Unregulated Activities

ONE of the areas that the Central Bank’s Discussion Paper on the review of the Consumer Protection Code is seeking feedback on is in relation to Unregulated Activities. The Central Bank highlights its concerns that consumers are not always aware that they are dealing with unregulated firms or accessing unregulated products or services.

Unregulated products may look similar to accessing other regulated investment products and this can lead to consumers placing a degree of trust in the providers of ‘look-alike’ financial products and services in circumstances where they are in fact not protected by financial services regulation.

Over the past number of years, we have seen a growth in the sale of unregulated products. There are valid reasons for this, as unregulated products can encourage innovation and diversity into markets outside those that are regulated.

These products often offer investors varying investment opportunities, for example, in renewable energy, and sometimes offer substantial returns, however it is important that clients are made fully aware of the significant difference in consumer protections if investing in such products. Brokers Ireland has previously highlighted concerns regarding unregulated products to the Central Bank and has proposed that these products should be regulated as this would ensure protections for consumers.

Such a move would require legislative change and is addressed in the discussion paper, where it is outlined that decision to regulate firms and services is made either at an EU level or by the Oireachtas and is informed by the potential for a sector to cause harm to the financial system and/or to consumers.

It is noted that legislators need to strike a balance between imposing regulatory costs and the need to protect the stability of the financial system and the interests of consumers.

Brokers Ireland previously issued guidance outlined below to its members who are proposing to deal in unregulated products with a view to ensuring that where members advise on these products, their clients are fully aware of the differences between regulated and unregulated products.

Regulated / Unregulated Providers

It is vital that members are aware whether the provision of the product is regulated or unregulated. When dealing with a provider a Broker should ask that providers warrant (i) the regulatory status of the firm and (ii) whether the products are regulated (i.e. subject to the regulation of the Central Bank) or not.

Professional Indemnity Insurance (PII)

Most professional indemnity policies for regulated activities will not cover the firm for advising on unregulated activities. Before a Broker contemplates advising on an unregulated product, we advise that the firm check with their PII provider to clarify if the activity will be covered under their policy.


Under the Consumer Protection Code, regulated firms must ensure that any communications to clients in relation to unregulated products are sent on letterhead/email which does not contain the firm’s regulatory disclosure line.

If firms operate a website, there must be separate sections for regulated and unregulated activities. The Central Bank has advised that regulated firms should include a warning in a prominent position on all communications with clients that relate to unregulated products.

The warning needs to be both clear about the regulatory status of the product and explicit about what investor protections are lost.

The warning could be in the following format:

Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank and, as a result, it is not covered by the Central Bank requirements designed to protect consumers or by a statutory scheme.

Investor Compensation Company DAC (ICCL)

Unregulated activity is not covered under the ICCL. If an unregulated company goes out of business and cannot return a client’s investments or money, the ICCL will not compensate these clients.

Financial Services and Pensions Ombudsman

The FSPO, in accordance with the Financial Services and Pensions Ombudsman Act 2017, can examine a complaint which arises in connection with the provision or refusal to provide financial services (including information and advice provision) where the provider is a regulated financial service provider.

Each complaint is assessed on its own merits and in relation to its specific and particular circumstances and evidence provided. Therefore, advice of unregulated activity may fall under the remit of the FSPO.

Separation of Regulated and Unregulated Activities

The Central Bank expects it to be clear to a client when a regulated firm is providing unregulated products. The regulated firm should use different letter head, email, different sections on websites and keep all files and communication separate from regulated activities when advising on unregulated activities.

One way to ensure separation between regulated and unregulated activities is to carry out unregulated activities through a separate, unregulated legal entity i.e. you could have two firms: Joe Blogs regulated (ltd) and Joe Blogs unregulated ltd.

The Discussion Paper poses the question whether the regulatory statement is useful for consumers and how the difference between regulated and unregulated activities can be made clearer for consumers and should there be additional obligations on regulated firms when they undertake unregulated activities.

We welcome any feedback from members in response to these questions in advance of the 31st of March when submissions to the Discussion Paper are required. If members have any other queries in relation to the sale of unregulated products, please contact