QUESTION 1 TEMPLATE
The GENERAL PROHIBITION is that no person may carry on a regulated activity in the UK unless authorised or
exempt (s19 Financial Services and Markets Act 2000 – FSMA). An “authorised person” includes banks, building
societies and insurance companies (as authorised by the Prudential Regulation Authority (PRA)) and stockbrokers,
financial advisers, mortgage brokers and firms of solicitors (as authorised by the Financial Conduct Authority (FCA)).
Solicitors are “exempt” if they can use the s327 FSMA exemption.
STEP 1: Is the firm of solicitors in business?
Yes, providing a service to a client. APPLY TO FACTS (individual client or department)
STEP 2: Is there a specified investment? [ ] = most common to solicitors
- Certificates representing certain securities
- Rights under article 36H agreement (an (article 80)
agreement between a borrower and lender - Units in a collective investment scheme
where the lender provides credit to the (article 81)
borrower of £25,000 or less or the agreement - Rights under a stakeholder or personal
is not carried on for business purposes by the pension scheme (article 82)
borrower) - Greenhouse gas emission allowances (article
- Deposits (article 74) 82A)
- Electronic money (e-money) (article 74A) - Options (article 83) (NB: options over land
- Insurance contracts (articles 3 and 75) not regulated)
o E.g. buildings insurance, legal - Futures (article 84)
expenses insurance, indemnity - Contracts for differences (article 85)
insurance, life policies (whether term - Lloyd’s syndicate capacity and syndicate
insurance, whole life assurance, membership (article 86)
endowment assurance or annuities) - Funeral plan contracts (article 87)
- Shares (article 76) - Regulated mortgage contracts (article 88)
- Stocks and shares ISA - Home reversion plans (article 88A) – Equity
- Instruments creating or acknowledging release
indebtedness (article 77) - Home purchase plans (article 88B) – designed
o E.g. debentures, debenture stock, to purchase a home in a way that is
loan stock, bonds, certificates of acceptable under Islamic Law
deposit. - Regulated sale and rent back agreements
- Alternative finance investment bonds (article (article 88C)
77A) – Islamic equivalent to a bond or debt - Consumer credit agreements (article 88D)
instrument - Consumer hire agreements (article 88E)
- Government securities and public securities - Rights to or interests in investments (article
(article 78) 89)
o E.g. stock, bonds, UK Gilts - Bonds
- Instruments giving entitlements to - Gilts
investments – warrants (article 79) - Unit trusts, OEICs and investments trusts
- Insurance policies
NOT normally regulated, so far as solicitors are concerned
Building society share accounts
Bank and building society current and deposit accounts
Cash ISAs
National savings products inc. premium bonds
Occupational pensions
Land
Options over land
Mortgages which are NOT regulated mortgage contracts
Commercial borrowing
, Categorisation of Specified Investments:
Securities - Shares
- Bonds and Debentures
- Gilts
- Warrants
- Units in a unit trust and OIECs
- Stakeholder and personal pension
Relevant - ALL Insurance contracts (NOT restricted to qualifying contracts of insurance )
investments - Options
- Futures
- Contracts for difference
- Rights under funeral plan contracts (savings plan for funeral)
Contractually - Qualifying contracts of insurance (whole life, endowment and annuities)
based - Options
investments - Futures
- Contracts for difference
- Rights for funeral plan contracts (savings plan for funeral)
Regulated
mortgage
contracts
Regulated - Home reversion plan – equity release scheme
home finance - Home purchase plan – mortgage for islamic law / sharia law
transactions - Regulated sale and rent back agreement – sell your house and give you a lump sum of
cash so you use the house to get money but you do not own the house
Consumer - Lending that is regulated
Credit / Hire - Credits provided to an individual – credit cards, personal loans and hire purchase and
Agreements instalments
- Commercial borrowing – i.e. under £25k for business purposes
- Hire agreements
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