Complete guide to PSC financial and business skills exam - Distinction achieved (ULaw)

Question 1: The General Prohibition – S.19 FSMA (16
Marks/30mins)
PART A: IS A REGULATED ACTIVITY BEING CARRIED OUT?
S.19 FSMA: No person may carry on a regulated activity in the United Kingdom, or purport
to do so, unless he is authorised or exempt.
1. Is the firm of solicitors in business? Always yes.
A regulated activity must be “carried on by way of business”. The firm is in business because
it is providing a service to a client.
2. Is there a specified investment? What category do they fall within?
Specified Investments for FSMA purposes
Securities Relevant investments
 Stocks and Shares  All insurance contracts
 Bonds and debentures  Options
 Guilts  Futures
 Warrants  Contracts for difference
 Shares in investment trusts  Rights under funeral plan contracts
 Units in unit trusts and shares in an
OEICs
 Personal and stakeholder pensions
 Government stock
 Equities
 Stocks and shares ISA
Regulated mortgage contracts Contractually based investments
 Mortgage contracts IF 40% of the  Qualifying contracts of insurance:
area of the property is used for whole life (insurers for the whole
residential purposes life), endowment (guaranteed
Regulated home finance transactions payout on a fixed date) and
 Home reversion plans (equity annuities (individual pays a capital
release) sum to an insurance company in
 Home purchase plans return for income payments for the
 Regulated sale and rent back rest of their life)
agreements  Options
Consumer credit/hire agreements  Futures
 Consumer loans  Contracts for difference
 Credit cards  Rights under funeral plan contracts
 Buy now pay later schemes
Not specified investments for FSMA purposes
 Cash – bank accounts, proceeds of sale, cash ISAs
 Land
 Unregulated mortgage contract (e.g. commercial property)
 National savings products (incl. premium bonds)
 Chattels
 Commercial borrowing
 Occupational borrowing
 Options over land