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IMC Unit 1 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

what is an authorised person

A

an individual who has approval from the FCA to carry out regulated activities

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2
Q

What is an approved person

A

An authorised Firm

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3
Q

what are the 2 different types of authorisation

A

passporting
part 4a permission

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4
Q

who carries out part 4a permission

A

FCA /PRA

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5
Q

where do applications for part 4a permission go for FCA regulated firms

A

to the FCA

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6
Q

what does the FCA have to satisfy itself of when looking at part 4a permissions

A

applier has sufficient financial and management skill to undertake the relevant functions

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7
Q

where do you find the threshold conditions for part 4a authorization

A

in the COND sourcebook in Block 1: highlevel standards

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8
Q

where do dual regulated firms apply for part 4a permission changes

A

to the PRA

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9
Q

when can the PRA accept permissions for dual regulated firm part 4a changes

A

only with the consent of the FCA

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10
Q

who assess legal status of dual regulated firms

A

PRA

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11
Q

who assesses location of offices for dual regulated firms

A

PRA

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12
Q

where does a firm have to be located for part 4a permisssion

A

head and registered offices must be in the UK

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13
Q

what is the effective supervision condition for past 4a permission

A

a regulator must be satisifed that a controlling shareholder will not prevent the regulator from effective regulation

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14
Q

who is a close link

A

a company or an individual who owns more than 20% of the voting capital in a company

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15
Q

who assesses effective supervision for dual regulated firms

A

FCA/ PRA

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16
Q

who assesses appropriate non financial resources for dual regulated firms

A

FCA

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16
Q

who assesses appropriate non financial resources for dual regulated firms

A

FCA

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17
Q

who assesses prudent conduct for dual regulated firms

A

PRA

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18
Q

what is the prudent conduct condition for part 4a regulated firms

A

the appropriateness of the applicants financial and non financial resources

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19
Q

who assesses suitability for dual regulated firms

A

FCA / PRA

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20
Q

who assesses business model for dual regulated firms

A

FCA / PRA

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21
Q

who carries out passporting

A

the local regulator

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22
Q

what is passporting

A

allows a company to obtain authorisation to conduct business in the UK by being passported via a European directive

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23
Q

what is the UCITs directive

A

it allows collective investment schemes to be passporting

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24
Q

what is MiFID

A

it allows firms to be passported

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25
Q

how has the UK combatted it’s loss of rights to passporting into Europe

A

by opening a EEA based subsidiary which from there they can then passport into other EEA countries

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26
Q

what is the purpose of MiFID

A

to promote a single European market place

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27
Q

what are the main objectives of MiFID

A

increase post trade transparency across the EEA
ensure the best execution of trades
ensure cost effective execution venues are available

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28
Q

what is onshoring

A

when we brought over all of the EU laws into UK laws surrounding MiFID

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29
Q

who does the EEA comprise of

A

EU countries
Norway
Iceland
Liechtenstein

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30
Q

what did the MiFID II change

A

changes were made to regulate unregulated markets by creating organised trading facilities

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31
Q

what is MiFID business

A

it is a subset of regulated activities

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32
Q

who does MiFID apply to

A

any firm whose head and registered offices are situated in the same EEA state and which conducts core investment activities

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33
Q

what are the core investment activities

A

reception and transmission of orders
execution of orders
portfolio management
investment advice
underwriting and placing
operating a MTF or OTF

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34
Q

what are MiFID investments

A

shares, bonds and derivatives

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35
Q

what is MiFIR

A

Markets in Financial Instruments Regulation
it makes MiFID regulation i.e. EU law

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36
Q

where is the home regulator

A

where the firm is regulated and licensed

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37
Q

what are ancillary services

A

safekeeping, custody and admin
granting loans to an investor
advice to undertakings on M&A
foreign exchange services
investment research
underwriting

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38
Q

is a firm which carries out ancillary services only MiFID

A

no

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39
Q

when can a firm carrying out ancillary services be passported

A

when they are carrying out the services alongside one or more core activity

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40
Q

who oversees the business when a firm is doing business with another company in a different country

A

the home regulator for everything other than COB rules

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41
Q

when does the host state regulator oversee the businesss

A

when carrying out COB related activities
then the host state will regulate the activities

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42
Q

who are exempt persons

A

appointed representatives
recognised investment exchanges and clearing houses
lloyds syndicate members
members of designated professional bodies
governement entities
central banks
councils

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43
Q

who has the responsibility for appointed representatives

A

the firm that employs them must ensure that they are complying with regulation

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44
Q

what are appointed representatives also known as

A

tied agents

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45
Q

what is an RIE

A

essentially an exchange that has meet the recognition requirements set out in the FSMA 2000

