Financial Services

Question 1

How does FSMA work?

Answer 1

General prohibition on regulated activities under s19 FSMA - we as solicitors are prohibited from carrying out regulated activities unless authorised/exempt

Regulated activities:
-activities of a specified kind - e.g. advising on merits
-investments of a specified kind - e.g. shares, pensions

Are you being asked to do an activity which is regulated in relation to an investment which is regulated??

Question 2

Financial Services Decision Tree:

Answer 2

1. Is the investment ‘specified’ under FSMA?
   -shares, regulated mortgage contracts, insurance contracts, bonds, pensions
   -if no: FSMA does not apply
2. If yes, is the activity a ‘specified activity’ under FSMA?
   -Arranging deals in investments, advising on merits of investments, dealing in investments, managing investments
   -if no: FSMA does not apply
3. If yes, is the activity excluded under FSMA??
   -intro to authorised person?
   -necessary part?
   -sale of a body corporate? 50% or more of the voting shares in a body corporate
   -if yes: FSMA does not apply
4. If no, does the activity fulfil the basic conditions in s.327 of FSMA and the SRA Scope Rule 2?
   -if yes, the activity is an exempt regulated activity
   -if no, the firm must be authorised by the FCA

Question 3

How does FSMA work?

Answer 3

General prohibition on regulated activities under s19 FSMA - we as solicitors are prohibited from carrying out regulated activities unless authorised/exempt

Regulated activities:
-activities of a specified kind - e.g. advising on merits
-investments of a specified kind - e.g. shares, pensions

Are you being asked to do an activity which is regulated in relation to an investment which is regulated??

Question 4

Which investments will NOT be classified as specified investments under FSMA?

Answer 4

-deposit
-interests in land - fall outside FSMA but a solicitor offering advice on investments in land may still face disciplinary proceedings by the SRA
-certain National Savings products
-euros
-cash ISAs
-premium bonds
-chattels, fine art, gold, wine, stamps, vintage cars

Question 5

Financial promotions - exemptions. Solicitors can make/direct the following communications without having to be an authorised person/without approval by an authorised person:

Answer 5

-one-off financial promotions and solicited real time communications are permitted
-introductions to an ATP or an exempt person
-communications to investment professionals

Question 6

What are the basic conditions in Scope Rule 2/s.327 FSMA?

Answer 6

-the regulated activity must arise out of or be complementary to the legal work carried out for the client under the legal retainer; and
-the regulated activity must be incidental to the legal work - a small proportion in relation to time spent/fees charged by the firm for the legal work, and
-the solicitor must account to the client for any commission received, however small

Question 7

What are reserved instrument activities?

Answer 7

Deeds and other specific forms of contract such as transfer of property, instrument or charge, preparing documents relating to real estate.

Question 8

What are reserved instrument activities?

Answer 8

Deeds and other specific forms of contract such as transfer of property, instrument or charge, preparing documents relating to real estate.

Question 9

What are the different regulated activities specified in FSMA 2000?

Answer 9

Advising - giving specific advice to the client which the client will then act on
Arranging - making arrangements, selecting shares
Managing - managing assets belonging to another person in circumstances involving discretion
Safeguarding - administering or looking after shares - more relevant to probate/trust work
Dealing as agent - e.g. selling shares as agent on the client’s behalf