FSMA 2000 And FSA 2012 Flashcards
What is a defence of breaking The General Prohibition?
Person to show they took all reasonable precautions and exercised all due diligence to avoid the offence
What does S56 FSMA give the regulators the power to do?
Make an order (prohibition order) to prevent individual performing a specified function (could be a specific activity or general)
What is the punishment for breaching an prohibition order?
Fine
What does S59 of FSMA outline?
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
What does S71 of FSMA provide for?
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
What does s138D Financial Services Act 2012 outline?
Circumstances when damages can be claimed as a result of a breach of a rule by an authorised person
What is the Regulated Activities Order?
Clarify which activities specifically are regulated
What types of money is covered as an investment under RAO?
Deposits
Electronic money
What are ADRs?
American depositary receipts - given holders rights over a certain number of UK company shares, dealt in and pay dividends in dollars
What are depositary receipts?
Bearer instruments evidence rights over block of shares - usually for a bank or trust company
What is a unit in collective investment scheme?
Collective instrument scheme e.g pooled investments, both recognised and unrecognised
ROA rules covers which types of options and futures?
- Securities or contractually based instruments (shares, stock, bonds)
- currencies
- precious metals (gold, silver)
-options on futures contracts
Why types of futures does ROA exclude?
Futures agreed for commercial purposes (as opposed to those for investments)
What is a CFD?
Spread bets, interest rate swaps. Contracts referencing fluctuations in the value of index
Types of home finance covered under RAO?
Mortgage contract, at least 40% for house
Lifetime mortgages
Equity release
Home purchase (Islamic financing)
Regulated sale and rent back (40% ownership)
Types of money related activities covered under RAO?
-Accepting deposits
- Issuing e money
- Dormant account funds
What is the holding out exemption from authorisation?
Individuals or companies who are not in business of dealing in investments don’t require authorisation if they only invest for themselves
What circumstances mean an exemption is available for futures, options and CFDs?
- 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
Exclusions from dealing as principal not need authorisation
- 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
When can advice in Newspapers be excluded from needing authorisation?
If it is news information
Not a paper for investment advice
When can trustees be exempt from authorisation?
- acting as rep for another party
- not receiving renumeration for investment
(Cannot be used for insurance)
What types of insurance is covered as an investment under RAO?
Long term insurance (life)
General (e.g motor)
Lloyds Syndicate capacity and membership
What types of investments are covered as a. investment under RAO?
Shares
Debentures
Gov and public securities
Warrants
Certificates
UICIS
What types of trading instruments are covered as an investment under RAO?
Options
Futures
CFDs
What types of pensions are covered as an investment under RAO?
Stakeholder pensions
Personal pensions
What types of housing products is covered as an investment under RAO?
Regulated mortgage contract (40% min)
Equity release
Home purchase plan
Sale and rent back
What types of unusual items are covered as an investment under RAO?
Funeral plans
Green house gas emission allowance
Shariah compliant bonds
What types of lending products are covered as an investment under RAO?
Consumer hire agreements
Credit agreements
Specified investments
Types of insurance related activities covered under RAO?
Contracts of insurance
Admin of insurance contract
Lloyd’s Market Activities
Types of investment related activities covered under RAO?
- 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
Types of housing related activities covered under RAO?
Arranging and advising on Home finance transaction
Types of random activities covered under RAO?
Emissions auctions
Funeral plans
Specified benchmarks
Types of pension related activities covered under RAO?
Establishing, operating or winding up pension scheme
4 activities excluded from ROA in relation to employee share schemes?
- dealing in investments as principal and agent
- arranging investments
- safeguarding admin
Types of activities with ROA activity exclusions?
Overseas persons
Employee share schemes
Trustees and nomineees
Newspaper advice
Group or joint enterprises
What do regulators expect with regards to appointed representatives being used by authorised firms?
business conducted remains responsibility of authorised person and DD/checks must be carried out
What activities can an appointed representative be used for?
Dealing, advising or arranging investments
Home financing
Admin of insurance contracts
Safeguarding of assets
Some consumer lending activities
What particularly activities can an appointed representative not be used for?
Not permitted to deal in investments as principal or manage investments
2 main areas of change with regard to appointed representatives regime after 2022?
-Additional info on ARs and notification requirements (30 days before)
- Stronger ownership with regulated firm
- Enhanced oversight on ARs
Why are Member of Lloyd’s exempt from general prohibition?
FCA expects Lloyd’s activities will be suitably supervised by The Society of Lloyd’s
Examples of people who apply to DPBs rather than FCA for authorisation?
Surveyors
Accountants
Solicitors
Actuaries
Converyancers
What is a DPB?
Designated progressional body
What does by way of business mean?
Authorisation only required if remuneration or benefits is given for business activity
What is the process to apply to be authorised?
