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- Preliminary Material
- Main Text
- Part I The Industry and Regulatory Context
- Preliminary Material
- 1 The Legal and Regulatory Framework
- A The Context: Wealth and Financial Services
- 1.01
- (1) The rise of a share-owning democracy
- (2) The wider perspective of savings and investments
- (3) The financial services industry
- (4) Financial crises and legislative reaction
- (5) Reforms of the Coalition Government
- (6) The Financial Services Act 2012
- (7) The Financial Services (Banking Reform) Act 2013
- (8) Other relevant reform material
- B Principal Features of the Legislation and Regulatory Regime
- C The Approach and Scope of this Work
- D Advice, Information, and Product Regulation
- (1) Definition of core terms
- (2) Conduct of business regulation and prudential supervision
- (3) Why regulate financial services?
- (4) Caveat emptor versus conduct of business regulation
- (5) Regulation of products or advice?
- (6) Information or advice
- (7) Advice regulation, information regulation, and product regulation
- E The European Dimension
- 1.97
- 1.98
- 1.99
- (1) Treaty provisions
- (2) Mutual recognition
- (3) European firms under the Financial Services and Markets Act 2000
- (4) Conduct of business and the Investment Services Directive
- (5) European law and statutory compensation schemes
- (6) The UCITS Directive
- (7) Electronic commerce and retail financial services
- (8) The Financial Services Action Plan and subsequent developments
- A The Context: Wealth and Financial Services
- 2 The UK Regulatory Framework
- A The Financial Regulatory System
- B The 2000 Act: Authorization and Exemption
- C Key Elements of the Regime
- D The Handbooks
- Part II Causes of Action
- Preliminary Material
- 3 Unregulated Financial Services and the Impact on Transactions
- A Background
- B Principles Developed Before the 2000 Act
- C The Integrity of Transactions under the 2000 Act
- 3.15
- (1) Prohibition and ‘breaching the perimeter’
- (2) Acting outside the scope of a permission but ‘within the perimeter’
- (3) Consequences for an agreement made by an unauthorized person
- (4) Consequences for an agreement made through the use of an unauthorized person
- (5) Overriding discretion
- (6) The special regime for deposit-taking contracts
- (7) Unlawful communications and the financial promotion regime
- (8) Consequences of breach of FCA rules
- 4 Breach of Statutory Duty
- A General Principles
- B Background to the 2000 Act: Causes of Action in the 1986 Act
- C The 2000 Act: Who Can Sue?
- D Principal Statutory Cause of Action: Section 138D
- E Other Causes of Action under the Act for Breach of Statutory Duty
- 4.41
- (1) Exceeding the terms of a permission
- (2) Use of prohibited individuals
- (3) Use of non-approved persons
- (4) Contravention of a requirement imposed on an incoming European firm
- (5) Impermissible promotion of a collective investment scheme
- (6) Contravention of a direction made under powers of intervention in authorized unit trust schemes
- F Rights of Action in the FCA Handbook
- 5 Claims in Contract
- A Introduction
- B Contracts to Provide Financial Advice: Problems of Consideration
- C Incorporation and Implication of Terms
- D Interpretation or Construction
- E The Unfair Terms in Consumer Contracts Regulations 1999
- 6 Misrepresentation and Duties of Disclosure
- A Introduction
- B Misrepresentation
- C Duties of Disclosure at Common Law and in Equity
- 7 Negligence
- A Introduction
- B The Duty of Care
- C Concurrent Liability
- D Duties to Persons Other than the Immediate Client
- E Duties Owed by Persons Other than Advisers
- (1) Introduction
- (2) Financial services providers
- 7.49
- (i) The regulatory context
- (ii) Product providers and duties of care
- (iii) Product providers and dangerous products
- (iv) Duty of care of information providers to ultimate recipients
- (v) Seymour v Ockwell: the factual matrix
- (vi) Seymour v Ockwell: the three claims and the outcome
- (vii) Seymour v Ockwell: the investors’ claim against the independent financial adviser
- (viii) Seymour v Ockwell: the investors’ claim against ZIFA
- (ix) Seymour v Ockwell: the claim by the independent financial adviser against ZIFA
- (x) Conclusions
- (xi) Where the investor receives direct representations from the product provider
- (3) Employers
- F Duties of Care and Commercial Investors
- 7.112
- (1) Springwell Navigation : the factual matrix
- (2) Springwell Navigation : the claims
- (3) Springwell Navigation : the existence of a contractual or tortious duty to advise?
