Chapter 5: Financial Services

• Bank of England


  Responsible for setting monetary policy
• Financial Conduct Authority


  Independent body that regulates the conducts of all financial services in the UK and is accountable to HM treasury
• Financial Conduct Authority


  • Protecting customers - type of level of protection will depend on the type of financial product e.g. complexities
  • Protecting financial markets - taking measures to safe guard the integrity of the UK financial system
  • Responsible for granting 'approved' person status to people who will work in certain functions of regulated financial services firms including some solicitors
• A person cannot carry our regulated activities unless they are authorised or exempt from doing so
• Specified activities


  • Advising - giving advice to an investor or potential investor on the merits of buying, selling, subscribing for or underwriting a particular investment (Does not cover generic advise on buying/selling shares)
  • Arranging - Making arrangements for another person to buy, sell, subscribe for or underwrite a particular investment
  • Dealing as agent - Buying, selling, subscribing for or underwriting investments as agent for a client
  • Managing - Managing assets belonging to another person in circumstances which involve the exercise of discretion
  • Safeguarding - Safeguarding assets belonging to another and administering them
• Specified investments


  • Insurance contracts
  • Shares in a company and other securities
  • Debentures
  • Mortgage contracts
  • Pension schemes
  • Funeral plans
• Interests in land and some national savings products such as Premium bonds are not specified investments
• Advice given to a client in a personal capacity is not classed as a regulated activities
• Exclusions to the rules on Specified investments


  • Take over exclusion
  • Acting as trustee, nominee or personal representative
  • Introducing or acting through an authorised person
  • The reasonably regarded as necessary exclusion
• Takeover exclusion


  A solicitor can deal as an agent, arrange, or advise with respect to a client who is buying or selling 50% or more of the voting shares of a company or when the object of the transaction otherwise may be reasonably regarded as taking control of the daily running of a company
• Acting as trustee, nominee or personal representative


  A solicitor can advise, arrange, manage and safeguard investments when acting as a trustee, nominee or personal representative
• Introducing or acting through an authorised person


  • A solicitor can introduce a client to a person authorised by the Financial Conduct Authority (e.g. stockbroker, mortgage broker etc.) in order for the client to receive advice
  • A solicitor may arrange or act as an agent with respect to specified investments if the client receives advice from authorised person and the solicitor merely assists the client is acting on this
  • This exclusion is not available if the solicitor received any payment or commission for he authorised person which is not accounted for to the client
• The reasonably regarded as necessary exclusion

  • A solicitor will not violate the General Prohibition if they carry on an activity in relation to specific investments that might otherwise be regulated activity if the activity may reasonably be regarded as a necessary part of providing the legal services
  • This exclusion cannot be used if the activity is billed separately from the main legal advice
• Incidental activities of members of designated professional bodies


  • If a solicitor provides financial services which arise out of or are complementary to the legal services provided, the manner and scale of their provision is incidental to the provision of legal advice and the solicitor does not receive compensation for this from anyone else without accounting to the client for it, the services will be exempted
  • The exemption is similar to the exclusion for providing reasonably necessary activities
  • Sol is a member of a designated professional body such as SRA and her advice on investments is only incidental to the clients dispute, it falls withing this exemption
• Determining whether the activity is incidental


  • Determined by looking at whether it is incidental to the work the firm does as a whole and also whether it is incidental to the client's particular matter
  • This exemption could not be relied on if one of the firm's main areas of business was the provision of the regulated activities
• The exemption does not extend to activities contained it SRA financial services rules 2019 or the non-exempt activities order, including carrying out activities such as recommending that a client enter into a regulated mortgage contract as borrower or advising that a lay client buy publicly traded securities
• Conduct of business rules

  • Informing the client at the outset that the firm is regulated by the SRA and not the Financial conduct Authority
  • Confirming (if relevant) that the client is coming to the firm only for 'execution' of their instructions and has not sought or relied on advice from the firms in relation to the transaction
• General Prohibition


  No person may carry on regulated activity unless authorised or exempt
• Regulated activity


  • Specified activity: ADAMS (Advising, Dealing as an agent, Arranging, Managing, Safeguarding)
  • Specified investment: FC DIMPS (Insurance Contracts, Company shares, Debentures, Mortgage contracts, Pension schemes, Funeral plans, (Bot land or national savings products))
  • Carried on by way of business
  • No exclusion applies: Takeover exclusion, Acting as trustee, nominee or personal representative, Introducing or acting through authorised person, Providing necessary activities
• Exemption


  • Member of designated professional body: Solicitors regulation authority
  • Incidental activity: Providing financial service that is incidental to firms work as a whole and incidental to client's matter, Does not receive compensation unless accounted for to client
• Insurance distribution activates


  • Additional requirements which must be complied with when firms carry our activates in relation to insurance policies
  • Firms dealing with conveyancing, probate and litigation matters when clients require insurance such as a defective title insurance it conveyancing transactions or after the event insurance it a litigation matter
  • Firm would need to notify SRA that they were carrying out activities it relation to insurance policies, be put on a register of providers and appoint an insurance distribution officer