Regulated activities within the context of financial services
What are financial services
Financial services are services involving, advising, dealing with, arranging, managing some e.g. investments. Financial services are regulated by Financial Services Authority (FSA) which bares the responsibility for them. If a person invests money in some sort of an investment he will need some advice in relation to this as it is a very specific area which may not be easily understood unless a professional adviser intervenes and gives you a professional advice in relation to them. Namely, he may need advice with respect to e.g. the types of investments, what will be the tax advantages and return from investment. He or she should also be made aware of a potential risk he or she is taking in relation to a particular investment.
Because of the complexity of the matter such professional advice is highly regulated and controlled in the UK. Therefore regulation is carried out in relation to the work of e.g. banks, investment firms, building societies, insurance companies etc. Their important objective is to maintain the following in al the circumstances: market confidence, understanding of financial systems, protecting consumers and reducing financial crimes. Conduct of Business rules help to regulate and maintain these. However there are some other rules which assist in regulating the activities, these are FSA Handbook and in relation to carrying out of regulated activities by a law firm further rules apply.
It is essential to note that some law firms do not have authorisation with respect to this therefore they cannot give professional advise relating to regulated activities. In fact generally there are only a few firms which obtained this authorisation. A person who would want to carry out regulated activity without authorisation, could be guilty of an offence on summary conviction he or she would be liable for the following: the imprisonment for a term not more than 6 months or a fine not exceeding statutory maximum. On conviction on indictment liability to imprisonment for a term not exceeding 2 years arises or a fine.
The activity can be mainstream and non-mainstream
If the firm is carrying out a mainstream activity, it must obtain authorisation from Financial Services Authority and must comply with and follow FSA Handbook.
Non –mainstream activity
Non-mainstream activity needs authorisation from Solicitors Regulation Authority and must comply with and follow SRA Code of Business Rules. In order for the regulated activity to be a non-mainstream activity, several conditions must be satisfied, these are e.g. the person who is carrying out the activity is a member of a profession , no commission must be received by this person and this activity is merely incidental to carrying out normal professional service.
For more information on:
- Regulated activities
- Excluded activities
- Financial Promotions
- How to double check whether the authorisation is needed