- (4) Springwell : the specific misrepresentations claim
- (5) Springwell Navigation : the regulatory regime and customer classification
- (6) Springwell Navigation : analysis of conclusion on duty to advise
- G The Impact of Contractual Provisions on the Common Law Duty of Care
- 8 Equitable Claims:
- A Fiduciary Obligations
- (1) Introduction
- (2) Who is a fiduciary?
- (3) What are the obligations of the fiduciary?
- (4) Application to financial advisers
- (i) The duty of care and skill
- (ii) Springwell Navigation: breach of fiduciary duty and explanation of documents
- (iii) Financial advisers and secret commissions
- (iv) Disgorgement of commission and other secret benefits
- (v) Hurstanger Ltd v Wilson
- Two categories of commission payments: ‘wholly secret’ commissions and inadequate disclosure
- Hurstanger Ltd v Wilson: the facts
- The potential conflict of interest
- The statement of principle on disclosure of commissions paid to agents
- The decision in Hurstanger Ltd v Wilson
- Impact on financial services cases
- (vi) Client assets
- B Undue Influence
- (1) Introduction
- 8.27
- (i) Third-party effects
- (ii) Developments before Etridge in the House of Lords
- (2) The leading case: Royal Bank of Scotland v Etridge (No 2)
- (3) Undue influence in financial advice cases
- (1) Introduction
- C Inequality and Unconscionability
- (1) Introduction
- (2) Modern applications
- A Fiduciary Obligations
- Part III Intermediaries and Financial Promotion
- Preliminary Material
- 9 Intermediaries
- A Introduction
- B The Common Law Rules of Agency
- C Appointed Representatives, Statutory Agency, and Vicarious Responsibility
- D Polarization and Depolarization
- 10 Financial Promotion
- A Introduction
- B Unauthorized Persons and the Financial Promotion Regime
- C Financial Promotion and Collective Investment Schemes
- D Authorized Persons and the Financial Promotion Regime
- Part IV Standards of Conduct
- Preliminary Material
- 11 Standards of Conduct:
- A Introduction
- B The Standard of Care in Negligence
- (1) Scope of duty of care or standard of care?
- (2) The Bolam test
- (3) Standard of care of financial advisers at common law
- (4) Positive or negative duty?
- (5) Accuracy of information
- (6) Regulatory rules and the standard of care
- (7) Standard of care for employers
- C General Principles of Compliant Financial Advice
- (1) Introduction
- (2) Know your customer
- (3) Suitability
- (4) ‘Best advice’
- (5) Customer’s understanding of risk
- (6) Affordability
- (7) Illustrative investment cases
- (8) Standards of liability: independent versus tied advisers
- (9) The standard of liability owed by a product provider to an intermediary
- (10) Treating customers fairly
- (11) Duty and standard of care in relation to commercial investors
- 12 Standards of Conduct for Investment Advice, Stockbroking, and Portfolio Management
- A The Development of the Investor Protection Rules
- B The Conduct of Business Sourcebook
- 12.07
- (1) The consultation process
- (2) Method of implementation: ‘intelligent copy-out’
- (3) Interpretation of FCA Rules in COBS
- (4) Requirements which go beyond MiFID
- (5) The Contents of COBS (NEWCOB)
- (6) Actionability under section 138D
- (7) Scope and application
- (8) Conduct of business obligations
- (9) Client categorization
- (10) Compare: ‘eligible complainants’ to the Ombudsman
- (11) Compare: ‘private person’ under FSMA 2000
- (12) Communication with clients and financial promotion
- (13) The regulators’ approach to financial promotions
- (14) Distance communications
- (15) Information about the firm, its services, and remuneration
- (16) Excessive charges
- (17) Insurance mediation
- (18) Client agreements
- (19) Suitability (including basic advice)
- (20) Appropriateness (for non-advised services)
- (21) Dealing and managing
- (22) Investment research
- (23) Product information and explanation of risk
- (24) Cancellation rights
- (25) Specialist rules on pensions and with profits
- (26) Client assets and client money
