DPB licences for investment business

Q: How might this work in practice?

Illustration only. A three director practice prepares accounts and tax returns for 400 clients and wants to recommend a particular tax fee protection policy to them and to pass clients' details to an independent financial adviser for pension advice. Recommending the specific policy and passing details to the adviser are both amber activities, so the firm needs a DPB licence (or another route such as appointed representative status). One director is a non accountant who joined from industry. She needs DPB affiliate status before the licence can be granted. The firm must appear on the FCA register for insurance distribution, add the PROF 4 statement to its engagement letters and check its professional indemnity limits. If the firm later wanted to recommend specific pension products, that would be red, requiring full FCA authorisation; see when accountants need FCA authorisation.

A designated professional body (DPB) licence lets an accountancy firm carry on a limited range of FCA regulated activities, known as exempt regulated activities, without being authorised by the FCA. The exemption comes from Part 20 of the Financial Services and Markets Act 2000 and only works if the regulated work is incidental to, and arises out of or complements, accountancy services the firm is already providing to that client. Typical examples are recommending tax fee protection insurance to an accounts client or passing a client’s details to an independent financial adviser.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

Why does an accountancy firm need a DPB licence at all?

Section 19 of the Financial Services and Markets Act 2000 (FSMA) prohibits anyone from carrying on a regulated activity in the UK unless they are authorised or exempt. Breach is a criminal offence under section 23, punishable on indictment by up to two years’ imprisonment, a fine or both. Many things accountants do in the ordinary course of work touch regulated activities: arranging insurance, introducing clients to investment advisers, commenting on pension advice, or helping with share transactions in a private company.

Part 20 of FSMA offers professional firms a middle route. Under section 326 the Treasury designates professional bodies, and the designation order names ICAEW, ICAS, the Institute of Chartered Accountants in Ireland and ACCA among them. A firm supervised by one of those bodies can carry on exempt regulated activities under the body’s rules rather than under direct FCA authorisation. ICAEW describes the DPB regime as light touch regulation that lets firms extend services they already provide.

What conditions must the firm meet under section 327?

Section 327 FSMA sets the statutory conditions. In summary the firm must:

be a member of the profession, or be controlled or managed by one or more members;
not receive any pecuniary reward or other advantage from anyone other than the client unless it accounts to the client for it. The FCA’s guidance in PROF 2 reads this as requiring the firm to hold any such commission to the order of the client;
provide the regulated service in a manner incidental to its professional services;
carry on no other regulated activities, apart from those for which it is otherwise exempt; and
keep clear of activities excluded by Treasury order under section 327(6).

The DPB’s own rules, made under section 332(3) and approved by the FCA, add that in providing a particular professional service to a particular client the firm may only carry on regulated activities that arise out of, or are complementary to, that service. PROF 2 also confirms that an exempt professional firm cannot itself be an authorised person, although it can act as an appointed representative of an authorised firm alongside its DPB activities.

Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.

From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.

See my price in 2 questions or call 01795 841 310.

★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews

Which activities need a licence and which do not?

ICAEW’s Traffic Light Guide to Investment Business Activity sorts common situations into three colours: green (not regulated), amber (allowed with a DPB licence) and red (FCA authorisation required). Some examples from the guide:

Area	No licence needed	DPB licence	FCA authorisation
Pensions	General discussion of the tax treatment of pensions; giving the client an authorised adviser’s contact details	Passing the client’s details to an authorised firm with consent; explaining and evaluating the adviser’s advice; arranging payments into a personal pension at the client’s request	Recommending a specific personal pension contract or a transfer
Non investment insurance	Discussing the need for a type of cover, such as tax fee protection, without discussing specific products	Discussing the merits of a specific pure protection contract such as tax fee protection insurance where complementary to other services; recommending a particular contract that is not a large risk	Advising on or arranging large risks, or insurance unrelated to the firm’s professional services
Portfolio management	Acting under a power of attorney where an authorised firm takes routine investment decisions	Non discretionary decisions on overall investment strategy or appointing an external fund manager	Discretionary investment management

ICAEW also gives the example of advising on the purchase of shares in a private company for less than a controlling stake as corporate finance work that a licence can cover.

