Financial Services and Markets Act 2000, section 327

Exemption from the general prohibition

Part XX Provision of Financial Services by Members of the Professions

(1) The general prohibition does not apply to the carrying on of a regulated activity by a person (“P”) if—

(a)F2465the conditions set out in subsections (2) to (7) are satisfied; ...

[F2466 (aa)where the activity is the provision of a service listed in [F2467 Part 3 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001F2467] relating to a financial instrument, the condition set out in subsection (7A) is also satisfied; andF2466]

(b)there is not in force—

(i)a direction under section 328, or

(ii)an order under section 329,

which prevents this subsection from applying to the carrying on of that activity by him.

(2)P must be—

(a)a member of a profession; or

(b)controlled or managed by one or more such members.

(3)P must not receive from a person other than his client any pecuniary reward or other advantage, for which he does not account to his client, arising out of his carrying on of any of the activities.

(4)The manner of the provision by P of any service in the course of carrying on the activities must be incidental to the provision by him of professional services.

(5)P must not carry on, or hold himself out as carrying on, a regulated activity other than—

(a)one which rules made as a result of section 332(3) allow him to carry on; or

(b)one in relation to which he is an exempt person.

(6)The activities must not be of a description, or relate to an investment of a description, specified in an order made by the Treasury for the purposes of this subsection.

(7)The activities must be the only regulated activities carried on by P (other than regulated activities in relation to which he is an exempt person).

[F2468 (7A)The condition mentioned in subsection (1)(aa) is that—

(a)the service is provided in an incidental manner in the course of a professional activity F2469...; and

(b)the professional activity concerned is the provision of professional services.

(7B)In subsection (7A) a service is provided in an incidental manner in the course of a professional activity F2470... if the applicable conditions are satisfied.

(7C)The applicable conditions for the purposes of subsection (7B) are those set out in [F2471 paragraph 6(a) to (c) of Schedule 3 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001F2471] .F2468]

(8) “Professional services” means services—

(a)which do not constitute carrying on a regulated activity, and

(b)the provision of which is supervised and regulated by a designated professional body.

[F2472 (9)The exemption in this section does not apply to the carrying on of a regulated claims management activity in Great Britain.F2472]

Read section 327 in the full Act → Definitions (9) Cases (3)

Definitions used in section 327

general prohibition

“general prohibition” has the meaning given in section 19(2);

Defined in s.417(1) · see it in the full Act
regulated activity

“regulated activity” has the meaning given in section 22;

Defined in s.417(1) · see it in the full Act
members

“members”, in relation to a profession, means persons who are entitled to practise the profession in question and, in practising it, are subject to the rules of the body designated in relation to that profession, whether or not they are members of that body.

Defined in s.325(2) · see it in the full Act
clients

(8) In this Part “clients” means—

(a)persons who use, have used or are or may be contemplating using, any of the services provided by a member of a profession in the course of carrying on exempt regulated activities;

(b)persons who have rights or interests which are derived from, or otherwise attributable to, the use of any such services by other persons; or

(c)persons who have rights or interests which may be adversely affected by the use of any such services by persons acting on their behalf or in a fiduciary capacity in relation to them.

Defined in s.328(8) · see it in the full Act
rule

“rule” means a rule made by the FCA or the PRA under this Act;

Defined in s.417(1) · see it in the full Act
exempt person

“exempt person”, in relation to a regulated activity, means a person who is exempt from the general prohibition in relation to that activity as a result of an exemption order made under section 38(1) or as a result of section 39(1) or ... 285 ;

Defined in s.417(1) · see it in the full Act
Investment

(4) “Investment” includes any asset, right or interest (including where an asset, right or interest is, or comprises or represents, a cryptoasset) .

Defined in s.22(4) · see it in the full Act
Specified

(5) “Specified” means specified in an order made by the Treasury.

Defined in s.22(5) · see it in the full Act
regulated claims management activity

“regulated claims management activity” means activity of a kind specified in an order under section 22(1B) (regulated activities: claims management services) ;

Defined in s.417(1) · see it in the full Act

Cases considering section 327 (3)

Clydesdale Financial Services Ltd & Ors v Smailes & Ors

[2009] EWHC 1745 (Ch) · 18 June 2009Interprets

The court interprets section 327(3) as requiring an exempt solicitor not to receive an unaccounted pecuniary reward or advantage from a person other than the client. Unaccounted commissions could remove the exemption and place the insurance arrangements in breach of the general prohibition (see paras [44]-[46]).

