Josh Bates, specialist regulatory lawyer at O’Connors
By Josh Bates, Specialist Regulatory Lawyer at Legal Futures Associate O’Connors Law
The outsourcing of marketing activity has become a common feature of many law firms that handle claims-related work – a tacit acceptance perhaps that attracting clients requires specialist skills which some lawyers simply do not have.
Certain marketing activity – whether carried out in-house by a law firm’s marketing team or outsourced to a third party – falls within the Financial Conduct Authority’s ambit of ‘regulated activity’, meaning that some law firms will need to comply with the FCA’s regulatory rules and guidance in relation to it.
So, here’s a simple guide to help you to assess if your current arrangements are compliant.
What marketing activity is regulated by the FCA?
Marketing activity is regulated by the FCA if the activity ‘is or relates to claims management services’ and it is ‘specified activity’ carried on ‘by way of business in Great Britain’.
What type of marketing activity ‘is or relates to claims management services’?
Although the scope of marketing activities which comprise ‘claims management services’ is broad, for it to be captured by regulation it must be linked to one or more of the following types of claim:
- A personal injury claim.
- A financial services or financial products claim.
- A housing disrepair claim.
- A specified benefits claim (e.g. industrial injuries, workers’ compensation).
- A criminal injury claim.
- An employment claim.
What marketing activity amounts to ‘specified activity’?
There are six specified activities that apply to these types of claim, making a complex framework of required permissions, particularly for those wanting to carry out the full spectrum of regulated claims management activity in relation to all six types of claim. Fortunately, the FCA has produced a handy table of the six specified activities in its policy statement PS18/23 which are:
- Seeking out persons who may have a claim.
- Referring details of a claim or potential claim, or of a claimant or potential claimant.
- Identifying a claim or potential claim, or a claimant or potential claimant.
- Advising a claimant or potential claimant.
- Investigating a claim.
- Representing a claimant.
What is meant by ‘carried on by way of business in Great Britain’?
Whether an activity is ‘carried on by way of business’ is a question of judgment based on several factors (none of which, according to FCA guidance, is conclusive).
Law firms are likely to pay third-party marketeers for their marketing activity so it is almost certain that such activity will be ‘carried on by way of business’.
The territorial scope of claims management regulated activity is narrower than that of ordinary regulated activity in that it excludes Northern Ireland, the Channel Islands and the Isle of Man. A person will carry on an activity ‘in Great Britain’ if:
- they are a natural person usually resident in Great Britain or a corporate body constituted under the law of a part of Great Britain; or
- the activity is carried on in respect of a claimant who is a natural person usually resident in Great Britain or a corporate body constituted under the law of a part of Great Britain.
Surely law firms don’t have to be dual authorised?
As you will be aware, SRA authorised persons benefit from a statutory exclusion, meaning that they can carry on certain regulated activity without FCA authorisation. However, this exclusion only applies if the activity is carried on (a) in the ordinary course of legal practice and (b) through an SRA authorised firm, an FCA authorised firm, or another exempt business.
We still come across law firms involved in outsourcing marketing activity to third-party marketing companies who believe that this statutory exclusion extends to the third-party marketing company itself, as if it is an arm of the law firm. Such arrangements are unlikely to be compliant and could have significant financial and reputational consequences for the third-party marketing companies and for the outsourcing law firms.
To be sure claims management activities are compliant, advice should be taken from a regulatory lawyer and the advice followed. Doing this will provide a level of protection for a law firm in the event of a regulatory investigation and, done in the correct way, can attract the benefit of legal advice privilege.
Josh is an Associate Solicitor in law firm, O’Connors. He advises the full breadth of financial services and legal services businesses on compliance and regulatory matters, including the regulation of digital assets and Web 3.0 technologies.
Arrange a confidential discussion with the author:
- MOBILE 07384 831 882
- EMAIL joshuabates@oconnors.law
