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UK Regulation > FSMA 2000 And FSA 2012 > Flashcards

FSMA 2000 And FSA 2012 Flashcards

1
Q

What is a defence of breaking The General Prohibition?

A

Person to show they took all reasonable precautions and exercised all due diligence to avoid the offence

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2
Q

What does S56 FSMA give the regulators the power to do?

A

Make an order (prohibition order) to prevent individual performing a specified function (could be a specific activity or general)

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3
Q

What is the punishment for breaching an prohibition order?

A

Fine

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4
Q

What does S59 of FSMA outline?

A

Authorised person (firm) must take reasonable care to ensure no person performs a role that required approval from the regulators if that hasn’t been granted

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5
Q

What does S71 of FSMA provide for?

A

Circumstances where a person can sue for damages if they suffer a loss if firm breaches duties or a company to sue for damages in prescribed circumstances

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6
Q

What does s138D Financial Services Act 2012 outline?

A

Circumstances when damages can be claimed as a result of a breach of a rule by an authorised person

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7
Q

What is the Regulated Activities Order?

A

Clarify which activities specifically are regulated

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8
Q

What types of money is covered as an investment under RAO?

A

Deposits
Electronic money

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9
Q

What are ADRs?

A

American depositary receipts - given holders rights over a certain number of UK company shares, dealt in and pay dividends in dollars

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10
Q

What are depositary receipts?

A

Bearer instruments evidence rights over block of shares - usually for a bank or trust company

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11
Q

What is a unit in collective investment scheme?

A

Collective instrument scheme e.g pooled investments, both recognised and unrecognised

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12
Q

ROA rules covers which types of options and futures?

A
  • Securities or contractually based instruments (shares, stock, bonds)
  • currencies
  • precious metals (gold, silver)
    -options on futures contracts
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13
Q

Why types of futures does ROA exclude?

A

Futures agreed for commercial purposes (as opposed to those for investments)

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14
Q

What is a CFD?

A

Spread bets, interest rate swaps. Contracts referencing fluctuations in the value of index

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15
Q

Types of home finance covered under RAO?

A

Mortgage contract, at least 40% for house
Lifetime mortgages
Equity release
Home purchase (Islamic financing)
Regulated sale and rent back (40% ownership)

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16
Q

Types of money related activities covered under RAO?

A

-Accepting deposits
- Issuing e money
- Dormant account funds

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17
Q

What is the holding out exemption from authorisation?

A

Individuals or companies who are not in business of dealing in investments don’t require authorisation if they only invest for themselves

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18
Q

What circumstances mean an exemption is available for futures, options and CFDs?

A
  • person with whom unauthorised person deals with is authorised or exempt person acting in the course of business comprising a regulated activity in which they are exempt
  • unauthorised person enters transaction through non- UK office or deal with a non Uk based person
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19
Q

Exclusions from dealing as principal not need authorisation

A
  • Bank providing financing and receiving instrument
  • Treasury shares
  • Options, futures and CFDs for risk management
  • Bare trustee
  • Group transactions
  • employee share scheme
  • overseas person
  • e-commerce
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20
Q

When can advice in Newspapers be excluded from needing authorisation?

A

If it is news information
Not a paper for investment advice

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21
Q

When can trustees be exempt from authorisation?

A
  • acting as rep for another party
  • not receiving renumeration for investment

(Cannot be used for insurance)

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22
Q

What types of insurance is covered as an investment under RAO?

A

Long term insurance (life)
General (e.g motor)
Lloyds Syndicate capacity and membership

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23
Q

What types of investments are covered as a. investment under RAO?

A

Shares
Debentures
Gov and public securities
Warrants
Certificates
UICIS

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24
Q

What types of trading instruments are covered as an investment under RAO?

A

Options
Futures
CFDs

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25
Q

What types of pensions are covered as an investment under RAO?

A

Stakeholder pensions
Personal pensions

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26
Q

What types of housing products is covered as an investment under RAO?

A

Regulated mortgage contract (40% min)
Equity release
Home purchase plan
Sale and rent back

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27
Q

What types of unusual items are covered as an investment under RAO?

A

Funeral plans
Green house gas emission allowance
Shariah compliant bonds

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28
Q

What types of lending products are covered as an investment under RAO?

A

Consumer hire agreements
Credit agreements
Specified investments

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29
Q

Types of insurance related activities covered under RAO?

A

Contracts of insurance
Admin of insurance contract
Lloyd’s Market Activities

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30
Q

Types of investment related activities covered under RAO?

