Reception and transmission
Q13. When might we be receiving and transmitting orders in relation to one or more financial instruments? (A1 and recital 44)?
Under the general definition of this service, you only provide the service if you are both receiving and transmitting orders. For example, this would be the case if you transmit subscription or redemption orders received from a client to the operator of a collective investment undertaking or transmit buy or sell orders to agency brokers.
This service though is also extended to include arrangements that bring together two or more investors, thereby bringing about a transaction between those investors. This meaning may be relevant, for example, to corporate finance firms. It could include, in our view, negotiating terms for the acquisition or disposal of investments on behalf of a corporate client with a potential buyer or seller, for example as part of a merger or acquisition. You may be providing this service even though, having brought the investors together, the actual offer or acceptance is not communicated through you.
The extended meaning of the service only applies if the firm brings together two or more investors. A person issuing new securities, including a collective investment undertaking, should not be considered to be an ‘investor’ for the purpose of this extended meaning.
However, an issuer may be an investor for the purpose of the general definition of the service. Accordingly whilst an arrangement whereby a person, on behalf of a client, receives and transmits an order to an issuer will, in our view, amount to reception and transmission, one in which it simply brings together an issuer with a potential source of funding for investment in a company, will not.
If you are party to a transaction as agent for your client or commit your client to it, you may be doing more than receiving and transmitting orders and will need to consider whether you are providing the investment service of executing orders on behalf of clients.
Q14. We are introducers who merely put clients in touch with other investment firms - are we receiving and transmitting orders?
No. If all you do is introduce others to investment firms so that they can provide investment services to those clients, this in itself does not bring about a transaction and so will not amount to receiving and transmitting orders. But if you are a person who does more than merely introduce, for example an introducing broker, you are likely to be receiving orders on behalf of your clients and transmitting these to clearing firms and therefore may fall within the scope of MiFID.
Perimeter Guidance Manual, FCA, Release 50, May 2020 www.handbook.fca.org.uk, p. 9 - 11