Financial Services

Question 1

What are two main restrictions relevant to solicitors ?

Answer 1

• Carrying out a regulated activity (granted permission by FCA)
• making a financial promotion (criminal offence)

Question 2

What is the four part test for whether a firm can carry out a regulated act?

Answer 2

• Are you a business ?
• is there a specified investment ?
• is there a specified activity ?
• is there an exclusion ?

Question 3

What are included in specified investments ?

Answer 3

• stocks and shares
• securities
• insurance contract
• mortgage contracts

Question 4

What is not included in specified investment ?

Answer 4

National savings and interest in land

Question 5

What are the specified activities ?

Answer 5

• Dealing as an agent
• arranging
• managing
• safeguarding
• advising
• lending money

Question 6

What is the exclusion of introducing ?

Answer 6

(Arranging)

Simply introduce and no further role

(Can’t receive reward from ATP or be an insurance contract)

Question 7

What is the exclusion of using an authorised third party ?

Answer 7

(Dealing as agent and arranging)

Applies where transaction is to be entered into based on advice of an ATP, solicitor retains ongoing role in transaction but financial advice comes from ATP.

(Can’t receive commission from ATP)

Question 8

What is the exclusion of execution only clients ?

Answer 8

(Dealing as agent and arranging)

Applies where advice is not being sought but rather just executing.

No commission or insurance contracts

Question 9

What is the exclusion of action as trustee or PR ?

Answer 9

(Arranging, managing, safeguarding and advising fellow trustees)

Available to solicitor acting as PR

Question 10

What is exclusion of professional/necessary exclusion ?

Answer 10

(Applies to advising, arranging, safeguarding and dealing as agent)

Exclusion if the activity is performed in course of carrying on any profession or business and may be regarded as necessary part of other services

Question 11

What is the takeover exclusion ?

Answer 11

(Applies to arranging, advising and dealing as an agent)

Applies to transaction to acquire or dispose of shares in a corporate body or transaction entered into for purpose of acquisition

Must be more than 50% of shares

Question 12

Under FSMA 2000 solicitor firms can carry out regulated activities under what circumstances ?

Answer 12

• Doesn’t recover pecuniary from anyone other then client
• service must be incidental to provision by the firm of professional services
• firms must not be prohibited by order made by FCA

Question 13

What are the COB rules ?

Answer 13

Conduct of business rules apply when carrying out exempt regulated activity

Question 14

When can a solicitor make a financial promotion ?

Answer 14

Only if they are authorised by the FCA

Question 15

What is the test for making financial promotions ?

Answer 15

• Are you a business ?
• Are you making an invitation or inducement ?
• In connection with an investment
• In connection with an investment activity

Question 16

What must be satisfied to allow a real time promotions under FSMA ?

Answer 16

• Client must have prior to communication engaged solicitor to provide professional services
• Where activity is is exempt because of exemption for professional firms or exclusion
• where activity is incidental to provision of professional services