10.4: Financial Services Flashcards
What is the primary legislation governing financial services in the UK?
The Financial Services and Markets Act 2000 (FSMA) regulates financial services, creating the FCA and PRA as key regulators.
What is the general prohibition under FSMA s19?
It prohibits anyone from carrying out a regulated activity unless they are an authorised or exempt person.
What does FSMA s21 prohibit?
It bans unauthorised firms from making financial promotions unless the promotion is approved by an authorised person.
How is a regulated activity defined under FSMA s22?
An activity involving a specified investment and a specified activity carried out by way of business.
Name three examples of specified investments.
Shares
Debentures
Rights under a mortgage contract
Note: investments in residential property would not be a specified investment.
Name three examples of specified activities.
Dealing in investments as principal or agent
Arranging deals in investments
Advising on investments
What is the ATP Exclusion?
It allows solicitors to conduct regulated activities incidentally as part of their professional legal services without FCA authorisation.
What conditions must solicitors meet to rely on the FSMA s327 exemption?
Must be a member of a regulated profession (e.g., solicitor).
The financial activity must arise from their legal services.
No separate financial reward from third parties.
Must comply with the SRA Scope Rules.
What is the penalty for breaching FSMA s19 (general prohibition)?
A criminal offence punishable by up to 2 years’ imprisonment and/or a fine.
What steps should a solicitor follow to check if an activity breaches FSMA s19?
Does the activity relate to a specified investment?
Does the activity involve a specified activity?
Is the activity excluded?
Does the activity qualify for the FSMA s327 exemption?
What does the FSMA s327 achieve?
Provides an exemption for solicitors from the general prohibition (FSMA s19) if their financial activities are incidental to their legal services.
Conditions:
- The activity must be part of a professional service to a client.
- Solicitors cannot receive pecuniary reward from third parties for the financial services.
- The financial activity must be minor and incidental to legal work.
What is the ATP exclusion (Article 67 of FSMARAO)?
The ATP exclusion (Article 67 of FSMARAO) excludes certain regulated activities if they are a necessary part of legal services.
It applies to activities like:
- Arranging deals in investments
- Advising on investments
- The activity must be incidental, minor, and not separately remunerated.
Key Conditions for FSMA s327 and ATP exclusion?
✅ Activity must be incidental to legal services
✅ Solicitor must not receive separate financial reward for it
✅ The solicitor must comply with the SRA Scope Rules
What is the ‘takeover’ exclusion and when does it apply?
Allows a solicitor act. 50% or above of shares. The takeover exclusion applies to a transaction to acquire or dispose of shares in a body corporate if the shares include 50% or more of the voting shares and is between parties each of whom is a body corporate, a partnership, a single individual or a group of connected individuals.
Generic advice ie tax or investment advice is not a
not a regulated activity
specific advice is a regulated activity
Exclusion applies when - in terms of a takeover and shares?
deal includes 50% or more
