Financial services

Question 1

What is the general prohibition under FSMA?

Answer 1

No one may carry out regulated activity unless
Authorised person or exempt person

Question 2

How do you determine whether an activity is a regulated activity?

Answer 2

Specified investment + specified activity

Question 3

Which investments are specified under FSMA?

Answer 3

• shares
• instruments creating indebtedness
• regulated mortgage contracts

Question 4

What are specified activities under FSMA?

Answer 4

• dealing as principal/agent
• Arranging deals
• managing investments
• adivisng on merits of investments (element of opinion and reccomendation)

Question 5

What are the activities which are excluded from being specified activities under FSMA?

Answer 5

• introducing client to authorised person
• necessary part of other services
• In connection with sale of a corporate body

Question 6

What are the specific requirements for the exclusion of FSMA where the activity is necessary as a part of other services?

Answer 6

• business does not otherwise consist of regulated activities and
• reasonably regarded as necessary in course of that business

Question 7

What are the specific requirements on the exclusion of FSMA where the activity is connected with the sale of a corporate body?

Answer 7

• 50%/more of voting shares and between connected individuals
  or
• shares + shares already held by purchaser = 50% or more and connected individuals
  or
• object of transaction reasonably regarded as being acquisition of day-to-day control

Question 8

What needs to happen if FSMA applies?

Answer 8

Solicitor needs to be either
- directly authorised
- supervised by designated professional body

Question 9

When will the ‘introducing client to an authorised person’ exclusion not apply?

Answer 9

contracts of insurance or where solicitor receives commission

Question 10

What are the conditions to carry on an exempt regulated activity?

Answer 10

• member of profession
• no commission from third party unless accounted to client/consent to keep
• Incidental to professional services
• arises out of/complementary to provision of services

Question 11

When will it not be a criminal offence to communicate a financial promotion relating to share sales?

Answer 11

Authorised person approved contents or exemption

Question 12

What are the exemptions for communicating a financial promotion relating to share sales?

Answer 12

• Sale of body corporate
  o 50% or more of voting shares or
  o Shares + already held = 50% or
  o To acquire day-to-day control
• Investment professionals
• High net worth companies/individuals

Question 13

What are the exemptions for obtaining an approved prospectus when offering shares to the public?

Answer 13

• Offer is made to or directed at less than 150 persons
• Offer is sent only to qualified investors