Do I need to be regulated?

A question we are often asked is "Do I need to be regulated?". Unfortunately, it isn't easy to find the answer on the FCA website nor does a google search really help. So, let's try and answer that all important question.

The two areas of interest to us are 'giving advice' and ‘bringing about or arranging a deal'.

The first of these areas ‘giving advice’ captures many activities. Broadly speaking, if you are giving financial advice to someone and your advice is specific to them you need to be regulated. By advice we mean something that suggests an action they should take, for example buying or selling a share or an entire company. The "someone" could be an individual, a fund manager or a corporate entity, in other words, a person or a legal entity. Finally, when we say "specific to them" we mean something that is not made available to the public, so a newspaper wouldn't need to be regulated to provide a share tip column.

The second of these areas ‘bringing about or arranging a deal' is difficult to pin down, however, if you are paid on the basis of the success of a transaction in which you are somehow involved, you will almost certainly need to be regulated. When we say “paid on the basis of success” we would consider this to include commission, success fee, or a participation such as carry but not a predetermined fixed fee as might be received by a management consultant. By “involved” we mean that you had some direct involvement in the deal or transaction, typically giving corporate finance advice, or even indirect involvement such as introducing a buyer and seller without any further involvement in any subsequent transaction other than receiving a payment based on success.

If an individual, partnership or firm should be regulated but is not, the responsible individual, partners or directors are breaking the law. Those individuals can be imprisoned, fined, banned from ever being a director or banned from working in the Financial Services sector. In 2023, the FCA had 206 open investigations on unauthorised businesses, of which 157 were criminal investigations. Also, clients can recover losses or costs incurred by them from you, your partnership or firm as a result of an activity being undertaken for which you, your partnership or firm were not regulated.

Unfortunately, it is impossible to give specific advice as to what is or is not a regulated activity without knowing exactly what activities are being undertaken. But if you are unsure whether your business should be regulated, then speak with us to find out. It is simply not worth the risk of operating an unregulated business when it should be regulated - ignorance is not a credible defence!