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CISI: UK Regulation 2.0 > Chapter 2 The FSMA 2000 and FSA 2012 > Flashcards

Chapter 2 The FSMA 2000 and FSA 2012 Flashcards

1
Q

What is S19 FSMA 2000 “General Prohibition”?

No person may carry out……

A

No person may carry on a regulated activity in the UK unless he is an authorised person or an exempt person

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2
Q

What consitutes regulated activity under the Regulated Activities Order 2001?

A

Specified activity undertaken with a specified investment

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3
Q

What are the Criminal penalties for contravening the General Prohibition?

A

2 years imprisonment and an unlimited fine

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4
Q

What are the civil law consequences for contravening the General Prohibition?

If someone were to sue the firm.

A
  • Injunctions
  • Restitution orders - pay compensation
  • Contracts are voidable at the discretion of the investor
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5
Q

What are the Specified Investments?

You have to know them, write them down

A
  • Shares / depository receipts / warrants !
  • Debt instruments (gov and corp) !
  • Units in CIS !
  • Options !
  • Futures !
  • CFDs !
  • Emmisions allowances !
  • Lloyds syndicates, insurance contracts and funeral plan contracts
  • Pensions
  • Regulated mortgages and Home finance
  • Deposited and electronic money
  • Rights to specified investments
  • Loans or other forms of credit
  • Benchmarks

Those with a “!” are MiFID business

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6
Q

What are the MiFID “Specified Activities”?

There are 5

A
  • Dealing in investments
  • Arranging deals in investments
  • Managing investments
  • Advising on investments
  • Operating an OTF or MTF
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7
Q

What are the other “Specified Activities”?

A
  • Safeguarding and administering investments
  • Sending dematerialised instructions
  • Lloyds activities
  • Mortgages
  • Home finance activities
  • Managing dormant account funds
  • Accepting deposits by way of business and issuing electric monies
  • Providing credit ref or info services
  • Establishing, operating or winding up Penion schemes of CIS
  • Agreeing to carry on most regulated activites
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8
Q

What are “excluded activities”, not regulated under FSMA 2000?

What is the nuance with newspapers.

A
  • Newspapers and other media: Incidental advice (BUT NOT TIP SHEETS)
  • Providing information e.g. Bloomberg
  • Unpaid trustees e.g. nominees and executers
    Employee share schemes
    group or joint enterprises
    Absence of holding out
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9
Q

With regards to “the absence of holding out”, what are some of the “excluded activities”?

not regulated by FSMA 2000

A
  • Dealing as principal and end user, where no service is offered to others
  • Primary market sale or buy back
  • Derivatives for risk management or commercial purposes
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10
Q

When also would a “Specified Activity” be excluded?

For a specified activity there is this assumption

A

If it is not paid for!!

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11
Q

What does “Holding out” mean?

A

An individual has portrayed or implied that they are regulated and authorised to carry out regulated activity when they are not.

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12
Q

Which body is able to grant, vary or cancel a Part 4A permission?

A

The FCA and the PRA

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13
Q

What are some examples of Exempt Persons?

A
  • Bank of England (or other central banks, supranational funds etc)
  • Appointed Representatives (tied agents)
  • Lloyds syndicate members
  • DPBs
  • RIEs (e.g. LSE)
  • RCHs (e.g. Euroclear)
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14
Q

What is the Perimeter Guidance Manual (PERG)?

For Part 4A permission

A
  • Sets out guidance on when authorisation may be needed and any exclusions available
  • Not binding and reference to the relevant legislation essential
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15
Q

Once authorised under Part 4A permission, are you authorised to carry out all regulated activities?

A

No, only for what you apply for. This is why they can vary ones permission.

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16
Q

What are the Threshold Conditions (COND) for a Part 4A permission?

A

Sets out the minimum requirements for how one gets a Part 4A permission

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17
Q

For FCA firms which conditions arent relevant when granting Part 4A permission?

In comparisson to dual regulated firms?

A
  • Legal Status
  • Appropriate non-financial resources
  • Prudent conduct
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18
Q

With regards to threshold conditions, what is “Prudent Conduct” refering to?

