Financial Services Regulation

Flashcards covering the regulatory framework of financial services for solicitors, including FSMA 2000, designated regulators, regulated activities, and mandatory exemptions.

Financial Services and Markets Act 2000 (FSMA 2000)

The primary legislation that provides the general framework for the regulation of financial services in the UK.

Financial Conduct Authority (FCA)

An independent regulator accountable to Parliament concerned with 'conduct regulation' and ensuring financial markets function well.

Prudential Regulation Authority (PRA)

Part of the Bank of England responsible for 'prudential regulation' to ensure financial risks are managed sensibly by banks, building societies, and insurers.

General Prohibition (Section 19 FSMA 2000)

The rule stating that no person may carry on a regulated activity in the UK unless authorised or exempt.

Regulated Activity

An activity of a specified kind, carried on by way of business, relating to a specified investment or property of any kind.

The Business Test

One of the four tests for a regulated activity; a solicitor giving advice as part of their practice is considered to be 'in business'.

Specified Investment

Investments specified in RAO 2001, including company stocks, debentures, government securities, unit trusts, and insurance contracts.

Dealing as Agent

A specified activity involving buying, selling, or subscribing for investments when a solicitor commits a client to transactions on their behalf.

Arranging

A specified activity where a solicitor acts as the contact between a client and a provider, such as a life company or stockbroker.

Advising

Giving advice to a person in their capacity as an investor on the merits of buying or selling a specific investment; generic advice is excluded.

Takeover Exclusion

An exclusion for arranging or advising on transactions involving the acquisition or disposal of $50\%$ or more of the voting shares in a body corporate.

Section 327 Exemption

An exemption allowing professional firms to carry out regulated activities without FCA authorisation if they are incidental and the firm accounts for any pecuniary advantage.

ATP Exclusion

The 'Authorised Third Party' exclusion for dealing as agent or arranging when the transaction is entered into based on the advice of an FCA-authorised person.

Incidental (Specific Test)

A requirement for the s 327 exemption meaning the regulated activity must arise out of, or be complementary to, the provision of a legal service to a particular client.

Insurance Distribution

Activities such as advising on, proposing, or assisting in the administration of contracts of insurance like life policies or car insurance.

Financial Promotion Restriction (Section 21 FSMA 2000)

Prohibits unauthorised persons from communicating invitations or inducements to engage in investment activity unless approved by an authorised person or exempt.

Real Time Communication

A financial promotion made in the course of a personal visit, telephone conversation, or other interactive dialogue.

Best Execution (Rule 3.1)

An SRA COB Rule requiring firms to carry out transactions for clients as soon as possible unless it is in the client’s best interest not to.

Execution-only Client

A client who has not sought advice from the solicitor as to the merits of entering into a specific transaction.

SRA Financial Services (Scope) Rules

Rules that set out the specific activities solicitors’ firms can and cannot carry out under the professional exemption.