Part

ELM Electronic Money

Chapter

Application, contents, purpose and general

Printed on: 20/04/2025

Rulebook at: 29/04/2011

ELM 1

Application,
contents, purpose and general

ELM 1.1

Application

  • 01/12/2004

ELM 1.1.1

handbook-rule
ELM applies to every firm and every other person within a category listed in column (2) of the table in ELM 1.1.2 R and in accordance with column (3) of that table. ELM 1.1.3 R applies to an incoming EEA firm and an incoming Treaty firm instead of ELM 1.1.2 R.
  • 27/04/2002

ELM 1.1.2

handbook-rule

Application of different chapters of ELM (except for an incoming EEA firm or an incoming Treaty firm)

  • 01/01/2007

Incoming EEA firms and incoming Treaty firms

ELM 1.1.3

handbook-rule
  1. (1) ELM 1 applies to an e-money firm that is:
    1. (a) an incoming EEA firm; or
    2. (b) an incoming Treaty firm;
  2. if it has not established a branch in the United Kingdom. Otherwise ELM does not apply to such firms.
  3. (2) ELM 1 and ELM 6 apply to an e-money firm that is:
    1. (a) an incoming EEA firm; or
    2. (b) an incoming Treaty firm;
  4. if it has established a branch in the United Kingdom. Otherwise ELM does not apply to such firms.
  • 27/04/2002

Firms established outside the EEA

ELM 1.1.4

handbook-guidance
The definition of ELMI covers firms that are established outside the EEA. Thus all those parts of ELM that apply to ELMIs apply to such firms. However if the ELMI is a lead regulated firm, chapters 2, 3 and 7 of ELM do not apply.
  • 27/04/2002

Distance marketing activities

ELM 1.1.5

handbook-guidance
  1. (1) ELM 1.4A sets out certain minimum requirements under the Distance Marketing Directive in respect of a customer's cancellation rights. These rules are supplemented by the requirements in COBS 15.2 (The right to cancel), COBS 15.3 (Notice of exercise) and COBS 15.4 (Effects of cancellation) which all apply to e-money firms.
  2. (2) [deleted]
  • 01/11/2009

ELM 1.2

Contents and purpose

  • 01/12/2004

ELM 1.2.1

handbook-guidance
This chapter sets out which parts of ELM apply to which persons. It also explains that the regulated activity of issuing e-money is restricted to banks, building societies and ELMIs. It also sets out which parts of the rest of the Handbook apply to ELMIs.
  • 27/04/2002

ELM 1.2.2

handbook-guidance
Chapter 2 sets out rules and guidance on the capital adequacy of ELMIs. Chapter 3 sets out rules and guidance on the investment of the e-money float in high quality liquid assets. It also restricts the use by ELMIs of derivatives and quasi-derivative contracts. Chapter 4 sets out rules and guidance that restrict the business of ELMIs to activities closely related to issuing e-money. It also prohibits issuing e-money at a discount. Chapter 5 has rules and guidance on systems and controls and rules relevant to making calculations under the ELM financial rules. Chapter 6 has rules and guidance on redemption of e-money, the supply of information and purse limits. Chapter 7 has rules and guidance about the measure of capital adequacy by reference to an ELMI's membership of a group. Chapter 8 contains provisions relevant to small e-money issuers and applications for a small e-money issuer certificate.
  • 27/04/2002

ELM 1.2.3

handbook-guidance

ELM implements the parts of the E-Money Directive and (for ELMIs) the Banking Consolidation Directive dealing with these topics. As from 1 January 2007 the version of the Banking Consolidation Directive in force when the E-Money Directive came into force (Directive 2000/12/EC) was replaced by the current version. The FSA's policy in implementing the parts of the Banking Consolidation Directive that apply to ELMIs is generally that the current version of the Banking Consolidation Directive applies except that generally:

  1. (1) ELM does not implement provisions of the current version of the Banking Consolidation Directive that have no counterpart in the previous version; and
  2. (2) where the E-Money Directive applied a part of the previous version of the Banking Consolidation Directive that does not have a direct counterpart in the current version, ELM continues to implement the previous version.
  • 01/01/2007

ELM 1.2.4

handbook-guidance
The rules and guidance in ELM will help the FSA to meet the regulatory objectives of protecting consumers, maintaining market confidence and protecting financial stability. They do so by setting standards about the backing of e-money issued by an ELMI with high quality liquid assets. They also do so by setting minimum capital and other risk management standards. This mitigates the risk that ELMIs will be unable to meet their liabilities and commitments to consumers. ELM also protects consumers by regulating the relationship between issuers of e-money and those who hold their e-money.
  • 06/08/2010

ELM 1.2.5

handbook-guidance

The requirements for ELMIs are intended to take account of the following principles, which are based on the recitals to the E-Money Directive.

