The Financial Services Regulatory Framework including Authorisation, and how it Applies to Solicitors' Firms Flashcards
(12 cards)
Which Act establishes the UK’s financial services regulatory framework?
A. Financial Services and Markets Act 2000
B. Proceeds of Crime Act 2002
C. Legal Services Act 2007
D. Money Laundering Regulations 2017
A. Financial Services and Markets Act 2000
Explanation: FSMA 2000 sets up the FCA, PRA and the regulatory regime for financial services
Which body handles conduct regulation for banks and investment firms?
A. Prudential Regulation Authority (PRA)
B. Financial Conduct Authority (FCA)
C. Financial Ombudsman Service
D. Solicitors Regulation Authority
B. Financial Conduct Authority (FCA)
Explanation: The FCA oversees conduct and prudential rules for most firms; the PRA handles prudential only for major firms
Which of the following is a regulated activity under FSMA unless exempted?
A. Providing legal advice incidental to a conveyancing transaction
B. Accepting deposits
C. Drafting client wills
D. General litigation advocacy
C. Drafting client wills
Explanation: Will drafting is not a regulated financial service; accepting deposits is a regulated activity
Who resolves customer complaints against FCA-authorised firms?
A. Financial Conduct Authority
B. Prudential Regulation Authority
C. Financial Ombudsman Service
D. Legal Services Board
D. Financial Ombudsman Service
Explanation: The FOS handles complaints, not the FCA or PRA directly
A solicitor’s firm holds client money in a deposit account and offers to pay interest. Which is true?
A. FCA authorisation is required unless service is incidental
B. No permission is ever needed for client money
C. SRA Accounts Rules automatically grant FCA permission
D. The firm must outsource all client accounts to a bank
B. No permission is ever needed for client money
Explanation: Holding client money under SRA Accounts Rules is exempt, but paying interest may require FCA permission unless truly incidental
A law firm wants to advise clients on mortgage products directly. They must:
A. Obtain FCA permission for mortgage mediation
B. Rely on the SRA for financial services approval
C. Only train a COFA and proceed
D. Refer all mortgage work to another solicitor
C. Only train a COFA and proceed
Explanation: Mortgage advice is a regulated activity requiring FCA permission; training COFA alone is insufficient
A solicitor instructs an appointed representative to handle clients’ insurance needs so the firm avoids direct FCA authorisation. This is:
A. A valid referral model
B. A breach of FSMA
C. A requirement under SRA rules
D. Automatically covered by SRA exemption
D. Automatically covered by SRA exemption
Explanation: Solicitors can refer via appointed representatives without FCA permission under the legal exemption
After expanding into investment advice, a firm should:
A. Map regulated activities and seek FCA permissions where needed
B. Assume SRA authorisation covers all activities
C. Only notify the COFA internally
D. Stop providing all legal services
A. Map regulated activities and seek FCA permissions where needed
Explanation: Firms must identify regulated activities and obtain FCA permissions beyond incidental legal work
The statutory exemption for solicitors covers financial activities that are:
A. Ancillary and incidental to legal services
B. All investment services
C. Client-money deposits only
D. Mortgage and insurance brokerage
C. Client-money deposits only
Explanation: The exemption applies only to truly incidental tasks like holding money; other services need FCA permission
Which officer in a solicitors’ firm oversees compliance with FCA and SRA financial requirements?
A. COLP
B. COFA
C. MLRO
D. MLCO
A. COLP
Explanation: The Compliance Officer for Legal Practice (COLP) covers legal compliance, while COFA covers financial controls
To justify relying on an exemption, a firm must:
A. Document why each activity is incidental to legal practice
B. Obtain a letter from the SRA every year
C. File a notification with the FCA
D. Use a template exemption certificate
B. Document why each activity is incidental to legal practice
Explanation: Firms need clear records explaining their exemption rationale for each activity
If a firm’s service mix changes to include high-volume insurance distribution, it should:
A. Review and update its FCA permissions or exemption analysis
B. Continue under the original authorisation
C. Transfer all insurance clients to another firm
D. Only rely on COFA oversight
D. Review and update its FCA permissions or exemption analysis
Explanation: Significant changes require re-assessment of permission needs under FSMA
