lOMoARcPSD|3013804
1
Q1 Part A)
1. Is the firm of solicitors in business?
a. Yes. By [DOING XYZ], we are providing a service to [CLIENT], therefore we are acting in the
course of business.
2. Is there a specified investment? (Choose 2 relevant specified + 2 relevant unspecified)
a. Specified investments are investments specified as such by the Regulated Activities Order
(RAO), including:
i. “Securities”
1. Shares
2. Shares in OEICs
3. Shares in Investment trusts
4. Bonds
5. Debentures
6. Gilts
7. Warrants (right to buy shares)
8. Units in unit trusts
9. Personal and stakeholder pensions
10. Stocks & shares ISA
ii. “Relevant investments”
1. ALL Insurance contracts
2. Options for certain assets:
a. Securities
b. Foreign Currencies
c. Precious metals
d. Contractually based investments
e. An option on an option of the above assets
3. Futures
4. Contracts for difference (i.e. equity derivates)
5. Rights under a funeral plan scheme
iii. “Contractually based investments”
1. “Qualifying contracts of insurance”
a. Whole life policies (not term life insurance)
b. Endowment policies (often linked with “endowment mortgage”)
c. Annuities
2. Options (as above)
3. Futures
4. Contracts for difference (i.e. equity derivates)
5. Rights under a funeral plan scheme
iv. “Regulated mortgage contracts” (RMCs), i.e.:
1. A loan;
2. Secured by way of charge over land;
3. Where at least 40% of that land is used as a dwelling by the borrower
a. Typical homeowner mortgages are included, but buy-to-let mortgages,
second mortgages, or mortgages to companies are generally not
covered.
v. Regulated home finance transactions
1. Home reversion plans (equity release)
2. Home purchase plans (Islamic finance)
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3. Sale & lease back plans
vi. Consumer credit / hire agreements
a. Unspecified investments
i. Bank / building society accounts
ii. Cash ISA
iii. Land
iv. Options over land
v. National savings products (including premium bonds)
vi. Commercial borrowing
vii. Occupational pensions
3. Is there a specified activity? (Choose 3)
a. Specified activities are those activities specified as such by the RAO.
b. “The work undertaken by the firm in [REAL ESTATE] is likely to involve the following
specified activities:”
c. Investment-related Activities
i. Arranging deals in investments (Art 25)
1. This applies where a solicitor makes arrangements for another person to deal in
a
security and/or relevant investment.
2. To deal means buying or selling for consideration.
3. Arranging includes either:
a. Bringing about deals (e.g. filling out stock transfer form); or
b. Making arrangements with a view to deal (e.g. introducing the
client to a stockbroker / financial advisor)
4. APPLY
ii. Advising on investments (Art. 53)
1. This applies where a solicitor advises a client on the merits of dealing in a
particular investment, where investment means securities and/or relevant
investments
2. To deal means buying or selling for consideration.
3. The advice must be specific; generic advice will not be caught.
4. APPLY
iii. Managing investments (Art. 37)
1. This applies where a solicitor manages assets where:
a. The assets are securities or contractually based investments;
b. The assets belong to someone else; AND
c. Sole discretion is exercised by the firm, not the client (i.e. where the
solicitor is a trustee of a discretionary trust / personal representative
(executor or administrator of a will))
2. APPLY
iv. Safeguarding AND administering investments (Art. 40)
1. This applies where a solicitor safeguards AND administers assets which:
a. Are securities or contractually based investments; and
b. belong to someone else
2. Safeguarding means controlling the assets (i.e. possessing physical custody of
the asset, e.g. obtaining share certificates)
3. Administering means doing something else such as collecting income /
dividends or proxy voting
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4. APPLY
v. Dealing as principal (Art. 14)
1. This applies where a solicitor is dealing in securities or contractually
based investments on their own behalf as trustee or PR.
