Georgie Clayton 2023 ©
Financial Business and Services
Part 1: Regulation
1 Long Form Q
5 MCQ
Solicitors cannot carry out a regulated activity unless they are authorised by the FCA or PRA (rare) or exempt by virtue of the s.327 FSMA exemption.
If a solicitor carries out a regulated activity without authorisation or exemption, then (i) s/he commits a criminal offence punishable by up to 2 years in prison and/or an unlimited fine; (ii)
any contract that s/he has entered into is rendered unenforceable; and s/he commits professional misconduct.
If a client needs financial advice in relation to a specified investment, then the solicitor:
o Can become a financial adviser authorised by the FCA to do so
o Can become an appointed representative (and thus exempt) to do so – this is unlikely due to conflicts with Principles 3 & 7
o Can refer him/her to a financial adviser provided that it is in the best interests of the clients and the clients are informed of any financial or other interest which the solicitor has in
referring the client.
This is unlikely when the FA is an AR as the AR is tied to a particular product/ product provider (unless they are an AR tied to a principal who provides independent
advice for RIP or is independent for non-RIP)
!/! if there are time constraints and the deal must be done quickly, and the AR has a product available which is suitable to the client, then it may be in the client’s best
interests.
This is unlikely with preferred FAs who wish for all clients to be referred.
they may wish/need to consult a financial adviser (FA)
The FA must either be authorised by the FCA or PRA or exempt (i.e., an appointed representative)
FA advises on a RIP FA advises on a non-RIP
FA must disclose the type of advice being given, whether independent or restricted. FA does not need to disclose the type of advice being given.
Independent = when the recommendation is based on a comprehensive and fair analysis But the FA can only describe themselves as “independent” if the advice being given is
of the relevant market (i.e., can objectively consider all types of RIP) and is unbiased and independent and they are not tied to a particular product/ product provider.
unrestricted.
An FA who provides independent advice is an “independent adviser” or
“independent financial adviser”
Restricted = advice provided is limited to a limited range of products or product providers.
An FA who provides restricted advice is usually an appointed representative
(AR) or a “tied agent”, i.e., agents of a principal who is tied to an authorised
person. However, some AR are tied to a principal who does provide independent
,Georgie Clayton 2023 ©
advice and so some AR can provide independent advice.
FAs are prohibited from receiving commissions from the suppliers of RIP who are
recommended by the advisers. Charges must now be agreed in advance.
FAs can receive commissions from the suppliers of RIP who are recommended by the
advisers.
How to answer the long-form Q
Tips:
Keep your answers relevant to the law, i.e., if a corporate department, think about SI, and SIA that corporate departments will come across.
Give examples.
Q1: is the firm of If the firm provides a service to a client, then yes. “The solicitor acting may be carrying out a regulated activity for the following
solicitors a business? reasons.”
Yes = continue to Q2 “The firm is a business as it is providing a service to a client, i.e., [TYPE]
[WHO IS THE CLIENT]”.
Q2: is there a specified SI include: “Specified Investments are involved.
investment? Shares – regardless of rights attached
Stocks and shares ISAs e.g., there is a mortgage and on the facts it is a regulated mortgage contract.
Yes = continue to Q3 Bonds It is a first legal charge over [NAME]’s (the borrower) dwelling.”
Debentures
Loan stock
AFIB
Any loan stock, bonds and any other instruments creating or
acknowledging indebtedness issued by any government, regional
assembly, etc
Gilts
Warrants
Futures
Contracts for differences where underlying SI
Unit trusts, investment trusts and OEICs (pooled funds)
Insurance policies (all)
Stakeholder and personal pensions
Regulated mortgage contracts
o First legal charge over a borrower’s dwelling
Options over SI
Consumer credit and consumer hire agreements
,Georgie Clayton 2023 ©
SI do not include
Loan agreements
Premium bonds
National Savings deposits, bonds, yearly plan contracts
Buy-to-let mortgages, commercial mortgages, second mortgages
Building society share accounts
Bank and building society current and deposit accounts
Cash ISAs
Occupational pension schemes
Land
Options over land
cash
!/!
If there is something in the Q which is not a SI, make sure to mention it
too.
If the SI is vague, i.e., “pension”, then make sure to mention that if it is an
occupational pension, then it will not be a SI, but if it is a personal
pension, then it will be a SI.
If there is a house (even though it is not a SI), query whether there is a
regulated mortgage contract.
If there is a mention of cash, remember this is not a SI.
Q3: is there a specified Advising on solicitor advises on the merits of buying, selling, subscribing “The work relating to those specified investments could/ would include
(investment) activity? investments or underwriting a particular SI. specified activities.
