Chapter 2: Financial Services and Markets Act 2000 & Financial Services Act 2012

Question 1

What is the General Prohibition S19?

Answer 1

No person (firm) may carry on a regulated activity on the UK, unless he is either authorised or exempt fro the requirement to be authorised.

Question 2

What classifies as regulated activity?

Defined in what ? 2001?

Answer 2

Specified activities in specified investments, defined in the Regulated Activities Order in 2001

Question 3

What is the Punishment for Unauthorised Investment Business?

How much and how long in prison?

Answer 3

Two years and or an unlimited fine.

Question 4

What is the “Civil Remedies”, when it comes to Unauthorised Business?

enforcable and unenforcable?

Answer 4

Contracts are enforcable by the “injured party” (investor), but are unenforcable by the “offending person” (the firm)

Question 5

What are “Specified Investments”?

There are 16 so think of all you know, it isnt that deep.

Answer 5

• Deposits
• Electric monies
• Insurance Contracts
• Shares Debentures
• Government and Public Securities
• Warrants
• Certificates representing certain securities
• Units in a collective investment scheme
• Stakeholder pension schemes / personal pension schemes
• Options: Securities, currencies and precious metals
• Futures for investment / speculative purposes
• Contracts for Difference
• Lloyds syndicate capacity and membership
• Funeral Plans
• Home finance transactions

Question 6

Are futures for hedging purposes classed as specified investments?

Answer 6

No

Question 7

What are the 3 extra “Specified Investments”?

Answer 7

• Greenhouse gas emissions allowance
• Credit agreements / consumer hire agreements
• Alternative finance investment bonds

Question 8

What are non-specified investments?

Answer 8

• Property deals
• Currency deals
• National Savings products

Question 9

What are the Alternative Exchanges AKA?

Answer 9

Multilateral Trading Facilities and Organised Trading Facilities

Question 10

What are “Specified Activities”?

Try and remember the important ones

Answer 10

• Accepting deposits
• Issuing electronic money
• Effecting/performing / Administering Insurance contracts
• Dealing in investments as principal or agent
• Arranging and advising on home finance transactions
• Operating MTFs and OTFs
• Bidding in emission auctions
• Managing investments
• Safeguarding and administering investments
  *** Sending dematerialised instructions
• Establishing or operating UCITs
• Establishing or operating a pension scheme
• lloyds market activities
• Entering a funeral plan contract
• Activities related to consumer credit
• The setting of benchmarks
• Advising on home land finance transactions**

Question 11

What does the book highlight as non-specified activities?

There are 4

Answer 11

• Dealing as principal i.e acting as a market maker
• News media (unless a subscribed tip sheet)
• Trustees, nominess or appointed reps
• Employee share schemes

Question 12

Who are exempt from regulated activities?

Answer 12

• Appointed representatives
• RIE and RCHs
• FSMA Exemption order 2001 (Supranational bodies and central banks e.g. BoE and IMF)
• Syndicate members of LLoyds of london (Underwriters)
• Designated professional bodies (DPBs)

Question 13

What is a designated professional body (DPB)?

Answer 13

Regulated individuals will apply to these rather than the FCA or PRA for permission to carry out incidental regulated actvities.

Question 14

What are examples of DPBs?

Answer 14

Accountants, solicitors, actuaries, chartered surveyors, licesned conveyancers

Question 15

What is the Authorisation Process?

Answer 15

Depending on the type of firm, a firm will need to submit an application pack to either the PRA and/or the FCA..

Question 16

What do Dual Regulated Firms need to do to become Authorised?

Is it dual?

Answer 16

Need to make a Single application to PRA but will need FCA consesnt.

Question 17

What does and “Application Pack” require?

Answer 17

• Core details
• Controllers
• Business Plan
• Disclosure of significant events
• Approved person forms
• Checklist and Declaration

Question 18

What are the “Threshold Conditions”?

Very simply

Answer 18

Minimum standards for being and remaining authorised.

Question 19

What are the 8 threshold conditions?

Answer 19

1. Legal Status (PRA)
2. Location of Offices (PRA) - registered UK office
3. Business conducted in a prudent manner - appropriate financial and non-financial resources
4. Effective supervision, including close links (FCA/PRA) (20% shareholding)
5. Appropriate resources both financial and non financial
6. Suitability of (FCA/PRA) - Fit and proper
7. Business model (FCA) - Suitable business strategy
8. Appointment of claims representatives (PRA) - for motor insurers only

Question 20

What is the purpose of the regulators supervision arrangements?

Answer 20

To mitigate and manage risks to statuatory objectives being met

Question 21

What are the 4 supervisory tools?

Answer 21

• Identify
• Diagnose
• Remedy
• Evaluate

Question 22

What factors are considered during the fit and proper test?

Bit cringe

Answer 22

• Honesty, integrity and reputation
• Competence and capability
• Financial Soundness

Question 23

What in a nutshell is the approval process is the SMCR?

This is actually what it is

Answer 23

Under the SMCR an individual may be permitted to perform a senior management function, only after the regulator has appointed them approved status.

Question 24

What is FSMA S56?

Not!

Answer 24

FCA can issue prohibition orders against those who are not fit and proper.

Question 25

What is FSMA S59?

Not allowed.

Answer 25

No person may perform an approved function unless allowed by the regulator.

Question 26

What is FSMA S71?

There are 2 parts. They can Suiiii

Answer 26

A private person can sue a firm when.
* A prohibited individual carries out an approved function
* An unapproved function carries out a controlled function

Question 27

What is FSA S138D?

Answer 27

A private person can sue if they suffer losses from a frim breaching an FCA rule.

Question 28

How is Competence assesed?

Training and competence. What am i doing right now?

Answer 28

One must pass each mondule of an appropriate exam. Like the FCAs

Question 29

What are the exempetions from the assesing competence requirements?

Answer 29

• Three years up-to-date relevant experience outside of the UK: May be exempt from examinations BUT NEVER REG MODULE
• 30 day rule: where an oversees individual is in the UK

Question 30

What is the Public Interest Disclosure Act 1998 (PIDA)?

UK Whilstle Blowing Regime

Answer 30

A firm cannot include a clause in an employees contract preventing them from blowing the whistle on their employees practices.

Question 31

What are some of the risks (offenses) identified by the PIDA?

There are 4 (obvious)

Answer 31

• Commiting an offense
• Failing to comply with a legal obligaton
• Breaching health and safety rules
• Damaging the envirnoment

Question 32

Under the UK Whistle Blowing Regime, what are the FCA rules?

Answer 32

• Appoint a non-exec or senior manager as the whislteblowing champion
• Put internal whistleblowing arrangements in place
• Tell employees about FCA and PRA whilsteblowing services
• Present a report on whilsteblowing annually to the board.

Question 33

What is the Regulatory Decision Committee (RDC)?

Who are they accountable to? Who is the Chairman?

Answer 33

Independant committee outside the UK management structure
* Accountable to the FCA
* Chairman is an FCA employee

Question 34

What is the Enforcement and Decision Making Committee (EDMA)?

For the BoE

Answer 34

• PRA committee at BoE
• Its executive does no sit on any other board or panel at the bank

Question 35

What is the Upper Tribunal (Tax and Chancery Chamber)?

AKA TC Cut?

Answer 35

• Independant of the FCA (Appointed by governments ministry of justice)
• Considers appeal in relation to: Decision notices / Supervisory notices
• Individual firms have 28 days to appeal (if they wish)