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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
What types of pensions are covered as an investment under RAO?
Stakeholder pensions Personal pensions
26
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
27
What types of unusual items are covered as an investment under RAO?
Funeral plans Green house gas emission allowance Shariah compliant bonds
28
What types of lending products are covered as an investment under RAO?
Consumer hire agreements Credit agreements Specified investments
29
Types of insurance related activities covered under RAO?
Contracts of insurance Admin of insurance contract Lloyd’s Market Activities
30
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
31
Types of housing related activities covered under RAO?
Arranging and advising on Home finance transaction
32
Types of random activities covered under RAO?
Emissions auctions Funeral plans Specified benchmarks
33
Types of pension related activities covered under RAO?
Establishing, operating or winding up pension scheme
34
4 activities excluded from ROA in relation to employee share schemes?
- dealing in investments as principal and agent - arranging investments - safeguarding admin
35
Types of activities with ROA activity exclusions?
Overseas persons Employee share schemes Trustees and nomineees Newspaper advice Group or joint enterprises
36
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
37
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
38
What particularly activities can an appointed representative not be used for?
Not permitted to deal in investments as principal or manage investments
39
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
40
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
41
Examples of people who apply to DPBs rather than FCA for authorisation?
Surveyors Accountants Solicitors Actuaries Converyancers
42
What is a DPB?
Designated progressional body
43
What does by way of business mean?
Authorisation only required if remuneration or benefits is given for business activity
44
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
45
What is fee for applying for authorisation?
£1500 for easy cases £5000 for more complex cases
46
Deadline for authorisation?
6 months complete cases 12 months incomplete cases
47
What are threshold conditions?
Minimum standards expected to remain authorised
48
When did changes to threshold conditions come in?
2013
49
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)
50
Which threshold conditions apply to FCA only regulated firms?
- location of offices (within UK) - effective supervision - appropriate resources - suitability - business model
51
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
52
What is a fixed portfolio firm?
Pillar one firm for FCA deemed greatest risk to statutory objectives
53
What is a flexible portfolio firm?
Pillar 2 - Event driven reactive supervision Pillar 3 - Thematic review for products supervision
54
What is the PIF?
Proactive intervention framework used by PRA to assess firms chance of failure
55
What is Form A?
Form SM&CR firm submits to the regulator to get a person approved status
56
How long does it take to process a form A?
90 days (they can stop the clock if they need more info)
57
Things regulator checks for fitness and propriety test
Convictions / court cases Disciplinary regulatory proceedings Complaints Previous refusals Bankruptcy Disqualification from roles
58
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
59
What is the directory?
Public register for checking key people in financial services industry (lists all certified persons and NEDs)
60
What is the PIDA Act 1998?
Public Interest Disclosure Act, protects whistleblowers from retaliation
61
The FCA rules on whistleblowing (2016) apply to who?
Deposit takers with over £250m of assets and to Solvency II insurers
62
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
63
What is DEPP?
Decisions, Procedures and Penalties Manual
64
What does DEPP cover?
Statutory notices FCA / PRA can issue Regulatory decisions committee Settlements / penalties / powers Policy on assisting overseas regulators
65
What does the enforcement guide set out?
Sets out regulators approach to how it exercises main enforcement powers
66
How large can a settlement discount be (for disciplinary fines)?
Up to 30% for early settlement
67
How is Regulatory Decisions Committee somewhat independent?
- Outside FCA management structure, so all bar one (Chair) are non FCA employees - Own legal team
68
What is the EDMC?
Enforcement Decision Making Committee (PRA)
69
What is the purpose of EDMC?
Strengthen BoE enforcement processes by separating investigation teams and decision makers in enforcement cases
70
What is a regulatory warning notice?
Provide recipient details on the proposed actions and why. Gives right for firm to argue their case.
71
Can FCA publish warning notices publicly?
Yes, but only after consultation with firm who are receiving it
72
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)
73
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
74
What is a final notice?
Set out the terms of final actions and dates by which they are effective
75
Are final notices published?
Yes can be on FCA website
76
3 possible forms of disciplinary sanction from FCA?
- public statements of misconduct - public censures - fines
77
What is a private warning from regulator?
Issued when regulator has concerns but isn’t going to be bring formal disciplinary action
78
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
79
What is a variation of permission?
Part 4A permission can be varied or cancelled
80
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
81
Steps to withdrawal approval from an individual?
Issue warning Issue a decision notice Can be referee to Tribunal to appeal
82
What is a prohibition of individuals used for?
Prevent individual carrying out particular functions
83
What is more serious withdrawal or prohibition?
Prohibition is usually more serious (greater lack of fitness)
84
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
85
How long do you have to appeal to Upper Tribunal?
28 days
86
Who appoints Upper Tribunal?
Ministry of Justice
87
Is Upper Tribunal binding?
Yes decision is binding on the regulator but a firm/person can appeal point of law to Court of Appeal
88
How long can a product be banned for by FCA?
12 months without consultation
89
What powers of intervention does FCA have?
Temporarily ban products Ban financial promotions
90
How long do you have to provide docs requested by regulators
Provide within reasonable length of time
91
How quickly should regulators staff request docs?
Without delay
92
What docs can FCA request?
Info/docs reasonably required in operation of FCA duties or conferred powers under Acts
93
What is S165 of FSMA?
Regulators right to request info
94
What permission does s166 of FSMA give?
Right for FCA to get a skilled person (3rd party) to review
95
What is s167 of FSMA?
Firms must appoint competent person to assist regulator with reports e.g usually an accountant / solicitor

UK Regulation (6 decks)

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