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CISI: UK Financial Regulations > Chapter 2: The Financial Services and Markets Act 2000 & Financial Services Act 2012 > Flashcards

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

1
Q

What are the provisions for when a person is exempt from regulated prohibition

A

Appointed Representatives
Recognised Investment Exchanges or Clearing Houses
Operators of MTS’s
Members of Society of Lloyds
Central Banks, Supranational Bodies, Local Authorities, Charities
Professional Firms

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2
Q

What is a prohibition order?

A

Stops someone from performing a specified function by FCA or PRA

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3
Q

What is the Regulated Activities Order?

A

Order part of FSMA to clarify what regulated activities are
Range of investments
Range of activities

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4
Q

What are the specified investments as part of RAO?

A

Deposits (ex deposits on goods)
Electronic money (e.g. a claim on the e-money issuer)
Rights under contracts of insurance
Shares
Debentures (lean stock)
Government and public securities
Warrants
Certificates
Collective investment Schemes
Stakeholder Pension Schemes
Options
Futures
CFDs
Lloyds syndicate membership
Funeral plan
Mortgage
Home reversion

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5
Q

What is an exclusion?

A

Carrying out regulated activity without having to apply for authorisation

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6
Q

What is the absence of holding out?

A

Exclusion from having to be regulated
Market makers and individuals who trade only for themselves to make profit

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7
Q

What exclusions apply for dealing as principal?

A

Bank providing finance and accepting instrument acknowledging the debt
Company issuing its own shares
Using derivatives for risk management purposes for unregulated activities

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8
Q

Do Group and Joint Enterprises get any exclusions?

A

Yes on pretty much everything
Dealing in investments as principal.
* Dealing in investments as agent.
* Arranging deals in investments.
* Managing investments.
* Safeguarding and administering investments.
* Sending dematerialised instructions.
* Advising on investments.

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9
Q

Is advice in newspapers excluded?

A

Yes if advice is contained in a newspaper, journal, magazine, or other periodical publication, or is given by way of a service comprising regularly updated news or information.

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10
Q

When is newspaper advice regulated?

A

If the principal purpose of a publication is the provision of investment advice

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11
Q

Is authorisation required for Trustees?

A

There is an exclusion from the need for authorisation if the person carrying on the regulated activity is:
* acting as the representative of another party
* not generally holding themselves out as carrying on regulated activities, and
* not receiving additional remuneration for providing these investment services.

NOT FOR INSURANCE THO

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12
Q

Is authorisation required for Employee Share Schemes?

A

No, to encourage them

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13
Q

When do overseas persons not require authorisation for regulated activities?

A

Providing that they do not do so from a permanent place of business in the UK

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14
Q

What are exemptions?

A

When certain persons to be exempt from the general prohibition in the conduct of regulated activity.

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15
Q

Are appointed representatives exempt?

A

Yes
An appointed representative can be any type of person (ie, a natural person or any other legal person)who has entered into a contract with an authorised person (the principal) for the purpose of conducting regulated activity.

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16
Q

What must the person who has an appointed representative have in order for the representative to be exempt?

A

Authorisation on whatever activity is being done

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17
Q

What are appointed representatives not allowed to do?

A

deal in investments as principal or manage investments.

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18
Q

Who must be approved in an representative firm?

A

Governors and individuals who will be performing customer functions

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19
Q

What improvements have been made to the appointed representatives regime

A

Notification requirements for principals
Clarifying and strengthening the responsibilities

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20
Q

What is the FSMA Exemption Order 2001

A

The Treasury has established certain exemptions from the need to be authorised for particular persons.
Some of the exemptions are restricted where they only apply sometimes

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21
Q

What are supranational bodies not exempt from?

A

Effecting or carrying out contracts of insurance

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22
Q

What are the exemptions that members of Lloyds have?

A

They can do regulated activities in relation to contracts of insurance written at Lloyds

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23
Q

Why does general prohibition not apply to members of Lloyds?

A

They are overseen by the Society of Lloyds which is seen as suitably supervised

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24
Q

What are the 5 professionals that can perform regulated activities without applying to FCA?

A
  • Accountants
  • Solicitors
  • Actuaries
  • Chartered Surveyors
  • Licensed Conveyancers

They have to apply to respective designated professional body

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25
Q

What is a designated professional bodies?

A

Bodies that grant permission to regulated activities

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26
Q

What does it mean when an activity is carried on by way of business?

A

Whether the regulated activity is a core part of the business
For example, if someone takes deposits to bake a cake doesn’t mean they need to be regulated by FCA for deposit taking.

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27
Q

If a firm is dual-regulated who does it submit application to for authorisation?

A

PRA, but can only authorise with FCA consent

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28
Q

What are the 10 pricing categories?

A

FCA pricing will change based on the complexity of the applicants activities

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29
Q

What is the regulator deadline for determining cases?

A

6 months for complete cases
12 months for incomplete cases

30
Q

What happens if a an authorised firm decides to incorporate (sole trader to limited company)

A

The new entity needs to become authorised

31
Q

What are the threshold conditions (TCs)?

A

Minimum standards expected of authorised persons remaining authorised.

