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Legal Services - 5 - Financial Services - Coggle Diagram
Legal Services - 5 - Financial Services
The General Prohibition and Regulated Activities
No-one may carry out this work unless authorised
Conditions: "
Specified activity
" in relation to a "
specified investment
", carried out
in the way of BUSINESS
to which
no EXCLUSIONS apply
Specified Regulated Activities per RAO (ADAMS)
Advising
Does not cover 'generic advice' - eg whether buying shares in general is good
Giving advice to an
investor
,
potential investor
, or their
agent
on the merits of doing X for a
PARTICULAR INVESTMENT
Buying
Selling
Subscribing for
Underwriting
A solicitor gives specific advice to a client about whether they should purchase shares in a particular company. The advice is not general but tailored to the specific merits and risks of investing in that company’s shares.
Arranging
Making arrangements
for
another person
to do X for a
PARTICULAR INVESTMENT
Buying
Selling
Subscribing for
Underwriting
A solicitor arranges for a client to purchase a bond issued by a third party. This might involve setting up the transaction or acting as an intermediary between the client and the financial institution selling the bond.
Dealing as an Agent
Doing the following regarding an
INVESTMENT
for a client
AS**
an agent:**
Buying
Selling
Subscribing for
Underwriting
A solicitor acts on behalf of a client to buy shares in a specific company. The solicitor carries out the transaction in the stock market, acting as the client's agent to make the purchase.
Managing
Managing assets for another person when
EXERCISE OF DISCRETION
is necessary
A solicitor manages a portfolio of investments for a client, exercising discretion over what assets to buy or sell based on the client’s investment objectives and risk tolerance.
Safeguarding
Safeguarding
assets
belonging to
another person and
administering them
A solicitor holds and safeguards assets on behalf of a client, such as acting as a custodian for shares or funds, ensuring their safekeeping and administering them according to the client’s instructions or legal obligations.
Specified Regulated
Investments
(FM DIPS)
Funeral plans
Mortgage contracts
Debentures
Insurance contracts
For these, you must
INFORM SRA
you're carrying out insurance-related work,
be put on a REGISTER OF PROVIDERS
, AND
APPOINT an INSURANCE DISTRIBUTION OFFICER
+4 exclusions don't apply,
only INCIDENTAL ACTIVITY EXEMPTION does
Shares in a company
and other securities
Pension schemes
IMPORTANT EXCEPTIONS that AREN'T REGULATED INVESTMENTS
Interests in land
Premium bonds (+ some other national savings products)
Exclusions
(as opposed to exemptions)
Takeover Exclusion
Solicitor can ADA (Arrange, Advise, Deal as an Agent) for a client
who is:
Buying
or
selling
OVER 50% of shares
in a company
Note: not subscribing for or underwriting
Subscribing for: Committing to purchase shares when they're issued (eg IPO)
Underwriting: guaranteeing to buy any remaining shares or securities in public offering that public doesn't buy
Or when transaction object
reasonably regarded
as
taking control of daily running of company
Applies to DS (Debentures, Shares)
NONE
of these apply to
INSURANCE
contracts or policies
Acting as Trustee, Nominee, or Personal Representative Exclusion
Solicitor can AAMS for investments
when acting as trustee, nominee, or personal representative - NOT DEAL AS AN AGENT
The trustee exclusion is specifically designed for situations where the solicitor is
managing investments as part of a fiduciary duty
in
those specific roles
, such as managing a trust or estate.
Theoretically for any of FM DIPS
Introducing or Acting Through An Authorised Person
Exclusion
Solicitor can introduce client to FCA-authorised person AND
Solicitor can then
arrange
or
act as an agent
(but not A(dvise) M(anage) S(afeguard)) for specified investment
if client receives advice from FCA-authorised person
AND solicitor is
simply assisting the client in acting on that advice
FM DPS
Exclusion NOT AVAILABLE IF Solicitor
Received
payment/commission
from authorised person AND
Did not
account for it to the client
Reasonably regarded as necessary
to providing legal services
Exclusion
DOES NOT APPLY TO
MANAGING ASSETS
Doesn't fall foul of GP if
activity
may
reasonably be regarded as a necessary part of providing legal services
Also does not apply if ACTIVITY IS BILLED SEPARATELY from main legal advice
Can ADA(S)
Takeover
: ADA - DS,
Trustee
: AAMS FM DIPS,
Authorised person
: DA, FM DIPS,
Reasonably Regarded as Necessary
: ADAS, FM DIPS
In the way of business
Eg acting as a solicitor in office
Vs talking to friend at party (not in way of business)
EXEMPTION
Incidental activities of Members of Designated Professional Bodies
Available for insurance
Much lower threshold than 'reasonably regarded as necessary for provision of legal advice' exclusion
Incidental activity
- how to determine
Incidental
to the work the
firm does
as a whole
AND
incidental to
client's particular matter
Are secondary or a small part of the solicitor's primary legal services. They are not the main focus of the firm's work.
Applies:
A solicitor is handling a commercial property transaction for a client. As part of the overall legal advice, the solicitor provides advice on whether the client should take out a loan to finance the purchase of the property. This advice is incidental to the primary legal services being provided, which are focused on the property transaction.
Doesn't apply:
A law firm regularly provides advice on investments as part of their client services. For example, they frequently advise clients on which shares or bonds to invest in, or act as intermediaries in financial transactions as a core part of their services. One of their main areas of business is helping clients with financial investments
.
Firm/Solicitor must confirm that
Client
knows
firm is SRA,
NOT
FCA-regulated from OUTSET
Client is coming to firm only
for execution of instructions
and
has NOT relied on any of their advice
Exclusion doesn't apply to:
Activities in SRA Financial Services Scope Rules 2019
Activities in Non-Exempt Financial Activities order
Eg encouraging client enter
regulated mortgage contract
as borrower
Advising that a lay client buy publicly-traded securities
Applicable when:
Solicitor provides
financial services
which either arise of or are complementary to the legal services provided; AND
Manner
and
scale
of provision is
incidental
to provision of
legal advice
Solicitor does not receive compensation
from anyone
else
without accounting to client for it
Note: Difference between reasonably regarded as necessary and incidental
RRAN
Financial activity must be
necessary to legal service
being provided
The financial advice is viewed as
essential to the completion
of the
legal service
.
It
directly contributes to the primary legal advice
or service.
Eg Financial advice necessary for a corporate sale or property transaction.
Incidental
The financial activity must be
incidental or peripheral to the main
legal service.
The financial activity is
secondary to the legal service
but is related to it
It
accompanies
the legal service but
does not have to be necessary
to it.
Eg Mentioning financial instruments in the context of legal advice.