2. To deal means buying or selling for consideration.
3. APPLY – This is rare (only in context of trusts)
vi. Dealing as agent (Art 21)
1. This applies where a solicitor deals in securities or relevant investments as
agent
a. To deal means buying or selling for consideration.
b. Agent means acting in the solicitors name, but on behalf of the client
(e.g. where a stockbroker accidentally addresses transfer note to the
solicitor instead of client)
2. APPLY – This is rare in practice
d. Insurance-related Activities
i. SEE RELEVANT ACTIVITIES ABOVE
ii. “Insurance Distribution” includes:
1. Arranging an insurance contract (Art. 25)
a. E.g. Obtaining quotes
2. Advising on an insurance contract (Art. 53)
a. E.g. Recommending a particular insurance
b. E.g. Negotiating the terms of a particular insurance
c. E.g. Advising on the conclusion of the contract
3. Dealing in insurance as agent (Art. 21)
a. E.g. Underwriting insurance policies on an insurance company client’s behalf
4. Assisting in the administration and performance of a contract of insurance (Art.
39A)
a. E.g. Helping a client to make a claim under an insurance policy
b. E.g. Defending an insurance company in litigation re. an insurance claim
e. Mortgage-related Activities
i. Arranging a Regulated Mortgage Contract (RMC) (Art. 25A)
1. This applies where a solicitor:
a. Arranges for a client to either enter into an RMC or to vary the
terms of an RMC as borrower (e.g. filling out relevant forms); or
b. Makes arrangements with a view to RMCs (e.g. introducing the client
to a mortgage broker)
2. APPLY
ii. Advising on an RMC (Art. 53A)
1. This applies where a solicitor advises a client on either:
a. Entering into a particular RMC; or
b. Varying the terms of a particular RMC
2. The advice must be specific; generic advice will not be caught.
3. APPLY
iii. Entering into an RMC as lender (Art. 61(1))
1. This applies where a solicitor lends money a client (buyer) to enter into an RMC.
2. Very unlikely but possible if solicitor acting as trustee
iv. Administering an RMC (Art. 61(2))
1. This applies where a solicitor completes various administrative tasks for the
lender client of an RMC, such as:
a. Notifying the borrower of any changes to the RMC; or
b. Collecting or recovering monies due under an RMC from the
borrower. 3
, lOMoARcPSD|3013804
f. Home Finance-related Activities
i. Similar activities to the RMC activities for:
1. Home reversion plans (equity release)
2. Home purchase plans (Islamic finance)
3. Sale & lease back plans
g. Consumer Credit-related Activities, including:
i. Credit broking activities
ii. Debt related activities
1. E.g. debt counselling – helping a client in debt work out next steps
2. E.g. debt adjusting – Making arrangements for the repayment or satisfaction of
debts in an amount or manner that differs from the original debt structure (e.g.
consolidation)
3. E.g. debt collecting
4. E.g. debt administration
4. Is the activity ‘excluded’? (Choose 3) – if YES FSMA does not apply!
a. The RAO sets out exclusions to each activity
ACTIVITY RELEVANT EXCLUSIONS
INVESTMENT ACTIVITY EXCLUSIONS
Art. 14: Dealing
as Principal Art. 15: Absence of holding out
o Excludes the activity of dealing as principal in securities and assignment of
qualifying contracts of insurance, provided the solicitor:
Has not held themselves out as providing a service of dealing in securities
and contractually based investments (i.e. a stockbroker); and
Is not a bare trustee.
Art. 16: Dealing in contractually-based investments
o Excludes the activity of dealing as principal in contractually based investments,
provided an authorised provider is used (e.g. stockbroker, financial advisor, banks
etc)
Art. 66(1): Acting as a trustee, nominee or personal representative
o Excludes the activity of dealing as principal providing:
The solicitor is a trustee or PR (including bare trustee); and
The solicitor has not held themselves out as providing a service of dealing
in securities and contractually based investments.
o 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).
