The Financial Services And Markets Act 2000 (as amended by the FSA 2012)

Question 1

Under the FSMA, there are three main factors which determine whether a particular kind of investment business requires authorisation.

What are these three factors?

Answer 1

1. Whether the investments come within the scope of the system of regulation. (Checking if the investment is covered by regulations)
2. Whether the activity carried out in relation to those investments is regulated. (What are these investments being used for?)
3. Whether any exemption is available. (Sometimes, firms can operate without full authorisation based on some conditions)

Question 2

For anyone who undertakes investment business in the UK, as per the FSMA 2000 they are required to be:

Answer 2

1. An authorised person OR,
2. An exempt person.
3. A “person” includes both legal person (a firm) and an individual.
4. An authorised person is authorised because of Part 4A permission of the FSMA. They must apply to the FCA unless they’re a systemically important firm that must be authorised by PRA.

Question 3

What are the criminal offences under the FSMA (as amended by the FSA 2012) include?

Answer 3

1. A person who is NOT authorised or exempt describing themselves as authorised or exempt.
2. Misleading a market or investors by making a misleading or dishonest statement of promise.
3. Knowingly/ recklessly creating a false impression for the purpose of personal gain or, to cause a loss/ risk of loss to another person.

Question 4

FSA 2012 also introduced a new offence with regards to misleading statements and impressions in relation to benchmarks.

Under Section 91 a person is such to commit an offence if :

Answer 4

1. Make to another person a false or misleading statement.
2. Act/ engage in any course of conduct which creates a false or misleading impression on the price/ value of any investment. Also includes interest rate of transactions.

Question 5

The FCA has a lead role in investigating and prosecuting offences.

What are some of the consequences of committing offences?

Answer 5

1. Imprisonment for a term up to 10 years.
2. Fine

Or both.