Question: Is it expected that solicitors' practices will receive a dispensation from regulation along the lines of that granted to them for financial services?
FSA's Answer: Yes. Currently, professionals such as solicitors, accountants and actuaries are allowed to do certain regulated activities that are connected to, and a minor part of, the core professional services they offer their clients, without needing to be authorised by the FSA. Known as Exempt Professional Firms (EPFs), they must comply with detailed requirements set out in Part 20 of the Financial Services and Markets Act (FSMA) and described in the rules of their professional bodies, known as Designated Professional Bodies (DPBs).
The government is extending the scope of the current EPF regime to include general insurance and mortgage business. So, if you are a solicitor doing conveyancing and you are also arranging insurance as part of a house purchase, then you are likely to qualify for exemption, because the insurance is closely connected to, and a minor part of, your core professional service.
However, if you offered clients a full insurance advisory service, you would probably need to be FSA authorised because it is unlikely the advice would be sufficiently connected to conveyancing.
While EPFs will not have to worry about FSA rules, they will be supervised and regulated by their relevant DPB.
Rules for EPFs must be approved by the FSA, so the Law Society will have to amend its own rules and guidance for solicitors doing mortgage and general insurance business and the FSA will have to approve them. We expect that DPBs will produce draft rules later this year and that they will tell their members about any changes.