SRA Handbook

Other restrictions

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Rule 5: Other restrictions

5.1

Retail investment products (except personal pension schemes)

(a)

A firm must not recommend, or make arrangements for, a client to buy a retail investment product except where:

(i)

recommending, or arranging for, a client to buy a retail investment product by means of an assignment;

(ii)

the arrangements are made as a result of a firm managing assets within the exception to rule 5(4) below; or

(iii)

arranging a transaction for a client where the firm assumes on reasonable grounds that the client is not relying on the firm as to the merits or suitability of that transaction.

5.2

Personal pension schemes

(a)

A firm must not recommend a client to buy or dispose of any rights or interests in a personal pension scheme.

(b)

A firm must not make arrangements for a client to buy any rights or interests in a personal pension scheme except where the firm assumes on reasonable grounds that the client is not relying on the firm as to the merits or suitability of that transaction but this exception does not apply where the transaction involves:

(i)

a pension transfer; or

(ii)

an opt-out.

5.3

Securities and contractually based investments (except retail investment products)

(a)

A firm must not recommend a client to buy or subscribe for a security or a contractually based investment where the transaction would be made:

(i)

with a person acting in the course of carrying on the business of buying, selling, subscribing for or underwriting the investment, whether as principal or agent;

(ii)

on an investment exchange or any other market to which that investment is admitted for dealing; or

(iii)

in response to an invitation to subscribe for an investment which is, or is to be, admitted for dealing on an investment exchange or any other market.

(b)

This rule does not apply where the client is:

(i)

not an individual;

(ii)

an individual who acts in connection with the carrying on of a business of any kind by himself or by an undertaking of which the client is, or would become as a result of the transaction to which the recommendation relates, a controller; or

(iii)

acting in his capacity as a trustee of an occupational pension scheme.

5.4

Discretionary management

(a)

A firm must not manage assets belonging to another person in circumstances which involve the exercise of discretion except where the firm or a manager or employee of the firm is a trustee, personal representative, donee of a power of attorney or receiver appointed by the Court of Protection, and either:

(i)

all routine or day to day decisions, so far as relating to that activity, are taken by an authorised person with permission to carry on that activity or an exempt person; or

(ii)

any decision to enter into a transaction, which involves buying or subscribing for an investment, is undertaken in accordance with the advice of an authorised person with permission to give advice in relation to such an activity or an exempt person.

5.5

Corporate finance

(a)

A firm must not act as any of the following:

(i)

sponsor to an issue in respect of securities to be admitted for dealing on the London Stock Exchange; or

(ii)

nominated adviser to an issue in respect of securities to be admitted for dealing on the Alternative Investment Market of the London Stock Exchange; or

(iii)

corporate adviser to an issue in respect of securities to be admitted for dealing on the PLUS Market.

5.6

Insurance mediation activities

(a)

Unless a firm is registered in the Financial Services Register it must not carry on any insurance mediation activities;

(b)

Any firm undertaking insurance mediation activities must appoint an insurance mediation officer whose details will be made known to the FCA and who will be responsible for the firm's insurance mediation activities.

5.7

Regulated mortgage contracts

(a)

A firm must not recommend a client to enter as borrower into a regulated mortgage contract but can endorse a recommendation given by an authorised person with permission to advise on regulated mortgage contracts or an exempt person in relation to the giving of such advice.

5.8

Regulated home purchase plans

(a)

A firm must not recommend a client to enter as home purchaser into a regulated home purchase plan with a particular person but can endorse a recommendation given by an authorised person with permission to advise on regulated home purchase plans or an exempt person in relation to the giving of such advice.

5.9

Regulated home reversion plans

(a)

A firm must not recommend a client to enter as reversion seller or plan provider into a regulated home reversion plan with a particular person but can endorse a recommendation given by an authorised person with permission to advise on regulated home reversion plans or an exempt person in relation to the giving of such advice.

5.10

Regulated sale and rent back agreements

(a)

A firm must not recommend a client to enter as agreement seller or agreement provider into a regulated sale and rent back agreement with a particular person but can endorse a recommendation given by an authorised person with permission to advise on regulated sale and rent back agreements or an exempt person in relation to the giving of such advice.

5.11

Credit-related regulated activities

(a)

Where a firm carries on a credit-related regulated activity or a connected activity it must comply with the provisions and guidance set out in Rule 1.3R of the transitional provisions in the FCA's CONC as they were in force immediately before 1 April 2014 in relation to that activity, with any appropriate modification to take into account the coming into force of HM Treasury Orders that give effect to the transfer of consumer credit regulation from the OFT to the FCA.

Note

(i)

A firm which relies on the Part XX exemption cannot carry on insurance mediation activities unless they are on the FCA's Exempt Professional Firms (EPF) Register and appoint an insurance mediation officer. Firms wishing to be on this Register should notify the SRA (contactcentre@sra.org.uk and 0370 606 2555) and provide details of their insurance mediation officer. The EPF Register can be accessed on the FCA website - see www.fca.org.uk.

(ii)

During the transitional period between 1 April 2014 and 31 March 2016, firms carrying on credit-related regulated activities will be required to comply with the guidance and other provisions listed in the transitional provisions in the FCA's CONC. These provisions should not impose any new obligations as firms should already be complying with them but firms will need to adopt a common sense approach in interpreting them, for example, references to the OFT in these provisions and guidance should be read as if they referred to the FCA and references to the relevant supervisory authority mean the SRA.