A
  • Dealing (principal or agent) in securities or contracts
  • arrangement deals
  • MTF (multilateral trading facility)
  • OTF (organised trading facility)
  • Safeguarding investments
  • Advising
  • Dematerialised instructions (CREST)
  • Collective investment schemes
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31
Q

Types of housing related activities covered under RAO?

A

Arranging and advising on Home finance transaction

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32
Q

Types of random activities covered under RAO?

A

Emissions auctions
Funeral plans
Specified benchmarks

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33
Q

Types of pension related activities covered under RAO?

A

Establishing, operating or winding up pension scheme

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34
Q

4 activities excluded from ROA in relation to employee share schemes?

A
  • dealing in investments as principal and agent
  • arranging investments
  • safeguarding admin
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35
Q

Types of activities with ROA activity exclusions?

A

Overseas persons
Employee share schemes
Trustees and nomineees
Newspaper advice
Group or joint enterprises

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36
Q

What do regulators expect with regards to appointed representatives being used by authorised firms?

A

business conducted remains responsibility of authorised person and DD/checks must be carried out

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37
Q

What activities can an appointed representative be used for?

A

Dealing, advising or arranging investments
Home financing
Admin of insurance contracts
Safeguarding of assets
Some consumer lending activities

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38
Q

What particularly activities can an appointed representative not be used for?

A

Not permitted to deal in investments as principal or manage investments

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39
Q

2 main areas of change with regard to appointed representatives regime after 2022?

A

-Additional info on ARs and notification requirements (30 days before)
- Stronger ownership with regulated firm
- Enhanced oversight on ARs

40
Q

Why are Member of Lloyd’s exempt from general prohibition?

A

FCA expects Lloyd’s activities will be suitably supervised by The Society of Lloyd’s

41
Q

Examples of people who apply to DPBs rather than FCA for authorisation?

A

Surveyors
Accountants
Solicitors
Actuaries
Converyancers

42
Q

What is a DPB?

A

Designated progressional body

43
Q

What does by way of business mean?

A

Authorisation only required if remuneration or benefits is given for business activity

44
Q

What is the process to apply to be authorised?

A
  • Submit pack to FCA or PRA, outlining core details, controllers, business plan, disclosure of events, approved person form, checklist and declaration
  • Dual regulated firms only submit to PRA
45
Q

What is fee for applying for authorisation?

A

£1500 for easy cases
£5000 for more complex cases

46
Q

Deadline for authorisation?

A

6 months complete cases
12 months incomplete cases

47
Q

What are threshold conditions?

A

Minimum standards expected to remain authorised

48
Q

When did changes to threshold conditions come in?

A

2013

49
Q

Full list of threshold conditions?

A
  • legal status
  • location of offices (within UK)
  • prudent business
  • effective supervision
  • appropriate resources
  • suitability
  • business model
  • claims reps (for motor insurers)
50
Q

Which threshold conditions apply to FCA only regulated firms?

A
  • location of offices (within UK)
  • effective supervision
  • appropriate resources
  • suitability
  • business model
51
Q

Which regulator assessed the threshold conditions for a dual reg firm?

A
  • legal status: PRA
  • location of offices (within UK): PRA
  • prudent business: PRA
  • effective supervision: BOTH
  • appropriate resources: FCA
  • suitability: PRA
  • business model: FCA
  • claims reps (for mot
52
Q

What is a fixed portfolio firm?

A

Pillar one firm for FCA deemed greatest risk to statutory objectives

53
Q

What is a flexible portfolio firm?

A

Pillar 2 - Event driven reactive supervision
Pillar 3 - Thematic review for products supervision

54
Q

What is the PIF?

A

Proactive intervention framework used by PRA to assess firms chance of failure

55
Q

What is Form A?

A

Form SM&CR firm submits to the regulator to get a person approved status

56
Q

How long does it take to process a form A?

A

90 days (they can stop the clock if they need more info)

57
Q

Things regulator checks for fitness and propriety test

A

Convictions / court cases
Disciplinary regulatory proceedings
Complaints
Previous refusals
Bankruptcy
Disqualification from roles

58
Q

Which senior roles are PRA functions to approve?

A

CEO, CFO
CRO, head of audit
Head of key business functions
Group entity SM
Chairman
chair of risk / audit committee
Chair of remunerations
Chief operations

59
Q

What is the directory?

