IOC - UK Reg CH 2 - FSMA 2000 - FSA 2012 Flashcards
- Is a bank deposit a specified investment as defined in the Regulated Activities Order?
Yes, Deposits – money paid by one person to another, with or without interest being earned on it and on terms that it will be repaid when a specified event occurs (eg, when a demand is made). The obvious example is deposits held with banks and building societies. For clarity, the RAO sets out certain exclusions – eg, electronic money (covered separately below), money paid in advance for the provision of goods or services and money paid as a security deposit.
- Does a firm that accepts deposits from customers need to be regulated and authorised to carry out this activity?
Yes, Part II, Regulated and Prohibited Activities, includes the general prohibition, which simply states that no person can carry on a regulated activity in the UK, or purport to do so, unless he is either authorised or exempt. If a person contravenes the general prohibition it is a criminal offence; the maximum sanctions are up to two years’ imprisonment and an unlimited fine.
- Is a market maker required to be regulated and authorised when carrying on such activity for a firm?
Dealing in investments as principal is a regulated activity. This means that persons dealing for themselves in the hope of making profits are required to be authorised or exempt. However, this regulated activity is restricted to those persons who are holding themselves out as and acting as market makers, and who regularly solicit the public with the purpose of inducing them to deal.
The result is that a wide range of activity is excluded from the regulated activity of dealing as principal.
This means that firms which are professional dealers, such as market makers, and which hold themselves out as such, are carrying on a regulated activity; but individuals or companies which are not in the business of dealing in investments, and which invest only for themselves in the hope of making a profit, are excluded.
- State three exclusions relating to regulated activity.
Members of the Professions
Members of Lloyd’s
Appointed Representatives
- How are appointed representatives exempt from the requirement to be regulated and authorised?
An appointed representative can be any type of person (ie, a natural person or any other legal person) who has entered into a contract with an authorised person (the principal) for the purpose of conducting regulated activity. The authorised person becomes the principal and accepts legal responsibility for the regulated activity conducted by the appointed representative. In this way, the appointed representative becomes an exempt person under FSMA for the conduct of permitted regulated activity.
The FCA and the PRA rules do not apply to appointed representatives because they are not authorised persons. However, any business conducted by the appointed representative for which the principal has accepted responsibility will be treated as having been conducted by the principal. The principal itself must have the permissions for the activity that is to be carried out by the appointed representative.
- Name two types of exempt person under the FSMA Exemption Order 2001.
European Investment Bank
Bank of England
International Monetary Fund
- What are the threshold conditions for being granted Part 4A permission?
The Threshold Conditions (TCs) were effectively the minimum standards for being, and remaining, authorised. The Financial Services and Markets Act 2000 (Threshold Conditions) Order 2013 changed and re-distributed responsibility for TCs between the FCA and the PRA.
- What is the purpose of the regulators’ supervision arrangements?
The regulators have a range of supervisory tools available to them that can be classified under four headings:
Diagnostic tools – designed to identify, assess and measure risk such as those described above.
Monitoring tools – to track the development of identified risk, wherever this arises.
Preventative tools – to limit or reduce identified risks and so prevent them crystallising or increasing.
Remedial tools – to respond to risks when they have crystallised.
- What factors are taken into account when assessing an individual as fit and proper for approval?
An individual may be permitted to perform a controlled function only after they have been granted approved person status by the regulator. The candidate completes a form and this is notified to the regulator by the firm. The form includes a comprehensive list of questions to establish a person’s employment history, and gives the regulator the information it needs to conduct the assessment of fitness and propriety.
- State the five types of controlled functions.
The five controlled functions are:
Governing functions. Required functions. Systems and control functions. Significant management function. Customer function.
- Are standard NEDs subject to the Certification Regime and the Conduct Rules?
Standard NEDs are not subject to the Certification Regime, however since 3 July 2017 they are subject to the Conduct Rules. They are now subject to the 5 individual conduct rules and senior manager conduct rule 5.
- Which type of firm must comply with the Training and Competence Sourcebook?
The TC Sourcebook requires that firms do not assess an employee as competent to carry on one of the specified activities until that employee has demonstrated the necessary competence to do so and has (if required) attained an appropriate qualification. The list of appropriate qualifications is an Appendix to the TC Sourcebook and has the status of evidential provision.
- True or false; a person who advises on derivatives may do so under supervision so long as they have passed a regulatory module?
False. The individual must have attained the full qualification before commencing the activity, even under supervision.
- Which act provides the legal basis for the protection of whistleblowers?
The Public Interest Disclosure Act (PIDA) 1998
- What is a whistleblower champion?
Under the new Accountability Regime, firms subject to this new regime will be required to appoint an individual acting as the whistleblower champion. Their responsibility is ensuring and overseeing the integrity, independence and effectiveness of the firm’s policies and procedures on whistleblowing – including policies and procedures intended to protect whistleblowers from being victimised because they have disclosed reportable concerns.