- (27) The Retail Distribution Review
- 13 Regulated Collective Investment Schemes
- A Introduction to Collective Investment Schemes in the UK
- B Statutory Definition of a CIS
- C CIS Exclusions
- (1) Individual investment management arrangements
- (2) Schemes not operated by way of business
- (3) Debt issues
- (4) Certain employee share schemes
- (5) Schemes entered into for commercial purposes wholly or mainly related to existing business
- (6) Bodies corporate
- (7) Pensions
- (8) Other exclusions under the CIS Order
- D The Alternative Investment Fund Managers Directive
- E Consequences of there being a CIS
- F Consequences of there being an AIF
- G UCITS and Other Authorized CIS in the UK
- H Categories of UK Authorized CIS
- 13.95
- 13.96
- (1) UCITS
- (2) Operation of UCITS in the UK
- 13.103
- 13.104
- 13.105
- 13.106
- 13.107
- 13.108
- (i) Transferable securities
- (ii) Transferable securities linked to other assets
- (iii) Closed end funds
- (iv) Derivatives
- (v) OTC derivatives
- (vi) Embedded derivatives
- (vii) Money market instruments
- (viii) Investment in other CIS
- (ix) Covered bonds
- (x) Government and public securities
- (xi) Cash and near cash
- (xii) Borrowing
- (3) Other investment techniques
- (4) Non-UCITS retail schemes
- (5) Qualified investor schemes
- I Powers and Duties of the Authorized Fund Manager and Trustee
- J Delegation
- K EMIR
- 14 Standards of Conduct in General Insurance Business
- A The Regulation of Insurance Mediation Activities by the FCA
- (1) What happened on 14 January 2005?
- (2) Sources of regulation
- (3) The period since the start of regulation (14 January 2005)
- (4) Current regulatory issues
- (5) Introducing the key players in the UK’s insurance mediation community
- (6) Common legal issues in insurance mediation
- (7) Which insurance contracts and activities fall within the regulatory regime?
- (8) Dealing in investments as agent—RAO 2001, article 21
- (9) Arranging deals in investments—RAO 2001, article 25
- (10) Assisting in the administration and performance of a contract of insurance—RAO 2001, article 39A
- (11) Advising on investments—RAO 2001, article 53
- (12) Agreeing to carry on specified kinds of activity—RAO 2001, article 64
- B Bringing the Insurance Contract to the Market—Advertising and Inducements
- (1) Financial promotions
- 14.126
- (i) The requirements for communications to clients and financial promotions
- (ii) Exemptions
- 14.133
- 14.134
- Territorial scope ICOBS 1.1 and ICOBS 1, Annex 1
- Generic promotions—FPO 2005, article 17
- Promotions containing the requisite information—FPO 2005, article 24
- Contracts of large risks and reinsurance contracts—FPO 2005, article 25
- Real-time communications—FPO 2005, article 26
- Promotions communicated from outside the UK—FPO 2005, articles 30, 31, 32, and 33
- One-off promotions—FPO 2005, article 28
- Exempt professional firms—FPO 2005, articles 55 and 55A
- (2) Inducements
- (1) Financial promotions
- C Selling, Advising on, and Arranging Sales of Insurance Contracts by Firms
- 14.153
- 14.154
- 14.155
- 14.156
- (1) Definitions
- (2) Dealing with customers face to face
- (i) What needs to be disclosed by a firm introducing customers to an insurer or to another insurance intermediary?
- (ii) What status and product information needs to be disclosed by a firm arranging sales of non-investment contracts of insurance?
- 14.160
- Initial or ‘status’ disclosure, scope of service, and fair analysis
- Fees and commission disclosure
- Additional disclosure on status and scope of advice for protection policies
- Eligibility for cover
- Statement of demands and needs
- Pre-contract product disclosure
- Pre-contract product disclosure—general insurance contracts
- Pre- and post-contract disclosure—pure protection contracts and payment protection contracts
- Whose responsibility is the detailed product disclosure?
- (iii) What needs to be done by a firm that is making advised sales?
- (3) Distance contracts
- (4) What are the obligations when dealing with commercial customers?