Yes = continue to Q4 Most common Advice must not be generic.
e.g., Advising. Any advice is likely to involve advising an investor on the
Arranging solicitor brings about deals merits of disposing or acquiring investments. This advice would not be
deals in generic advice. [APPLY TO THE FACTS i.e., advising on the merits of
investments acquiring shares in a particular Co if corporate, etc]
or makes arrangements with a view to a deal regardless of
whether the deal actually takes place. So, it is anything that
Most common helps/ assists in the buying, selling, subscribing for or e.g., Arranging. You may well bring about the disposal or acquisition of
underwriting SI regardless of whether the purchase, sale, investments, in particular make arrangements re [SPECIFIED
subscription or underwriting actually happens e.g., INVESTMENT]. [APPLY TO THE FACTS, i.e., drafting a particular document,
preparatory acts such as filling out a stock transfer form, filling out a particular form, putting in touch with an authorised person, etc]
drafting a SPA, etc.
e.g., Insurance Distribution. You may assist in
Managing solicitor has sole discretion in buying, selling, subscribing or surrendering/obtaining/assigning insurance. [APPLY TO THE FACTS].
investments underwriting SI without reference to the owner of the SI.
, Georgie Clayton 2023 ©
Common Usually when the solicitor is a trustee or a personal
representative, so often in PCD.
e.g., a solicitor is acting for a client who wishes to sell some
shares and transfer others direct to individual beneficiaries
under a will. Carrying out the terms of the will in relation to the
stocks and shares could amount to managing if the client has
given the solicitor discretion to decide which shares are being
sold and which are being transferred as beneficiary.
Safeguarding solicitor safeguards (controls) and administers (does
and something else such as collecting income/ dividends, proxy
administering voting) SI or makes arrangements to safeguard and
investments administer
Common e.g., a client asks you to look after her investment portfolio
once the proceeds are invested.
Insurance solicitor advises on a contract of insurance or rights under it,
distribution e.g., client seeks advise on whether he has a claim under a
activities contract of insurance
OR solicitor proposes or carries out other work preparatory to
the conclusion of the contract of insurance, e.g., client wants
to take out building insurance and solicitor puts him in touch
with an insurance broker
OR solicitor concludes a contract of insurance
OR solicitor assists in the administration and performance of
a contract of insurance, e.g., solicitor notifies a claim under an
insurance policy and helps negotiate a settlement under a
contract of insurance
So covers everything from getting quotes, recommending a
particular insurance, negotiating the terms, concluding the
contract, bringing an insurance claim, defending a claim for
the insurance company.
Financial Business and Services
Part 1: Regulation
1 Long Form Q
5 MCQ
Solicitors cannot carry out a regulated activity unless they are authorised by the FCA or PRA (rare) or exempt by virtue of the s.327 FSMA exemption.
If a solicitor carries out a regulated activity without authorisation or exemption, then (i) s/he commits a criminal offence punishable by up to 2 years in prison and/or an unlimited fine; (ii)
any contract that s/he has entered into is rendered unenforceable; and s/he commits professional misconduct.
If a client needs financial advice in relation to a specified investment, then the solicitor:
o Can become a financial adviser authorised by the FCA to do so
o Can become an appointed representative (and thus exempt) to do so – this is unlikely due to conflicts with Principles 3 & 7
o Can refer him/her to a financial adviser provided that it is in the best interests of the clients and the clients are informed of any financial or other interest which the solicitor has in
referring the client.
This is unlikely when the FA is an AR as the AR is tied to a particular product/ product provider (unless they are an AR tied to a principal who provides independent
advice for RIP or is independent for non-RIP)
!/! if there are time constraints and the deal must be done quickly, and the AR has a product available which is suitable to the client, then it may be in the client’s best
interests.
This is unlikely with preferred FAs who wish for all clients to be referred.
they may wish/need to consult a financial adviser (FA)
The FA must either be authorised by the FCA or PRA or exempt (i.e., an appointed representative)
FA advises on a RIP FA advises on a non-RIP
FA must disclose the type of advice being given, whether independent or restricted. FA does not need to disclose the type of advice being given.
Independent = when the recommendation is based on a comprehensive and fair analysis But the FA can only describe themselves as “independent” if the advice being given is
of the relevant market (i.e., can objectively consider all types of RIP) and is unbiased and independent and they are not tied to a particular product/ product provider.
unrestricted.
An FA who provides independent advice is an “independent adviser” or
“independent financial adviser”
Restricted = advice provided is limited to a limited range of products or product providers.
An FA who provides restricted advice is usually an appointed representative
(AR) or a “tied agent”, i.e., agents of a principal who is tied to an authorised
person. However, some AR are tied to a principal who does provide independent
,Georgie Clayton 2023 ©
advice and so some AR can provide independent advice.
FAs are prohibited from receiving commissions from the suppliers of RIP who are
recommended by the advisers. Charges must now be agreed in advance.
