s.19(1) – The General Prohibition
No person may carry on regulated activity in UK unless (a) authorised or (b) exempt
Apply s.22(1) - regulated activity = specified investment + specified activity
FSMA 2000 (Regulated Activities) Order 2001 (RAO)
Pt III = Specified investment
o NB FSMA does NOT apply to business/asset sales - only share sales (Art 76 RAO)
Pt II = Specified activity
o Art 14 - Dealing in investments as principal inc. buying/selling securities
o Art 25 - Arranging deals in investments inc. Seller Auction Sale
Exception - Art 28 –person making arrangements enters into them as
principal (applies to S as party to share sale agreement) or agent
Exception - Art 29 –arranging transaction as agent through authorised
person, provided auth. person advised not solicitor + no pecuniary reward or
other advantage from person other than client
Exception - Art 33 – referring client to an authorised person
o Art 21 - Dealing in investments as agent
Art 53(1) – advising on the merits of investments inc. selling shares
Art 70 RAO – General Exclusion
Applies to all activities above – provides that a person will not be carrying on activity of a
kind specified by entering into transaction to acquire/dispose of shares in a company and:
o Share bought/sold consist of/inc. ≥ 50% of voting shares in the co; OR
o Shares, together with any already held by B consist of/inc. at least 50% of voting
shares; AND
o In either case, acquisition/disposal is between parties, each of whom is a body
corporate / partnership / single individual / group of connected individuals
Group of connected = single group, each of whom is/will be either director /
manager of co. being sold / close relative of such person / trustee of such
people
If conditions NOT met, exclusion may apply where ‘object of the transaction may
nevertheless be regarded as being the acquisition of day-to-day control of the affairs of
the body corporate’
Art 70 DOES NOT apply to public takeovers
, s. 21 FSMA - Restrictions on financial promotion
General prohibition on all types of financial promo/marketing of investment activity
o E.g. cold calling, websites, general advertising
Failure to comply = Criminal offence in course of business to communicate an invitation or
inducement to engage in investment activity – fine/imprisonment
o unless authorised person/contents of communication approved by authorised person
o includes approaching potential buyers to induce and claims mgmt activity
Sch 1 Pt II FSMA (Financial Promotion) Order 2005 = type of investments subject to s.21
o Inc. share sales, NOT collection of assets / business sale
FPO exemptions:
Art 19(1) – comms made only to recipients whom person making comms believes on
reasonable grounds to be an investment professional
Art 49(2)(a) – communication made to any body corporate which has/is a member of the
same group as an undertaking which has, a called up share capital or net assets of not less
than:
o £500k - if Body corporate has > 20 members OR is a subsidiary undertaking with
> 20 members
o £5m Otherwise
Art 62(2)(b)(ii) (most important) – comms related to transaction which meets the conditions
set out in Art 70 RAO
o including transaction reasonably regarded as acquisition of day-to-day control of
the affairs of the body corporate
NB – only need to qualify for one exception in the FPO to be exempt from s.21 FSMA
restrictions
s.85 FSMA – Requirement for prospectus
Prospectus needed where offer to the public
Exception - s.86(1)– no need for prospectus needed if sent to < 150 people
s.755(1) CA 2006 – Offer of shares to the public
If B is a private company + consideration comprises an allotment (rather than transfer) of
shares, B must be satisfied that consideration does not infringe prohibition on offering
shares to the public
s.89 Financial Services Act 2012 (FSA)
S that fails to disclose relevant matters in connection with a sale of shares may be
criminally liable
Important to note for co. officers – criminal offence to make false + misleading statements
to induce B into purchase so accurate info should always be given
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