- D Handling the Premium and Other Money
- E Cancelling the Insurance Contract
- F Claims Handling
- A The Regulation of Insurance Mediation Activities by the FCA
- 15 Standards of Conduct in Mortgage Lending and Advising
- A The Regulation of Mortgages and Advice by the FCA
- B What Activities Fall within the Regulatory Regime?
- (1) Introduction
- (2) Questions to be considered to decide if authorization is required
- (3) The regulated mortgage activities
- (i) The arranging activities
- (ii) Advising in relation to regulated mortgage contracts
- (iii) Entering into regulated mortgage contracts
- (iv) Administering a regulated mortgage contract
- (v) Agreeing to carry on a regulated mortgage activity
- (vi) Is the regulated mortgage activity being carried on in the UK?
- (4) Direct regulation or the appointed representative route?
- (5) Consequences of non-compliance
- C Designing, Marketing, and Distributing Mortgage Products
- (1) Marketing and promoting mortgages
- (2) The FCA rules relating to qualifying credit promotions
- (3) The regulated mortgage contract as a product
- 15.133
- 15.134
- 15.135
- 15.136
- (i) The legal formation of the mortgage contract
- (ii) The regulatory ingredients
- 15.144
- 15.145
- The key facts illustration—the basis of the offer document
- Business loans
- Other regulatory requirements affecting the content of the offer document
- Exclusion of liability
- Contracts concluded at a distance
- Annual percentage rate
- Excessive charging
- Early repayment and arrears charges
- Unfair terms
- A word on responsible lending
- (4) Distributing mortgages—advising and selling standards
- (5) Qualified and competent mortgage advisers
- D Designing, Promoting, and Distributing Equity Release Products
- E Treating Customers Fairly—Ongoing Obligations
- Part V Deposit-Taking and Consumer Credit Conduct of Business
- Preliminary Material
- 16 Conduct of Business for Banks, Other Deposit-Takers, and Payment Services Providers
- A From Self-regulation to Statutory Regulation
- B Regulation of Payment Services
- (1) The Payment Services Directive
- (2) The Payment Services Regulations: introduction
- (3) Scope of the PSR: ‘payment services’
- (4) Responsibility for licensing, supervision, and complaints
- (5) Changes to the Handbook
- (6) A new general definition of ‘eligible complainant’ before the FOS
- (7) Supervision and enforcement
- (8) Key concepts and definitions
- (9) Information requirements
- (10) Conduct of business rules
- C Banking Conduct of Business
- (1) Licensing and supervision of deposit-takers
- (2) The background to BCOBS
- (3) The rationale for BCOBS
- (4) The pre-BCOBS landscape
- (5) BCOBS: commencement
- (6) BCOBS: key concepts and definitions
- (7) BCOBS: scope and application
- (8) BCOBS: communications and financial promotions
- (9) Distance communications
- (10) Information to be communicated to banking customers
- (11) Post-sale requirements
- (12) Cancellation rights
- D Lender Liability
- 17 Regulation of Consumer Credit Business by the Financial Conduct Authority
- A Introduction to the Consumer Credit Regime
- B Credit-related Regulated Activities
- (1) Scope of regulated credit-related activities
- (2) Common concepts
- (3) Regulated activities 1: entering into a regulated credit agreement
- (4) Regulated activities 2: entering into a regulated consumer hire agreement
- (5) Regulated activities 3: operating an electronic system in relation to lending
- (6) Regulated activities 4: credit broking
- (7) Regulated activities 5: debt adjusting, debt counselling, debt collecting, and debt administration
- (8) Regulated activities 6: providing credit information services and providing credit references
- (9) Regulated activities 7: agreeing to carry on credit-related regulated activity
- C Authorization, Supervision, and Enforcement of Credit-related Activities and Credit Firms by the FCA
- (1) The FCA’s approach: higher and lower risk activities
- (2) Being authorized by the FCA
- (3) Interim permission as a precursor to authorization
- (4) The FCA’s approach to supervision and data collection
- (5) The FCA reporting requirements
- (6) Prudential standards applicable to consumer credit firms
- (7) The FCA’s enforcement powers
- D Conduct of Business Standards: CONC
- E Rights of Action and Complaints to the Ombudsman
- Part VI Remedies
- Preliminary Material
- 18 Remedies
- A Damages
- (1) Introductory observations
- (2) The juridical framework
- (3) The information and advice dichotomy
- (4) Types of loss
- (5) Warranty of returns
- (6) Damages for fraudulent advice
- (7) Rescission
- (8) Overview
- B Damages under the Financial Services and Markets Act 2000
- C Particular Products
- (1) Protection Policies
- (2) Pensions products
- (3) Mortgage products
- (4) Investment products
- D Incidental Heads of Claim
- E Regulatory Remedies
- F Judicial Review
- G Human Rights and Misfeasance as Exceptions to Statutory Immunity
- A Damages
- 19 Accessing Compensation:
- A Complaints Handling
- B Alternative Dispute Resolution
- C Expert Determinations
- D Mediation
- E Financial Ombudsman Service
- (1) Background
- (2) Territorial scope
- (3) Which complaints?
