FCA Regulatory Flashcards
What is the role of Financial Services Actions Plan (FSAP)?
Creation and implementation of directives and regulations for the EU
What is the difference between directives and regulations?
Both are set out by FSAP, directives are transposed into National Law whereas regulations are immediately binding in member states
What is the role of European Securities and Market Authority (ESMA)?
- Ensures consistent treatment of investors and issuers across EU
- Equal conditions of competition for financial service providers
What are the four levels of the Lamfalussy process?
- Legislative acts
- Implementing measures
- Facilitating Regulatory Convergence
- Enforcement
What are the objectives of the FCA?
- Ensuring that relevant markets work well
- Consumer protection
- Integrity
- Competition
What are the objectives of the PRA?
- Promote the safety and soundness
- Secure appropriate protection for policyholders (insurance specific)
- Facilitate effective competition
What are the powers and scope of the FCA?
- Grant, vary, withdraw Part 4A authorisation of firms, approval of individuals, recognition of other bodies
- Rule-making
- Prosecution
- Supervision and enforcement
What is the general prohibition?
S19 FSMA 2000 states that no person can carry on regulated activity in the UK unless he is an authorised person or an exempt person.
What are the maximum penalties for breaching S19 FSMA 2000 in the magistrates court and Crown Court?
Six months jail and £5000 fine for magistrate
Two years jail and unlimited fine
What are designated investments?
Subset of regulated activity (excludes commercial banking, lending and general insurance activities) - certain rules apply in COBS and only apply to firms carrying out designated investment activities.
What are the excluded activities from S19 FSMA 2000?
- Dealing as a principal or end user
- Derivatives used for risk management
- Company issuing instruments on itself
- Newspaper tipsheets
- Unpaid trustees, nominees and personal representatives
- Employee share schemes
What are the excluded investments from S19 FSMA 2000?
- Property
- Currencies
- Premium bonds
- National Savings Certificates
- Tangible assets
What constitutes an exempt person under S19 FSMA 2000?
- Appointed representatives
- Lloyd’s syndicate members
- DPB
- RIEs and ROIEs
- RCHs
- BoE
Name the Recognised Investment Exchanges and Recognised Clearing Houses
Recognised investment exchanges:
- LSE
- NEX
- LME
- ICE Futures
- CBOE Europe
- Euronext London
Recognised clearing house:
- Euroclear UK and Ireland (CREST)
- LCH
- ICE Clear Europe
- LME Clear
Name the principles for businesses
- Integrity
- Skill, care and diligence
- Management and control
- Financial prudence
- Market conduct
- Customer interests
- Communication with clients
- Conflicts of interest
- Customers: relationships of trust
- Clients assets
- Relations with regulators
Define client
Someone to whom the firm provides, intends to provide or has provided a service in the course of carrying a regulated activity (includes ancillary services and financial promotion targeted customers)
Define customer
Customer include retail client and professional client
What are the three pillars of supervision and tools of supervision used by the FCA?
The three pillars of supervision are 1) Proactive firm supervision 2) Event driven work 3) Issues and products supervision
The tools of supervision are diagnostic, monitoring, preventative, and remedial
What is the risk-based approach of supervision used by the FCA?
Risk-based approach means FCA assesses the individual firms for risk each presents to the regulator’s objectives and determine how much supervisory attention should be directed at each firm.
Fixed portfolio firms: have nominated supervisor, a proactive approach and continuous assessment
Flexible portfolio firms: Team of sector specialists and are assessed as part of thematic sector work
What are the controlled functions?
Significant influence functions: governing functions, required functions (compliance, money laundering, CASS oversight), systems and control function (finance officer, risk assessment and internal audit), significant management function, customer dealing function
What are the criteria applied to ensure approved person is fit and proper?
- Honesty, integrity and reputation
- Competence and capability
- Financial soundness
What is a clean withdrawal?
A firm must give FCA notice in writing within 7 business days of a person ceasing to perform a controlled function
What are the statements of principles for approved persons?
- Integrity
- Skill, care and diligence
- Observe proper standards and market conduct
- Deal with FCA and other regulators in an open and cooperative way
Significant influence functions only:
- Organised for effective control
- Skill, care and diligence in managing business of firm
- Complies with regulations
What is the purpose of the Accountability Regime (Conduct Rules)?
to provide a framework which regulators will make judgements about an individual’s actions and applies to senior management functions, certification employees and all other staff except for ancillary staff
What are the investigative powers of the FCA?
Under S165 FSMA 2000, enter the premise without notice, demand documents, file, tapes, interview any employee
What is the penalty for failure to cooperate with FCA and provide false evidence?
2 years and unlimited fine
Given a warning notice, how long does the RDC allow for the firm to respond?
28 days
What are the disciplinary measures of the FCA?
- Withdrawal or variation of authorisation or approval
- Prohibition from regulated activities
- Restitution order
- Public censure, statements of misconduct, financial penalties
- Prosecution