FAs can receive commissions from the suppliers of RIP who are recommended by the
advisers.
How to answer the long-form Q
Tips:
Keep your answers relevant to the law, i.e., if a corporate department, think about SI, and SIA that corporate departments will come across.
Give examples.
Q1: is the firm of If the firm provides a service to a client, then yes. “The solicitor acting may be carrying out a regulated activity for the following
solicitors a business? reasons.”
Yes = continue to Q2 “The firm is a business as it is providing a service to a client, i.e., [TYPE]
[WHO IS THE CLIENT]”.
Q2: is there a specified SI include: “Specified Investments are involved.
investment? Shares – regardless of rights attached
Stocks and shares ISAs e.g., there is a mortgage and on the facts it is a regulated mortgage contract.
Yes = continue to Q3 Bonds It is a first legal charge over [NAME]’s (the borrower) dwelling.”
Debentures
Loan stock
AFIB
Any loan stock, bonds and any other instruments creating or
acknowledging indebtedness issued by any government, regional
assembly, etc
Gilts
Warrants
Futures
Contracts for differences where underlying SI
Unit trusts, investment trusts and OEICs (pooled funds)
Insurance policies (all)
Stakeholder and personal pensions
Regulated mortgage contracts
o First legal charge over a borrower’s dwelling
Options over SI
Consumer credit and consumer hire agreements
,Georgie Clayton 2023 ©
SI do not include
Loan agreements
Premium bonds
National Savings deposits, bonds, yearly plan contracts
Buy-to-let mortgages, commercial mortgages, second mortgages
Building society share accounts
Bank and building society current and deposit accounts
Cash ISAs
Occupational pension schemes
Land
Options over land
cash
!/!
If there is something in the Q which is not a SI, make sure to mention it
too.
If the SI is vague, i.e., “pension”, then make sure to mention that if it is an
occupational pension, then it will not be a SI, but if it is a personal
pension, then it will be a SI.
If there is a house (even though it is not a SI), query whether there is a
regulated mortgage contract.
If there is a mention of cash, remember this is not a SI.
Q3: is there a specified Advising on solicitor advises on the merits of buying, selling, subscribing “The work relating to those specified investments could/ would include
(investment) activity? investments or underwriting a particular SI. specified activities.
Yes = continue to Q4 Most common Advice must not be generic.
e.g., Advising. Any advice is likely to involve advising an investor on the
Arranging solicitor brings about deals merits of disposing or acquiring investments. This advice would not be
deals in generic advice. [APPLY TO THE FACTS i.e., advising on the merits of
investments acquiring shares in a particular Co if corporate, etc]
or makes arrangements with a view to a deal regardless of
whether the deal actually takes place. So, it is anything that
Most common helps/ assists in the buying, selling, subscribing for or e.g., Arranging. You may well bring about the disposal or acquisition of
underwriting SI regardless of whether the purchase, sale, investments, in particular make arrangements re [SPECIFIED
subscription or underwriting actually happens e.g., INVESTMENT]. [APPLY TO THE FACTS, i.e., drafting a particular document,
preparatory acts such as filling out a stock transfer form, filling out a particular form, putting in touch with an authorised person, etc]
drafting a SPA, etc.
e.g., Insurance Distribution. You may assist in
Managing solicitor has sole discretion in buying, selling, subscribing or surrendering/obtaining/assigning insurance. [APPLY TO THE FACTS].
investments underwriting SI without reference to the owner of the SI.
, Georgie Clayton 2023 ©
Common Usually when the solicitor is a trustee or a personal
representative, so often in PCD.
e.g., a solicitor is acting for a client who wishes to sell some
shares and transfer others direct to individual beneficiaries
under a will. Carrying out the terms of the will in relation to the
stocks and shares could amount to managing if the client has
given the solicitor discretion to decide which shares are being
sold and which are being transferred as beneficiary.
Safeguarding solicitor safeguards (controls) and administers (does
and something else such as collecting income/ dividends, proxy
administering voting) SI or makes arrangements to safeguard and
investments administer
Common e.g., a client asks you to look after her investment portfolio
once the proceeds are invested.
Insurance solicitor advises on a contract of insurance or rights under it,
distribution e.g., client seeks advise on whether he has a claim under a
activities contract of insurance
OR solicitor proposes or carries out other work preparatory to
the conclusion of the contract of insurance, e.g., client wants
to take out building insurance and solicitor puts him in touch
with an insurance broker
OR solicitor concludes a contract of insurance
OR solicitor assists in the administration and performance of
a contract of insurance, e.g., solicitor notifies a claim under an
insurance policy and helps negotiate a settlement under a
contract of insurance
So covers everything from getting quotes, recommending a
particular insurance, negotiating the terms, concluding the
contract, bringing an insurance claim, defending a claim for
the insurance company.