A

Public register for checking key people in financial services industry (lists all certified persons and NEDs)

60
Q

What is the PIDA Act 1998?

A

Public Interest Disclosure Act, protects whistleblowers from retaliation

61
Q

The FCA rules on whistleblowing (2016) apply to who?

A

Deposit takers with over £250m of assets and to Solvency II insurers

62
Q

Key FCA rules on whistleblowing?

A
  • whistleblowing senior champion
  • Internal whistleblowing arrangements
  • text in settlement agreements to allow for whistleblowing
  • Tell UK employees about FCA/PRA services and appointed reps/ tied agents
  • Annual report to board
  • Inform FCA is lose a court case with a whistleblower
63
Q

What is DEPP?

A

Decisions, Procedures and Penalties Manual

64
Q

What does DEPP cover?

A

Statutory notices FCA / PRA can issue
Regulatory decisions committee
Settlements / penalties / powers
Policy on assisting overseas regulators

65
Q

What does the enforcement guide set out?

A

Sets out regulators approach to how it exercises main enforcement powers

66
Q

How large can a settlement discount be (for disciplinary fines)?

A

Up to 30% for early settlement

67
Q

How is Regulatory Decisions Committee somewhat independent?

A
  • Outside FCA management structure, so all bar one (Chair) are non FCA employees
  • Own legal team
68
Q

What is the EDMC?

A

Enforcement Decision Making Committee (PRA)

69
Q

What is the purpose of EDMC?

A

Strengthen BoE enforcement processes by separating investigation teams and decision makers in enforcement cases

70
Q

What is a regulatory warning notice?

A

Provide recipient details on the proposed actions and why. Gives right for firm to argue their case.

71
Q

Can FCA publish warning notices publicly?

A

Yes, but only after consultation with firm who are receiving it

72
Q

What is a decision notice?

A

Provides details of the action the FCA has decided to take. Gives right of appeals (can have a follow up second decision notice)

73
Q

What is a supervisory notice?

A

Provides firm details or actions FCA has taken or proposes to take. Might limit Part 4A permissions. Can be published

74
Q

What is a final notice?

A

Set out the terms of final actions and dates by which they are effective

75
Q

Are final notices published?

A

Yes can be on FCA website

76
Q

3 possible forms of disciplinary sanction from FCA?

A
  • public statements of misconduct
  • public censures
  • fines
77
Q

What is a private warning from regulator?

A

Issued when regulator has concerns but isn’t going to be bring formal disciplinary action

78
Q

Is a private warning on your record?

A

Yes, it’s in compliance history and could impact persons chance for SM&CR role in the future

79
Q

What is a variation of permission?

A

Part 4A permission can be varied or cancelled

80
Q

What is a Withdrawal of Authorisation?

A

Regulator can cancel Part 4A if they have serious concerns or if regulated activities have come to an end

81
Q

Steps to withdrawal approval from an individual?

A

Issue warning
Issue a decision notice
Can be referee to Tribunal to appeal

82
Q

What is a prohibition of individuals used for?

A

Prevent individual carrying out particular functions

83
Q

What is more serious withdrawal or prohibition?

A

Prohibition is usually more serious (greater lack of fitness)

84
Q

When is a public censure used vs a fine?

A
  • if firm didn’t make a profit/loss from their breach
  • less serious will more likely be a censure
  • whether they cooperate / plead guilty
  • previous record
  • if regulator guidance was followed
85
Q

How long do you have to appeal to Upper Tribunal?

A

28 days

86
Q

Who appoints Upper Tribunal?

A

Ministry of Justice

87
Q

Is Upper Tribunal binding?

A

Yes decision is binding on the regulator but a firm/person can appeal point of law to Court of Appeal

88
Q

How long can a product be banned for by FCA?

A

12 months without consultation

89
Q

What powers of intervention does FCA have?

A

Temporarily ban products
Ban financial promotions

90
Q

How long do you have to provide docs requested by regulators

A

Provide within reasonable length of time

91
Q

How quickly should regulators staff request docs?

A

Without delay

92
Q

What docs can FCA request?

A

Info/docs reasonably required in operation of FCA duties or conferred powers under Acts

93
Q

What is S165 of FSMA?

A

Regulators right to request info

94
Q

What permission does s166 of FSMA give?

A

Right for FCA to get a skilled person (3rd party) to review

95
Q

What is s167 of FSMA?

A

Firms must appoint competent person to assist regulator with reports e.g usually an accountant / solicitor

UK Regulation (6 decks)

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