Financial Services and Markets Act 2000 and the operation of employee incentive arrangements in the UK
Produced in partnership with Ian Fraser
Financial Services and Markets Act 2000 and the operation of employee incentive arrangements in the UK

The following Share Incentives practice note Produced in partnership with Ian Fraser provides comprehensive and up to date legal information covering:

  • Financial Services and Markets Act 2000 and the operation of employee incentive arrangements in the UK
  • FSMA 2000
  • FSMA 2000 and the operation of share plans in the UK
  • The General Prohibition
  • Regulated activity
  • Relevance to employee incentive arrangements
  • Exclusion for activities carried on in connection with employee share schemes
  • Employee share incentives and collective investment schemes
  • The Financial Promotion Restriction
  • Relevance to employee share incentives
  • More...

The Financial Services and Markets Act 2000 (FSMA 2000) is the principal legislation governing the financial services sector and regulating securities and investments in the UK and has a number of implications for the operation of employee incentive arrangements. This Practice Note explains how FSMA 2000 affects employee incentive arrangements and identifies some of the key areas which employers must take into account when offering participation in incentive arrangements to employees in the UK.

FSMA 2000

FSMA 2000 regulates securities and investments in the UK in order to protect consumers, protect and enhance the integrity of the financial system and promote effective competition within the financial services sector. It does so by prohibiting and restricting certain activities in relation to certain types of investments unless they are carried out by an authorised person or an exclusion or exemption applies.

Breaches of FSMA 2000 may result in criminal liability.

FSMA 2000 and the operation of share plans in the UK

The two main aspects of FSMA 2000 that need to be taken into account when offering employee incentive arrangements in the UK are:

  1. the general prohibition on carrying on a 'regulated activity' by anyone other than an authorised person or an exempt person under FSMA 2000, s 19 (the General Prohibition), and

  2. the restriction on communicating an invitation or inducement, in the course of business, to engage in an investment

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