QUESTION 1A – FSMA REGULATIONS
No person may carry on a regulated activity in the UK unless authorised or exempt (s19 FSMA).
Need to ensure that the
... [Show More] firm is not committing a criminal offence by carrying out a regulated activity
without authority pursuant to S 23 FSMA, so we need to consider the effect of FSMA.
1. Are you in Business?
a. For an activity to be a regulated activity under FSMA, it must be “carried on by way of business”.
As the firm is providing a service for the client, it is in business for FSMA purposes.
2. Are there any specified investments?
a. A specified investment is one that has been specified as such by the RAO. The specified
investments involved in this scenario include: [list and relate to facts]
b. The following are not considered to be specified investments [list and relate to facts]
Category of
Investment
Type of Investment Associated activity
• Advising – giving advice to client
• Arranging – helping client to buy or sell
• Dealing – Solicitor is doing the act
Securities
• Shares
• Bonds and debentures
• Gilts
• Warrants
• Units in a unit trust / OEIC
• Stakeholder and personal
pension (not an occupational
pension)
1. Arranging deals in investments
• Applies to securities and relevant investments.
• Solicitor facilitates client to buy / sell security or relevant
investment or makes arrangement with a view to deal
(i.e. completing stock transfer form or put in touch with
stockbroker)
2. Advising on investment
• Applies to securities and relevant investments.
• Advising a person on merits of buying / selling securities
or relevant investments.
• Advice must be specific – generic advice not caught (i.e.
just advice to invest in shares).
• if giving generic advice solicitor must comply with SRA
codes
3. Managing investments
• Applies to security or contractually based investment
• Solicitor does not own the property, but client gives the
solicitor sole discretion to manage the portfolio (usually
where s is trustee or PR)
4. Safeguarding and administering investments
• Applies to securities or contractually based investments
• Solicitor needs to be controlling the securities (i.e.
custody of share certificate,) and doing something else
(i.e. dealing with dividend income, voting at GM,
letterbox)
5. Dealing as principal
• Applies to securities or contractually based investments
• Solicitor needs to be buying in their own name as
principal (they own the legal title)
• usually occurs where trustee or PR – VERY RARE
6. Dealing as agent
• Applies to securities and relevant investments
• Usually mistake – acting in solicitors name but behalf of
client (e.g. where stockbroker addresses contract note
to solicitor)lOMoAR cPSD|22180208
Relevant
Investments
• ALL Insurance contracts
(including both qualifying and
non-qualifying)
• Options
• Futures
• Contracts for difference
• Rights under funeral plan
contracts
See Securities for potential activities which might apply
FOR INSURANCE DISTRIBUTION ACTIVITIES (insurance
products)
1. Arranging on insurance contract
Making arrangements which lead to client acquiring/
disposing insurance \(i.e. referring to insurance broker)
2. Advising on insurance contract
Advising on the merits of acquiring / surrendering
insurance
3. Dealing in insurance as agent
Enter into insurance contract on client’s behalf
4. Assisting in the administration and performance of a
contract of insurance
Helping client make a claim under a policy / get a pay-out
Applies to all stages of work with an actual insurance contact
(i.e. from getting quote to defending claim of insurance)
Contractually
Based
Investments
• Qualifying contracts of
Insurance (whole life,
endowment, annuity)
• Options
• Futures
• Contracts for difference
• Rights under funeral plan
contracts
See Securities for potential activities which might apply
See note on Insurance Distribution Activities which might
apply (above)
Regulated
Mortgage
Contracts
Three conditions to be met for
mortgage to be RMC:
1. First Charge over borrower’s
dwelling
2. More than 40% of area
residential (mixed use)
3. Borrower must live in the
property
(so does not cover buy to let /
commercial or second
mortgages)
1. Arranging RMC
Arranging for person to:
enter into the RMC / vary the terms of existing RMC
or making arrangements with a view to RMC (i.e.
referring to mortgage broker)
2. Advising on RMC
Must be giving specific advice on the merits of:
entering into RMC or
vary terms of a particular RMC
3. Entering into an RMC as Lender
Typically requires solicitor to lend money to buyer –
very rare. But possible if solicitor acting as trustee.
4. Administering RMC
Typically acting for a lender -requires notifying
borrower of changes or collecting / recovery of
money due from borrower
Regulated home
finance
transactions
• Equity release and home
reversion
• Sharia finance
• Sale and repurchase
agreements
1. Arranging on home reversion / home purchase
plans / sale and rent back
2. Advising on home reversion / home purchase plans /
sale and rent back
3. Entering into as lender on home reversion / home
purchase plans / sale and rent backlOMoAR cPSD|22180208
4. Administering on home reversion / home purchase
plans / sale and rent back
Consumer credit
/ hire
agreements
• Agreement between lender and
non-corporate individual (must
be under 25k and not for
business purposes)
• Hire purchase – right to use it,
you do not own it (vehicle
leasing)
1. Credit broking activities
Effecting introduction to someone who wants and a
provider of credit (e.g. giving out a flyer)
2. Debt related activities [Show Less]