Financial services Flashcards
what is the general prohibition (s19)
no person can carry on a regulated activity in the UK unless they are authorised or exempt
who is an authorised person
individuals or entities who have permission from FCA
what is the penalty for breach of general prohibition
criminal offence
up to 2 years imprisonment or unlimited fine
agreements may be unenforceable
what is the financial promotions restriction under s21
unauthorised persons cannot make a financial promotion
what is the general prohibition under s19 FSMA
Businesses carrying out regulated activities must be authorised by an appropriate regulator (FCA) OR fall within the provision for professional firms
what are the 4 tests to see if an activity is regulated
- is it a business?
- is there a specified investment?
- is there a specified investment activity?
- is there an exclusion?
what is a specified investment
basically any investment NOT interests in land OR National Savings products
what is a specified investment activity
- dealing as agent
- arranging
- managing
- safeguarding
- advising
- lending money on/administering a regulated mortgage contract
dealing as agent
- Sol buys, sells, subscribes or underwrites investments on behalf of a client
- commits the client to transaction
arranging
- sol acts as link btw client and financial institution
managing
- discretionary management only
- sol makes investment decisions on behalf of client
- e.g. where sol acts as trustee or pR
safeguarding
- sol holds and administers investments for a client
advising
- giving advice on merits of specific investments
- generic advice NOT regulated
what is the effect of an exclusion
act which would otherwise be a regulated activity is NOT considered a regulated activity
introducting
for: arranging
sol introduces client to authorised person and has no further involvement (cannot act as a mediator)
ATP exclusion
for: dealing as agent and arranging
when transaction is carried on based on the advice of an authorised third person - financial advice given by ATP not sol
when does ATP not apply
where sol receives comission and does not account to client
execution only
for: dealing as agent and arranging
client has not sought advice from sol regarding merits or sol declined to five
when does execution only not apply
when sol has received comission or reward not from the client
trustees or PRs
for: arranging, managing, safeguarding, administering
sols acting as trustees or PRs
professional/necessary exclusion
for: advising, arranging, safeguarding, dealing as agent
must be necessary part of other services provided in that profession (not possible to deliver other services w/o performing the regulated activity)
takeover excl
for: arranging, advising, dealing as agent
transactions to acquire or dispose of shares in a body corporate where:
- shares are 50% or more of voting shares
- between parties who are within the body corporate, a partnership or group of connected individuals
what do the exclusions not apply to?
insurance contracts
what is the exemption for professional firms
can conduct certain regulated financial activities without needing FCA authorisation provided they are regulated by designated professional body (here SRA)
requirements for exemption:
- activity must arise out of or be complementary to the professional service
- must be incidiental to the legal service
- must account for any reward
- must carry out regulated activities permitted by the DPB
- cannot be prohibited by treasury
- not carry out any other regulated activities
what is the specific test
relates to that particular client:
* arise or be complementary to the professional service provided to the client
* regulated activity must be linked to the legal service
* legal service must be primary and regulated activity must be incidental
* legal and regulated activity must be provided to same client
what is the general test
relates to firms overall activities:
* proportion of regulated activities compared to other services
* how the regulated activities are represented
* impression from advertising
can the 327 exemption be used for firms authorised by FCA
NO
What is the test to determine whether a communication contravenes financial promotion restriction
- Is a communication being made?
- Is the communication an invitation or inducement?
- Is there an investment activity?
- Is the communication made in the course of a business?
