Managing investments
Managing investments

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Managing investments
  • Definition
  • The exercise of discretion
  • Belonging to another
  • Security or contractually-based investments
  • Exclusions
  • Regulation of Discretionary Portfolio Managers

This Practice Note covers the regulated activity of managing investments.

Definition

Managing investments is a regulated activity under article 37 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544 (RAO).

Managing investments consists of:

  1. managing assets involving the exercise of discretion;

    1. in relation to assets beneficially belonging to another,

    2. in circumstances where the assets consist of or include any investment which is a ’security’ or a ’contractually-based investment’ (for further information as to what constitutes a ’security’ or a ’contractually-based investment’ please see below).

The exercise of discretion

The regulated activity of managing investments only applies where discretion is exercised by the investment manager. Where there is portfolio management without discretion (eg where the manager buys shares on the instructions of the client, or receives and transmits orders on the instructions of the client), the activity is likely to be another regulated such as ‘dealing in investments, either as principal or agent' (RAO SI 2001/544, arts 14 and 21) or ‘arranging deals in investments’ (RAO SI 2001/544, art 25). See Practice Notes: Dealing in investments and Arranging deals in investments and operating multilateral and organised trading facilities for further information.

The investment manager will decide for themselves what to do with the client’s assets, taking into account a number of factors, including the type of client (retail or professional) as well as the client’s knowledge

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