  1. (1) It is desirable to provide a regulatory framework that helps to ensure that e-money delivers its full potential benefits and that avoids hampering technological innovation. Therefore the regime provides a "technology neutral" regulatory framework.
  2. (2) In order to respond to the specific risks associated with e-money, the supervisory regime is targeted specifically at issues relating to issuing e-money. As a result, parts of the prudential supervisory regime applying to banks do not apply to ELMIs.
  3. (3) It is necessary to preserve a level playing field between ELMIs and banks and building societies issuing e-money and, thus, to ensure fair competition among a wider range of institutions to the benefit of holders of e-money. To assist in achieving this, the removal of some features of the prudential supervisory regime applying to banks and building societies is balanced by rules that are stricter than those applying to banks and building societies. The main example of these stricter requirements is the limits on the business activities that ELMIs may carry on and the requirements about asset-liability management of the e-money float. As the main prudential measures that apply to ELMIs are targeted specifically at the issue of e-money, it is necessary to restrict the business of ELMIs to that activity.
  • 27/04/2002

ELM 1.3

Restriction on issuing e-money

  • 01/12/2004

ELM 1.3.1

handbook-guidance
Article 1(4) of the E-Money Directive says that Member States shall prohibit persons or undertakings that are not credit institutions from carrying on the business of issuing electronic money. The purpose is to ensure that only persons who are subject to a prudential regime designed to deal with the risks of issuing e-money engage in that activity.
  • 27/04/2002

ELM 1.3.2

handbook-guidance
For persons who are not firms, this is implemented by the general prohibition. For firms, this is achieved by the rules in ELM. The definition of ELMI covers any firm whose permitted activities include issuing e-money. Only a bank, building society, incoming Treaty firm and incoming EEA firm are excluded. If a firm falls into the definition of an ELMI, all the rules in ELM about ELMIs apply. These include ELM 4.3.1 R (Restriction on activities), which prevents an ELMI from doing anything except issuing e-money and certain related activities. Therefore if a firm (other than a building society) wishes to have a Part IV permission that includes issuing e-money, it will either have to become an ELMI, and accept the restrictions that come with that status, or become a bank.
  • 27/04/2002

ELM 1.3.3

handbook-guidance
However, article 8 of the E-Money Directive says that EEA States may allow their competent authorities to waive the application of some or all of the provisions of that Directive and the application of the Banking Consolidation Directive to certain small or local e-money schemes. The regime for such schemes is described in ELM 8. Even though a small e-money issuer does not have a Part IV permission that includes issuing e-money, it does not infringe the general prohibition by issuing e-money.
  • 27/04/2002

ELM 1.4

Meaning of e-money and application of financial promotion

  • 01/12/2004

ELM 1.4.1

handbook-guidance
Guidance on the meaning of e-money and the applicability of the parts of the Act and the Handbook that apply to financial promotions can be found in PERG 3.
  • 27/04/2002

ELM 1.4A

Distance contracts: cancellation

  • 01/12/2004

Right to cancel

ELM 1.4A.1

handbook-rule

A consumer has a right to cancel a distance contract the making or performance of which by the firm constitutes, or is part of, issuing e-money unless:

  1. (1) the performance of the distance contract has been fully completed by both parties at the customer's express request before the customer exercises his right to cancel; or
  2. (2) the firm has an initial service agreement with the consumer and the contract is in relation to a successive operation or separate operation of the same nature under that agreement (see COBS 15 Annex 1 1.11R), in which case the right to cancel applies only to the initial agreement.
  • 01/11/2007

Cancellation period

ELM 1.4A.2

handbook-rule

The right to cancel referred to in ELM 1.4A.1 R starts on the later of:

  1. (1) the day of the conclusion of the contract; and
  2. (2) the day on which the consumer receives the contractual terms and conditions and other information required by ELM 6.8 (Information), and lasts for 14 calendar days.
  • 01/11/2007

Failure to give information on cancellation rights

ELM 1.4A.3

handbook-rule
If a firm does not give a consumer notice of his cancellation rights in accordance with ELM 6.8.2A R and COBS 15.2.4 G, the contract remains cancellable and the consumer is not liable for any shortfall.
  • 01/11/2007

Exercising the right to cancel

ELM 1.4A.4

handbook-rule
A consumer may, without giving any reason, cancel the contract by serving notice upon the firm, before expiry of the relevant cancellation period, in accordance with the instructions for exercising that right provided to the consumer in accordance with ELM 6.8.2A R and COBS 15.3.1 R and COBS 15.3.2 R.
  • 01/11/2007

ELM 1.5

Application of other parts of the Handbook to ELMIs

  • 01/12/2004

ELM 1.5.1

handbook-guidance
The application of other parts of the rest of the Handbook to ELMIs is summarised in ELM 1.5.2 G. For the detailed application of each chapter, see the Application provision at the start of the chapter or section. ELM 1.5.2 G does not apply to an incoming EEA firm, incoming Treaty firm or small e-money issuer.
  • 27/04/2002

ELM 1.6

Actions for damages

  • 01/12/2004

ELM 1.6.1

handbook-rule
A contravention of the rules in ELM does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action) unless ELM 1.6.2 R applies.
  • 27/04/2002

ELM 1.6.2

handbook-rule
ELM 1.6.1 R does not apply to the rules in ELM 6 (Redemption, information requirements and purse limits) or ELM 8 (Small e-money issuers).
  • 27/04/2002