FSMA 2000 & FSA 2012 Flashcards
Regulated activity
Specified activity undertaken with a specified investment
Authorised person
Part 4A permission
Criminal Penalties for contravening General Prohibition
2yr jail, and/or unlimited fine
Civil law consequences of contravening the General Prohibition
Injunctions
* Restitution orders
* Contracts are voidable at the discretion of the investor
MIFID Investments
Shares/Depositaryreceipts/Warrants
* Debt instruments e.g. bonds, Gilts, loan stock,
debentures, T-bills, commercial paper
* Units in collective investment schemes
* Options
* Futures
* Contractsfordifference(CFDs)
* Emissions allowances
Other Specified Investments
Lloyd’s syndicates, insurance contracts and funeral plan contracts
* Pensions
* Regulated mortgages and home finance
* Deposits and electronic money
* Rights to specified investments, e.g.repos
* Loans and other forms of credit
* Benchmarks
MIFID Activities
Dealing in investments
* Arranging deals in investments
* Managing investments
* Advising on investments
* Operating a multilateral or organised trading facility (MTF or OTF)
Other Specified Activities
Safeguarding and administering investments, e.g. acting as a custodian
* Sending dematerialised instructions,e.g.electronic money transfer
* Lloyd’s activities, insurance activities and providing funeral plan contracts
* Mortgages: provision, administration, advising and arranging
* Home finance activities
* Managing dormant account funds
* Accepting deposits by way of business and issuing electronic money
* Providing credit reference or credit information services
* Establishing, operating or winding up a collective investment scheme or pension scheme
* Agreeing to carry on most regulated activities
Excluded Activities
Newspapers and other media - Incidental advice (but not ‘tip sheets’)
* Providing information
* Unpaid trustees e.g. nominees, executors * Employee share schemes
* Group or joint enterprises
* Absence of holding out
- Dealing as principal and end user, where no service is offered to others - Primary market sale or buyback
- Derivatives for risk management (commercial purposes/hedging)
Exempt Persons
-Appointed Representatives
- Lloyds syndicate members
-Members of DPBs
- RIE
- RCH
- Other exempt bodies, central banks, supranational etc
Threshold Conditions for Part 4A permission
Location of offices
Effective supervision
Appropriate resources
Appropriate non-financial
resources
Prudent conduct
Suitability (Fitness and propriety)
Business model
Senior Management Functions
Pre-Approval by regulator, subject to fit and proper assessment, subject to conduct rules, records kept for 6 years from any change
Firm applies on behalf of manager, informed within 90 days
Certification functions
certificate issued by the firm, subject to fir and proper assessment, subject to conduct rules
Fit and Proper Test
Fit and proper test
- Honesty, integrity and reputation
* Employment history(sixyears)
* Criminal convictions(no time limit)
* Breaches of FCA/PRA rules
* Complaints
- Competence and capability
* Examsuccess
* Experience and training
- Financial soundness * Bankruptcy
Individual Conduct Rules
You must act with integrity
2. You must act with due skill, care and diligence
3. You must be open and co-operative with the FCA, the PRA and other regulators
5. You must observe proper standards of market conduct
Where Consumer Duty applies Rule 6 replaces Rule 4
4. You must pay due regard to the interests of customers and treat them fairly
6. You must act to deliver good outcomes for retail customers
Training and Competence
All employees of firms carrying on activities with or for retail customers must demonstrate competence
Firms must not allow employees to carry out activities without appropriate supervision
Competence must be regularly reviewed to ensure they remain competent
Public Interest Disclosure Act
Protects the ability for an employee to make a protected disclosure
A protected disclosure relates to: * Criminal offences
* Breach of legal requirements * Miscarriage of justice
* Endangering health and safety
* Damage to the environment
* Concealment of the above
Firms should adopt procedures including statements of:
* The proper way to disclose
* Failures that are worthy of disclosure
* Assurances of protected disclosure
* Avenues of external disclosure (including the FCA)
* Penalties for making false or misleading disclosure
Information gathering by the FCA/PRA (FSMA 2000)
Powers of enforcement officers (S165)
- Enter the premises of an authorised firm without notice - Demand documents, file, tapes, data
- Interview any employee
Supervision of firms: Co-operation
The FCA/PRA has the legal power to demand information/documentation:
- Must be provided within a reasonable time period (S165)
- Direct the firm to appoint competent persons to provide FCA/PRA with any required information (S167)
- Appoint a third party to carry out the investigation (S168)
- Failure to co-operate is a criminal offence (S177)
- Providing false or misleading evidence is a criminal offence (S177)
Written notices
Private warnings
- Where the regulator decides not to take formal disciplinary action - Remains on the firm’s and individual’s disciplinary record
* Warning notice (can be published with recipient consent) - Alerts recipient that action is proposed and why
* Supervisory notices
- Alternative to warning notice
- Aim is preventative rather than disciplinary - Action can be effective immediately
* Decision notice
- Issued when the RDC have reviewed representations relating to warning notices
* Final notices (published)
- Issued to make a decision or supervisory notice final and operational - States the date when action takes effect
* Notice of discontinuance
- Issued at any point during the investigation process
- Confirms that the regulator will proceed no further with the investigation
Powers of intervention and enforcement
FCA can ban products posing unacceptable risks to consumers * Products can be banned for up to 12 months without consultation
- FCA can ban financial promotions deemed to be misleading
* No need to go through normal enforcement process (too slow)
