Financial Services Flashcards
Who regulates firms & solicitors in ‘regulated activities’?
FCA
Who regulates firms in ‘exempt regulated activities’?
SRA
What is the primary legislation dealing with financial services?
FSMA 2000
Financial Services & Markets Act 2000
What is meant by the general prohibition?
The act contains a general prohibition that prevents businesses and individuals from carrying on certain regulated activities without authorisation or exemption
What happens if a business carries out regulated activities?
They commit a criminal offence
When will someone be classed as ‘authorised’
Where they have obtained authorisation from from appropriate regulator.
FCA is guided by 3 objectives in the Act what are they?
Consumer Protection
Integrity of financial systems
Prompting competition in the market
What is regulated activities?
General terms
Activities that can only be carried out by those with appropriate authorisation or exempt
What is the 3 components to regulated activities?
- An activity of a SPECIFIED kind
- Relates to a SPECIFIED investment
- Carried on by way of business
What are the 5 specified activities?
- Dealing in investments as agent
- Arranging deals in investments
- Managing investments
- Advising on investments
- Safeguarding and Administering investments
Can a solicitor give generic advice on investments
Yes - only if SPECIFIC advice is given will this be classed as specified activities
What are specified investments?
Stock & Shares
Debentures, loan stock & bonds
G’ment and public securities
Open ended investment companies
Insurance contracts
Regulated mortgage contracts
Home reversion & purchase plans
Deposits
Credit Agreements
What is excluded from specified investments?
Interests in land
National savings
What are the 5 exclusions relating to regulated activity?
Introducing an authorised person
Arranging or dealing with an ATP
Acting as a trustee, nominee or PR
Activities necessary in business
Activities in sale of a body of a corporate company where shares consist of 50% or more of voting shares
What does designated professional body mean?
A firm can carry on exempt regulated activities without being regulated by the FCA
What regulatory body is a designated professional body under the act for solicitors?
SRA
When can exemption be relied upon by firms?
Where the majority of the work the firm carries out is not regulated financial activity
If a firm is exempt what can it do?
Permitted to carry on certain types of regulated activities known as exempt regulated activities
What are exempt regulated activities?
Activities carried out by persons exempt from FCA authorisation by way of a designated professional body exemption.
What are the conditions that need to be met for solicitors to be exempt from FCA regulation under the SRA who is a designated professional body?
- Must be a solicitor
- Must inform client of any payments from 3rd parties
- Financial services must not be a major part of business (incidental)
- Activity permitted in the SRA financial services rules
- Treasury has a list of activities that cannot be provided
- Exemption cannot be used by firms regulated by FCA
What does incidental take into consideration when deciding if the financial services are a major part of their work?
Scale of regulated activity undertaken
Extent activities are advertised as a separate service
Does the firm specifically advertise regulated activities
A firm cannot offer regulated financial services that are unconnected to a legal matter
What rules regulate the way in which exempt professional firms carry on exempt regulated financial services activities?
SRA financial services rules
What are the SRAs core regulatory requirements:-
Rule 2 - status disclosure
Rule 3 - execution of transfers
Rule 4 - records of transactions
Rule 5 - record of commissions
Rule 6 - safekeeping of c’s investments
Rule 7 - execution only business
Rule 8 - retention of records
What is the financial promotion prohibition?
A solicitor who is not authorised by the FCA must not in the course of business communicate or invite to engage in investment activity
What happens if you breach the financial promotion prohibition?
You comitt a criminal offence
