Authorised and Approved Persons Flashcards
What is an approved persons? (1)
- A firm that has been approved to be regulated and carry out regulated activities/investments
What are the 2 ways a person can be authorised?
- Part 4a permission under MiFID
- Passporting
In what document can guidance for Part 4a authorisation be found?
FCA Perimeter Guidance Manual (PERG)
What part of the FCA handbook does Part 4a permission fall under? (3)
- FIT (fit and proper)
- COND (outlines the threshold conditions needed to be met to be authorised and approved - this is reinstated in Block 4 - SUP)
- APER (approved or exempt)
What must the applicant apply in respect to? (1)
The regulated activity they wish to carry. Authorisation must be specific not general
What are assessment criteria for meeting threshold conditions for part 4a permission? (8)
- Legal status
- Location of offices - head office must be registered in the UK
- Effective supervision - relates to the effect of a group or a controlling shareholder who prevents authorisation. Regulator must be satisfied that a close link is not hindering regulation - a close link has 20% or more of voting share.
- Appropriate resources
- Appropriate non-financial resources
- Prudent conduct
- Suitability
- Business model
What is defined as the EEA under MiFID?
- All European Union countries plus Norway, Iceland and Liechtenstein
What is passporting? (4)
- Temporary Transitional Power issued by the Her Majesty’s Treasury
- Allows firms to continue operating in the UK without Part 4a permission/authorisation
- UK firms cannot be passported into the EEA (ended in March 2022)
- All other firms in the EEA can move freely without permission
What new rules did MiFID II and MiFIR introduce in 2018? (4)
- Market infrastructure - regulation of traditionally unregulated exchanges such as OTFs, algorithmic trading
- Transparency of OTFs and OTC derivatives
- Market stability - position limits on commodity derivatives
- Consumer protection - product disclosures and governance e.g. KIIDs
Who does MiFID apply to? (2)
- All firms that are headquartered and registered in the same EEA country
- Firms that are carrying the core and ancillary services recognised by MiFID
What are the core services that can be passported under MiFID? (7)
- Dealing on personal account
- Dealing on behalf of a client
- Transmission and reception of 1 or more financial products
- Underwriting and placement of financial products
- Investment advice
- Portfolio management
- Operating MTFs and OTFs
What are the ancillary services covered by MiFID? (6)
- Custody over core services
- Granting loans to an investor (firms not involved)
- FX services
- Investment research and financial analysis
- Services related to underwriting
- M+A advice
What instruments are covered by MIFID?
- Transferable securities
- Money market instruments
- Units in CIS
- Derivatives in securities, currencies, interest rates and yields
- Currency derivatives
- CFDs
- Other derivatives
- Emissions allowances
What products specifically are not covered by MiFID?
- Retails products
- Pensions
- Insurance
- Mortgages
Once a company is passported, which regulators is it liable to?
Regulators in both the home and host state
What is the home state regulator responsible for? (4)
- Authorisation
- Prudential supervision
- Custody
- Conduct of business
What is the host state responsible for?
- Conduct of business rules when doing business in host state
- Other rules, such as approval of controlled functions
Who is exempt from authorisation? (6)
- Lloyds members
- Appointed representatives
- Members of professional bodies
- Government organisations e.g. BoE
- RIEs and RCHs
- Supranational organisations e.g. IMF
What exchanges are recognised by the FCA?
- LSE
- AQSE
- ICE Futures Europe
- London Metals Exchange
Who are the 2 main RCH?
- LCH
- CREST operated by Euroclear
Is Lloyds authorised?
The Society of Lloyds requires authorisation but members of Lloyds Syndicates are exempt.
What are the 11 Principles of Business? (acronym: I see more for my rights, C x 6)
- Integrity
- Skill, care, diligence
- Management and control
- Financial prudence
- Market conduct
- Relationship with regulator
- Consumer duty
- Client assets
- Conflict of interest
- Consumer interest
-Client relationship: trust
What is SYSC? (3)
- Senior management, systems and controls
- Block 1 of FCA handbook
- Purpose is to encourage directors and senior management of authorised firms to take appropriate responsibility when organising the firm
How many managers are needed for an Alternative Investment Fund?
