Chapter 2 Flashcards
1
Q
what is an authorised person
A
an individual who has approval from the FCA to carry out regulated activities
2
Q
What is an approved person
A
An authorised Firm
3
Q
what are the 2 different types of authorisation
A
passporting
part 4a permission
4
Q
who carries out part 4a permission
A
FCA /PRA
5
Q
where do applications for part 4a permission go for FCA regulated firms
A
to the FCA
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
7
Q
where do you find the threshold conditions for part 4a authorization
A
in the COND sourcebook in Block 1: highlevel standards
8
Q
where do dual regulated firms apply for part 4a permission changes
A
to the PRA
9
Q
when can the PRA accept permissions for dual regulated firm part 4a changes
A
only with the consent of the FCA
10
Q
who assess legal status of dual regulated firms
A
PRA
11
Q
who assesses location of offices for dual regulated firms
A
PRA
12
Q
where does a firm have to be located for part 4a permisssion
A
head and registered offices must be in the UK
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
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
15
Q
who assesses effective supervision for dual regulated firms
A
FCA/ PRA
16
Q
who assesses appropriate non financial resources for dual regulated firms
A
FCA
16
Q
who assesses appropriate non financial resources for dual regulated firms
A
FCA
17
Q
who assesses prudent conduct for dual regulated firms
A
PRA
18
Q
what is the prudent conduct condition for part 4a regulated firms
A
the appropriateness of the applicants financial and non financial resources
19
Q
who assesses suitability for dual regulated firms
A
FCA / PRA
20
Q
who assesses business model for dual regulated firms
A
FCA / PRA
21
Q
who carries out passporting
A
the local regulator
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
23
Q
what is the UCITs directive
A
it allows collective investment schemes to be passporting
24
what is MiFID
it allows firms to be passported
25
how has the UK combatted it's loss of rights to passporting into Europe
by opening a EEA based subsidiary which from there they can then passport into other EEA countries
26
what is the purpose of MiFID
to promote a single European market place
27
what are the main objectives of MiFID
increase post trade transparency across the EEA
ensure the best execution of trades
ensure cost effective execution venues are available
28
what is onshoring
when we brought over all of the EU laws into UK laws surrounding MiFID
29
who does the EEA comprise of
EU countries
Norway
Iceland
Liechtenstein
30
what did the MiFID II change
changes were made to regulate unregulated markets by creating organised trading facilities
31
what is MiFID business
it is a subset of regulated activities
32
who does MiFID apply to
any firm whose head and registered offices are situated in the same EEA state and which conducts core investment activities
33
what are the core investment activities
reception and transmission of orders
execution of orders
portfolio management
investment advice
underwriting and placing
operating a MTF or OTF
34
what are MiFID investments
shares, bonds and derivatives
35
what is MiFIR
Markets in Financial Instruments Regulation
it makes MiFID regulation i.e. EU law
36
where is the home regulator
where the firm is regulated and licensed
37
what are ancillary services
safekeeping, custody and admin
granting loans to an investor
advice to undertakings on M&A
foreign exchange services
investment research
underwriting
38
is a firm which carries out ancillary services only MiFID
no
39
when can a firm carrying out ancillary services be passported
when they are carrying out the services alongside one or more core activity
40
who oversees the business when a firm is doing business with another company in a different country
the home regulator for everything other than COB rules
41
when does the host state regulator oversee the businesss
when carrying out COB related activities
then the host state will regulate the activities
42
who are exempt persons
appointed representatives
recognised investment exchanges and clearing houses
lloyds syndicate members
members of designated professional bodies
governement entities
central banks
councils
43
who has the responsibility for appointed representatives
the firm that employs them must ensure that they are complying with regulation
44
what are appointed representatives also known as
tied agents
45
what is an RIE
essentially an exchange that has meet the recognition requirements set out in the FSMA 2000
46
what are the requirements for an exchange to become recognised
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
47
examples of recognised exchanges
ICE Futures Europe
London Metals Exchange
London Stock Exchange
Aquis Stock Exchange
48
what happens through a clearing house
agreements to buy / sell securities happen on an exchange but the delivery of the security in exchange for cash occurs through the clearing house
49
what are the recognized clearing houses in the UK
Euroclear UK and Ireland
LCH
50
when would a member of Lloyds syndicate need authorisation
when advising or managing
51
when would members of a professional body be exempt
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
what are the principals for business fro
they are a general statement of the fundamental obligation of firms under the regulatory system
53
where are the principles for business found
in the sourcebook called PRIN in the handbook
54
who do the principles for business apply to
all authorised firms
55
what does a breach in a business principle arise to
does not arise to action but will be taken into account for the purpose of discipline or intervention
56
what are the 11 principles for bsuiness
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
what does the client asset principle of business relate to
client assets should be segregated from firms assets
58
what does the customer relationship of trust principle of business relate to
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
who are customers
professional and retail clients
60
who are client
professional
retail
eligible counterparties
61
which principles of business apply to eligible counterparties
all bar customer relationship and trust and customer interests
62
where is the SYSC found
in block 1 high level standards
63
where is the SYSC applied
in the management and control principle for business
64
what is the purpose of the SYSC
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
what are the main chapters in the SYCS