- (4) Time limits
- (5) Who is an eligible complainant?
- (6) Compulsory jurisdiction
- (7) The obligation of cooperation
- (8) Complaint handling procedures of the ombudsman
- (9) Transitional provisions and enforcement
- (10) Enforcement of FOS awards and the composition of authorized firms
- (11) Standard terms governing the voluntary jurisdiction
- F Financial Services Compensation Scheme
- G Consumer Redress Schemes
- H Court Proceedings
- I Restitution Orders and Injunctions
- J Regulatory Duties
- K Insolvent Firms
- L The FCA Review of Interest Rate Swaps
- Part VII Bringing and Defending Claims
- Preliminary Material
- 20 Proving Liability and Loss
- 21 Claims Investigation and Presentation
- A Presenting the Claim
- B Avenues for Disclosure
- 21.14
- 21.15
- 21.16
- 21.17
- (1) Background to the sales and advice process—disclosure in context
- (2) Fit and proper criteria—adviser specific disclosure
- (3) Typical claimant’s disclosure
- (4) Typical defendant’s disclosure
- (5) Public inquiry documents
- (6) Independent financial advisers
- (7) Documents generated by the firm’s complaints handling process
- (8) Documents generated by FCA intervention
- (9) Objections to disclosure
- (10) Documents created in relation to related disciplinary action
- (11) DEPP and the Enforcement Manual
- C Witness Statements
- D Instructing Experts
- E Costs Issues
- F Loss Schedule
- 22 Defending Claims
- 23 Defences
- A Responding to Claims
- B Limitation
- 23.06
- (1) Actions Founded on Tort
- (i) General position
- (ii) Damage and contingent liability
- (iii) Application to financial advice cases
- (iv) The effect of compensating gains
- (v) Differences in kind between the benefits
- (vi) Potential for tailoring heads of loss claimed
- (vii) The effect of a ‘cooling off’ period
- (viii) The cost of subsequent advice as a potential trigger
- (2) Actions founded on contract
- (3) Actions for sums recoverable by statute
- (4) Contribution
- (5) Trust property
- (6) Postponement of limitation period in case of fraud, concealment, or mistake
- (7) Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual
- (i) Latent damage
- (ii) Applicability of section 14A
- (iii) Requisite knowledge to set time running
- (iv) Identification of the act or omission causing loss
- (v) Knowledge that advice was negligent
- (vi) Knowledge of loss in fact—the need for further advice
- (vii) Subrogated claims
- (viii) Individual claimant’s capacity to appreciate relevant facts
- (ix) Identity of claimant
- (x) Continuing duties
- (8) Time limits for proceedings involving claims for anxiety or distress
- (9) Waiver of limitation
- (10) Time limits and the Ombudsman
- C Causation
- D Contributory Negligence
- E Contribution Against Third Parties
- F The Defence of Contractual Estoppel
- Part VIII Financial Services and Solicitors
- Preliminary Material
- 24 Financial Services and Solicitors
- A Regulation of Professionals
- B The Historic Position of Solicitor Firms
- C The Scheme of the Solicitors’ Investment Business Rules
- D Authorization under the Financial Services and Markets Act
- Part I The Industry and Regulatory Context
- Further Material
- [44.201.94.72]
- 44.201.94.72