2
What is whistleblowing?
A personal who informs on a person or firm on regulated activity
What does SYSC cover? (4)
- Apportionment of responsibility (records kept for 6 years)
- Effective internal procedures to ensure employees concerns are met
- Remuneration codes
- Establish and maintain systems and control
What are the FCAs executive senior management roles?
- Executive director
- Compliance oversight
- Money laundering officer
- Senior manager
What are the 3 types of staff under the Senior Management and Certification Regime?
- Senior management e.g. Mary Ann
- Cerftification staff e.g. Ed Coley
- Conduct staff e.g Tim Gibbons
What are the PRAs executive senior management roles?
- C level execs
- Head of internal audit
- Head of key business area
- Group entity senior manager
What are the PRAs non-executive senior management roles?
- Chairman of risk/audit/remuneration
- Senior independent director
Which types of organisations can apply to be passported or receive Part 4a permission? (4)
- Sole trader
- An indiviudal
- A corporation
- An unincorporated association (not an authorised person, but wants to carry out regulated activity)
What are the assessment thresholds for single and dual regulated firms? (8)
Legal status - PRA only for dual regulated firms
Location - FCA for single regulated, PRA for dual regulated
Effective supervision - FCA for single regulated, FCA and PRA for dual regulated
Appropriate resources - FCA for single regulated only
Appropriate non-financial resources - FCA for dual regulated only
Prudential conduct - PRA for dual regulated only
Suitability (fit and proprietary) - FCA for single regulated and FCA and PRA for dual regulated
Business model - FCA for single regulated and FCA and PRA for dual regulated
What are the 3 objective of MiFID?
- Cost effective execution venues are available across EEA
- Best trade execution across EEA
- Increase post-trade transparency across EEA
What is MiFID? (1)
- Markets in Financial Instruments Directive
- Onshored into UK law via EU Withdrawal Act 2018 aka UK MiFID
What are the remuneration codes? (3)
- At least 40% of bonus must be deferred for 3 years
- If significant amount, at least 60% must be deferred
- At least 50% should be in shares or non-cash instruments
What is a bonus based on? (3)
- How well the company/team performs
- Risk-adjusted e.g inflation
- Assessed in respect to financial and non financial factors
What activities can an employee not carry without passing tests?
- Advising and dealing activities
What is retail distribution review? (5)
- To improve the trust of retail investment sector through
1. Ethical standards
2. A higher level qualification
3. CPD (minimum 35 hrs every year, 21 hrs of these should be structured)
4. Statements of Professional Standings (SPS)
5. Prohibition on commission
What is the Fit and Proper test? (3)
- Financial soundness
- Honesty, integrity, reputation
- Competence and capability
How long should training and comepetence records be kept? (3)
- 5 years for MiFID business
- 3 years for non-MiFID business
- Indefinitely for pensions transfer specialist
After resigning, how long must fit and proper records be kept for approved persons?
3 years - liable still for any wrongdoing after resignation
Who is responsible for assessing the capability of individuals?
Firms
What are the CFA ethics? (7)
- Profesionalism
- Integrity to capital markets
- Duty to clients
- Duty to employers
- Investment analysis, recommendations and action
- Conflict of interest
- Responsibilities as a CFA institutional member or CFA candidate
Who does RDR not apply to? (4)
- Non advised services
- Execution only business
- Advice on stocks and share or structured deposits
- Basic advice where advisors still have the ability to earn commission
What is FCA Perimeter Guidance manual for?
Guidance on Part 4a permission
What is a close link?
- When a shareholder has 20% or more of the voting share capital
What are the key differences between ethics and compliance?
Ethics
- Prevention
- Spirit of law
- Value driven
- Principles based
- Implicit
- Discretionary
Compliance
- Detection
- Letter of law
- Fear driven
- Rule based
- Explicit
- Mandatory
To gain Part 4a permission, where must the head and register office be located?
UK
