Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
QUESTION 1 – 4 TOPICS - 30 MINUTES ON THIS
YOU DO NOT NEED TO CONCLUDE QUESTION 1
The First question will cover if there is a regulated activity and if can give financial advice.
Do not need to refer to legislation in answer but apply facts of scenario.
PART A
REGULATED ACTIVITIES: SHARES
Answer
1. It needs to be considered whether the firm of solicitors is in business as for an
activity to be regulated under FSMA. We are providing (corporate work, private
client work), therefore we are providing a services to a client and we are in business.
(slide 38).
NOTE: (If in pub with friends and saying to friends to buy these shares, the social
setting/friends will not be business or providing legal services so this test will fail).
2. It needs to considered whether there is a specified investment which have been
specified by the RAO. We will be acting on the stock/shares and the category is
securities. The client also wishes to take out a life policy or a term life policy. Land
and Cash is mentioned in the script but land will not be regarded as a specified
investment for the purposes of FSMA. (slide 50)
3. I am helping my client sell and transfer shares. “Cover facts of question”
Arranging: making arrangements for another person to buy or sell a security
or a relevant investment (slide 58) (4.1.1)
• Under Art 25(1), this will be bringing about the sale of shares and
assisting with the stock/share transfer form. “Cover facts of question”
• Under Art 25(2), this can be putting the client in touch with his
stockbroker to assist with the sale of shares and this may be classed as
assisting with a view to a deal. This will be relevant even if the
meeting with the stockbroker does not take place. “Cover facts of
question”
Advising: advising a person on the merits of dealing in a particular
investment. (slide 59) (4.1.2)
• Under Art 53, The advice we are recommending must be specific
investment and in line with the Principles and the Codes. Generic
advice is not caught. “Cover facts of question”
Insurance Distribution Activity. (Slide 64) (4.2.1)
• This can be helping the client obtain quotes to take out a new term
life policy. “Cover facts of question”
Managing Investments: Art 37 (slide 60) (4.1.3)
1
, Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
• Managing “assets” (security or contractually-based investment) which
belong to another AND sole discretion exercised within the firm e.g.,
where solicitor is trustee or PR. “Cover facts of question”
• This may involve managing assets that beneficially belong to another
person. This would be the case where a solicitor made the decision
rather than as is usual advising the client what decision to make. This
activity is usually most common with films that undertake probate
work and or trust work. “Cover facts of question”
Safeguarding AND Administering. Art 40 (slide 61) (4.1.4)
• Controlling securities or contractually-based investments that belong
to someone else AND doing something else, e.g. collecting
income/dividends or proxy voting. “Cover facts of question”
• Must be doing both safeguarding (e.g., collecting assets to distribute
in accordance with the will AND administering (e.g., dealing with
correspondence/admin as the solicitor). “Cover facts of question”
4. It needs to be considered if any exclusions apply. Most Relevant Exclusions.(4.6).
Arranging – AUTHROISED PERSON EXCLUSION (slide 80)
• arranging deals with or through an authorised person (Art 29) applies
to arrangements made by solicitor under both art25(1) & (2). We
have entered into that transaction with or through an authorised
person (stock/share broker) and we’ve entered into that transaction
either on advice from the brokers or if the client is an execution-only
client.
• The firm needs to be able to accounts to the client for any pecuniary
reward. “Cover facts of question”
Advising – There’s no specific exclusions for advising so we’d have to look to
the General Exclusions (4.11) to see whether they apply in this instance.
• Professional/necessary exclusion (4.11.2) (slide107) Art 67. Dealing
with advising the client on a particular investment. Is the work to be
reasonably regarded as a necessary part of our legal work and no
separate renumeration is incurred. Chances are the client may needs
to sell some shares to pay for inheritance tax. “Cover facts of
question”
• Sale of a body corporate exclusion (4.11.3) (slide 108) Art 70. The
work must relate to a share deal and there are shares in this question.
