FSMA step 3

Question 1

Step 3: Is there an exclusion available?

Answer 1

Excluded activities can be carried on without FCA authorisation - for example:
* regulated activities that are a necessary part of other services carried on in course of profession
* regulated activities in connection with sale of a body corporate
* authorised persons

Question 2

What does the necessary part exclusion mean?

Answer 2

Idea is that it must be impossible to do main job (other services) without also doing regulated activity
* so if you can provide main service without dealing/arranging/advising, then exclusion does not apply = as such, specified investment must be essential
* rarely used as if dealing/arranging is needed, professional can simply refer to FCA authorised-person

Question 3

When can necessary part exclusion not be used?

Answer 3

• Does not apply to certain regulated firms (e.g., investment firms) = as exclusion is designed for professionals whose main business is not financial services
• Does not apply to contracts of insurance

Question 4

What does sale of a body corporate exclusion mean?

Answer 4

Idea is if purpose of transaction is to buy/sell shares in company, solicitor will not be treated as:
* dealing as principal or agent
* arranging deals in investment
* giving investment advice

= subject to conditions being met.

Question 5

What conditions must be met for sale of body corporate condition?

Answer 5

• shares being sold includes at least 50% of voting rights and both parties are either: a company, partnership, single individual or group of connected person
• or purchaser already owns some shares or after purchase will own at least 50% of voting rights
• or transaction’s purpose is to acquire day-to-day control of company - even if shares are less than 50%

commonly used in practice

Question 6

What is an authorised person exclusion?

Answer 6

Idea is that solicitor will not be dealing in investments as an agent/arranging deals in investments if:
* transaction is entered into on advice of authorised person
* or it’s clear client is not seeking or has not sought advice from solicitor as to merits of entering transaction

Question 7

When does authorised person exclusion not apply?

Answer 7

• Transaction relates to contract of insurance
• or solicitor receives commission (or advantage) from any other person to which he does not account to client