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R01 Study > Chapter Seven: Core Regulatory Principles and Rules > Flashcards

Chapter Seven: Core Regulatory Principles and Rules Flashcards

1
Q

What is Section 19 (S.19) under the Financial Services and Markets Act (FMSA)?

A

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.

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2
Q

What is the maximum penalty for an authorisation breach under S.19?

A

2 years in prison and an unlimited fine.

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3
Q

When does grandfathering not apply?

A

When authorisation for activities has not been previously regulated by the FSA.

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4
Q

What are the regulated activities that require authorisation?

A
  1. Banking
  2. Home finance
  3. Insurance
  4. Pension Scheme Operator
  5. Investment Intermediary
  6. Insurance Intermediary
  7. Investment Management
  8. Credit related Tasks
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5
Q

Who is responsible for the actions of an Appointed Representative?

A

The Authorised Person (Principal) who appointed them.

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6
Q

What are the three types of Appointed Representative?

A
  1. Introducer
  2. Tied Agent
  3. Full Appointed Representative
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7
Q

What are the two types of registrations that a Designated Professional Body (DPB) can use?

A

Exempt or Authorised

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8
Q

For which regulated activities do Designated Professional Bodies (DPB) member firms not require authorisation from the FCA?

A

Activities that are purely incidental to their professional services.

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9
Q

What regulatory body would a new Insurance Firm apply to for authorisation?

A

PRA

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10
Q

What regulatory body would a Financial Intermediary apply to for authorisation?

A

FCA

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11
Q

What would a Scope of Permission Notice contain?

A

Details of the firms authorisation including which activities they are allowed to undertake and what, if any limitations are applied.

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12
Q

For what period of time could a person within a firm undertake controlled activities without needing the approval of the FCA?

A

12 weeks per year.

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13
Q

If a firm is changing from a partnership to a limited company, can it transfer its authorisation?

A

No, it must reapply as a new firm.

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14
Q

What are the key aims of the SMCR?

A

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.

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15
Q

If a portfolio loses 80% of its value, is the client entitled to compensation from her adviser?

A

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.

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16
Q

What are the five significant influence functions which can only be performed by approved persons?

A
  1. Governing functions
  2. Required functions
  3. Systems and control functions
  4. Significant management functions
  5. Customer dealing functions
17
Q

What jobs roles fall under ‘Executive Functions’ under the SMCR ?

A
  1. Chief exec
  2. Chief finance
  3. Chief risk
  4. Head of audit
  5. Head of key business area
18
Q

Which job roles fall into Oversight as part of the new SM and CR

A
  1. Chairman
  2. Chair of risk committee
  3. Chair of audit committee
  4. Chair of remuneration committee
  5. Senior independent director
  6. Head of overseas branch
19
Q

Under the SMCR, what does a firm need to do?

A
  1. Ensure each senior manager has a statement of responsibilities
  2. Introduce a firm responsibilities map
  3. Ensure all senior managers are pre-approved before carrying out their roles
  4. Ensure each is assessed for Fitness & Propriety
20
Q

How do material risk takers need to be certified under the SMCR?

A
  1. Assessed for Fitness & Propriety
  2. Issue a certificate
  3. Have a process in place to assess annually
21
Q

What are the 3 classifications of firms under SMCR?

A
  1. Limited Scope
  2. Core Firms
  3. Enhanced Firms
22
Q

What types of firms are considered to be ‘enhanced’ under SMCR?

A
  1. IFPRU (Investment Firms Prudential Regime) typically providers of Collective Investment Schemes
  2. Large CASS (Clients Assets Sourcebook) meaning whoever holds client assets including Discretionary Fund Managers
  3. Asset managers holding £50 billion plus
  4. Intermediary firms with £35 million or more in revenue per annum
  5. Credit lenders who earn over £100 million or more in revenue per annum
  6. Mortgage lenders with 10,000 or more mortgages outstanding (who aren’t banks)
23
Q

How long should training records be kept for?

A

3 years for non MiFID firms
5 years for MiFID firms
Indefinitely for pension transfer

24
Q

How long must complaints be retained for?

A

3 years for non MIFID firms

5 years for MIFID firms

25
Q

What are the time limits on complaints to Financial Ombudsmen FOS?

A

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

26
Q

If a retail client wants to make a complaint, who should this be to first?

A

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).

27
Q

Who are exempt from being an ‘eligible claimant’ under FSCS?

A 
Overseas Financial Institutions
Pension and Retirement Funds
Government Institutions
Regional and Local Authorities
Large Companies and Partnerships
Alternative Investment Funds
Large Mutual Funds
28
Q

What are the limits for deposits under the FSCS?

A

100% of the first £85,000 invested per person, per firm.

29
Q

What are the limits for investments under the FSCS?

A

100% of the first £85,000 invested per person, per firm.

30
Q

What are the limits for long term insurance under the FSCS?

A

From Providers - 100% of the claim with no limit.

From Intermediaries - 90% (some 100%) with no limit.

31
Q

What are the limits for general insurance under the FSCS?

A

100% of valid claims or unexpired premiums for compulsory insurance.
90% for non-compulsory insurance.

32
Q

What are the limits for home finance under the FSCS?

A

100% of the first £85,000.

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