It must satisfy the Hard Edge test OR the Objective Test. Client must
satisfy conditions rather than solicitor.
o Hard Edge -The deal must concern at least 50% share or more
of the voting shares in the company, and, the acquisition or
disposal is between the parties each of whom is a body
corporate. Chances are we will not know this in particular.
2
, Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
o Objective Test – This is satisfied Where the object of the in
transaction may reasonably be regarded as being the
acquisition of the day-to-day control of the affairs of the
company. We do not have enough information to conclude on
this. Exclusion conclusion - We do not have enough
information to know whether this exclusion applies.
• Insurance Distribution Exclusion (4.7) – There is an exclusion but it
applies if only when the solicitor is working on behalf of the insurance
company (slide 92).
o NONE OF THE EXCLUSIONS APPLY TO THE INSURANCE
DISTRIBUTION ACTIVITY. THEREFORE, IN ORDER TO AVOID
BREACHING S.19 FSMA, WE WILL LOOK TO RELY ON THE
SECTION 327 FSMA EXEMPTION
PART B
EXEMPTIONS
ANSWER
In order to rely on the s.327 Exemption, certain conditions need to be satisfied.
1. The firm must be a member of a designated professional body. This condition is
satisfied as the firm will be a body of the Law Society and the scenario does not state
otherwise.
2. The firm has to account for any pecuniary awards (section 327(3) FSMA and Scope
Rule 2.1(a)) or any other advantage received from the 3rd party. The client will need
to be told about the commission received as it is their money. We can ask the client
if they would like a cheque or if the commission payment can be used offset against
their bill. There is nothing in the scenario to suggest a pecuniary award was received
or that it was not disclosed to the client (slide 112).
3. The firm must satisfy the incidental test which has 2 parts: LOOK AT BOTH TESTS!
General incidental test – Make Assumptions - It must be satisfied that the firm
is in fact a law firm providing regulatory activities. To satisfy this, as long as not
more than 50% of income of the firm comes from legal services, the activity will
be incidental. Nothing to suggest this is not satisfied in the scenario.
Specific incidental test - – Make Assumptions - The solicitor can only provide
financial service to client if it is complimentary and subordinate to the legal
work being provided. The financial service cannot be standalone and once the
legal work has been completed, the financial advice must be stopped. (For
example, if clients want to buy a building and we are acting on this and client
then wants to buy insurance for this, we can assist as this is incidental to the
legal work being provided. Taking out a life policy may be subordinate to some
3
, Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
legal work). However, in exam state there is not enough information to decide if
it is complimentary to the legal work.
4. The Scope Rules
Prohibited Activities (slide 116) that are too specialised for solicitors e.g.,
dealing in investments as principal and insurance distribution activities in
relation to insurance–based investment products e.g., “with-profit” endowment
policies.
Restricted Activities (slide 117/118).
• Securities and contractually-based investments – restrictions on
recommending to buy e.g., the firm can’t recommend that an
individual person buys listed shares. In this scenario, our firm cannot
recommend an individual client buy shares, we can recommend a
corporate client buy shares. We can recommend an individual sells
quoted shares and buys private limited company shares.
• Insurance distribution activities (5.2.1)b(iii) –
o must have compliance officer for insurance distribution,
register with FCA & comply with any other restrictions e.g.,
insurance-based investment product, where relevant.
o Must be registered with the FCA in the Financial Services
register.
QUESTION 1
QUESTION BANK
PART A
REGULATED ACTIVITIES: REAL ESTATE
Answer
1. It needs to be considered whether the firm of solicitors is in business as for an
activity to be regulated under FSMA. We are providing Real Estate work, therefore
we are providing a services to a client and we are in business (slide 48).
NOTE: (If in pub with friends and saying to friends to buy these shares, the social
setting/friends will not be business or providing legal services so this test will fail).
2. It needs to considered whether there is a specified investment which have been
specified by the RAO. Land and Cash is mentioned in the script but land will not be
regarded as a specified investment for the purposes of FSMA. (slide 50). We will be
acting in real estate and this is a specified investment under Regulated Mortgage
4
18th November 2023
QUESTION 1 – 4 TOPICS - 30 MINUTES ON THIS
YOU DO NOT NEED TO CONCLUDE QUESTION 1
The First question will cover if there is a regulated activity and if can give financial advice.
