Crossing the line – when is a ‘physical’ commodity option contract investment business under the FSMA 2000?

Commodity traders need to be aware when their transactions are at risk of running afoul of the Financial Services and Markets Act 2000 (FSMA 2000) provisions that make commodity futures and options contracts ‘investment business’ in certain circumstances. The consequences can be severe as a failure to be registered and authorised to carry out investment business under the Act can result in contracts being unenforceable. If authorised, the FSMA 2000 imposes a strict regime on the conduct of investment business that must be adhered to. A failure to follow the conduct of business rules may be an offence under the Act and can result in the imposition of civil liability and administrative sanctions.