1
Q1 Part A)
1. Is the firm of solicitors in business?
a. Yes. By [DOING XYZ], we are providing a service to [CLIENT], therefore we are acting in the
course of business.
2. Is there a specified investment? (Choose 2 relevant specified + 2 relevant unspecified)
a. Specified investments are investments specified as such by the Regulated Activities Order
(RAO), including:
i. “Securities”
1. Shares
2. Shares in OEICs
3. Shares in Investment trusts
4. Bonds
5. Debentures
6. Gilts
7. Warrants (right to buy shares)
8. Units in unit trusts
9. Personal and stakeholder pensions
10. Stocks & shares ISA
ii. “Relevant investments”
1. ALL Insurance contracts
2. Options for certain assets:
a. Securities
b. Foreign Currencies
c. Precious metals
d. Contractually based investments
e. An option on an option of the above assets
3. Futures
4. Contracts for difference (i.e. equity derivates)
5. Rights under a funeral plan scheme
iii. “Contractually based investments”
1. “Qualifying contracts of insurance”
a. Whole life policies (not term life insurance)
b. Endowment policies (often linked with “endowment mortgage”)
c. Annuities
2. Options (as above)
3. Futures
4. Contracts for difference (i.e. equity derivates)
5. Rights under a funeral plan scheme
iv. “Regulated mortgage contracts” (RMCs), i.e.:
1. A loan;
2. Secured by way of charge over land;
3. Where at least 40% of that land is used as a dwelling by the borrower
a. Typical homeowner mortgages are included, but buy-to-let mortgages,
second mortgages, or mortgages to companies are generally not
covered.
v. Regulated home finance transactions
1. Home reversion plans (equity release)
2. Home purchase plans (Islamic finance)
1
1
, lOMoARcPSD|3013804
3. Sale & lease back plans
vi. Consumer credit / hire agreements
a. Unspecified investments
i. Bank / building society accounts
ii. Cash ISA
iii. Land
iv. Options over land
v. National savings products (including premium bonds)
vi. Commercial borrowing
vii. Occupational pensions
3. Is there a specified activity? (Choose 3)
a. Specified activities are those activities specified as such by the RAO.
b. “The work undertaken by the firm in [REAL ESTATE] is likely to involve the following
specified activities:”
c. Investment-related Activities
i. Arranging deals in investments (Art 25)
1. This applies where a solicitor makes arrangements for another person to deal in
a
security and/or relevant investment.
2. To deal means buying or selling for consideration.
3. Arranging includes either:
a. Bringing about deals (e.g. filling out stock transfer form); or
b. Making arrangements with a view to deal (e.g. introducing the
client to a stockbroker / financial advisor)
4. APPLY
ii. Advising on investments (Art. 53)
1. This applies where a solicitor advises a client on the merits of dealing in a
particular investment, where investment means securities and/or relevant
investments
2. To deal means buying or selling for consideration.
3. The advice must be specific; generic advice will not be caught.
4. APPLY
iii. Managing investments (Art. 37)
1. This applies where a solicitor manages assets where:
a. The assets are securities or contractually based investments;
b. The assets belong to someone else; AND
c. Sole discretion is exercised by the firm, not the client (i.e. where the
solicitor is a trustee of a discretionary trust / personal representative
(executor or administrator of a will))
2. APPLY
iv. Safeguarding AND administering investments (Art. 40)
1. This applies where a solicitor safeguards AND administers assets which:
a. Are securities or contractually based investments; and
b. belong to someone else
2. Safeguarding means controlling the assets (i.e. possessing physical custody of
the asset, e.g. obtaining share certificates)
3. Administering means doing something else such as collecting income /
dividends or proxy voting
2
, lOMoARcPSD|3013804
4. APPLY
v. Dealing as principal (Art. 14)
1. This applies where a solicitor is dealing in securities or contractually
based investments on their own behalf as trustee or PR.