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46
Q

what are the requirements for an exchange to become recognised

A

high standards of integrity, sufficient financial resources
business on the exchange is conducted in an orderly manner
price transparency and effective monitoring
rules setting out procedures in the event of a default
arrangements for investigating complaints

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47
Q

examples of recognised exchanges

A

ICE Futures Europe
London Metals Exchange
London Stock Exchange
Aquis Stock Exchange

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48
Q

what happens through a clearing house

A

agreements to buy / sell securities happen on an exchange but the delivery of the security in exchange for cash occurs through the clearing house

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49
Q

what are the recognized clearing houses in the UK

A

Euroclear UK and Ireland
LCH

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50
Q

when would a member of Lloyds syndicate need authorisation

A

when advising or managing

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51
Q

when would members of a professional body be exempt

A

they have to apply to their professional body for a license and the firm they work for must only provide incidental investment services and does not receive remuneration

52
Q

what are the principals for business fro

A

they are a general statement of the fundamental obligation of firms under the regulatory system

53
Q

where are the principles for business found

A

in the sourcebook called PRIN in the handbook

54
Q

who do the principles for business apply to

A

all authorised firms

55
Q

what does a breach in a business principle arise to

A

does not arise to action but will be taken into account for the purpose of discipline or intervention

56
Q

what are the 11 principles for bsuiness

A

integrity
skill, care and diligence
management and control
financial prudence
market conduct
customer interest
communications with clients
conflicts of interests
customer relationships of trust
clients assets
relationships with regulators

57
Q

what does the client asset principle of business relate to

A

client assets should be segregated from firms assets

58
Q

what does the customer relationship of trust principle of business relate to

A

a firm must take responsible care to ensure the suitability of it’s advice and discretionary decisions for any customer that is reliant on their judgement

59
Q

who are customers

A

professional and retail clients

60
Q

who are client

A

professional
retail
eligible counterparties

61
Q

which principles of business apply to eligible counterparties

A

all bar customer relationship and trust and customer interests

62
Q

where is the SYSC found

A

in block 1 high level standards

63
Q

where is the SYSC applied

A

in the management and control principle for business

64
Q

what is the purpose of the SYSC

A

provide guidance on how senior managers can fulfil their responsibilities under the management and control principle

to encourage senior managers and directors to take responsibility for appointment of systems and controls

65
Q

what are the main chapters in the SYCS

A

SYSC 4 general organisational requirements
SYSC 5 employees, agents and other persons
SYCS 6 compliance, internal audit and financial crime
SYSC 18 whistleblowing

66
Q

what is the general requirement outlined in SYSC 4 general organisational requirements

A

a firm should create clear and transparent lines of responsibility

67
Q

what is the aim of SYSC 5: employees, agents and other persons

A

to bring responsibility all the way down the firm

68
Q

what does SYSC 18 whistleblowing aim to do

A

remind firms of their responsibilities under the public interest disclosure act 1998

69
Q

what is discussed in the PIDA 1998

A

a clause between a worker and his employer precluding the employer from whistleblowing is void
includes the appointment of a whistleblowing champion

70
Q

who is a whistle blowing champion

A

a senior manager who is responsible for overseeing the effectiveness of the whistle blowing policy

71
Q

what is protected disclosure

A

the protection given to whistle blowers

72
Q

what is the remuneration code

A

40% of a bonus must be deferred for 3 years (60% for senior managers)
50% of bonus in shares
senior managers must disclose bonuses annually

73
Q

what is the SMCR

A

the Senior manager regime and the certification regime rolled into one with the aim of regulated how people work instead of the firm as a whole

74
Q

what are senior management function prescribed responsibilities

A

these are actions that must be carried out by the firm
they involve or might involve a risk of serious consequences for the authorised person or business

75
Q

who does certification functions apply to

A

people who are not senior managers but still have risk of harm being caused to clients if they dont do their job correctly

76
Q

who is subject to Conduct rules (COCON)

A

senior manager functions
certification functions
other conduct rules staff

77
Q

who are ancillary staff

A

staff that work in financial institutions but their job doesnt’ involved anything to do with it
e.g. cleaners

78
Q

what is a statement of responsibilities

A

it lists all the prescribed responsibilites for each senior manager

79
Q

what happens to the statement of responsibilities after it has been written

A

a senior manager signs and aknowledges that they have a duty of responsibility to carry out the things they have agreed to
the list then gets sent to the FCA

80
Q

what 3 things can a senior manager do to have a regulator take action against them

A

regulator can find misconduct by the SM’s firm
the SM was responsible for the management of the firms activities
the SM did not take stesp to avoid the misconduct

81
Q

responsibilities of a firm under the certification regime

A

a firm has to identify and list which jobs fall into the significant harm function category
then assess whether the certified person is fit and proper to carry out this role

