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(^1) Q1 Part A)
f. Home Finance-related Activities i. Similar activities to the RMC activities for:
The client is an execution-only client. AND The solicitor accounts to the client for any pecuniary reward. o This exclusion does NOT apply if the specified investment is a contract of insurance. Art. 33: Introducing o The activity of “arranging” is excluded if the client is introduced to: An authorised or exempt person … … for the provision of independent advice. o This exclusion is only suitable if the solicitor does not intend to complete any further work for the client. o Consequently, the solicitor may keep any pecuniary reward, provided this is disclosed to the client. o This exclusion does NOT apply if the specified investment is a contract of insurance. Art. 66(1): Acting as a trustee, nominee or personal representative o Excludes the activity of arranging, providing: The solicitor is a trustee or PR (including bare trustee); and The arrangements are for themselves, other trustees or beneficiaries; and The solicitor does not receive any additional remuneration for the arrangement (i.e. only paid at trustee rate for any work done) o Does NOT apply to insurance unless the solicitor receives NO REMUNERATION for the work. Art. 67(1): Professional / Necessary Exclusion o An exclusion is provided where the regulated activity (i.e. financial work) can be reasonably regarded as a necessary part of other services carried on in the course of a profession (i.e. our legal work). o ‘Necessary part’ means that it must not be possible for the solicitor to carry out their everyday duties without carrying out the regulated activity as well. However, the activity must be a minor part of the legal services as a whole E.g. dealing in shares when purchasing a flat as you’d have to buy shares in the management company o This exclusion is subject to the condition that there is no separate remuneration received by the solicitor to carry on the regulated activity i.e. must be billed as part of one matter. o This exclusion does NOT apply to insurance unless the solicitor receives NO remuneration for the work. Art. 70(1): Regulated activities undertaken in connection with the sale of a body corporate. o Excludes the activity of dealing as principal, provided: The work relates to a share deal; and The transaction meets either the hard-edged test or the objective test. Hard-edged test: o The shares involved consist of 50% or more of the voting shares (including any shares already held by the buyer). Group together any connected people (i.e. spouse/blood/step relations of a
director/manager). o The buyer and seller must each be: individuals; a group of connected persons; a partnership; or a company. Objective test: o The object of the transaction may reasonably be regarded as to pass the day-to-day control of the body corporate Art. 37: Managing Investments Art. 38: Attorneys o The solicitor is exempt from the activity of “managing” if: They are acting under a power of attorney; and All day-to-day decisions relating to the investment are taken by an authorised individual / exempt person. Art. 66(1): Acting as a trustee, nominee or personal representative o Excludes the activity of “managing”, providing: The solicitor is a trustee or PR (including bare trustee); and The solicitor does not hold themselves out as somebody who manages investments; and The solicitor does not receive any additional remuneration for the management (i.e. only paid at their trustee rate for work done) o Does NOT apply to insurance unless the solicitor receives NO REMUNERATION for the work. Art. 40: Safeguarding AND administering Art. 66(1): Acting as a trustee, nominee or personal representative o Excludes the activity of “safeguarding and administering”, providing: The solicitor is a trustee or PR (including bare trustee); and The solicitor does not hold themselves out as somebody who safeguards and administers investments; and The solicitor does not receive any additional remuneration for the management (i.e. only paid at their trustee rate for work done) o Does NOT apply to insurance unless the solicitor receives NO REMUNERATION for the work. Art. 67(1): Professional / Necessary Exclusion o An exclusion is provided where the regulated activity (i.e. financial work) can be reasonably regarded as a necessary part of other services carried on in the course of a profession (i.e. our legal work). o ‘Necessary part’ means that it must not be possible for the solicitor to carry out their everyday duties without carrying out the regulated activity as well. However, the activity must be a minor part of the legal services as a whole E.g. dealing in shares when purchasing a flat as you’d have to buy shares in the management company o This exclusion is subject to the condition that there is no separate remuneration received by the solicitor to carry on the regulated activity i.e. must be billed as part of one matter.