A

Financial resources available

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19
Q

Who do dual regulated firms apply to for a Part 4A permission?

A

The PRA

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20
Q

Can a UK authorised firm, passport its license to conduct business in EEA states?

A

No.

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21
Q

What is the Senior Manager and Certification Regime AKA?

A

Individual accountability regime

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22
Q

What are some SMFs?

At the firm what are they?

A
  • All directors
  • All heads of functions
  • MLRO
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23
Q

What are some Certification Functions?

These are signif…..

A

These are significant harm functions, i.e. conduct risk causes harms to consumers, the firm and the broader financial market

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24
Q

Who must identify signifacnt harm functions?

A

The firm

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25
Q

Who assesses SMFs to be “Fit and Proper”?

Do these need to be pre approved?

A

The FCA or the PRA

Yes

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26
Q

Who assesses Certification Functions to be “Fit and Proper”?

A

The firm itself

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27
Q

Who are subject to conduct rules at a firm?

A

SMFs, Certification functions & other conduct staff

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28
Q

Are ancillary staff subject to the Conduct Rules?

A

No

29
Q

Are other conduct staff subject to the fit and proper test or conduct rules?

A

No

30
Q

For senior management functions, what is required for “Presecribed Responsibility”?

There are 3 points

A
  • Must be allocated to the most senior individuals
  • Set out in the Statement of Responsibilities - must be signed and sent to the regulator
  • Records kept for 6 years of any change
31
Q

For SMFs how longs should records be kept for any change?

A

6 years

32
Q

What is the Purpose of the Responsibilities Map?

A

Enhanced transparency of accountability and reporting lines, maps out what SMFs do what and where

33
Q

What are the Reasonable Steps SMFs must take?

There are 2

A
  • Fulfil any prescribed responsibilities
  • Prevent, stop and remedy breaches
34
Q

What happens if an SMF does not take the “Reasonable steps”?

A

Potential disciplinary action can be taken by the regulator

35
Q

What are some examples of Certification Functions?

A
  1. Material risk takers - traders etc.
  2. Supervisors of CFs - e.g. the traders manager
36
Q

How often should the firm assess the fitness and proprietry of CFs?

Either…….but most of the time……..

A
  • On appointments
  • Annually
37
Q

With reagrds to the FIT test, what is form A?

When will firms be informed?

A

Firms use form A to apply for approval on behalf of SMFs to the FCA or the PRA. They should be informed of the decision within 90 days

38
Q

What are the 3 areas assessed under the Fit and Proper Test?

A
  • Honesty, integrity and reputation
  • Competence and capability e.g. exam success CISI exams or training
  • Financial Soundness e.g. Bankruptcy
39
Q

For the FIT test, what is researched under Honesty, Intergrity and Reputation?

What are the time frame (scope) that these points are valid?

A
  • Employment history (6 years)
  • Criminal convictions (no time limit, will only be if relevant)
  • Breaches of FCA/PRA
  • Complaints
40
Q

For the Individual Conduct Rules, what are the “First Tier Rules” that apply to SMFs, CFs and OCRs?

What constitues a breach of these?

A
  1. You must act with intergrity: Deliberatley breaching
  2. You must act with due skill care and dilligence: Incompetence
  3. You must be open and co-operative with the FCA and the PRA: failure to inform
  4. You must pay due regard to the interest of customers and treat them fairly
  5. You must observe proper standards of Market Conduct
41
Q

Where Consumer Duty applies, which rule replaces what?

What is this rule?

A

6 replaces 4

  1. You must act to deliver good outcomes to retail customers
42
Q

What SYSC rule is the background for Training and Competency?

What does this cover?

A

SYSC 5 covers the overall requirements to ensure that employees meet high level competency requirements.

43
Q

What are the 3 general requirements from the T&C sourcebook?

Training & Competence

A
  • All employees of firms carrying on activities with or for retail customers must demonstrate competence. may require exam success
  • Firms must not allow employees to carry out activities without appropriate supervision
  • Competence must regulalry be reviewed to ensure they remain competent
44
Q

Who is responsible for assesing the competency of employees?

