Financial Services

Question 1

Who is the designated professional body for lawyers

Answer 1

SRA

Question 2

Who authorises businesses conducting regulated activities

Answer 2

FCA

Question 3

Can the FCA require firms to withdraw or amend misleading financial promotions

Answer 3

Yes with immediate effect

Question 4

Can the FCA block the launch or stop a service or product

Answer 4

Yes

Question 5

Can anyone carry out regulated activities

Answer 5

No S19 FSMA general prohibition unless authorised or exempt

Breach of s19 is a criminal offence

Question 6

Consequences of breaching s19

Answer 6

Criminal offence

Any agreement might be unenforceable

Question 7

How to tell if an activity is regulated

Answer 7

S22
Are you in business
Specific investment, relate to financial standing or setting of a benchmark
Specific activity
If yes to all of above then it is regulated unless you can use an exemption

Question 8

Is providing or advising on credit about financial standing.

Answer 8

Yes

Question 9

What is a specified investment

Answer 9

Stocks, shares, debentures, loanstock, bonds, government securities, open needed investment companies, insurance contracts, home improvement or purchase plans, regulated mortgage contracts, deposits, credit agreements

Question 10

What is not a specified investment

Answer 10

Interest in land or national savings products st

Question 11

Specified activities

Answer 11

Dealing as an agency 
Arranging
Managing 
Safeguarding 
Advising (specific not generic) 
Lending money on/ administering a regulated mortgage

Question 12

What are the exclusions

Answer 12

Introducing 
ATP
Execution only
Acting as trustee or PR
Professional / necessity 
Takeover

Question 13

Which exclusions cannot be used for insurance contracts and require you to account to client for money

Answer 13

ATP
Execution only
Trustee/PR
Professional/ necessity

Question 14

Which specified activities can the introducing exclusion be used for

Answer 14

Arranging

Question 15

Which specified activities can the ATP exclusion be used for

Answer 15

Dealing as an agent

Arranging

Question 16

Which specified activities can the execution only exclusion be used for

Answer 16

Dealing as an agent

Arranging

Question 17

Which specified activities can the acting as a trustee or PR exclusion be used for

Answer 17

Arranging 
Managing 
Safeguarding 
Advising trustees or beneficiaries 
Lending or administering a mortgage

Question 18

Which specified activities can the professional/necessity exclusion be used for

Answer 18

Advising, arranging, safeguarding and dealing as an agent

Question 19

Which exclusions do not allow you to be remunerated separately

Answer 19

Trustee/ PR- cannot be paid above normal allowance for trustee/PR duties

Professional/necessity - cannot be remunerated separately for regulated activities LLM

Question 20

Which specified activities can the takeover exclusion be used for

Answer 20

Arranging, advising, dealing as agent

Question 21

When can the takeover exclusion apply

Answer 21

50% or more of voting shares and between a body corporate, partnership or individuals

Can be to sell just some shares, doesn’t need to be all of them. As long as it’s at least 50%. Add what they already have to what they’re buying to see if it’s at least 50%

Also if not 50% but acquiring day to day control of the body

Question 22

Requirements for relying on s327 exemption for professional firms

Answer 22

Must not receive any pecuniary or other advantage from someone other than the client which you don’t account for to the client

Must be incidental to provision of services by firm (specific test)

Must carry out only regulated activities by DPB (general test)

Activities must not be prohibited by treasury or FCA

Firm must not carry out any other regulated activities

Question 23

What is the s327 specific test

Answer 23

Regulated activities must arise out of professional service to client. Must be linked and must be to the same person

Question 24

What is the s327 general test

Answer 24

Activities that would otherwise be regulated activities cannot be a major part of firms activities

Question 25

Which rules must a firm comply with the relying on s327 exemption

Answer 25

SRA financial services (scope) rules and SRA conduct of business rules

Question 26

Who cannot use s327 exemption

Answer 26

Firms authorised by FCA for other non-mainstreaming regulated activities where they are authorised to carry out defined regulated activities

Question 27

What do the SRA financial service (conduct of business) rules do

Answer 27

Regulate the way a firm undertakes financial services under s327

Question 28

What must you do for an execution only client with a retail investment product Under SRA financial service (conduct of business) rules

Answer 28

Write to client to confirm they’re not relying on advice of solicitor and firm must keep a copy of the letter

Question 29

What must you tell clients about FCA when using s327 According to SRA financial service (conduct of business) rules

Answer 29

Tell clients you’re not authorised by the FCA but they can complain to SRA or legal ombudsman

Question 30

How must you behave when relying on s327 According to SRA financial service (conduct of business) rules

Answer 30

Act in clients best interests and complete transaction ASAP unless not in their best interests

Question 31

Recording keeping requirements when working under s327 According to SRA financial service (conduct of business) rules

Answer 31

Must keep records of instructions | Must record commissions received for regulated activities and how they were dealt with

Question 32

What info must you provide client with when acting under s327 According to SRA financial service (conduct of business) rules

Answer 32

Info regarding remuneration for contract of insurance must be provided to client before conclusion of initial contract

Question 33

Can a firm conduct consumer credit activity

Answer 33

To conduct consumer credit activity you must be authorised by FCA or rely on s327 Conducting litigation regarding credit or hire agreements is not consumer credit activity. Allowing clients time to pay is exempt if no more than 12 payments across max 12 months an no interest or other charges

Question 34

Can anyone make financial promotions

Answer 34

No s21 FSMA - cannot make financial promotions unless content approved by authorised person

Question 35

FSMA 2000

Answer 35

Financial services and markets act 2000

Question 36

What is a financial promotion

Answer 36

Communicating an invitation or inducement to engage in investment activities

Question 37

Test to determine if you are making a financial promotion

Answer 37

Are you in business? | Are you making an invitation or inducement in connection with an investment or investment activity?

Question 38

When can a solicitor make real time communications to introduce a client to an ATP

Answer 38

Solicitor is not close relative of ATP Solicitor doesn’t get pecuniary reward or advantage other than from client Solicit not giving advice regarding merits of investment

Question 39

What are the two exemptions for making financial promotions

Answer 39

Real time promotions to a client who has already engaged the solicitor where the controlled activity promoted is exempt or excluded and the controlled activity would be incidental to the professional services. Solicitor must reasonably believe that client understands risks and at the time would expect to be contact by solicitor regarding that activity Non real time promotions- must contain specific statements