View more on these topics

Designated drivers

The coming of the FSA will radically change the nature of the regulatory regime.

For many in the professions the ability to opt out to the designated professional body (DPB) regime allows avoidance of the issue altogether.

If only life were so simple. The nature of the Financial Services & Markets Act means that the whole regulated arena is dictated by two sets of rules – the first adopted by all the regulated firms and the second created by the DPB for its new constituency.

The Solicitors (Financial Services) Scope Rules are the Law Society guideline rules that law firms must abide by.

My concern relates to the monitoring of the perimeter fence between the two regimes. It has been a long-standing complaint and cause of concern that category-one law firms operate in the grey areas of the Solicitors Investment Business Rules 1995.

The “necessary” exemptions has allowed a multitude of actions which if viewed by an IFA would be deemed to be full regulated advice.

The perimeter of the two regimes relies on the cross cooperation of the DPB and the FSA. At the end of the DPB regime&#39s borders lies a criminal offence.

The DPB would, in effect, have to report its members to the FSA and allow it to bring proceedings under S23 FSMA 2000. I cannot see the DPB throwing its members to the mercy of the criminal courts. It is for this reason that the new regime will need to be policed proactively and fairly by all DPB monitors.

The scope of the new DPB is more restrictive than the RPB overseen by the Law Society. The need for DPB firms to be well educated is paramount.

The Law Society has published its guidance document, Professional Ethics – information pack on the new scheme for the regulation of fin-ancial services.

This publication is remarkable in that it actually gives the solicitors the story in a much more direct way than before. It mentions negligence. It suggests referral.

The document does not go as far as mentioning the “IFA” but does refer to an “authorised person”. Progress!

The booklet splits into various areas of legal work and clearly points out to a lawyer how FSA authorisation is best be avoided. This is breath-taking stuff – a clear steer not to authorise with the FSA. The key areas the guide concentrates on relate to:

Corporate.

Matrimonial.

Trusts.

Probate.

Attorneyships.

Key areas of opportunity for IFAs will only be productive if they take time out to understand the Solicitors Practice Rules 1990. Try looking at commission retention (r10), fee sharing (r7) and the Introduction and Referral Code.

The guide can be found on the Law Society website (www.lawsociety.org.uk). To look at each area in turn:

Corporate

The Financial Promotions Order is a very difficult piece of secondary legislation to apply. The corporate law firm needs to be very careful as the nature of the order means that “financial promotions” need to be approved by an auth-orised person.

The average corporate firm will not be authorised. The majority under RPB status hold category-one status. Be warned, though, the average firm has sat back on the protection given under the Financial Services Act 1986 via exemptions.

This is a very dangerous path for a firm to take. Tell them, provide a copy of the FPO and see the colour drain.

Matrimonial

Sensibly dealing with pension rights will always be a regulated act. The wafer-thin exemptions that still exist are not capable of holding the weight of a “this is incidental” excuse.

The assignment of endowments still appears to be an old favourite. This will be allowed under the new regime.

Advice on other investments will almost always be regulated under the new regime. The argument that a firm can dispose of investments is dangerous. Somewhere along the line they will have to comment on one investment against another.

The matrimonial lawyer, in the main still, battles on under the impression that offsetting will solve everything. The guide gives the warning and uses the “negligence” word.

Trust, probate and attorneyships

The Trustee Act imposes very much higher duties on professional trustees. The lawyer who is not authorised and still refuses to comply with the Act is going to end up on the receiving end of problems.

The average trust lawyer has seen the new Trustee Act as sufficiently scary to ensure that changes in practice occur. What is going to strengthen this will be the FSA taking action against individuals for acting beyond the scope of the DPB regime.

Conclusion

The new regime is designed to tighten up the decisions lawyers will have to make. The opportunities for IFAs will not come by persuading them that they can do a good job. The opportunity will come from showing the lawyer why they can no longer hide in the grey area of the old regime.

Gareth Fatchett is a partner of ProAct Legal

Recommended

Eastern Europe is the place for Baring Isa

Baring Asset Management is making its emerging Europe investment trust available to investors who want to access it via an individual savings account (ISA).The Isa has been aimed at the experienced investor who is looking to use all of their Isa allowance and who is comfortable with a high-risk investment.It will invest in the Baring […]

Axa Sun Life appoints two to its business development team

Axa Sun Life is appointing Nina Glass and Duncan Mosely to senior positions to its business development unit.Glass, who was formerly director of European partnerships with American Express Europe, joins as head of strategic partnerships.Mosely becomes head of partnership solutions, and was previously e-business operations director for Axa UK.Axa Sun Life director of business development […]

St James&#39s Place sees new business up 16 per cent

St James&#39s Place Capital saw its business grow by 16 per cent to £152m in the nine months to September 30, from £131m for the same period in 2000.Pension business grew by 36 per cent over the period to £35m from £26m, and life business grew by 4 per cent to £17 per cent from […]

Jelf IFM buys healthcare intermediary CHMG

IFA Jelf IFM Group has purchased Wiltshire based specialist healthcare intermediary Corporate Health Management Group.CHMG, with offices in Marlborough, joins Jelf IFM which already has a network of offices in Bristol, Bath, Cheltenham and Manchester. Jelf IFM says the deal places it in the top 15 healthcare intermediaries in the UK.Apart from healthcare, Jelf IFM […]

Life cover for life

When someone mentions whole of life plans, most people will think of a niche product that serves as an inheritance tax planning tool for high-net-worth clients. And it’s really not surprising they’ve been pigeonholed in that waybecause before the arrival of RDR in 2013, that’s more or less exactly what they were. For advisers thinking […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com