Financial Services Flashcards
What are the two main financial restrictions on solicitors?
(1) Carrying out a regulated activity;
(2) Making a financial promotion
What is the general prohibition?
No person may carry on a regulated activity in the UK unless authorised or exempt.
What is the four stage test establishing whether an activity is regulated?
(1) Is it carried out by way of business?
(2) Is there a specified investment?
(3) Is there a specified activity?
(4) Is there an exclusion?
What are examples of specified investments?
- Stocks and shares;
- Loans, bonds, government securities (gilts);
- Insurance contracts;
- Mortgage contracts
What are investments that fall outside the scope of ‘specified investments’?
Land;
Certain national savings products
What are the 5 specified investment activities?
- Dealing as agent (buying, selling, subscribing);
- Arranging (solicitor as middle-man);
- Managing (exercising discretion regarding investments);
- Safeguarding;
- Advising (giving advice on merits of investment);
What type of advice falls out of the scope of FSMA?
Generic advice, e.g. advising on what the difference is between share a and share b, but not advising on the merits of the investment.
What are the six exclusions and what is their effect?
(a) introducing;
(b) using an authorised third party;
(c) acting for an execution-only client;
(d) acting as a trustee or PR;
(e) the professional/necessary exclusion;
(f) the takeover exclusion
The effect of an exclusion is that an act which would be considered a regulated activity is no longer regarded as such
What is the introducing exclusion and what activity does it apply to?
Only applies to the activity of arranging; solicitor simply introduces the client to an authorised person then have no further role.
What is the authorised third person exclusion and what activity does it apply to?
Activities: Dealing as agent and arranging;
Transaction entered into on the advice of a person authorised by the FCA. Cannot receive financial benefit from the ATP
What is the professional/necessary exclusion and what activities does it apply to?
Activities: Advising, arranging, safeguarding and dealing as agent;
If the activity is performed in the course of carrying on business, and is a necessary part of other services, e.g. acting on the acquisition of a company and arranging the share purchase
What is the takeover exclusion and what activities does it apply to?
Activities: Arranging, advising and dealing as agent;
applies when an acquisition consists of 50% or more of the voting shares in a body corporate or of its day-to-day control
What is the exemption for professional firms under s327?
The firm doesn’t receive any pecuniary advantage due to the activity; and
the provision of the service is incidental to their core services. Must arise out of, or be complementary to, the work involved. Further, the activities cannot be a major part of the firms activities.