o This exclusion does NOT apply to insurance unless the solicitor receives NO remuneration for the work. Art. 53: Advising on the Merits Art. 66(1): Acting as a trustee, nominee or personal representative o Excludes the activity of “advising”, providing: The solicitor is a trustee or PR (including bare trustee); and The advice is for themselves, other trustees or beneficiaries; and The solicitor does not receive any additional remuneration for the arrangement (i.e. only paid at trustee rate for any work done) o Does NOT apply to insurance unless the solicitor receives NO REMUNERATION for the work. Art. 67(1): Professional / Necessary Exclusion o An exclusion is provided where the regulated activity (i.e. financial work) can be reasonably regarded as a necessary part of other services carried on in the course of a profession (i.e. our legal work). o ‘Necessary part’ means that it must not be possible for the solicitor to carry out their everyday duties without carrying out the regulated activity as well. However, the activity must be a minor part of the legal services as a whole E.g. dealing in shares when purchasing a flat as you’d have to buy shares in the management company o This exclusion is subject to the condition that there is no separate remuneration received by the solicitor to carry on the regulated activity i.e. must be billed as part of one matter. o This exclusion does NOT apply to insurance unless the solicitor receives NO remuneration for the work. Art. 70(1): Regulated activities undertaken in connection with the sale of a body corporate. o Excludes the activity of dealing as principal, provided: The work relates to a share deal; and The transaction meets either the hard-edged test or the objective test. Hard-edged test: o The shares involved consist of 50% or more of the voting shares (including any shares already held by the buyer). Group together any connected people (i.e. spouse/blood/step relations of a director/manager). o The buyer and seller must each be: individuals; a group of connected persons; a partnership; or a company. Objective test: o The object of the transaction may reasonably be regarded as to pass the day-to-day control of the body corporate INSURANCE DISTRIBUTION EXCLUSIONS Insurance Distributions Exclusions for insurance distributions either do not apply, or will not apply unless the solicitor receives NO remuneration for the work (and thus making the exclusion highly impractical for the solicitor). MORTGAGE ACTIVITY EXCLUSIONS Arranging an Art. 29: Arranging deals with or through an authorised person
o The buyer and seller must each be: individuals; a group of connected persons; a partnership; or a company. Objective test: o The object of the transaction may reasonably be regarded as to pass the day-to-day control of the body corporate Advising on an RMC Art. 66(1): Acting as a trustee, nominee or personal representative o Excludes the activity of “advising”, providing: The solicitor is a trustee or PR (including bare trustee); and The advice is for themselves, other trustees or beneficiaries; and The solicitor does not receive any additional remuneration for the arrangement (i.e. only paid at trustee rate for any work done) Art. 67(1): Professional / Necessary Exclusion o An exclusion is provided where the regulated activity (i.e. financial work) can be reasonably regarded as a necessary part of other services carried on in the course of a profession (i.e. our legal work). o ‘Necessary part’ means that it must not be possible for the solicitor to carry out their everyday duties without carrying out the regulated activity as well. However, the activity must be a minor part of the legal services as a whole E.g. dealing in shares when purchasing a flat as you’d have to buy shares in the management company o This exclusion is subject to the condition that there is no separate remuneration received by the solicitor to carry on the regulated activity i.e. must be billed as part of one matter. Entering into an RMC as lender Art. 66(1): Acting as a trustee, nominee or personal representative o Excludes the activity of “entering into an RMC as lender”, providing: The solicitor is a trustee or PR (including bare trustee); and The advice is for themselves, other trustees or beneficiaries; and The solicitor does not receive any additional remuneration for the arrangement (i.e. only paid at trustee rate for any work done) Administering an RMC Unlikely to come up – see page 32 o Slide 94 – Using an authorised person o Slide 95 – Acting for an authorised person CONSUMER CREDIT ACTIVITY EXCLUSIONS Consumer Credit Activities Unlikely to come up – see page 33 o Slide 97 – Legal profession
Q1 Part B) – Section 327 Exemption
Corporate & Finance
- Shares / bonds - Warranty & Indemnity Insurance - Advising / arranging the sale or purchase of shares / bonds - Advising / arranging a contract of insurance - Consumer credit related activities o Introducing lender and borrower - Debt related activities o Debt counselling o Debt adjusting o Debt collection o Debt administration / enforcement - Home finance activities o Home reversion plans (equity release) o Home purchase plans 1. Buy/sell shares and bonds 2. Transfer/ issue shares/bonds 3. Negotiate terms of sale / purchase 4. Negotiate / obtain insurance 5. Consider what to do with proceeds of sale 6. Advise on IPO/Placing 7. Advise on takeover
(Islamic finance) o Sale & rent back Family - Regulated mortgage contracts
- Insurance policies (life assurance) - Pension - Shares - Land 1. Advising on entering / varying RMC 2. Advising on a contract of insurance 3. arranging 4. Transfer / assigning interest in house and other assets 5. Advise whether to accept assignment of product (eg endowment) rather than cash 6. Transfer shares in family company 7. Obtain a pension valuation 8. Assist with a new mortgage and life cover
COB Rules If a firm is undertaking a regulated activity (i.e. no exclusions apply) and wishes to rely on the s. 327 exemption, compliance with the COB rules is necessary. Rule 2 – Status Disclosure o The firm must disclose the following in writing in a manner that is clear, fair and not misleading, before carrying out a regulated activity or in good time before the conclusion of a contract of insurance A statement that the firm is authorised by the SRA and not the FCA The name and address of the firm The nature of the regulated activities and that they are limited in scope And a statement explaining that complains and redress mechanisms are provided through the SRA and Legal Ombudsman o Additionally, before providing a service to a client which includes any insurance distribution activity with or for a client, and in good time before the conclusion of a contract of insurance, you must state that you are an ancillary insurance intermediary and make a standard-form statement in writing to the client. Rule 3 – Execution of Transactions o The firm must carry out transactions for the client as soon as possible unless it reasonably believes it is in the clients best interests not to do so. o Transaction means purchase, sale, subscription or underwriting of a particular security . Rule 4 – Records of Transactions o Where a firm receives instructions from a client to effect transaction or makes a decision to effect a transaction in its discretion, it shall keep a record of: The name of the client; The terms of the instructions or decisions; and The date when the instructions were received. o Where a firm gives instructions to another person to effect a transaction, the firm shall keep record of: The name of the client; The terms of the instructions or decisions; The date when the instructions were received; and The name of the other person instructed. o Transaction means purchase, sale, subscription or underwriting of a particular security . Rule 5 – Record of Commissions o Where a firm receives commission which is attributable to regulated activities carried on by the firm, the firm must keep record of: The amount of commission received; and How the firm has accounted to the client for that commission. Rule 6 – Safekeeping of clients’ investments (see p. 60 manual) Rule 7 – Retail Investment Products (execution-only business) Rule 8 – Retention of Records Rule 9 – Insurance Distribution Activities
Introductions and Referrals