Mr Gopee lodge with the London Mercantile Court a list containing details (including date of issue, issue number, names of parties and names of Court) of all County Court Proceedings in which any application was capable of being made, or in respect of which any enforcement was or would be potentially available, within the definition in paragraph i) above; (the extended order stated that this paragraph repeated in modified form the obligation which Mr Gopee had been under since the Order of 19 July 2013);

iv) all and any such County Court proceedings not set out on the list referred to in paragraph iii) above would be struck out, alternatively transferred to the London Mercantile Court and struck out on 7 March 2014; and that all existing judgments obtained by claimants in those cases will be set aside from the same date; all applications arising out of such strikeouts and setting asides will be heard by the London Mercantile Court not in the County Court;

v) all and any proceedings of the kind described in paragraph i) above brought in the County Court but not in the London Mercantile Court after today's date will be automatically transferred to the London Mercantile Court;

vi) Mr Gopee will not, without first having obtained an order from the London Mercantile Court permitting Mr Gopee to do so, claim, give notice of, or otherwise assert in any way to any defendant in any case within the definition of paragraph i) above, any potential such defendant, any alleged rights under any alleged assignment or other transfer or change of name or seek to register, assert or otherwise notify such rights to any third party including, but not limited to, HM Land Registry or any similar bodies;

vii) any application under the extended order must be supported by witness statement lodged not less than 72 hours before the hearing and by skeleton argument lodge not less than 24 hours before the hearing; Mr Gopee was advised (but not required) to have legal representation on any such application; the order was to remain in force, notwithstanding any such application, unless and until it is varied or discharged by the London Mercantile Court or by the Court of Appeal.'

At paragraphs 24(ii) and (iii) and 25, Gloster LJ said:

'ii) Neither Mr Gopee nor his associated companies have lost their ability to acquire properties, or interest in properties such as charges, or to protect their interests accordingly by means of registration at HM Land Registry. The fact that the results of the extended order requires them to issue proceedings to justify their entitlement to do so is merely as a result of the case management directions given by HHJ Mackie which, given the appalling past history of Mr Gopee and his associated companies' loans in breach of the requirements of the Consumer Credit Act 1974, are entirely justifiable. The fact that Mr Gopee and his associated companies are required to go through the hoops of issuing proceedings against HM Land Registry to satisfy the court that their loans or acquisitions are not yet another example of an appalling breach of the Consumer Credit Act 1974 cannot possibly in all the past circumstances be regarded as a breach of their human rights. If HM Land Registry wrongfully object to a request for registration in circumstances where there are no possible objections on Consumer Credit or other grounds, then no doubt it will have to bear the costs of any application made by Mr Gopee and/or his associated companies to obtain the Court's sanction to the transaction.

iii) In other words the orders of HHJ Mackie have not precluded Mr Gopee and his associated companies from protecting or establishing their rights in appropriate proceedings in the London Mercantile Court or in the Central County Court. These orders were a legitimate means of protecting the interests of the numerous borrowers whom Mr Gopee's companies had dealt with in serious breach of the requirements of the Consumer Credit Act. HHJ Mackie had by the time of the extended order had extensive experience of dealing with the problems to which these cases gave rise. His response was in my judgment a practical and proportionate one.

25. In all the circumstances I see no basis on which these proposed appeals would have any real prospect of success. Accordingly I dismiss the applications for permission to appeal...'