Introducing a client to an independent financial adviser: the introducing exclusion (RAO art 33)
Wilhelmina Asante has inherited £300,000 and asks her solicitor, Rupert Hale of an SRA-authorised firm in York that is not FCA-authorised, what she should invest in. Rupert gives no view on any investment. Instead he refers her to Okafor Wealth, an independent financial adviser authorised by the FCA, so that it can give her independent advice on investments generally. Rupert's firm receives no fee or commission for the introduction. The introduction is not made with a view to any transaction relating to a contract of insurance.
Which of the following best describes whether Rupert's introduction is a regulated activity?
Choose one answer to see the reasoning.
Worked answer
Correct answer A: It is not a regulated activity, because introducing a client to an authorised person with a view to independent advice on investments is excluded from 'making arrangements'.
THE RULE TO REMEMBER
Introducing a client to an authorised person with a view to independent advice on investments is excluded from the arranging activity in art 25(2) (RAO 2001 art 33).
Introducing a client to an independent financial adviser: the introducing exclusion (RAO art 33)
Making arrangements with a view to transactions in investments is a specified activity under art 25(2) of the Regulated Activities Order 2001. Article 33 excludes from art 25(2) arrangements under which clients are introduced to another person, where that person is an authorised person (among others) and the introduction is made with a view to the provision of independent advice or the independent exercise of discretion in relation to investments generally. Okafor Wealth is FCA-authorised and the referral is so that it can give Wilhelmina independent advice on investments generally. Rupert expressed no view on the merits of any investment, so he has not advised on investments. The introduction is therefore excluded and is not a regulated activity, and the firm does not need FCA authorisation or the Part 20 exemption for it. Article 33(d) also requires the non-insurance condition (or the separate article 33B route); the facts expressly satisfy the non-insurance condition.
Why B is wrong: Recommending an adviser is not advice on the merits of buying or selling a particular investment, and Rupert gave no view on any investment.
Why C is wrong: The art 33 exclusion takes the introduction outside art 25(2) altogether, so the Part 20 exemption is not needed for it.
Why D is wrong: There is no monetary de minimis limit in art 33; the exclusion depends on who the client is introduced to and why.
Why E is wrong: Article 33 does not depend on the absence of commission; commission matters instead for the Part 20 exemption's accounting condition.
A little more practice done.
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