A

The firm

45
Q

For Whilstblowing, where firms must adopt procedures, what statements must they include?

under PIDA 1998

A
  • The proper way to disclose
  • Failures that are worthy of disclosure
  • Assurance of protected disclosure
  • Avenues for external disclosure (FCA)
  • Penalties for making false of misleading disclosures
46
Q

What is the Whislteblowers Champion?

A

A senior manager under SMCR, that is responsible for overseeing the procedure in relation to whistle blowing

47
Q

What are the Powers of Enforcement Officers under S165?

What can the FCA or PRA do without notice?

A
  • Enter the premisis of an authorised firm without notice
  • Demand documents, files, tapes, data
  • Interview an employee
48
Q

Under an investigation, how long do the firm have to provide the regulator with requested documents?

A

Within a reasonable time period

49
Q

What is S177?

Failure to do what in an investigation / investigation?

A
  • Failure to co operate is a criminal offense
  • Providing false or misleadin evidence
50
Q

In regards to co-operation during an investigation, what is S167?

A frim can demand a firm to do what?

A

Appoint a competent person to provide any of the information require to the PRA or the FCA

51
Q

In regards to co-operation during an investigation, what is S168?

The firm can appoint what?

A

Appoint a third party to carry out an investigation

52
Q

What is a “Notice of Discontinuance” and when is it issued?

A

After an investigation and preliminary findings have been review, the regulator will serve notice to the firm that the investigation has been closed.

53
Q

When might a “Private Warning” be issued?

Why is this bad though?

A

If after reviewing the preliminary findings, there is nothing wrong or a little thing, the regulator can reach out to the individual make them aware there will be no discplinary action

It will stay on their discplinary record

54
Q

What is a “Warning Notice”, and when is it issued?

A

If the regulators after an investigation suspect wrongdoing, they will send a warning notice to the firm, making them aware of the discplinary actions they wish to proceed with

55
Q

What is a “Supervisory Notice”, and when is it issued?

Is this preventative or disciplianry?

A

A notice issued by the RDC, once an investigation has been conducted, to essentially say, there is nothing really wrong, but we can help put them right, and is effective IMMEDIATLEY

Sort of like a little slap on the wrist so is PREVENTATIVE

56
Q

What is a “Decsion Notice”?

A

Issued by the RDC outlining the discplinary measure the regulator wishes to take, allowing the person time to appeal

57
Q

Who are notices and decsions issued by?

A

The RDC (regulatory decisions committee)

58
Q

Is the RDC a committee of the FCA?

A

Yes

59
Q

Why must the RDC wait 28 calendar days after issuing a “Decision Notice”?

A

To allow the firm to appeal the decision to the Upper Tribunal

60
Q

Who runs and oversees the Upper Tribunal?

A

The Ministry of Justice

61
Q

What notice can a firm appeal against?

Only 2

A

The decision notice and the supervisory notice

62
Q

Which of the Notices are usually published?

Final

A

The final decision notice or the Final Supervisory Notice

63
Q

Can a Warning Notice be published?

What is the nuance here?

A

Yes but only with the firms consent

64
Q

Under FSMA 200 what are the Statutory Notices?

A

Warning notice, supervisory notice, decsion notice

65
Q

What is a “Further Decsion Notice” and when is it issued?

A

Where a firm responds to the decision notice, accepts it, but wants to make a few changes without appealing to the upper tribunal

66
Q

What are the availible disciplinary measures?

There are 5

A
  • Withdrawal or variation of authorisation
  • Prohibition order
  • Restitution order
  • Prosecution
  • Public cesnure, statment of misconduct anf financial penalties
67
Q

What is a S56 Prohibition?

Can this vary?

A

An order that prohibits an individual from working in a particular area

Yes with both time and scope

68
Q

What is the Powers of Intervention and Enforcement under FSA 2012?

Can this be done without consultation, how long for?

A
  • FCA can ban products posing unacceptable risks to consumers, without consultation for up to 12 months
  • FCA can ban financial promotions deemed to be misleading (no need to go through usual enforcement procedures)
69
Q

What is a “Final Notice”?

What and when!!!

A

Issued after a potential appeal where the regulator has now decided the action it will take and the date it becomes effective.

CISI: UK Regulation 2.0 (5 decks)

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