Watersheds Ltd v Dacosta & Anor

[2009] EWHC 1299 (QB) · 13 February 2009Defines

The court accepted that Watersheds was controlled or managed by members of a relevant profession, satisfying the professional-status condition for exemption. (see paras [73]-[75]) The statutory condition concerning pecuniary rewards from persons other than the client was set out, but no separate issue under it was materially determined. (see para [73]) The court held that any regulated activity was incidental to Watersheds’ professional services. Equity finance work was a minor part of the overall practice and was not a separate business. (see paras [77]; [80]-[82]) The court set out the condition restricting other regulated activities, but no separate disputed application of that condition was identified. (see para [73]) The court set out the condition concerning activities or investments specified by Treasury order, without making a separate determination under it. (see para [73]) The court set out the condition that the activities must be the only regulated activities carried on, apart from exempt activities, without separately deciding it. (see para [73]) The court used the statutory definition of professional services in assessing whether any regulated activity was incidental to Watersheds’ professional services. (see paras [73]-[74]; [80]-[82])

Bampton v Rust & Anor

[2008] EWHC 3662 (QB) · 31 July 2008

The court considered the claimant’s reliance on section 327 but concluded that the statutory provision added nothing material to the common-law claims in negligence and deceit. (see para [63])

What each judgment says about section 327 is in the case-law panel in the full Act.

Explanatory note

585.This section sets out the tests which need to be met in order for a professional to qualify for the exemption, including:

  • the professional must be a member of a professional body which is designated by the Treasury;

  • the professional must not receive a commission from a third party in respect of the regulated activities unless he accounts to his client for it;

  • the regulated activities must be provided in a way that is incidental and complementary to the provision of professional (for example, legal, actuarial or accountancy) services;

  • the regulated activities must not relate to sensitive products (for example, life insurance). What amounts to a “sensitive product” is to be specified by the Treasury in regulations.

All the explanatory notes for the Act

Amendments and notes

11 notes from legislation.gov.uk

Amendments

  1. F2465Word in s. 327(1)(a) omitted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by virtue of The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 2 para. 43(2)(a) (with reg. 7)
  2. F2466S. 327(1)(aa) inserted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 2 para. 43(2)(b) (with reg. 7)
  3. F2467Words in s. 327(1)(aa) substituted (31.12.2020) by The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/632), regs. 1(3), 64(a); 2020 c. 1, Sch. 5 para. 1(1)
  4. F2468S. 327(7A)-(7C) inserted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 2 para. 43(3) (with reg. 7)
  5. F2469Words in s. 327(7A)(a) omitted (31.12.2020) by virtue of The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/632), regs. 1(3), 64(b); 2020 c. 1, Sch. 5 para. 1(1)
  6. F2470Words in s. 327(7B) omitted (31.12.2020) by virtue of The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/632), regs. 1(3), 64(c); 2020 c. 1, Sch. 5 para. 1(1)
  7. F2471Words in s. 327(7C) substituted (31.12.2020) by The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/632), regs. 1(3), 64(d); 2020 c. 1, Sch. 5 para. 1(1)
  8. F2472S. 327(9) inserted (E.W.S.) (29.11.2018 for specified purposes, 1.4.2019 in so far as not already in force) by The Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018 (S.I. 2018/1253), arts. 1(2)(3), 91(5)

Modifications

  1. C1070S. 327 modified in part (E.W.S.) (29.11.2018 for specified purposes, 1.4.2019 in so far as not already in force) by The Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018 (S.I. 2018/1253), arts. 1(2)(3), 83(4)
  2. C1071S. 327(5)(7) restricted (1.12.2001) by S.I. 2001/544, arts. 2(1), 13(1); S.I. 2001/3538, art. 2(1)

Commencement

  1. I71S. 327 wholly in force at 1.12.2001; s. 327 not in force at Royal Assent see s. 431(2); s. 327(6) in force for certain purposes at 25.2.2001 by S.I. 2001/516, art. 2(b), Sch. Pt. 2; s. 327 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)