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Regulation & Compliance Chapter 1, 2 & 4 > Regulated Activities, Authorisation and MIFID > Flashcards

Regulated Activities, Authorisation and MIFID Flashcards

1
Q

General Prohibition

A

S19 FSMA 2000

No person carry out a regulated activity unless

Authorised person or exempt person

Offence is punishable with two years in prison unlimited fine

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2
Q

Prohibition Order

A

FSMA gave FCA power to bar an individual from performing specified function

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3
Q

Specified Activities can be divided into

A
  • Designated Investment Business
    COBS applies too

Stockbroking, investment advice, fund management

  • Other Specified Activities
    Activities covered under other FCA sourcebooks not COBS

Retail banking, mortgages, general insurance

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4
Q

Specified Activities

A

Designated Investment Business - COBS Apply

Dealing/Arranging/Managing/Advising on Investments

Operating a MTF or OTF

Safeguarding and administering investments

Sending dematerialised instructions (electronic money transfer - CREST)

Life Assurance

Activities relating to setting of benchmarks

Acting as trustee of an AUT

Establishing/operating or winding up collective investment scheme or pension scheme

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5
Q

Other Specified Activities

A

NOT COBS

1) General insurance activities and funeral plan contracts
2) Lloyd’s activities (Insurance brokers)
3) Mortgages; provision, administration, advising and arranging
4) Other Home finance activities
5) Accepting deposits by way of business and issuing electronic money (Retail Banks)

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6
Q

Specified Investments

A 
Shares 
Bonds 
Gilts 
Warrants 
Units in funds 
Options 
Futures 
CFDs
Contracts of insurance 
Lloyds syndicates 
Deposits 
Loans and other forms of credit 
Contracts for hire of goods 
Rights to specified investments 
Electronic money

FMSA does not cover commodities, nor tangible assets
e.g. gold, houses
Currencies also excluded
NS&I Products such as premium bonds

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7
Q

UK Process for Authorisation

A

(FMSA, S20)

Part 4A permission

UK Firms apply to regulator for permission to carry on one or more regulated activities

BREXIT meant no passporting to/from UK to EEA

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8
Q

Statutory routes to authorisation

A

FSMA (S31)

1) Person with Part 4A permission
2) Treaty firm qualifying under schedule 4

UK Trade agreements with foreign countries

3) Person otherwise authorised under the act

treasury grant authorisation directly to anyone

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9
Q

Threshold Conditions for FCA - authorised firms

A
  • Location of offices
  • Effective supervision
  • Appropriate resources
  • Suitability (fit + proper person)
  • Business Model

COND Sourcebook - contains threshold conditions

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10
Q

PRA Conditions

A

1 + 4 of threshold Conditions (Loc of Office + - Suitability (fit + proper person)

Business Conducted in prudent manner
Appropriate financial + non- financial resources

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11
Q

Variation + Cancelling of Permission/authorisation

A

Variation (amend/limit)

1) Regulators own powers
Failure to satisfy COND
No reg activity for 12 months
Advance regulators objective (e.g. policy change)

2) Change in control of authorised person
3) Request by overseas regulator

Cancelling

Regulator gives warning notice and decision notice - RDC

Authorised person may appeal to upper tribunal

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12
Q

MIFID

A

Markets in Financial Instruments Directive

Common standards of business for investment firms and investment markets in financial services

Reg is affected

  • Conduct of firms
  • Transparency of markets
  • Investor protection
  • Product intervention

MIFID Business = Core MIFID Activity + MIFID Instrument

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13
Q

EU MIFID

A

Harmonises regulations across EEA

Allows passporting of MIFID business across EEA

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14
Q

UK MIFID

A

Part of UK Law - applies to UK firms

UK Firms cannot use the MIFID Passport

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15
Q

MIFID CORE Activities

A

Core Activities

Reception + transmission of orders 
Execution of orders 
Portfolio management 
Investment advice 
Underwriting and placing 
Operating MTF or OTF
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16
Q

MIFID ANCILLARY Services

A

1) Safekeeping and administration
2) Loans to carry out transactions
3) Investment research and financial analysis
- Cannot be passport on their own

Passporting can happen if with a core MIFID activity

17
Q

MIFID INSTRUMENTS

A

Shares, Bonds, Derivatives

Transferable Securities

Money Market instruments

Units in collective investment schemes

Derivatives relating to securities, currencies, interest rates

Commodity derivatives

Credit derivatives

Financial CFDs

Other variable derivatives (Climate)

18
Q

EEA Passport

A

Covers EEA firms authorisation in own member state who wish to carry out regulated activities in other EEA States

European Economic Area
27 EU countries plus ICELAND NORWAY LIECHTENSTEIN

19
Q

HOME State Regulator

A

Authorisation

Prudential Supervision (financial resources client assets)

COBS for Cross border services

20
Q

HOST State Regulator

A

COBS by BRANCH in host state

21
Q

Types of Office in EEA HOST State

A

Representative office

  • office in host state, marketing and client development
  • No transactions carried out, no passport rights
  • not separately reg no reg activities

Branch

  • office in host state, under name of home state parent company ( HAS PASSPORT)
  • Undertake reg activities under parent company passport

Subsidiary

  • separately created company in host state with separate legal personality
  • Undertake reg activities under own local authorisation

NOT limited to Passport

22
Q

Exempt Persons

A

1) Appointed Representatives (+TIED Agents)
2) Lloyd’s syndicate members
3) Member of Designated Professional Bodies (accountants, Actuaries, Solicitors)
4) Recognised Investment Exchanges
5) Recognised Clearing Houses
6) Other exited bodies e.g. BoE , Central banks, Government Bodies

23
Q

Regulated activity

A

Regulated Activities Order 2001

Specified activity undertaken with a specified investment

24
Q

EEA Process for Authorisation

A

EEA applies for MIFID Passport

to Local Regulator

25
Q

Four categories of Authorised Person set out in the FSMA.

A

a) Persons holding a Part 4A permission to carry on one or more regulated activities;
b) EEA firms (authorised under Schedule 3);
c) EU Treaty firms (authorised under Schedule 4); or
d) Any person otherwise authorised under FSMA (s31 (1)).

26
Q

main requirements that apply to becoming an exempt appointed

representative of an authorised person.

A

A person (other than an authorised person) may act as an appointed representative where:

a) They are a party to a contract with an authorised person (the principal);

b) The contract permits or requires the person to carry on business of a prescribed
description and complies with any requirements that may be prescribed under relevant
Regulations;

c) The principal accepts responsibility in writing for the carrying on of those activities in
respect of the whole or part of that business s39 (1) (a) (i) and (ii) and (b)).

27
Q

List the various panels that the Financial Conduct Authority (FCA) has a statutory duty to consult.

A

The FCA is required to consider representations that are made to it by any of the four panels set out below:

a) The FCA Practitioner Panel;
b) The Smaller Business Practitioner Panel;
c) The Markets Practitioner Panel;
d) The Consumer Panel.

28
Q

the ‘relevant persons’ who must be represented on the FCA’s Markets Practitioner Panel.

A

a) Authorised firms;
b) Persons who issue financial instruments (e.g. listed companies)
c) Sponsors (of listed companies);
d) RIEs;
e) Primary information providers (PIPs).

29
Q

Give examples of excluded activities.

A

Acting as a trustee, nominee or personal representative

  • Activities in the course of carrying on a profession or business
  • Activities in connection with the supply of goods or services
  • Groups and joint enterprises
  • Activities in conjunction with the sale of a body corporate
  • Employee share schemes

Regulation & Compliance Chapter 1, 2 & 4 (14 decks)

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