2. To deal means buying or selling for consideration.
3. APPLY – This is rare (only in context of trusts)
vi. Dealing as agent (Art 21)
1. This applies where a solicitor deals in securities or relevant investments as
agent
a. To deal means buying or selling for consideration.
b. Agent means acting in the solicitors name, but on behalf of the client
(e.g. where a stockbroker accidentally addresses transfer note to the
solicitor instead of client)
2. APPLY – This is rare in practice
d. Insurance-related Activities
i. SEE RELEVANT ACTIVITIES ABOVE
ii. “Insurance Distribution” includes:
1. Arranging an insurance contract (Art. 25)
a. E.g. Obtaining quotes
2. Advising on an insurance contract (Art. 53)
a. E.g. Recommending a particular insurance
b. E.g. Negotiating the terms of a particular insurance
c. E.g. Advising on the conclusion of the contract
3. Dealing in insurance as agent (Art. 21)
a. E.g. Underwriting insurance policies on an insurance company client’s behalf
4. Assisting in the administration and performance of a contract of insurance (Art.
39A)
a. E.g. Helping a client to make a claim under an insurance policy
b. E.g. Defending an insurance company in litigation re. an insurance claim
e. Mortgage-related Activities
i. Arranging a Regulated Mortgage Contract (RMC) (Art. 25A)
1. This applies where a solicitor:
a. Arranges for a client to either enter into an RMC or to vary the
terms of an RMC as borrower (e.g. filling out relevant forms); or
b. Makes arrangements with a view to RMCs (e.g. introducing the client
to a mortgage broker)
2. APPLY
ii. Advising on an RMC (Art. 53A)
1. This applies where a solicitor advises a client on either:
a. Entering into a particular RMC; or
b. Varying the terms of a particular RMC
2. The advice must be specific; generic advice will not be caught.
3. APPLY
iii. Entering into an RMC as lender (Art. 61(1))
1. This applies where a solicitor lends money a client (buyer) to enter into an RMC.
2. Very unlikely but possible if solicitor acting as trustee
iv. Administering an RMC (Art. 61(2))
1. This applies where a solicitor completes various administrative tasks for the
lender client of an RMC, such as:
a. Notifying the borrower of any changes to the RMC; or
b. Collecting or recovering monies due under an RMC from the
borrower. 3
, lOMoARcPSD|3013804
f. Home Finance-related Activities
i. Similar activities to the RMC activities for:
1. Home reversion plans (equity release)
2. Home purchase plans (Islamic finance)
3. Sale & lease back plans
g. Consumer Credit-related Activities, including:
i. Credit broking activities
ii. Debt related activities
1. E.g. debt counselling – helping a client in debt work out next steps
2. E.g. debt adjusting – Making arrangements for the repayment or satisfaction of
debts in an amount or manner that differs from the original debt structure (e.g.
consolidation)
3. E.g. debt collecting
4. E.g. debt administration
4. Is the activity ‘excluded’? (Choose 3) – if YES FSMA does not apply!
a. The RAO sets out exclusions to each activity
ACTIVITY RELEVANT EXCLUSIONS
INVESTMENT ACTIVITY EXCLUSIONS
Art. 14: Dealing
as Principal Art. 15: Absence of holding out
o Excludes the activity of dealing as principal in securities and assignment of
qualifying contracts of insurance, provided the solicitor:
Has not held themselves out as providing a service of dealing in securities
and contractually based investments (i.e. a stockbroker); and
Is not a bare trustee.
Art. 16: Dealing in contractually-based investments
o Excludes the activity of dealing as principal in contractually based investments,
provided an authorised provider is used (e.g. stockbroker, financial advisor, banks
etc)
Art. 66(1): Acting as a trustee, nominee or personal representative
o Excludes the activity of dealing as principal providing:
The solicitor is a trustee or PR (including bare trustee); and
The solicitor has not held themselves out as providing a service of dealing
in securities and contractually based investments.
o 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).