- 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
What is fee for applying for authorisation?
£1500 for easy cases
£5000 for more complex cases
Deadline for authorisation?
6 months complete cases
12 months incomplete cases
What are threshold conditions?
Minimum standards expected to remain authorised
When did changes to threshold conditions come in?
2013
Full list of threshold conditions?
- legal status
- location of offices (within UK)
- prudent business
- effective supervision
- appropriate resources
- suitability
- business model
- claims reps (for motor insurers)
Which threshold conditions apply to FCA only regulated firms?
- location of offices (within UK)
- effective supervision
- appropriate resources
- suitability
- business model
Which regulator assessed the threshold conditions for a dual reg firm?
- 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
What is a fixed portfolio firm?
Pillar one firm for FCA deemed greatest risk to statutory objectives
What is a flexible portfolio firm?
Pillar 2 - Event driven reactive supervision
Pillar 3 - Thematic review for products supervision
What is the PIF?
Proactive intervention framework used by PRA to assess firms chance of failure
What is Form A?
Form SM&CR firm submits to the regulator to get a person approved status
How long does it take to process a form A?
90 days (they can stop the clock if they need more info)
Things regulator checks for fitness and propriety test
Convictions / court cases
Disciplinary regulatory proceedings
Complaints
Previous refusals
Bankruptcy
Disqualification from roles
Which senior roles are PRA functions to approve?
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
What is the directory?
Public register for checking key people in financial services industry (lists all certified persons and NEDs)
What is the PIDA Act 1998?
Public Interest Disclosure Act, protects whistleblowers from retaliation
The FCA rules on whistleblowing (2016) apply to who?
Deposit takers with over £250m of assets and to Solvency II insurers
Key FCA rules on whistleblowing?
- 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
What is DEPP?
Decisions, Procedures and Penalties Manual
What does DEPP cover?
Statutory notices FCA / PRA can issue
Regulatory decisions committee
Settlements / penalties / powers
Policy on assisting overseas regulators
What does the enforcement guide set out?
Sets out regulators approach to how it exercises main enforcement powers
How large can a settlement discount be (for disciplinary fines)?
Up to 30% for early settlement
How is Regulatory Decisions Committee somewhat independent?
- Outside FCA management structure, so all bar one (Chair) are non FCA employees
- Own legal team
What is the EDMC?
Enforcement Decision Making Committee (PRA)
What is the purpose of EDMC?
Strengthen BoE enforcement processes by separating investigation teams and decision makers in enforcement cases
What is a regulatory warning notice?
Provide recipient details on the proposed actions and why. Gives right for firm to argue their case.
Can FCA publish warning notices publicly?
Yes, but only after consultation with firm who are receiving it
What is a decision notice?
Provides details of the action the FCA has decided to take. Gives right of appeals (can have a follow up second decision notice)
What is a supervisory notice?
Provides firm details or actions FCA has taken or proposes to take. Might limit Part 4A permissions. Can be published
What is a final notice?
Set out the terms of final actions and dates by which they are effective
Are final notices published?
Yes can be on FCA website
3 possible forms of disciplinary sanction from FCA?
- public statements of misconduct
- public censures
- fines
What is a private warning from regulator?
Issued when regulator has concerns but isn’t going to be bring formal disciplinary action
Is a private warning on your record?
Yes, it’s in compliance history and could impact persons chance for SM&CR role in the future
What is a variation of permission?
Part 4A permission can be varied or cancelled
What is a Withdrawal of Authorisation?
Regulator can cancel Part 4A if they have serious concerns or if regulated activities have come to an end
Steps to withdrawal approval from an individual?
Issue warning
Issue a decision notice
Can be referee to Tribunal to appeal
What is a prohibition of individuals used for?
Prevent individual carrying out particular functions
What is more serious withdrawal or prohibition?
Prohibition is usually more serious (greater lack of fitness)
When is a public censure used vs a fine?
- 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
How long do you have to appeal to Upper Tribunal?
28 days
Who appoints Upper Tribunal?
Ministry of Justice
Is Upper Tribunal binding?
Yes decision is binding on the regulator but a firm/person can appeal point of law to Court of Appeal
How long can a product be banned for by FCA?
12 months without consultation
What powers of intervention does FCA have?
Temporarily ban products
Ban financial promotions
How long do you have to provide docs requested by regulators
Provide within reasonable length of time
How quickly should regulators staff request docs?
Without delay
What docs can FCA request?
Info/docs reasonably required in operation of FCA duties or conferred powers under Acts
What is S165 of FSMA?
Regulators right to request info
What permission does s166 of FSMA give?
Right for FCA to get a skilled person (3rd party) to review
What is s167 of FSMA?
Firms must appoint competent person to assist regulator with reports e.g usually an accountant / solicitor