32
Q

What is the Business Model Threshold Condition?

A

Firm must prove to FCA that it has a viable sustainable business model

33
Q

Which two threshold conditions are not applicable to FCA solo regualted firms?

A

Legal status
Prudent conduct

34
Q

Which 3 conditions are not assessed by the FCA for dual regulated firms?

A

Legal status
Prudent conduct
Location of offices

35
Q

Which 2 conditions are not assessed by the PRA for dual regulated firms?

A

Appropriate resources
Business model

36
Q

What is the PRA?

A

Prudential regulator fort banks/depositor takers and insurance companies.

37
Q

What are the three types of work for supervision for the FCA?

A
  1. Proactive Firm Supervision – pre-emptive identification of harm.
  2. Reactive Supervision – dealing with issues that have emerged or are emerging/growing.
  3. Thematic – wider diagnostic or remedy work where there is actual or potential harm across a number of firms.
38
Q

What is a fixed vs flexible portfolio firm?

A

FCA Terminology
Fixed - under constant review (Proactive Firm Supervision)
Flexible - Event driven or thematic review

39
Q

What framework does the PRA use to capture their assessment of the likelihood of failure of each firm?

A

Proactive Intervention Framework (PIF)

40
Q

What are the four tools of supervision?

A

Identify - where is harm
Diagnose - extent of harm
Remedy - regulatory tools
Evaluate - published reports

41
Q

What must a person have to perform a senior management function?

A

Approved person status from regulator
Fills out “Form A”

42
Q

How far back does the senior management referencing go?

A

6 years

43
Q

How long do the FCA and PRA have to determine a senior managers fitness?

A

90 days

44
Q

What are the main criteria for the fit and proper test?

A
  • honesty, integrity and reputation
  • competence and capability, and
  • financial soundness.
45
Q

What are the three firm types for SM&CR for FCA solo regulated firms?

A

Limited Scope Firm - limited rules
Core Firm - baseline rules
Enhanced Firm - more rules

46
Q

How often must individuals deemed fit and proper be re-assessed?

A

At least annually - by the authorised firm.

47
Q

What is The Directory?

A

Public Register checking details of key people working in financial services

48
Q

What is the supplement required for training when carrying out activities for retail clients?

A

Training and Competence Sourcebook

49
Q

When can a employee be assessed by a firm for competence?

A

Once they have demonstrated the necessary competency and attained qualifications

50
Q

What is the overriding rule?

A

Individual conducting a specified activity is not eligible to be assessed as competent until got qualification

51
Q

Which act introduced protection for whistleblowers?

A

Public Interest Disclosure Act 1998

52
Q

Who can be a whistleblowing champion?

A

Non-executive director
Insurers - director or senior manager

53
Q

What must appointed representatives do in regards to whistleblowing?

A

Adopt internal procedures to encourage whistleblowing

54
Q

What can the FCA announce publicly about a proceeding

A

Details of a warranty notice proposing disciplinary action

55
Q

What is the independent committee that makes decisions against firms?

A

The FCA’s Regulatory Decisions Committee (RDC)
Independent of the enforcement teams

56
Q

Who is on The FCA’s Regulatory Decisions Committee (RDC)?

A

Only the chairperson is a FCA employee, the rest of the members represent the public interest and are either current or retired practitioners with financial services and/or legal knowledge and experience, or non-practitioners.

57
Q

What is the PRAs decision committee?

A

The PRA’s Enforcement Decision Making Committee (EDMC)

58
Q

What are the 4 types of Statutory Notices?

A

Warning notices - what they propose to do
Decision notice - what are they are going to do
Supervisory notice - action they have taken for Supervision
Final notice - action they have taken and date it will happen FCA website

59
Q

What are the 3 kinds of formal disciplinary sanction?

A

public statements of misconduct
public censures
financial penalties

60
Q

Where can a regulators decision be referred to?

A

The Upper Tribunal

61
Q

How long can products be banned for without consultation by the FCA?

A

12 months

62
Q

What are the two types of skilled person review?

A
  • S166 reports by skilled persons, and
  • S166A – where the skilled person is appointed to collect and update information.
63
Q

What is the max penalty for carrying out regulated activities?

A

Two years and unlimited fine

64
Q

Does a trustee that does not hold themselves as offering investment services need to be authorised?

A

No

65
Q

Is advising on bank cash deposits a regulated activity?

A

No

66
Q

Does Legal Status threshold condition apply to PRA and FCA firms?

A

No only PRA

67
Q

What kind of action is a public censure?

A

Disciplinary

68
Q

Which notice gives the recipient the right to make representations to the FCA?

A

Warning notice
After that its only appeals, final notice is after the appeals period

69
Q

Are National Savings & Investment bonds considered RAO investments?

A

No

70
Q

What is unique about Employee share schemes as per exclusions?

A

They don’t need one to encourage them

71
Q

What type of approach does the FCA take towards supervision?

A

Risk-based

72
Q

What does the Upper Tribunal do?

A

It handles appeals against regulatory decisions made by the FCA and PRA

CISI: UK Financial Regulations (5 decks)

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