Guidance to rule 19 – Financial services

• 1.

  Independence is a core duty (1.03). However rule 19 sets out the exact scope of this duty when carrying on regulated activities.

• 2.

  Note that under the Financial Services and Markets Act 2000 the Financial Services Authority (FSA) is the single statutory regulator of financial services business. Under the Financial Services and Markets Act 2000, if you carry on "regulated activities" you will need either to be regulated by the FSA or to rely on the Part XX exemption in the Financial Services and Markets Act 2000.

• 3.

  The Solicitors Regulation Authority is not therefore able to authorise you to conduct investment business. However, Part XX of the Financial Services and Markets Act 2000 makes special provision for professional firms which do not carry on mainstream investment business but which may carry on regulated activities in the course of other work such as conveyancing, corporate, matrimonial, probate and trust work. Part XX enables firms of solicitors which meet certain conditions to be treated as exempt professional firms and to carry on activities known as exempt regulated activities. These firms will not need to be regulated by the FSA but will be able to carry on exempt regulated activities under the supervision of and regulation by the Solicitors Regulation Authority.

• 4.

  In carrying out the functions of a designated professional body, the Solicitors Regulation Authority is required to make rules governing the carrying on of regulated activities by its members. In accordance with this requirement, the Solicitors' Financial Services (Scope) Rules 2001 set out the scope of the activities which may be undertaken by firms under the Part XX exemption in the Financial Services and Markets Act 2000. You should refer to these rules and the Solicitors' Financial Services (Conduct of Business) Rules 2001 regarding the carrying on of regulated activities.

• 5.

  This rule applies specifically in connection with regulated activities. It prohibits you from being an appointed representative (i.e. a tied agent) or from being actively involved in a separate business which is an appointed representative unless the separate business is the appointed representative of an independent financial adviser.

• 6.

  It also prevents you from entering into any restrictive arrangements in connection with regulated activities that could constrain the advice you give to clients or the referrals that you make. However, it would not prevent you from regularly introducing clients to a particular broker, provided that you have not entered into any arrangement which could constrain you to use that broker.

• 7.

  The prohibition on entering into restrictive arrangements does not apply to arrangements in connection with:

  • (a)

    regulated mortgage contracts;

  • (b)

    general insurance contracts, for example after the event insurance; or

  • (c)

    pure protection contracts, for example term assurance.

  This means that you would not be prevented from having an arrangement under which an introducer stipulates that you might only sell one particular insurance policy – for example, if there is a conditional fee agreement, provided that it is suitable for the client's needs and you have informed the client of the constraint. Although the prohibition in rule 19 does not apply to arrangements in connection with particular types of investments, you must still comply with 1.03 (Independence) and rule 9 (Referrals of business) .