Do not need to refer to legislation in answer but apply facts of scenario.
PART A
REGULATED ACTIVITIES: SHARES
Answer
1. It needs to be considered whether the firm of solicitors is in business as for an
activity to be regulated under FSMA. We are providing (corporate work, private
client work), therefore we are providing a services to a client and we are in business.
(slide 38).
NOTE: (If in pub with friends and saying to friends to buy these shares, the social
setting/friends will not be business or providing legal services so this test will fail).
2. It needs to considered whether there is a specified investment which have been
specified by the RAO. We will be acting on the stock/shares and the category is
securities. The client also wishes to take out a life policy or a term life policy. Land
and Cash is mentioned in the script but land will not be regarded as a specified
investment for the purposes of FSMA. (slide 50)
3. I am helping my client sell and transfer shares. “Cover facts of question”
Arranging: making arrangements for another person to buy or sell a security
or a relevant investment (slide 58) (4.1.1)
• Under Art 25(1), this will be bringing about the sale of shares and
assisting with the stock/share transfer form. “Cover facts of question”
• Under Art 25(2), this can be putting the client in touch with his
stockbroker to assist with the sale of shares and this may be classed as
assisting with a view to a deal. This will be relevant even if the
meeting with the stockbroker does not take place. “Cover facts of
question”
Advising: advising a person on the merits of dealing in a particular
investment. (slide 59) (4.1.2)
• Under Art 53, The advice we are recommending must be specific
investment and in line with the Principles and the Codes. Generic
advice is not caught. “Cover facts of question”
Insurance Distribution Activity. (Slide 64) (4.2.1)
• This can be helping the client obtain quotes to take out a new term
life policy. “Cover facts of question”
Managing Investments: Art 37 (slide 60) (4.1.3)
1
, Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
• Managing “assets” (security or contractually-based investment) which
belong to another AND sole discretion exercised within the firm e.g.,
where solicitor is trustee or PR. “Cover facts of question”
• This may involve managing assets that beneficially belong to another
person. This would be the case where a solicitor made the decision
rather than as is usual advising the client what decision to make. This
activity is usually most common with films that undertake probate
work and or trust work. “Cover facts of question”
Safeguarding AND Administering. Art 40 (slide 61) (4.1.4)
• Controlling securities or contractually-based investments that belong
to someone else AND doing something else, e.g. collecting
income/dividends or proxy voting. “Cover facts of question”
• Must be doing both safeguarding (e.g., collecting assets to distribute
in accordance with the will AND administering (e.g., dealing with
correspondence/admin as the solicitor). “Cover facts of question”
4. It needs to be considered if any exclusions apply. Most Relevant Exclusions.(4.6).
Arranging – AUTHROISED PERSON EXCLUSION (slide 80)
• arranging deals with or through an authorised person (Art 29) applies
to arrangements made by solicitor under both art25(1) & (2). We
have entered into that transaction with or through an authorised
person (stock/share broker) and we’ve entered into that transaction
either on advice from the brokers or if the client is an execution-only
client.
• The firm needs to be able to accounts to the client for any pecuniary
reward. “Cover facts of question”
Advising – There’s no specific exclusions for advising so we’d have to look to
the General Exclusions (4.11) to see whether they apply in this instance.
• Professional/necessary exclusion (4.11.2) (slide107) Art 67. Dealing
with advising the client on a particular investment. Is the work to be
reasonably regarded as a necessary part of our legal work and no
separate renumeration is incurred. Chances are the client may needs
to sell some shares to pay for inheritance tax. “Cover facts of
question”
• Sale of a body corporate exclusion (4.11.3) (slide 108) Art 70. The
work must relate to a share deal and there are shares in this question.
