Legal Services 4: Financial Services Flashcards
What are regulated financial activities?
Advising
- giving advice to an investor or potential investor on merits of buying, selling, subscribing or underwriting a particular investment
- does not cover generic advice
Arranging
- making arrangements for another person buying, selling, subscribing or underwriting a particular investment
Dealing as Agent
- buying, selling, subscribing or underwriting a particular investment as an agent for a client
Managing
- managing assets belonging to another person in circumstances which involve the exercise of discretion
Safeguarding
- safeguarding assets belonging to another and administering them
What investments are regulated investments?
- insurance contracts
- shares and other securities
- debentures
- mortgages
- pension schemes
- funeral plans
Not regulated
- premium bonds
- interests in land
- national savings products
In what circumstances does the general prohibition apply?
When carrying on regulated activity with respect to specified investments by way of business.
- means as part of a solicitors legal work rather than in personal capacity in social situations
Exclusion (will not breach)
- takeover exclusion
- acting as trustee, nominee or PR
- introducing or acting through authorised person
- necessary exclusion (if necessary part of legal work
- incidental activiteit (if member of SRA)
What is the takeover exclusion
Exception to General Prohibition
Solicitor can deal as agent, arrange or advise with respect to a client who is:
- buying or selling 50% or more of the voting shares of a company; or
- when the object of the transaction otherwise may be reasonably regarded as taking control of the daily running of a company
Can a lawyer avoid the general prohibition by working with authorised person?
Can introduce client to person authorised by FCA for advice
If the client receives advice from an authorised person and solicitor merely assists client in acting on advice
Exceptions
- not for insurance contracts
- not if solicitor receives any payment or commission from anyone except client
When might incidental actives exclusion apply?
If the SRA authorised solicitor provides financial services incidentally to provision of legal advice and does not receive compensation for this from anyone else without accounting to the client for it.
Incidental
- is it incidental to the work the firm does as a whole; and
- whether it is incidental to the client’s particular matter
Use if necessary exclusion does not apply
- for insurance contracts or managing assets
What is the necessary exclusion to the general prohibition?
Carry on activity other than MANAGING assets in relation to specified investments if activity may reasonably be regarded as a necessary part of providing the legal services.
Limitation
- cannot be used if activity is billed separately from main legal service
- cannot be used in relation to insurance policies
What are the conditions if a firm seeks to provide incidental activities?
- Must let client know at outset that the firm is regulated by the SRA and not FCA
- confirming that the client is coming to the firm only for execution and has not sought or relied on advice from the firm in relation to the transaction
What requirements are there for firms dealing with insurance matters
Needs to notify SRA that they were carrying out activities in relation to insurance policies
Be put on a register of providers
Appoint an insurance distribution officer
What are the exceptions to the introduction/acting through authorised person exclusion?
Does not apply
- insurance contracts
- if solicitor received any payment or commission from the authorised person or any source other than client
What are exceptions to the necessary exclusion?
Does not apply to
- Managing assets
- insurance contracts
- if activity is billed separately from main legal advice
What are the exceptions to the incedental exclusion?
- must account to the client for compensation received from anyone else
What is an example of the incidental exclusion?
- working with client on employment dispute
- client receives settlement
- client wants to invest settlement in shares
- client asks you to look after portfolio for them
- you are member of SRA (designated professional body)
When might a firm be dealing with insurance policies? (ie what to look out for)
Dealing with
- conveyancing
- probate
- litigation
As clients might require insurance (eg. defective title insurance, after event insurance etc.)
What must law firms do when conducting any insurance distribution activities? (in relation to client)
- reasonable steps to ensure that contract is suitable for client
- adapt the details of it according to the complexity of the contract and individual circumstances of the client
- provided client with written demands and needs statement
- contract just be consistent with demands and needs statement
