Chapter 2 - FSMA 2000 and FSA 2012 Flashcards
What is a Section 56 FSMA Prohibition Order?
Gives the FCA and PRA power to prohibit an individual performing a specified function.
What does section 71 FSMA provide to privateand non-private persons?
the ability to sue a firm for damages if they suffer loss from a breach of Section 56 where an individual breaches a prohibition order or Section 59 where a individual carries out a controlled function without approval.
What does Section 138D FSA 2012 provide?
The power to sue for losses resulting from the breach of a rule by an authorised person.
What are the exemptions to Section 138D FSA2012?
It doesn’t apply to listing rules, threshold conditions, short selling rules and capital adequacy rules.
What FCA guide does it use to give guidance on what is a contract of insurance?
PERG Sourcebook (Perimeter Guidance)
What is excluded from RAO specified investments list?
- NS&I deposits and products
- Trade bills
- Cheques
- Futures agreed for commercial purposes
What legislation covers advising, dealing and arranging in connection with a contract of insurance, and assisting in the administration and performance of a contract of insurance?
Insurance Mediation Directive
What are the Exclusions under FSMA 2000?
Dealing as principal for:
- Absence of holding out
- Group and Joint Enterprises: Intra group dealings
- Advice in newspapers
- Trustees, Nominees and Personal Representatives
- Employee Share Schemes
- Overseas Persons
What are the exemption under FSMA 2000?
- Appointed Representatives - Section 39 FSMA (dealing only allowed for general or pure protection contracts).
- RCHs and RIEs: FCA Handbook provides recognition and notification requirements
- FSMA Exemption Order 2001
- Members of Lloyd’s
- Members of the Professions
What is the application fee for a Part 4a permission?
Straightforward case: £1500
Complex case: £5000
What is the regulators statutory deadline for approving cases?
6 months - complete cases
12 months - incomplete cases
What are Threshold Conditions?
Minimum standards expected of authorised persons being and remaining authorised.
Over what time horizon does the FCA assess the sustainability of a firm’s business model?
Medium term
What is the business model threshold condition?
the sustainability of a firm’s business model: adequate contingency planning, models meets client needs and no risk to integrity of wider financial system (financial crime).
To which firms does the PRA Additional Conditions apply to?
Banks, building societies, credit unions and investment firms.
Are individuals or partnerships able to hold bank deposits or complete insurance business?
No
What is the effective supervision condition?
Effect of group structures - activities, products and business organisation must not be too complex and impede effective supervision.
What does the appointment of claims representatives TC do?
Requires motor insurers to have a claim representative in each EEA state for dealing with claims.
What is a fixed portfolio firm?
A firm subject to firm or group supervision (Pillar 1)
What is a flexible portfolio firm?
A firm subject to event-driven supervision (Pillar 2) and thematic review of products supervision (Pillar 3).
How long are the supervision cycles for fixed portfolio firms?
12 to 36 months
What is the Proactive Intervention Framework?
The PRA’s assessment of the proximity of each of its authorised firms to failure. Uses business risk, management and governance, capital and liquidity to make its assessment.
What are the 4 supervision tools?
- Diagnostic - identify, assess and measure risk.
- Monitoring tools - track the development of risk
- Preventative tools - limit or reduce identified risks and prevent them from crystallising.
- Remedial tools - respond to risk why they have crystallised.
What is a Section 166 of FSMA skilled persons’ report?
A report produced by an independent skilled person on an aspect of a firm’s business.
What does Section 59 require?
Persons fulfilling controlled functions are to be approved by the regulator.
How long does the FCA have to determine if a person is fit and proper to hold a controlled function?
90 days of receiving Form A.
What are the 4 Significant Influence Functions?
- Governing function
- Required Function
- Systems and controls function
- Significant management function (e.g. head of equity)
When can the PRA specify the description of a SIF?
If the firm is PRA authorised.
Under SMCR how far back does a candidate need to provide a ‘regulatory reference’ for?
Past 6 years
Under SMCR, what is a prescribed responsibility?
A list of responsibility that must be allocated amongst senior managers.
What factors will the regulator assess a person’s fitness and propriety for SMCR?
- honesty, integrity and reputation.
- competence and capability
- financial soundness
In assessing competence and capability, what document lays out the relevant requirements?
Training and Competence sourcebook
Which activities require an individual to have gained the full qualification before commencing the activity?
- Advising or dealing in: securities, derivatives, packaged products, friendly society tax-exempt policies, long term care policies, corporate finance advice, Lloyds participation, pensions transfer, fund adviser.
Within what time frame must the full qualification be attained within?
30 months
For non-asterisked roles, what are the exemptions to the full qualification rule?
30 day rule - spend less than 30 days under supervision in the UK.
At least 3 years up-to-date overseas experience.
As part of the RDR, when must a retail investment firm inform the FCA?
- An adviser is no longer competent
- An adviser has failed to gain the qualification in the time limits
- An adviser fails to comply with a Statement of Principle.
- An adviser has performed a TC activity without being competent and without the appropriate supervision.
Which legislation introduced the UK’s whistleblowing regime?
Public Disclosure Act (PIDA) 1998
What is the criteria for firms to be subject to the whistleblowing RULES?
- Deposit takers (banks, building societies, credit unions) with over £250 million in assets.
- Insurers subject to Insolvency II Directive
What is the maximum settlement discount?
30%
What is a warranty notice?
A notice issued by the regulator that proposes disciplinary action. It signals the start of formal enforcement proceedings.
How many members are there on the Enforcement Decision Making Committee and how many of them have a legal background?
9 members with 3 who are legally qualified
What are the 3 statutory notices?
- Warning notice
- Decision notice
- Supervisory notice
What is a warning notice?
Details the action the FCA proposes to take and why. It announces that start of formal disciplinary action.
What is a decision notice?
Details the actions the FCA has decided to take. Another notice can be issued if the decision changes.
What is a supervisory notice?
Provides details regarding the action is taking. Can limit a Part 4A permission with immediate effect.
What is a notice of discontinuance?
To overturn a decision or warning notice to signal that the regulator does not wish to proceed with disciplinary action.
What is a final notice?
Set out the terms of the final action which the FCA has decided to take and the date from which it will take effect.
What are the 3 forms of disciplinary sanctions?
- Public statements of misconduct (individuals)
- Public censures (Firms)
- Financial penalties
How many days does a firm/person have to refer to the Upper Tribunal after receiving a decision notice?
28 days
What were the additional enforcement powers provided by FSA 2012?
- Short-selling disclosure - fines
- Suspend firms/individuals
- Fines on individuals carrying out controlled functions without approval.
- Financial stability information-gathering powers
- Ban financial promotions and products
