QUESTION OF ETHICS

Q May I introduce a client requiring investment advice to an authorised person? A The Regulated Activities Order 2001 (RAO) defines regulated activities (as a combination of a specified investment and a specified activity) and also contains exclusions.

Article 33 of the RAO makes the activity of introducing an exclusion.

Exclusions are not regulated activities.

Anyone who can meet the conditions of the exclusion can make the introduction without being authorised.

A solicitor making such an introduction would not even have to comply with the Solicitors Financial Services (Scope) Rules 2001 under the designated professional body regime.

However, great care needs to be taken with this exclusion.

The FSA has indicated that anything more than a simple introduction would not be an exclusion.

For example, if the solicitor retained some ongoing role as a form of conduit, (by agreeing to obtain the advice on behalf of the client and passing it on to the client or making comments on the merits of accepting the advice given by the authorised person), this would not be an introduction for the purposes of the exclusion in article 33.

The exclusion does not require the solicitor to account to the client for any commission he receives; however, if the solicitor does not account then this may create difficulties because of the Financial Promotion Order.

The definition of financial promotion is wide and may include the situation where firms introduce a client to an authorised person.

However, there are many exemptions which might apply.

See paragraph 1.26 of the FSA Guidance for Professional Firms and [2001] Gazette, 25 October, 38.l Question of ethics is compiled by the Law Society's professional ethics guidance team.

Send questions for publication to Austin O'Malley, the Law Society, Ipsley Court, Berrington Close, Redditch B98 0TD; DX 19114 Redditch;tel: 020 7242 1222.