Chapter Seven: Core Regulatory Principles and Rules Flashcards
What is Section 19 (S.19) under the Financial Services and Markets Act (FMSA)?
This is referred to as the ‘General Prohibition’.
It refers to an authorisation breach where someone is carrying out a regulated activity without the required permissions.
What is the maximum penalty for an authorisation breach under S.19?
2 years in prison and an unlimited fine.
When does grandfathering not apply?
When authorisation for activities has not been previously regulated by the FSA.
What are the regulated activities that require authorisation?
- Banking
- Home finance
- Insurance
- Pension Scheme Operator
- Investment Intermediary
- Insurance Intermediary
- Investment Management
- Credit related Tasks
Who is responsible for the actions of an Appointed Representative?
The Authorised Person (Principal) who appointed them.
What are the three types of Appointed Representative?
- Introducer
- Tied Agent
- Full Appointed Representative
What are the two types of registrations that a Designated Professional Body (DPB) can use?
Exempt or Authorised
For which regulated activities do Designated Professional Bodies (DPB) member firms not require authorisation from the FCA?
Activities that are purely incidental to their professional services.
What regulatory body would a new Insurance Firm apply to for authorisation?
PRA
What regulatory body would a Financial Intermediary apply to for authorisation?
FCA
What would a Scope of Permission Notice contain?
Details of the firms authorisation including which activities they are allowed to undertake and what, if any limitations are applied.
For what period of time could a person within a firm undertake controlled activities without needing the approval of the FCA?
12 weeks per year.
If a firm is changing from a partnership to a limited company, can it transfer its authorisation?
No, it must reapply as a new firm.
What are the key aims of the SMCR?
To encourage staff of all levels to take personal responsibility for actions and to ensure firms and staff can understand and demonstrate where responsibility lies.
If a portfolio loses 80% of its value, is the client entitled to compensation from her adviser?
Not solely for the loss of value but, they may be entitled to recompense if the advice was in breach of the FSMA/FCA rules.
What are the five significant influence functions which can only be performed by approved persons?
- Governing functions
- Required functions
- Systems and control functions
- Significant management functions
- Customer dealing functions
What jobs roles fall under ‘Executive Functions’ under the SMCR ?
- Chief exec
- Chief finance
- Chief risk
- Head of audit
- Head of key business area
Which job roles fall into Oversight as part of the new SM and CR
- Chairman
- Chair of risk committee
- Chair of audit committee
- Chair of remuneration committee
- Senior independent director
- Head of overseas branch
Under the SMCR, what does a firm need to do?
- Ensure each senior manager has a statement of responsibilities
- Introduce a firm responsibilities map
- Ensure all senior managers are pre-approved before carrying out their roles
- Ensure each is assessed for Fitness & Propriety
How do material risk takers need to be certified under the SMCR?
- Assessed for Fitness & Propriety
- Issue a certificate
- Have a process in place to assess annually
What are the 3 classifications of firms under SMCR?
- Limited Scope
- Core Firms
- Enhanced Firms
What types of firms are considered to be ‘enhanced’ under SMCR?
- IFPRU (Investment Firms Prudential Regime) typically providers of Collective Investment Schemes
- Large CASS (Clients Assets Sourcebook) meaning whoever holds client assets including Discretionary Fund Managers
- Asset managers holding £50 billion plus
- Intermediary firms with £35 million or more in revenue per annum
- Credit lenders who earn over £100 million or more in revenue per annum
- Mortgage lenders with 10,000 or more mortgages outstanding (who aren’t banks)
How long should training records be kept for?
3 years for non MiFID firms
5 years for MiFID firms
Indefinitely for pension transfer
How long must complaints be retained for?
3 years for non MIFID firms
5 years for MIFID firms
What are the time limits on complaints to Financial Ombudsmen FOS?
6 months of the date of the final outcome from the firm
or
3 years after the complainant knew they had cause for complaint
or
6 years after the event
If a retail client wants to make a complaint, who should this be to first?
First complaint should be to the firm. If the firm does not resolve this issue in a way the client deems satisfactory, then they may escalate the complaint to the Financial Ombudsmen (FOS).
Who are exempt from being an ‘eligible claimant’ under FSCS?
Overseas Financial Institutions Pension and Retirement Funds Government Institutions Regional and Local Authorities Large Companies and Partnerships Alternative Investment Funds Large Mutual Funds
What are the limits for deposits under the FSCS?
100% of the first £85,000 invested per person, per firm.
What are the limits for investments under the FSCS?
100% of the first £85,000 invested per person, per firm.
What are the limits for long term insurance under the FSCS?
From Providers - 100% of the claim with no limit.
From Intermediaries - 90% (some 100%) with no limit.
What are the limits for general insurance under the FSCS?
100% of valid claims or unexpired premiums for compulsory insurance.
90% for non-compulsory insurance.
What are the limits for home finance under the FSCS?
100% of the first £85,000.
