ICAEW.com works better with JavaScript enabled.

Investment business licensing: expanding your services

Author: ICAEW

Published: 14 Jan 2022

Investment business covers a wide range of activities that accountancy firms might carry out as part of their broader client services. In the latest in our series on moving into new regulated areas, we look at what your firm needs to do to get a DPB (Investment Business) licence.

A DPB (Investment Business) licence allows firms to offer clients investment business services  – known as exempt regulated activities – as part of their professional services without requiring full authorisation by the Financial Conduct Authority (FCA).

“The DPB regime is light touch regulation,” explains Dean Neaves, Senior Manager, Quality Assurance Department, ICAEW. “It effectively means firms can expand on the services they already provide to clients by offering certain limited investment activities that normally can only be carried out by FCA registered entities.”

As a designated professional body (DPB), ICAEW is responsible for licensing and regulating firms that decide to carry out investment business that comes under the exempt regulated activities umbrella.

Exempt regulated activities

Full guidance and detailed examples of the types of investment business work that accountants may come across in practice is available in the DPB (Investment Business) Handbook. But in essence, there are three options: work that requires FCA authorisation, a DPB (Investment Business) licence, or neither.

Accountancy firms can carry out some investment business work without a DPB licence or FCA authorisation, for example generic investment advice, such as explaining different types of pension arrangements regarding the tax benefits of contributing to a pension scheme. Other work can only be carried out with FCA authorisation, including activities such as advice or recommendation that a client buy a particular security such as listed shares or units in a collective investment scheme.

This leaves the exempt regulated activities covered by the DPB (Investment Business) licence. Firms can only offer these activities if they are incidental and complementary to other accountancy services offered to the client. Examples might include extending corporate finance activities to enable firms to advise on the purchase of shares in private companies for less than a controlling stake and offering fee protection insurance where the client is the insured party.

Holding a licence also improves firms’ ability to make introductions or referrals to third parties involving investment business. A typical example would be a referral to an Independent Financial Adviser (IFA) for pensions or general insurance advice.

Your firm can also comment on and explain the financial advice given by the IFA if a client asks for this.

Incidental and complementary

Once your firm has decided it wants to carry out activities that fall under the DPB regime, you need to meet certain eligibility criteria. A DPB-licensed firm can only provide exempt regulated activities if these are incidental and complementary to accountancy work.

“You have to be basically an accountancy firm, and any exempt regulatory activity you provide has to be incidental to that, and then complementary to or arising out of professional services provided to the particular client,” says Phil O'Halloran Case Manager, ICAEW “That’s the key criteria, and you have to declare it on the application: you can’t provide investment business as a standalone service. If it’s not incidental and complementary then you’ll need to go for full FCA authorisation.”

In addition, all principals in the firm must be either a member of a DPB,  a DPB affiliate or a firm which holds audit registration or a DPB licence with ICAEW. “One of the most common mistakes firms make is when they appoint a new director who isn’t a member of a DPB, they forget they need to apply for affiliate status,” notes Neaves.

Compliance with the ICAEW Professional Indemnity Insurance (PII) Regulations is another requirement. When obtaining compliant PII cover there are some specific things to think about with some investment business activities. For example, where a firm is carrying out insurance distribution activities (which include offering clients a fee protection scheme whereby the client acquires rights under the scheme from the insurer), it has to have higher total PII cover than standard ICAEW requirements.

Right form; right fee

To become licensed, your firm needs to complete and submit the relevant application form (available on the ICAEW website), with the licence fee and supporting documents.

“Regulatory support will do some initial administrative checking to ensure you’ve used the right version of the form, paid the correct fee, and filled in everything,” explains Elaine Griffiths, Director of Regulatory Practice and Policy, ICAEW. “Then once we’ve gathered the factual pieces of information, it will be reviewed to confirm eligibility.”

Normally the registration process takes 8 to 12 weeks, but where applications are not straightforward, or eligibility is considered borderline, they might have to be referred on to ICAEW’s Investment Business Committee for a decision. In these cases, the timeframe will probably be longer.

As with registration for any regulated area, there are some tips to help the process go as smoothly as possible. “Make sure you fully complete all the sections on the form,” urges O'Halloran. “We come across quite a few instances where sections are left blank and we have to go back and ask for the information.”

Providing the correct supporting paperwork is also critical. One of the most common mistakes on the PII side of things is when firms are restructuring and mistakenly provide the PII policy for their existing firm. “But this doesn’t cover the new entity,” says O'Halloran. “That’s a frequent issue where we have to go back to the firm.”

Another area where firms can fall down is forgetting to factor in their DPB licensing when they incorporate. “If they’re changing perhaps from a partnership to an LLP, or sole practitioner to a limited company, they need to apply for their licences again for the new entity,” says Griffiths. “But sometimes this gets missed. They do it for audit or probate, but forget DPB.”

Traffic light guidance

Above all, the key thing firms thinking about carrying out investment business-related activities need to do is look carefully at what their clients require, or are asking for, and what kinds of services or products this involves. The next step is to decide which, if any, regulatory regime these come under.

To help you navigate this complex area, ICAEW has produced a useful ‘traffic light’ guide to signpost what advice firms can provide whether they hold a practising certificate, a DPB licence or operate under FCA regulation.


Keep updated

Be the first to know when articles like this are released by following us on LinkedIn and subscribing to our monthly newsletter, Regulatory & Conduct News.

Silver cone