SQE1 - Legal Services (Financial services)
ACTUAL QUESTIONS AND CORRECT
ANSWERS
What is the Financial Services and Markets Act 2000 (FSMA)? - CORRECT
ANSWERS✅✅The primary legislation dealing with the regulation of financial services. The
Act lays out the general framework for the regulation of financial services. Additional and
more specific details of the regulation are contained within secondary legislation.
What is the general prohibition? - CORRECT ANSWERS✅✅s9 FSMA contains a general
prohibition. It provides that 'No person may carry on a *regulated activity* in the UK unless
authorised or exempt' A person or business who does this will commit a criminal offence.
Why is there a general prohibition? - CORRECT ANSWERS✅✅The general prohibition
exists to ensure that only qualified and skilled individuals provide financial services to
consumers
When is a person classified as 'authorised'? - CORRECT ANSWERS✅✅A person will be
classified as authorised, where they have obtained authorisation from the appropriate
regulator.
e.g. if the FCA grants a person authorisation they will be subject to the FCA's regulation and
will not breach the general prohibition.
What are the two regulators under FSMA/for the financial services industy? - CORRECT
ANSWERS✅✅1. Prudential Regulation Authority (PRA) → regulates financial institutes
(e.g. banks, building societies)
2. Financial Conduct Authority (FCA) → regulates businesses firms and financial advisors
Which of the two regulators are relevant for solicitors/firms? - CORRECT
ANSWERS✅✅The FCA is the regulatory who regulates law firms.
, What is the strategic objective of the FCA? - CORRECT ANSWERS✅✅The FCA is guided
by the statutory objectives in the FSMA. It 's strategic objective is to ensure that the relevant
financial markets function effectively.
What are the operational objectives of the FCA? - CORRECT ANSWERS✅✅-Consumer
protection → ensuring an appropriate degree of protection for consumers of financial services
-Integrity → protecting and enhancing the integrity of the financial system
- Competition → promoting effective competition in the markets
What are regulated activities? - CORRECT ANSWERS✅✅Regulated activities refer to
activities that can only be carried by person with appropriate authorisation or persons who are
exempt from such authorisation.
What are the three components to regulated activity? - CORRECT ANSWERS✅✅1. An
activity of a specified kind (must be specified in an order from the Treasury) +
2. relates to a 'specified investment' (also specified by the Treasury)+
3. carried on by way of business
= Regulated activity within s22 FSMA
What are examples of specified activities?
- FSMA the Regulated Activities Order - CORRECT ANSWERS✅✅1. *Dealing* in
investments an agent
2. *Arranging* deals in investment
3. *Managing* investments
4. *Advising* on investments
5. *Safeguarding* and *administering* investments
What is dealing in investments as agent?
- Specified Activity - CORRECT ANSWERS✅✅A solicitor may 'deal as an agent' if they
buy, sell, subscribe for or underwrite an investment on behalf of a client and commit that
client to transactions.
ACTUAL QUESTIONS AND CORRECT
ANSWERS
What is the Financial Services and Markets Act 2000 (FSMA)? - CORRECT
ANSWERS✅✅The primary legislation dealing with the regulation of financial services. The
Act lays out the general framework for the regulation of financial services. Additional and
more specific details of the regulation are contained within secondary legislation.
What is the general prohibition? - CORRECT ANSWERS✅✅s9 FSMA contains a general
prohibition. It provides that 'No person may carry on a *regulated activity* in the UK unless
authorised or exempt' A person or business who does this will commit a criminal offence.
Why is there a general prohibition? - CORRECT ANSWERS✅✅The general prohibition
exists to ensure that only qualified and skilled individuals provide financial services to
consumers
When is a person classified as 'authorised'? - CORRECT ANSWERS✅✅A person will be
classified as authorised, where they have obtained authorisation from the appropriate
regulator.
e.g. if the FCA grants a person authorisation they will be subject to the FCA's regulation and
will not breach the general prohibition.
What are the two regulators under FSMA/for the financial services industy? - CORRECT
ANSWERS✅✅1. Prudential Regulation Authority (PRA) → regulates financial institutes
(e.g. banks, building societies)
2. Financial Conduct Authority (FCA) → regulates businesses firms and financial advisors
Which of the two regulators are relevant for solicitors/firms? - CORRECT
ANSWERS✅✅The FCA is the regulatory who regulates law firms.
, What is the strategic objective of the FCA? - CORRECT ANSWERS✅✅The FCA is guided
by the statutory objectives in the FSMA. It 's strategic objective is to ensure that the relevant
financial markets function effectively.
What are the operational objectives of the FCA? - CORRECT ANSWERS✅✅-Consumer
protection → ensuring an appropriate degree of protection for consumers of financial services
-Integrity → protecting and enhancing the integrity of the financial system
- Competition → promoting effective competition in the markets
What are regulated activities? - CORRECT ANSWERS✅✅Regulated activities refer to
activities that can only be carried by person with appropriate authorisation or persons who are
exempt from such authorisation.
What are the three components to regulated activity? - CORRECT ANSWERS✅✅1. An
activity of a specified kind (must be specified in an order from the Treasury) +
2. relates to a 'specified investment' (also specified by the Treasury)+
3. carried on by way of business
= Regulated activity within s22 FSMA
What are examples of specified activities?
- FSMA the Regulated Activities Order - CORRECT ANSWERS✅✅1. *Dealing* in
investments an agent
2. *Arranging* deals in investment
3. *Managing* investments
4. *Advising* on investments
5. *Safeguarding* and *administering* investments
What is dealing in investments as agent?
- Specified Activity - CORRECT ANSWERS✅✅A solicitor may 'deal as an agent' if they
buy, sell, subscribe for or underwrite an investment on behalf of a client and commit that
client to transactions.
