FSMA 2000 and FSA 2012 Flashcards
General prohibition (s19 FSMA 2000)
No person may carry on a regulated activity in the UK unless he is an authorised person or an exempt person. Breach is a criminal offence
Regulated activities order
Specified activities; in relation to: specified investments
Specified investments Exclusions
- Tangible property (including land, antiques and commodities
- Currencies (physical currencies and dealing in currencies, i.e. spot and forward contracts)
- Premium bonds and other National Savings and Investment Bank products
Specified activities exclusions
Investment advice in newspapers
TV broadcasts
Provision of information (e.g Reuters and BBG)
Unpaid trustees, nominees and personal reps
Operating an employee share scheme
Absence of holding out - dealing as principal and end user
Authorised person
Part 4A permission for UK firms
Passport (MiFID) for EEA firms
Contravention of General Prohibition
Criminal offences -> Crown court -> Two years’ imprisonment and/or an unlimited fine
Civil consequences of General Prohibition breach
Purpose is to protect consumers from harm
Injunctions, restitution orders, Contracts are voidable at the discretion of the investor
Part 4A threshold conditions (To be fit proper)
FCA firms/(Dual-regulated firms
- Legal status: Required legal status of applicant (n.a./PRA)
- Location of offices: Head office and registered office situated in UK (FCA/PRA)
- Business to be conducted in a prudent manner
- Effective supervision: Controlling shareholders (20% or more of the voting capital (FCA/FCA and PRA)
- Appropriate resources(FCA/n.a.)
- Suitability: senior managers (FCA/FCA and PRA)
- Business model (FCA/FCA)
- Appointment of a claims representative (motor insurers only
Passporting
Alternative way to obtain authorisation in the UK via European Directive
Include:
-Markets and Financial Instruments
-The UCITS Directive
Exempt persons
- BoE
- Lloyd’s syndicate members
- Recognised Investment Exchange (RIEs)
- Recognised Clearing Houses (RCH)
- Appointed representatives
- Designated Professional Bodies (DPB)
SM&CR
Refers to the Senior Managers and Certificate Regime. This superseded the Approved Persons Regime from the end of 2019
Fit and Proper test
Regulator or firm will only grant approved person status if the individual is fit and proper to undertake controlled function Considerations: -Honesty, integrity and reputation -Competency and capability -Financial Soundness
Senior management functions
Includes directors, non-executive directors, and the heads of main business units or functional areas within firms
Prea-pproval by regulator, subject to fit and proper assessment and subject to conduct rules
Certified functions
Certification Regime requires firms to assess, both at the recruitment stage and on an annual basis afterwards, the fitness and propriety of certain employees within the firm who pose a risk of significant harm to the firm or customers. Such employees are material risk takers, those performing risk of significant harm functions, and anyone supervising certain functions
Training and competence
Firms that provide services to retail clients are obliged to arrange employees to attain, maintain and strengthen their competencies
For employees to be fit and proper, they must be competent and capable. This is achieved by:
-Passing an appropriate exam
-Passing an internal assessment
Once threshold competency is attained, employees can operate without supervision
There can be certain certain circumstances where a firm would need to follow examination requirements
Senior Management Prescribed Responsibility
- Given to the Senior Manager who is the most senior person responsible for that activity or area
- Set out in a Statement of Responsibility
Senior Managers will have a Duty of Responsibility
The regulators can take action against a Senior Manager where they can show that:
- There was misconduct by the Senior Manager’s firm
- The Senior Manager was responsible for the management of the firm’s related activities
- The Senior Manager did not take such steps to avoid the misconduct
The burden of proof lies with the FCA
Individual (‘First Tier) Conduct Rules (senior managers, certified functions, conduct rules staff)
- You must act with integrity
- You must act with due skill, care and diligence
- You must be open and co-operative with the FCA, the PRA and other regulators
- You must pay due regard to the interests of customers and treat them fairly
- You must observe proper standards of market conduct