SYSC 4 general organisational requirements
SYSC 5 employees, agents and other persons
SYCS 6 compliance, internal audit and financial crime
SYSC 18 whistleblowing
66
what is the general requirement outlined in SYSC 4 general organisational requirements
a firm should create clear and transparent lines of responsibility
67
what is the aim of SYSC 5: employees, agents and other persons
to bring responsibility all the way down the firm
68
what does SYSC 18 whistleblowing aim to do
remind firms of their responsibilities under the public interest disclosure act 1998
69
what is discussed in the PIDA 1998
a clause between a worker and his employer precluding the employer from whistleblowing is void
includes the appointment of a whistleblowing champion
70
who is a whistle blowing champion
a senior manager who is responsible for overseeing the effectiveness of the whistle blowing policy
71
what is protected disclosure
the protection given to whistle blowers
72
what is the remuneration code
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
what is the SMCR
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
what are senior management function prescribed responsibilities
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
who does certification functions apply to
people who are not senior managers but still have risk of harm being caused to clients if they dont do their job correctly
76
who is subject to Conduct rules (COCON)
senior manager functions
certification functions
other conduct rules staff
77
who are ancillary staff
staff that work in financial institutions but their job doesnt' involved anything to do with it
e.g. cleaners
78
what is a statement of responsibilities
it lists all the prescribed responsibilites for each senior manager
79
what happens to the statement of responsibilities after it has been written
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
what 3 things can a senior manager do to have a regulator take action against them
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
responsibilities of a firm under the certification regime
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
how often does certification need to be renewed
annualy
83
what are the first tier conduct rules
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
what are the first tier conduct rules
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
if you do not act with integrity is it deliberate
yes
85
if you do not act with due skill, care and diligence is it deliberate
no
86
who does the second teir conduct of business rules apply to
senior managers
87
what are the second teir conduct of business rules
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
who applies the fit and proper test to the SMC
the FCA / PRA
89
who applies the fit and proper test for the CR
the firm itself
90
what are the 3 sections of the fit and proper test
Honesty, integrity and reputation
competence and capability
financial soundness
91
in regulated market where do you find market conduct rules
in the handbook as set out by the FCA
92
in an unregulated market where do you find market codes
the FCA has set out a process for recognising codes Called FCA recognition
93
what is the industry code for foreign exchanges
FX global code
94
who is responsible for the FX global code
the Global Foreign exchange committee
95
Money markets code is called
UK Money Markets code
96
lending practice code is called
Standards of Lending practice for business customers
97
what does the Standards of lending practice for business customers aim to do
sets benchmarks for good lending practices in the UK
98
who prepares the metal markets code
the London Bullion Market Association
99
who does the training and competencu SYSC focus on
employees of firms carrying out activities for retail clients
100
what are the general standards set out in the training and competency SYSC
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
what must retail investment advisors hold before they can give advice
statement of professional standing SPS from an accredited society
102
what does an SPS confirm
a retail advisor has
- gained an approved qualifiacation
- completed 35 hours CPD a year
- min of 21 structured CPD
- completed an annual declaration
103
firms must be what if they are delivering personal recommendations
independent
restricted
104
when do advisor charges need to be agreed with a client
ASAP
105
what is required by CFA about professionalism
knowledge of the law
independence and objectivity
misrepresentation
misconduct
106
who has the responsibility for recognised clearing houses
the bank of england
107
if a certified person breaks conduct rules who will be disciplined
just the individual and not the company
108
does market making require authorisation
yes
109
if a firm solely wants to conduct investment business who should they go to to seek authorisation
the FCA
110
if a firm wanted to carry out invesmtnet business as an incidental part of their business do they need to be authorised
yes or they could also be a member of a professional body and that would suffice
111
giving unsuitable advice to a customer breaches which principle for business
the customer trust
112
SYSC applies to who
all firms
113
training and competency applies to who
retail clients only
114
fit and proper test applies to who
applies to approved persons
115
when testing if someone is fit and proper do you need to take into account whether they are a domicile or not
no domicile is irrelevant
116
who does COCON apply to
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
clearing and settlement of transactions are the responsibility of who
a Recognised clearing house
118
when do the host rules apply
when it is to do with the operations of a branch
119
a french firm has a German branch from which it is doing business with Spain with a Portuguese client. Whose COBS apply?
the french firm
as client / branch are in different countries so home rules
120
who are subject to COCON rules
senior management functions
certification functions
other conduct rules staff
121
who is subject to fit and proper assessment
senior management function
certification function
122
when have you not acted with integrity
when you have knowingly done something wrong
123
when have you not acted with due skill
when you did something wrong but there is an element of doubt
124
what court is it for bankruptcy
civil
i.e. a county court
125
when a firm is refused part 4a permission who may they appeal to
TCCUT
126
what is the main duty of an RIE
satisfactory recording of transactions
