4): Financial Services Framework Flashcards
(16 cards)
What is the regulatory framework for financial services in solicitors’ firms?
Governed by the Financial Services and Markets Act (FSMA) 2000
FSMA sets out rules for regulated financial activities and promotions
Supported by statutory instruments and regulated by FCA (and indirectly by SRA for exempt solicitors)
What is the general prohibition under s.19(1), FSMA 2000?
No person may carry out a regulated activity in the UK unless:
They are an authorised person, or
An exempt person (e.g. solicitor under s.327 exemption)
What is the restriction on financial promotions under s.21(1), FSMA 2000?
An unauthorised person must not engage in financial promotion (inviting or inducing to invest)
Applies in course of business and includes written or oral communication
What is a regulated activity under s.22, FSMA 2000?
Includes activities:
Related to a specified investment, or
In relation to any property where specified under regulations
What is the s.327 exemption under FSMA 2000 for solicitors?
Exempts professional firms from needing FCA authorisation if all conditions met:
No s.328/329 directions/orders apply
Solicitor is a member of a profession
No reward from third parties (only from client)
Activity is incidental to professional services
Covered by rules or exemption under s.332(3) FSMA
Not prohibited by the Treasury
Solicitor does not conduct other regulated activities (unless exempt)
What do the Scope Rules and COB Rules govern?
Scope Rules: Define which financial services a law firm can carry out under the s.327 exemption
COB Rules (Conduct of Business): Govern how firms deliver those services (e.g. admin, record-keeping)
How to determine if an activity is regulated under s.22, FSMA 2000?
Ask 4 key questions:
Is it an activity of a specified kind?
Is it a specified investment?
Is it carried on by way of business?
Is the activity excluded?
What are examples of “specified activities” (RAO 2001, Part II)?
Dealing in investments as agent
Arranging deals in investments
Managing investments
Safeguarding/administering investments
Advising on investments
Administering regulated mortgage contracts
What are examples of “specified investments” (RAO 2001, Part III)?
Deposits
Contracts of insurance
Shares or stocks
Instruments acknowledging debt
Government/public securities
Units in investment schemes
Stakeholder pension rights
Options/futures/CFDs
Regulated mortgage contracts
Rights to/investments
What does “by way of business” mean?
If a solicitor acts in the course of their profession/practice area, it is considered “by way of business”
What exclusions apply to regulated activities?
General and specific exclusions include:
Introducing (e.g., referring a client)
Using authorised third parties
Acting for execution-only clients
Acting as trustee or personal representative
Necessary professional exclusions
Takeover exclusion
Examples of exclusion vs activity mapping:
Introducing → Arranging
Trustee → Advising, safeguarding
Execution-only client → Arranging only
Can a solicitor give advice without authorisation?
Yes, if generic advice is given (e.g., explaining difference
between mortgage types)
No, if it involves specific advice on merits/terms of a product
Who can carry on a regulated activity under s.19?
Only:
An authorised person (with FCA permission)
An exempt person (if Scope & COB Rules met under s.327)
What is the s.327 Exemption?
Applies if:
Solicitor is a member of a profession
No conflicting direction/order under s.328/s.329
Client pays any reward/advantage (not third parties)
Activity is incidental to legal services
Covered by rules under s.332(3) or exempt
Not caught by specific Treasury prohibitions
Not carrying out other regulated activities unless exempt
What are the Scope Rules and COB Rules?
Scope Rules: Define which financial activities a law firm may do under s.327
COB Rules: Regulate how financial services are provided (e.g., admin, record keeping)
