A more recent version of these Financial Services notes – written by Cambridge And Oxilp And College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Professional Conduct Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Section 3: Providing Financial Services
1. FIRST: identify WHAT S.19 a.
The key elements will give you easy marks!
2. Identify the investment (e.g. shares, a property, a piece of artwork)
3. Is there a SPECIFIED INVESTMENT under FSMA? See Part III RAO a.
There may be more than one;
Raise all the investments that may be a specified investment but probably wont - completeness = marks!
Identify the relevant article and if applicable go through the requirements: i. With property mortgages go through the Article 61(3) requirements (A.88 for definition). ii. For bonds - instruments creating indebtedness are under A.78.
4. Is the investments a SPECIFIED ACTIVITY under FSMA? See Part II RAO a.
First, identify the activity (e.g. advising on the purchase of shares) and write it down i. If Article 53 applies then mention it must be in relation to a particular investment and it must be to advise on the merits of that investment. It must also be to a potential advisor. You must identify all 3 to get marks!
ii. If you are using a power of attorney then Article 21 may apply (dealing in investments as agent).
NOTE: if a solicitor is advising on the general issues relating to shares (e.g. voting rights) then FSMA will not apply and no authorisation is required. i. BASICALLY: the advice cannot amount to a recommendation either to go for an investment, or not to go for an investment, or it will fall under FSMA.
5. Is the ACTIVITY EXCLUDED under FSMA? See Part II RAO again a.
Each activity will have specific exclusions so start there (the exclusion part of the article will say what general exclusions are available to it);
If that doesn't work, look at more general exclusions from Article 66 onwards which apply to more than one activity; i. When discussing Article 67, mention if it is necessary for the solicitor to advise (i.e. where a solicitor can give advice if it is reasonably regarded as a necessary part of other services). Also mention this exclusion is subject to the condition of no separate remuneration. ii. If a sale of body corporate - general exclusion of 50% of shares - a.70(2)(a)
Mention all exclusions that may come up
NOTE: if it is a 12 mark question then there probably won't be an exclusion (may be for 8 mark question).
IF YES - FSMA does not apply and no authorisation is required. IF NO...
6. Does the activity fulfil the basic conditions in S.327 a.
FSMA and SRA SCOPE RULE 4?
Section 327 FSMA: i. Is [the activity] carried out in the course of a profession? Always YES ii. Is [the activity] incidental? You are looking to see if it is a small part of the overall work being offered by the firm.
If the firm doesn't advertise the regulated activities separately from the other activities it does and the regulated activity forms a small part of the overall work then incidental.
iii. Is the commission earned passed on to the client? The could easily be done if necessary. b.
Scope Rule 4: i. Does the activity arise out of OR is complimentary to the non-regulated services being offered by the firm?
ARISE OUT OF - Look for logical flow of advice - i.e. if the solicitor is advising the client on a private injury matter and then gives advice on investment, this is NOT LOGICAL!
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