Chapter 7: FCA and PRA Authorisation of Firms and Individuals Flashcards
Which of the following is NOT a PRA Senior Manager Function for a UK bank?
A. Chief risk function
B. Executive director function
C. Head of internal audit function
D. Chief finance function
B. Executive director function is an FCA function, not a PRA function.
Which of the following is true of designated professional bodies (DPB)?
A. All UK professional bodies have DPB status under FSMA 2000, giving members the opportunity to conduct a range of regulated activities
B. Membership of a DPB gives authorisation to conduct the regulated activities prescribed in the Regulated Activities Order
C. Exemption via membership of a DPB is only allowable where the activities are incidental to the main business of the professional
D. DPBs, having exempt status, do not need to follow the FCA rules when conducting regulated activities
C. Exemption via membership of a DPB is only allowable where the activities are incidental to the main business of the professional.
If the regulated activities are incidental and the professionals do not receive separate renumeration, they are exempt from the need for authorisation. Only lawyers accountants, actuaries, conveyancers and chartered surveyors may receive an exemption when they are members of a DPB. Membership of a DPB does not give authorisation for regulated activities and does not exclude them from the rules.
Which of the following is a regulated activity?
A. Acting as an unpaid trustee for a portfolio of equity
B. Advising in the media on specified investments
C. Sending dematerialised instructions regarding the execution of a trade
D. Trading a personal portfolio of corporate bonds
C. Sending dematerialised instructions regarding the execution of a trade is a regulated activity.
The unpaid trustee, media column and dealing as principal in a personal portfolio are all excluded activities.
The Financial Services and Markets Act 2000 does NOT require businesses carrying out which of the following to be authorised?
A. Managing a bond fund
B. Advising on currencies
C. Establishing a collective investment scheme
D. Arranging deals in investments
B. Currencies are not specified investments.
Which of the following is a specified investment under the Regulated Activities Order?
A. Options on crude oil
B. Shares in an unincorporated business
C. US dollars
D. Premium bonds
B. Shares in an unincorporated business is a specified investment under the Regulated Activities Order.
Currencies and premium bonds are not classed as specified investments under the FSMA 2000, nor are options on commodities (other than options on precious metals). Shares in any business would be a specified investment.
Which of the following is NOT a conduct rules which must be followed by certified persons:
A. Acting with integrity
B. Observing proper standards of market conduct
C. Communicating in a clear, fair and non-misleading manner
D. Acting with due skill, care and diligence
C. ‘Communicating in a clear, fair and non-misleading manner’ is not a conduct rule. It would be covered by ‘communications with clients’, one of the principles for businesses.
Personal responsibility for senior manager functions is enforced by:
A. A set of Conduct Rules backed by a duty of responsibility
B. Four general principles supplemented by a code of ethics
C. A code of practice which incorporates a range of principles
D. Seven principles and a code of conduct
A. A set of Conduct Rules backed by a duty of responsibility.
There are ten conduct rules that apply to senior managers. I’m addition, prescribed responsibilities are laid out for each senior manager in a Statement of Responsibility, which is legally enforceable. This imposes a duty of responsibility.
For how long after the discovery of a problem can the FCA ahold an individual eligible for disciplinary action?
A. Six months
B. Twelve months
C. Two years
D. Three years
D. The FCA nay not bring proceedings after three years from when it first knew of the misconduct. The legislation has taken effect since June 2010. The new section in the FSMA is s. 66(4).
According to the general prohibition (S19 of the FSMA 2000), which of the following activities would NOT require a firm to gain authorisation by the Regulator?
A. Purchasing ADRs on behalf of a private client
B. Advising on the purchase of Indian rupees
C. Managing a future portfolio for a discretionary client
D. Booking shares for an execution only private client
B. Advising on currencies, such as rupees, is not an authorised activity under FSMA 2000 as detailed in the Treasury Regulated Activities Order 2001.
When providing services to a professional client, for which of the following investments would a firm NOT need to gain Part 4A Permission?
A. Options on a copper future
B. Gold
C. Regulated mortgages
D. Gilts
B. All are specified investments except gold.
Under which piece of legislation is the requirement for a firm to be authorised set out?
A. Financial Services and Markets Act 2000
B. Proceeds of Crime Act 2002
C. Companies Act 2006
D. Criminal Justice Act 1993
A. In order to be authorised, a person applies to the Regulator under Part 4A of the Financial Services and Markets Act 2000.
Which principle for businesses requires a firm to take reasonable care to organise its affairs responsibly and effectively?
A. Management and control
B. Integrity
C. Skill, care and diligence
D. Market control
A. Management and control requires a firm to take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems.
Which of the following is a regulated activity?
A. Dealing in currencies
B. Administering the estate of a deceased person
C. Establishing a stakeholder pension
D. Advising on secondary mortgages
C. Establishing a stakeholder pension is a regulated activity.
Currencies are not a specified investment, personal representatives and executors of a will are excluded activities, and advising on secondary mortgages are not regulated mortgage products.
Which of the following would be a breach of the Conduct Rule ‘Integrity’?
A. Misleading a client by providing false information
B. Failing to take reasonable steps to apportion responsibilities clearly amongst those to whom responsibilities have been delegated
C. Permitting transactions without a sufficient understanding of the risks involved
D. Accepting implausible or unsatisfactory explanations from subordinates without testing the veracity of those explanations
A. Misleading a client by providing false information breaches the ‘Integrity’ Conduct Rule.
Which ONE of the following rules within an authorised firm always requires fit and proper assessment by the Regulator?
A. Someone involved in recruiting staff
B. Someone working in compliance
C. Non-executive director
D. Someone with staff supervisory responsibilities
C. All four could potentially require approval, but only non-execs (as Senior Managers) would always require fit and proper assessment by the Regulator.