82
Q

how often does certification need to be renewed

A

annualy

83
Q

what are the first tier conduct rules

A

you must act with integrity
you must act with due skill, care and diligence
must be open / co-operative with the FCA
must pay due regard to customer interests
must oberserve proper standards of market conduct

83
Q

what are the first tier conduct rules

A

you must act with integrity
you must act with due skill, care and diligence
must be open / co-operative with the FCA
must pay due regard to customer interests
must oberserve proper standards of market conduct

84
Q

if you do not act with integrity is it deliberate

A

yes

85
Q

if you do not act with due skill, care and diligence is it deliberate

A

no

86
Q

who does the second teir conduct of business rules apply to

A

senior managers

87
Q

what are the second teir conduct of business rules

A

must take reasonable steps to ….
- ensure that the business of the firm is controlled effectively
- ensure that the business complies with relevant requirements and standards of the regulatory system
- any delegation of repsonsiblities is to an appropriate person and you must oversee the discharge of the delegated responsibility effectively
- must disclose any info that the FCA / PRA would expect to know

88
Q

who applies the fit and proper test to the SMC

A

the FCA / PRA

89
Q

who applies the fit and proper test for the CR

A

the firm itself

90
Q

what are the 3 sections of the fit and proper test

A

Honesty, integrity and reputation
competence and capability
financial soundness

91
Q

in regulated market where do you find market conduct rules

A

in the handbook as set out by the FCA

92
Q

in an unregulated market where do you find market codes

A

the FCA has set out a process for recognising codes Called FCA recognition

93
Q

what is the industry code for foreign exchanges

A

FX global code

94
Q

who is responsible for the FX global code

A

the Global Foreign exchange committee

95
Q

Money markets code is called

A

UK Money Markets code

96
Q

lending practice code is called

A

Standards of Lending practice for business customers

97
Q

what does the Standards of lending practice for business customers aim to do

A

sets benchmarks for good lending practices in the UK

98
Q

who prepares the metal markets code

A

the London Bullion Market Association

99
Q

who does the training and competencu SYSC focus on

A

employees of firms carrying out activities for retail clients

100
Q

what are the general standards set out in the training and competency SYSC

A

employees must demonstrate competence
employees must be supervised by a competent supervisor when they are not deemed competent
competency should be regularly reviewed
may require exam success

101
Q

what must retail investment advisors hold before they can give advice

A

statement of professional standing SPS from an accredited society

102
Q

what does an SPS confirm

A

a retail advisor has
- gained an approved qualifiacation
- completed 35 hours CPD a year
- min of 21 structured CPD
- completed an annual declaration

103
Q

firms must be what if they are delivering personal recommendations

A

independent
restricted

104
Q

when do advisor charges need to be agreed with a client

A

ASAP

105
Q

what is required by CFA about professionalism

A

knowledge of the law
independence and objectivity
misrepresentation
misconduct

106
Q

who has the responsibility for recognised clearing houses

A

the bank of england

107
Q

if a certified person breaks conduct rules who will be disciplined

A

just the individual and not the company

108
Q

does market making require authorisation

A

yes

109
Q

if a firm solely wants to conduct investment business who should they go to to seek authorisation

A

the FCA

110
Q

if a firm wanted to carry out invesmtnet business as an incidental part of their business do they need to be authorised

A

yes or they could also be a member of a professional body and that would suffice

111
Q

giving unsuitable advice to a customer breaches which principle for business

A

the customer trust

112
Q

SYSC applies to who

A

all firms

113
Q

training and competency applies to who

A

retail clients only

114
Q

fit and proper test applies to who

A

applies to approved persons

115
Q

when testing if someone is fit and proper do you need to take into account whether they are a domicile or not

A

no domicile is irrelevant

116
Q

who does COCON apply to

A

applies not just to conduct of persons in respect of the regulated functions they perform but also to any other functions they perform whtere those functions relate to the firm where they hold their approval

117
Q

clearing and settlement of transactions are the responsibility of who

A

a Recognised clearing house

118
Q

when do the host rules apply

A

when it is to do with the operations of a branch

119
Q

a french firm has a German branch from which it is doing business with Spain with a Portuguese client. Whose COBS apply?

A

the french firm
as client / branch are in different countries so home rules

120
Q

who are subject to COCON rules

A

senior management functions
certification functions
other conduct rules staff

121
Q

who is subject to fit and proper assessment

A

senior management function
certification function

122
Q

when have you not acted with integrity

A

when you have knowingly done something wrong

123
Q

when have you not acted with due skill

A

when you did something wrong but there is an element of doubt

124
Q

what court is it for bankruptcy

A

civil
i.e. a county court

125
Q

when a firm is refused part 4a permission who may they appeal to

A

TCCUT

126
Q

what is the main duty of an RIE

A

satisfactory recording of transactions

IMC Unit 1 (11 decks)

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