SRA Handbook

Interpretation

Back to version 21

Version 1 of the Handbook was published on 16/09/2011. For more information, please click 'History' Above

Rule 13: INTERPRETATION

13.1

The interpretation of these rules is governed by rule 8(1) - (4) of the SRA Financial Services (Scope) Rules 2001.

13.2

In these rules:

execution-only (transaction)

means a transaction which is effected by a firm 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;

Notes

(i)

Whether a transaction is execution-only will depend on the existing relationship between the client and the firm and the circumstances surrounding that transaction. Generally, a transaction will be execution-only if the client instructs the firm to effect it without having received advice from the firm. Even though this is the case, however, the transaction may still not qualify as execution-only because, in view of the relationship, the client may reasonably expect the firm to indicate if the transaction is inappropriate. In any event, a firm may be negligent (and possibly in breach of Principle 4) if it fails to advise on the appropriateness or otherwise.

(ii)

A transaction will also be execution-only if the firm has advised the client that the transaction is unsuitable, but the client persists in wishing the transaction to be carried out. In those circumstances it is good practice (and in some cases a requirement) for the firm to confirm in writing that its advice has not been accepted, and that the transaction is being effected on an execution-only basis.

(iii)

Where the transaction involves a packaged product, there is a specific requirement to confirm in writing the execution-only nature of a transaction (see Rule 8 above).

insurance undertaking

means an undertaking, whether or not an insurer, which carries on insurance business;

insurer

means a firm with permission to effect or carry out contracts of insurance (other than a bank);

non-mainstream regulated activity

means a regulated activity of a firm regulated by the FSA in relation to which the conditions in the Professional Firms Sourcebook (5.2.1R) are satisfied.

13.3

These rules are to be interpreted in the light of the notes.