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Examination Timing: 00H00M01S

John instructs his solicitor, Mrs. Smith, to act for him in the purchase of the entire issued share capital of a private limited company from another corporation. Mrs. Smith advises John on the share purchase and helps to prepare and negotiate all the necessary documentation. Neither Mrs. Smith nor her firm is authorised by the Financial Conduct Authority (FCA) to carry on a ‘regulated activity’ as defined in the Financial Services and Markets Act 2000 and related secondary legislation. 


Has Mrs. Smith breached the general prohibition against carrying on a regulated activity?

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Under the Financial Services and Markets Act 2000 (FSMA) and its secondary legislation, certain exclusions and exemptions apply to professional firms conducting corporate transactions. One of these exclusions is that the general prohibition against carrying on a regulated activity does not apply if the transaction involves the purchase of at least 50% of the voting shares in a company. In this scenario, since Mrs. Smith is advising on the purchase of the entire issued share capital of a private limited company, this exclusion applies. Thus, Mrs. Smith has not breached the general prohibition as defined by the FSMA. 


Key Point: This question highlights the intersection of corporate law and financial regulation. It is crucial to understand the exclusions and exemptions provided under the FSMA for professional firms engaged in corporate transactions, particularly when these transactions involve significant ownership stakes in a company.

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