SRA Handbook

Other restrictions

Back to version 21

Version 7 of the Handbook was published on 01/04/2013. For more information, please click 'History' Above

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.

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 0870 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.