Chapter 3- The Regulation of Financial Markets and Institutions- Section 3 Flashcards
Explain the role and the statutory objectives of FCA
Oversees the business conduct in the UK
Consumer protection
Enhance integrity of capital markets
Promote effective competition
List 3 of the 11 Business Principles of the FCA
Integrity of business
Treat customers fairly and equitably
Be financially prudent with its resources.
List consequences of breaching the Business Principles in the FCA
Any breach of a principle does not mean automatically start legal action.
Onus on FCA to show business has breached and from investigation of best principles, next steps are ascertained.
Explain purpose of SYSC
Encourage senior management to take responsibility under FSMA 2000
Give responsibility to specific directors and senior managers.
Explain scope of SYSC
Well defined responsibilities, with at least 2 people managing the firm and business continuity defined.
Competent with regard to skills
Has system of controls for money laundering and risk management.
If services are outsourced, responsibilities are withheld.
How long do records have to be kept under MiFID?
5 years
How do firms mitigate conflicts of interest?
Identify and operate organisational arrangement.
Disclosure of the conflict of interest as the last resort.
Which legislation protects employees for whistleblowing?
PIDA 1998 (Public Interest Disclosure Act) 1998
Which regulator do you go to if you want to escalate whistleblowing?
FCA
Does the FCA encourage contacting the FCA first regarding whistleblowing or solving internally?
Solving internally first; then escalate to FCA
2013 Proposals on whistleblowing apply to who
Depositary institutions (e.g. Banks etc) which have greater than £250m AuM, PRA reg firms and insurers.
Can you blow the whistle to FCA, the PRA or both?
Both
What is a whistleblowing champion?
Senior individual within the firm who oversees the effectiveness of whistleblowing and person who prepares an annual report on the operation of the policy.
How are effective remuneration policies implemented?
Bonus deferral
40% bonus must be deferred over a period of 3 years
60% for senior management, who’s bonus is > £500k
How are effective remuneration policies implemented?
Composition
> = 50% of bonuses must be made in shares, subject to an appropriate retention period.
Firms must not offer guaranteed bonuses except for new hires
Complete:
A person wishing to carry out one or more regulated activities must be authorised or __________
Exempt
How does a person get regulated?
To apply for Part 4A permission on the specific regulated activity that they wish to practice.
How many times is Part 4A permission granted?
Once; they will need to apply to the FCA to vary their permission.
Who are exempt from authorisation from needing permission?
Appointed representative of authorised persons.
RIEs (Recognised Investment Exchanges)
RCHs (Recognised Clearing Houses)
Member of a profession- solicitor, accountant etc where there part is marginal
Member of Lloyds.
Explain regulations under SMCR
Covers all solo FCA regulated firms from December 2019
Individuals are held accountable under 3 tiers: High to low
SMR - Senior Managers - subject to regulatory approval
Certification Regime- staff that could pose a risk to clients if they do not carry out their responsibilities well
Conduct- Rules for all staff
Senior Responsibility Maps - who are they for and why are they needed?
Shows how senior management fits with governance framework
Sets how various responsibilities are allocated.
Senior managers are responsible for the area of the breach that can be held individually accountable.
Certification regime - who are they for and why are they needed?
Must check that staff are certified to carry out certification functions once a year.
Onus on firm, NOT the FCA
Conduct rules - who are they for and why are they needed?
Conduct rules apply to all firms and all staff, regulated and unregulated financial services activities.
Integrity, CDD, Co-Operative with Regulators, Pay regards to consumer interests, observe proper standards of market conduct.
Explain regulations for training and competence:
Ensure staff is competent, is supervised by a supervisor who is cleared to practice.
Explain training requirements of investment managers
Have an appropriate qualification
Carry out 35 hours of CPD per year, 21 hours are structured e.g. seminars
Hold statement of professional standing by the accredited body.
