Regulated financial services activities

The regulated financial services activities are set out and explained in Part 2 of the Financial Services and Markets Act 2000 (FSMA)

These include dealing in, arranging, advising on, assisting in the administration of, and making arrangements with a view to:

• carrying out contracts of insurance;
• carrying out consumer credit activities;
• setting up stakeholder pension schemes;
•  advising, dealing in or managing, arranging deals, safeguarding and administering investments;
• setting up collective investment schemes;
• arranging, advising on, entering into and administering mortgages;
• providing basic advice on stakeholder products;
• participating in Lloyd's market activities;
• operating a multilateral trading facility;
• sending dematerialised instructions (electronic transfer of title in investments like securities and contractually based investments);
• entering funeral plan contracts;
• issuing e-money;
• agreeing to do most of the above activities.

The FCA provides a complete list of the regulated financial services activities in its Handbook glossary.

The  FSMA allows firms to carry out certain financial activities, if they are:

• Authorised and regulated by a Designated Professional Body (DPB), such as the SRA, under Part 20 of FSMA (known as an exempt professional firm (EPF).
• Able to rely on a statutory exclusion, meaning that the activity is not a regulated financial activity. For example, certain consumer credit activities, such as debt collecting, will be excluded from regulation under the FSMA where the activities are undertaken by solicitors (or other persons authorised under the Legal Services Act 2007) in the course of providing advocacy services or litigation services.

As a firm you need to determine whether or not you need to be authorised by the FCA or can rely on Part 20 of the FSMA.

Part 20 of the FSMA makes a special provision for professional firms that do not carry out mainstream financial services activities but which carry on regulated financial services activities (known as exempt regulated activities) in the course of other work, such as conveyancing, matrimonial, personal injury and trust work.

No. Firms cannot be authorised by both the FCA and a DPB at the same time. You are either authorised or exempt. Depending on how you carry on financial services activities will determine which camp you fall in.

Part 20 has two key provisions relevant to SRA-authorised firms:

• FSMA - regulated activities may be carried out by a member of the profession who is not authorised by the FCA where the regulated activity "...arises out of, or is complementary to, the provision of a particular professional service to a particular client..." (s332(4) of FSMA)
• the regulated activity "...must be incidental to the provision by them of professional services..." (s327(4) of FSMA).

So, for example, you might have:

• arranged for after the event insurance for a personal injury or conveyancing client
• provided debt counselling in respect of joint credit card debts in a matrimonial matter
• advised a client on how they should invest monies when advising on a will or probate matter.

As the financial services activities arise out of or are complementary to the service you provide to your client, and are incidental to the firm's legal/professional activities, you will be able to rely on Part 20 and, therefore, fall into the category of an EPF.

For firms to be able to rely on Part 20, we must have rules that govern the carrying out of regulated financial services activities by EPFs. These are: 

• the SRA Financial Services (Scope) Rules (Scope Rules)
• the SRA Financial Services (Conduct of Business) Rules (COB Rules).

The Scope Rules set out the scope of the financial services activities which may be undertaken by EPFs.

The rules specifically: 

• prohibit firms that are not authorised and regulated by the FCA from carrying on certain regulated activities;
• set out the basic conditions firms must satisfy when carrying out any regulated activities;
• set out other restrictions on regulated activities carried on by those firms.

If you undertake a regulated activity that falls outside the scope of our regime, and you are not authorised by the FCA, you may be committing a criminal offence. It is therefore imperative that you understand the activities which may be undertaken when relying on our rules and those which may not.

The COB Rules regulate the way in which firms carry out such exempt regulated activities - there are some key requirements that firms have to comply with if they carry on insurance distribution activities or consumer credit activities.

The Scope and COB Rules should be considered in parallel with obligations set out in the Principles and the Code of Conduct for solicitors, RELs and RFLs and the Code of Conduct for Firms.

Yes. You can go through our decision tree to help you assess whether or not you can rely on Part 20.

If, on your assessment, you are satisfied that you can rely on Part 20 (as an EPF) and comply with the  Scope and COB Rules, then you should notify us and confirm the financial activities that your firm carries on. 

If you arrange or advise on an insurance product for your client, your firm will need to have appointed an insurance distribution officer (IDO) and told us who that person is. The IDO does not need to be approved by us as a role holder and, in most firms, the person will be the firm's Compliance Officer for Legal Practice (COLP).

The FCA maintains a published register, which includes details about firms it authorises and EPFs. 

The SRA and other DPBs provide information to the FCA on a weekly basis, which is then used to update the register.

In addition, as a DPB, we are obliged to keep the FCA informed about the way in which we supervise and regulate EPFs. We must provide the FCA with "...the number of exempt professional firms..." and "...the range and scope of exempt regulated activities carried on by its exempt professional firms...".

The register assists the public and businesses to find out whether a firm they are using or plan to use, is authorised, registered by the Prudential Regulation Authority (PRA) and/or FCA, or is exempt.

Yes.  How corporate partners work and the activities they carry on is varied. So if the corporate partners are authorised bodies in their own right then they should respond to the questionnaire.

Principle 3 (act with independence) and paragraphs 5.1 to 5.3 of the  Code of Conduct for Solicitors, RELs and RFLs (as well as paragraph 7.1 (b) of the Code of Conduct for Firms) focuses on requirements for ensuring that you act in your client's best interests and that you and your firm's independence is preserved when engaging with third parties or recommending third parties to your client. You should avoid being an appointed representative as that might suggest that you have not acted with independence.