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LPC Law Notes Business Law and Practice Notes

Fsma Notes

Updated Fsma Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

A collection of the best LPC BLP notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

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FINANCIAL SERVICES AND MARKETS ACT 2000 (Regulated Activities) Order 2001 [FSMA 2000 RAO 2001]

  • FSMA s.19(1): No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is…an authorised person…

  • FSMA s.22(1): An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and… relates to an investment of a specified kind…

Our firm has just been instructed by first time house buyers, Sonya Lever and Francois Thomson. Sonya and Francois do not have a mortgage offer, but have collected several leaflets from building societies about various mortgages. They would like us to advise them on: (a) the best type of mortgage for them; and (b) for which of the various possible mortgages they should apply. This is financial advice so we need to check whether the firm is authorised to be undertaking this sort of work.

STEP 1: APPLY THE FINANCIAL SERVICES AND MARKETS ACT 2000 (REGULATED ACTIVITIES) ORDER 2001.

WILL THE FIRM BE UNDERTAKING A “REGULATED ACTIVITY”? (SS.19&20 FSMA)

  1. Will the work of the solicitor involve a specified investment (Part III RAO)? If yes, move on to 1.2.

If no, the firm will not be undertaking a regulated activity for the purposes of ss.19&20 FSMA. FCA authorisation is not required. Analysis completed.

Specified Investments (Part III RAO) include:

  • art 74: deposits

  • art 75: contracts of insurance

  • art 76: shares and stock

  • art 77: instruments creating or acknowledging indebtedness

  • art 78: government and public securities

  • art 79: instruments giving entitlements to investments

  • art 80: certificates representing certain securities

  • art 81: units in a collective investment scheme

  • art 82: rights under a stakeholder pension scheme

  • art 83: options

  • art 88: regulated mortgage contracts

  • art 89: rights to or interests in investments

The RAO defines each type of specified investment.

  • Art 88 RAO: “Regulated mortgage contracts” are a “specified investment”.

  • Art 61(3) RAO gives the definition of a regulated mortgage contract (RMC)

  1. a contract is a “regulated mortgage contract” if, at the time it is entered into, the following conditions are met -

  1. the contract is one under which a person (“the lender”) provides credit to an individual … (“the borrower”);

  2. the contract provides for the obligation of the borrower to repay to be secured by a first legal mortgage on land in the UK;

  3. at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling by the borrower …”

  • Applying these conditions to the present scenario, the mortgage that Sonya and Francois require will fall within the definition of a RMC – the lender will provide credit to them as individuals, the loan will be secured by a first legal charge on the property in the UK and at least 40% of that property will be used as a dwelling.

  • So, the answer to this first question is yes, there is a specified investment.

  1. Will the solicitor be carrying on a specified activity (Part II RAO) in relation to the specified investment (Part III RAO)? If yes, move on to 1.3.

If no, the firm will not be undertaking a regulated activity for the purposes of ss.19&20 FSMA. FCA authorisation is not required. Analysis completed.

Specified activities (Part II RAO), include:

  • art 14: dealing in investments as principal

  • art 21: dealing in investments as agent

  • art 25: arranging deals in investments

  • art 25A: arranging regulated mortgage contracts

  • art 39A: assisting in the administration and performance of a contract of insurance

  • art 40: safeguarding and administering investments

  • art 53: advising on investments

  • art 53A: advising on regulated mortgage contracts

The RAO defines each specified activity.

  • The clients have asked you to advise on which of the various possible mortgages they should apply for.

  • Article 53A RAO “Advising on regulated mortgage contracts” states:

  1. Advising a person is a specified kind of activity if the advice –

  1. is given to a person in his capacity as a borrower or potential borrower; and

  2. is advice on the merits of his doing any of the following –

  1. entering into a particular regulated mortgage contract, …

  • Advising on which of the various possible mortgages they should apply for would fall into this definition, and would therefore be a specified activity.

  1. Do any exclusions apply to the specified activity – specific or general?

If yes, the firm will not be undertaking a regulated activity for the purposes of ss.19&20 FSMA. FCA authorisation is not required. Analysis completed.

If no, the firm will be undertaking...

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