MEMA Scope · Assessment

Do discretionary investment managers need FCA authorisation?

A firm manages portfolios for clients and decides what to buy and sell on their behalf without needing approval for each transaction. Review the initial view below and answer a few questions to refine it.

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FCA rule references
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Initial viewProvisional assessment

Potential regulated activity identified

Managing investments may require FCA authorisation

Managing assets for others with discretion is a regulated activity needing authorisation, unless an exclusion applies.

Route to consider: Direct authorisation (full permission)

Discretionary Investment Management

Why this was flagged

1Managing assets belonging to another with discretion over what to buy and sell is managing investments.
2Placing the trades involves dealing or arranging activities as well.

Questions still to resolve

Answer to refine the view. The result updates as you go.

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Do you hold client assets or money yourself, rather than using an independent custodian?
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Do you also give advice to clients who keep their own discretion?
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Do you manage assets only for family members or connected companies, and not as a business for clients?
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Do you operate under an authorised firm that takes regulatory responsibility for you?

Regulatory basis to examine

RAO Art.37 Managing investmentsManaging investments PERG 13 Investment services and activities and investment firmsPERG 13: investment services and activities COBS 11 Dealing and managingDealing and managing MIFIDPRU 1 Application and general provisionsPrudential regime for investment firms

Your next steps

1Confirm whether you exercise discretion in every mandate
2Decide on custody: your own, or an independent custodian
3Determine your prudential category and capital requirements
4Build suitability, best execution and conflicts frameworks

Where applications for this model most often fall short

A mandate and suitability process with sample evidence
Prudential and capital planning
Best execution and trade allocation controls

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This is an initial indication from published FCA material, not an FCA determination or legal advice.

MEMA Compass

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How Compass helps

Ask about an activity, exclusion or FCA requirement. Answers come only from vetted profiles, FCA Handbook and legislation extracts and MEMA guidance, and every answer cites its source.

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Continue with a more detailed readiness assessment

If authorisation is required, check the firm’s governance, policies, resources and application preparedness.

Will the FCA Authorise Us?

MEMA Scope gives an initial view from published FCA material. It is not legal advice or an FCA determination. Automatic matching and typed questions use AI only to choose a profile and to answer from vetted guidance; the assessment itself is never written by AI.

About this business model

A firm manages portfolios for clients and decides what to buy and sell on their behalf without needing approval for each transaction.

Managing assets for others with discretion is a regulated activity needing authorisation, unless an exclusion applies.

This page gives an initial view from published FCA and legislation sources. It is not an FCA determination or legal advice. Not your business model? Describe your business in MEMA Scope.

Discretionary investment manager: frequently asked questions

Does discretionary management need FCA authorisation?

Managing assets belonging to another person with discretion is a regulated activity under RAO Art.37, so authorisation is normally needed unless an exclusion applies.

Does a discretionary manager need to hold client assets?

Not necessarily. Many managers use independent custodians. Holding client assets yourself brings the CASS rules and may need a separate permission.

What could change the answer for discretionary investment managers?

Managing assets for others with discretion is a regulated activity needing authorisation, unless an exclusion applies. It can change depending on the answers to questions such as: Do you hold client assets or money yourself, rather than using an independent custodian? Do you also give advice to clients who keep their own discretion? Do you manage assets only for family members or connected companies, and not as a business for clients? Do you operate under an authorised firm that takes regulatory responsibility for you?

Which FCA rules should discretionary investment managers look at first?

Start with: Managing investments; PERG 13: investment services and activities; Dealing and managing; Prudential regime for investment firms. This is an initial view from published FCA material, not an FCA determination.

What are the first steps for discretionary investment managers?

Confirm whether you exercise discretion in every mandate. Decide on custody: your own, or an independent custodian. Determine your prudential category and capital requirements. Build suitability, best execution and conflicts frameworks.

Businesses we check

MEMA Scope covers 32 common business models. Each page explains whether that kind of business may need FCA authorisation, the rules to look at and the routes to consider.