What extra rules apply to fee protection and other insurance?

Insurance distribution carries its own requirements. FCA guidance at PROF 7.1 explains that the FCA must keep a record of exempt professional firms carrying on insurance distribution activity, and that a firm doing such work whose name does not appear on the Financial Services Register is likely to be breaching the general prohibition. The DPB supplies the details to the FCA, but the firm should check it is listed.

PROF 4 adds disclosure rules. A firm must not suggest it is authorised by the FCA, and before carrying on insurance distribution it must give the client a prescribed written statement that it is not authorised by the FCA, that it is on the FCA register so that it can carry on insurance distribution, and that this part of its business is regulated by its DPB. The statement can sit in the engagement letter. ICAEW also notes that firms carrying on insurance distribution, including offering a fee protection scheme under which the client acquires rights from the insurer, need higher total professional indemnity cover than the standard ICAEW requirements. Our guides to running a fee protection scheme and fee protection rules by professional body cover the practical side.

Who can hold an ICAEW DPB licence?

ICAEW’s eligibility guidance says every principal of the firm must be an ICAEW, ICAS or ICAI member, a firm holding a DPB licence or audit registration with one of those institutes, or hold DPB affiliate status. A principal includes partners (including salaried partners), LLP members, directors (including shadow directors) and anyone held out as a principal. A common problem is appointing a spouse as a director with no active role: the appointment must be notified and the spouse will normally need affiliate status.

Changes to the firm’s structure must be notified within 10 business days. ICAEW warns that its Investment Business Committee invariably imposes substantial regulatory penalties, including recovery of fees saved, with publicity, when eligibility failures come to light at monitoring reviews.

ICAEW also highlights a trap for practices trading through more than one entity. Under regulation 3.09 of its DPB (Investment Business) Handbook, a licensed firm may only provide exempt regulated activities that arise out of or complement professional services it provides to that client. It cannot provide them to a client who receives professional services only from a connected, unlicensed entity. Firms in that position should license each entity or control the work carefully.

ACCA runs an equivalent regime: ACCA firms in the UK can carry out exempt regulated activities if registered through ACCA and eligible under its Designated Professional Body Regulations.

How does a firm apply and what follows?

Check the planned work against the Traffic Light Guide and the DPB (Investment Business) Handbook, which ICAEW updated with changes effective from 1 April 2026.
Confirm every principal meets the eligibility rules or applies for affiliate status.
Confirm professional indemnity cover meets ICAEW’s requirements, including any higher limits for insurance distribution, and that the policy is for the applying entity.
Submit the application form, fee and supporting documents. ICAEW says processing normally takes 8 to 12 weeks, longer if referred to the Investment Business Committee.

Once licensed, the firm must complete an annual return and is usually monitored through a combined Practice Assurance and DPB visit. ICAEW also notes that when a firm incorporates or converts, for example from a partnership to an LLP, the new entity must apply again, and firms often remember audit or probate but forget the DPB licence.

How might this work in practice?

Illustration only. A three director practice prepares accounts and tax returns for 400 clients and wants to recommend a particular tax fee protection policy to them and to pass clients’ details to an independent financial adviser for pension advice.

Recommending the specific policy and passing details to the adviser are both amber activities, so the firm needs a DPB licence (or another route such as appointed representative status).
One director is a non accountant who joined from industry. She needs DPB affiliate status before the licence can be granted.
The firm must appear on the FCA register for insurance distribution, add the PROF 4 statement to its engagement letters and check its professional indemnity limits.
If the firm later wanted to recommend specific pension products, that would be red, requiring full FCA authorisation; see when accountants need FCA authorisation.

What mistakes come up most often?

Appointing a new principal without checking DPB eligibility or applying for affiliate status.
Offering exempt regulated activities to clients of an unlicensed sister company.
Keeping commission from a product provider without accounting for it to the client.
Omitting the PROF 4 disclosure or implying FCA regulation on letterheads and websites; see marketing rules for accountants.
Assuming a practising certificate covers investment business. It does not; see practising certificates.

Solar Protect runs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work or read fee protection schemes for accountants.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.