FSA rescinds threat to company lawyers

Corporate lawyers threatened by the Financial Promotions Order have been rescued after guidance was introduced last week, abating fears that the order's wording might catch their everyday activity.

The original wording of the order - created by the Financial Services and Markets Act 2000 to regulate inducements and invitations to enter financial agreements - led many firms to insert long disclaimers into communications with clients and other parties to transactions.

Others took the step of opting into Financial Services Authority regulation as a precaution.

The guidance - which came into force at the beginning of this month - explains in what circumstances the exemptions to the order will apply and clarifies how the exemption for professional services operates.

Tim Herrington, a Clifford Chance partner who leads the financial services group of the Law Society's company law committee, said the guidance was very well received.

He said: 'The FSA have done an excellent job in dealing with many of the problems.'

The guidance makes clear that negotiations by lawyers with parties and clients in connection with transactions will ordinarily be exempt from the order.

Mr Herrington said the situation remains unclear regarding inducements to parties to make deposits, and in relation to negotiations surrounding insurance transactions.

He said the Society would continue to lobby the Treasury in relation to those areas.

Two consortia of City firms sent letters to the Treasury earlier this year requesting changes to the order, but neither was successful.

As a result, Clifford Chance, Taylor Joynson Garrett, Wragge & Co and Addleshaw Booth & Co decided to opt in to Financial Services Authority regulation.

SJ Berwin and other City firms, including Travers Smith Braithwaite and Denton Wilde Sapte, approached the Treasury with a draft amendment to the order - endorsed by the City of London Law Society's sub-committee for regulation - enabling professionals to be excluded when solicitors are carrying out usual corporate transaction business.

Mark Kalderon, a partner specialising in banking and financial services at Freshfields Bruckhaus Deringer, said: 'The guidance is very useful concerning one-off communications and has gone a long way to meeting the problems, although it is not as comprehensive as an amended order would have been.'

Jeremy Fleming