It must satisfy the Hard Edge test OR the Objective Test. Client must
satisfy conditions rather than solicitor.
o Hard Edge -The deal must concern at least 50% share or more
of the voting shares in the company, and, the acquisition or
disposal is between the parties each of whom is a body
corporate. Chances are we will not know this in particular.
2
, Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
o Objective Test – This is satisfied Where the object of the in
transaction may reasonably be regarded as being the
acquisition of the day-to-day control of the affairs of the
company. We do not have enough information to conclude on
this. Exclusion conclusion - We do not have enough
information to know whether this exclusion applies.
• Insurance Distribution Exclusion (4.7) – There is an exclusion but it
applies if only when the solicitor is working on behalf of the insurance
company (slide 92).
o NONE OF THE EXCLUSIONS APPLY TO THE INSURANCE
DISTRIBUTION ACTIVITY. THEREFORE, IN ORDER TO AVOID
BREACHING S.19 FSMA, WE WILL LOOK TO RELY ON THE
SECTION 327 FSMA EXEMPTION
PART B
EXEMPTIONS
ANSWER
In order to rely on the s.327 Exemption, certain conditions need to be satisfied.
1. The firm must be a member of a designated professional body. This condition is
satisfied as the firm will be a body of the Law Society and the scenario does not state
otherwise.
2. The firm has to account for any pecuniary awards (section 327(3) FSMA and Scope
Rule 2.1(a)) or any other advantage received from the 3rd party. The client will need
to be told about the commission received as it is their money. We can ask the client
if they would like a cheque or if the commission payment can be used offset against
their bill. There is nothing in the scenario to suggest a pecuniary award was received
or that it was not disclosed to the client (slide 112).
3. The firm must satisfy the incidental test which has 2 parts: LOOK AT BOTH TESTS!
General incidental test – Make Assumptions - It must be satisfied that the firm
is in fact a law firm providing regulatory activities. To satisfy this, as long as not
more than 50% of income of the firm comes from legal services, the activity will
be incidental. Nothing to suggest this is not satisfied in the scenario.
Specific incidental test - – Make Assumptions - The solicitor can only provide
financial service to client if it is complimentary and subordinate to the legal
work being provided. The financial service cannot be standalone and once the
legal work has been completed, the financial advice must be stopped. (For
example, if clients want to buy a building and we are acting on this and client
then wants to buy insurance for this, we can assist as this is incidental to the
legal work being provided. Taking out a life policy may be subordinate to some
3
, Atiba Millington – Professional Skills Course – Exam Notes
18th November 2023
legal work). However, in exam state there is not enough information to decide if
it is complimentary to the legal work.
4. The Scope Rules
Prohibited Activities (slide 116) that are too specialised for solicitors e.g.,
dealing in investments as principal and insurance distribution activities in
relation to insurance–based investment products e.g., “with-profit” endowment
policies.
Restricted Activities (slide 117/118).
• Securities and contractually-based investments – restrictions on
recommending to buy e.g., the firm can’t recommend that an
individual person buys listed shares. In this scenario, our firm cannot
recommend an individual client buy shares, we can recommend a
corporate client buy shares. We can recommend an individual sells
quoted shares and buys private limited company shares.
• Insurance distribution activities (5.2.1)b(iii) –
o must have compliance officer for insurance distribution,
register with FCA & comply with any other restrictions e.g.,
insurance-based investment product, where relevant.
o Must be registered with the FCA in the Financial Services
register.
QUESTION 1
QUESTION BANK
PART A
REGULATED ACTIVITIES: REAL ESTATE
Answer
1. It needs to be considered whether the firm of solicitors is in business as for an
activity to be regulated under FSMA. We are providing Real Estate work, therefore
we are providing a services to a client and we are in business (slide 48).
NOTE: (If in pub with friends and saying to friends to buy these shares, the social
setting/friends will not be business or providing legal services so this test will fail).
2. It needs to considered whether there is a specified investment which have been
specified by the RAO. Land and Cash is mentioned in the script but land will not be
regarded as a specified investment for the purposes of FSMA. (slide 50). We will be
acting in real estate and this is a specified investment under Regulated Mortgage
4
