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UK Financial Regulation > The Financial Services and Markets Act 2000 & Financial Services Act 2012 > Flashcards

The Financial Services and Markets Act 2000 & Financial Services Act 2012 Flashcards

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1
Q

are mortgages specified investments

A

first charge on primary residence is

buy to let isn’t
commercial isn’t

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2
Q

what are the threshold conditions for 4A permission (list)

A 
legal status
location of offices
effective supervision
appropriate resources
appropriate non-financial resources
prudent conduct
suitability (fitness and propriety)
business model
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3
Q

what is the criminal penalty for contravening the general prohibition (S19 FSMA 2000)

A

criminal offence -> crown court -> two years imprisonment and/or an unlimited fine

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4
Q

do the enforcement officers have the power to investigate any employee?

A

they have the power to interview any employee however they can only investigate approved persons

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5
Q

what does a warning notice lead to

A

disciplinary action

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6
Q

what is the prescribed responsibility function of senior management functions

A

given to senior manager who is most senior person responsible for that activity or area
set out in statement of responsibilities

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7
Q

what are the powers of enforcement officers (S165) by the FCA/PRA

A 
enter the premises of an authorised firm without notice,
demand documents (file, tapes, data),
interview any employee
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8
Q

what is the directory

A

sep 2019, FCA introduced The Directory to replace the old Financial Services Register. Contains information about key individuals and is searchable available to the public

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9
Q

what are the ‘first tier’ conduct rules

A

you must act with integrity,
you must act with due skill, care and diligence,
you must be open and co-operative with the FCA, 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

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10
Q

what does the threshold condition of effective supervision mean (4A permission)

A

how effectively can the regulators supervise.

If owned by shell & someone in South America -> don’t know, need disclosure of close links >20%

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11
Q

is authorisation blanket permission

A

no, a firm will seek permission to perform specific activities in specific investments

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12
Q

who is subject to fit and proper assessment

A 
senior management functions
certification functions (significant harm functions)
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13
Q

what is loan stock

A

unsecured corporate bond

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14
Q

can warning notices be published

A

can be published with recipient consent

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15
Q

what is a county court judgement

A

legal decisions handed down by the county court if you fail to pay money you owe

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16
Q

what is FSMA and when was it from

A

financial services and markets act 2000

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17
Q

who assesses the fitness and propriety of SMF (senior management functions)

A

the regulator

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18
Q

which notices are known as statutory notices

A

warning notices,
decision notices,
supervisory notices

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19
Q

what does censure mean

A

express severe disapproval of (someone or something), especially in a formal statement

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20
Q

what are the possible disciplinary measures

A

withdrawal or variation of authorisation or approval,
prohibition,
restitution order,
public censure, statements of misconduct and financial penalties,
prosecution

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21
Q

what are the three things that the fit and proper test test (FIT)

A 
honesty, integrity and reputation 
competence and capability
financial soundness (bankruptcy)
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22
Q

what is the list of specified investments

A 
shares (warrants, depositary receipts)
debt instruments
units in collective investment scheme
options on 
-specified investments
-currencies
-precious metals (gold, silver, palladium, platinum
futures
contracts for difference
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(mifid allows passporting of everything above this line)
Lloyd's syndicates, insurance contracts and funeral plan contracts
pensions
regulated mortgages and home finance
deposits and electronic money
rights to specific investments e.g. sales and repurchase agreements (repos)
loans and other forms of credit
emissions auction products
benchmarks (libor)
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23
Q

what is commercial paper

A

short term corporate bond

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24
Q

what will the FCA/PRA do if they receive insufficient information about the applicant for the fit and proper test (FIT)

A

they will continue to process the application, but will ask for further clarification

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25
what is the enforcement process of the regulator
investigation -> preliminary findings -> RDC issue -> firm response -> RDC issue -> appeal to upper tribunal within 28 days -> RDC issue -> disciplinary measures
26
what is the SM&CR regime
senior management and certification regime
27
what is an OTF
organised trading facility (OTF) - permit trading of derivatives and other non-equity financial instruments
28
the regulator take action against a senior manager if they can show that:
there was misconduct by the senior managers 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
29
are options on FX a specified investment
options on FX are specified investments even though FX isn't
30
what are the threshold conditions for 4A permission (descriptive not actual)
minimum requirements
31
where do dual regulated firms apply for 4A permission to
PRA
32
what are general requirements of the training and competence (T+C) sourcebook
all employees carrying on activities with or for retail customers must demonstrate competence (may require exam success, firm responsible for assessing competence), firms must not allow employees to carry out activities without appropriate supervision, competence must be regularly reviewed to ensure they remain competent
33
what are the two ways you can be an authorised person
``` 4A permission (UK firms) passport (regulated in EEA, MiFID) ```
34
for dual regulated firms who assesses the non-financial appropriate resources
FCA
35
who is also exempt from the need for authorisation (not exempt persons)
Lloyd's syndicate members | designated professional bodies (DPBs) - accountants, solicitors etc as long as incidental
36
what are the powers of intervention and enforcement given under FSA 2012
FCA can ban products posing unacceptable risks to consumers for up to 12 months without consultation, FCA can ban financial promotions deemed to be misleading (no need to go through normal enforcement process)
37
who are exempt persons
``` exempt bodies (Bank of England) recognised clearing houses (RCHs) recognised investment exchanges (RIE) appointed representatives (tied agent, financial advisors to market products to investors) ```
38
what are specified activities
dealing in investments arranging deals in investments managing investments advising on investments operating a multilateral trading facility (MTF) or organised trading facility (OTF) safeguarding and administering investments eg acting as custodian sending dematerialised instructions eg electronic money transfer Lloyd's activities mortgages 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
39
what is this called - "no person may carry on a regulated activity in the UK unless he is an authorised person or an exempt person"
the General Prohibition (S19 FSMA 2000)
40
what is a debenture
secured corporate bond
41
what is a regulated activity
specified activity in a specified investment in or into the UK
42
what is S19 of FSMA 2000 (General Prohibition)
no person may carry on a regulated activity in the UK unless he is an authorised person or an exempt person
43
what are sections S165, S167, S168, S177 FSMA 2000 regarding co-operation of firms
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)
44
what are the civil law consequences of contravening the general prohibition (S19 FSMA 2000)
``` injunctions (firm prohibited from continuing activities) restitution orders (restoring) contracts are voidable at the discretion of investor ```
45
what are excluded investments
``` property tangible assets (oil, metal, antiques) currencies (spot and forward) premium bonds national savings certificates (all National savings and Investment products) ```
46
what is one notable exception under insurance contracts that is not a specified activity
car breakdown insurance
47
who assesses the fitness and propriety of certification function employees
certificate issued by the firm
48
who does the code of conduct cover
all relevant employees: senior management functions certification functions other conduct rules staff not ancillary staff
49
how long does it take for regulators to come to a decision about 4A permission
up to 6 months
50
what is a private warning
regulator decides not to take formal disciplinary action, | remains on firm's and individual's disciplinary record
51
what is fsa and when was it from
financial services act 2012, amendments to FSMA 2000
52
what is a depositary receipt
certificate issued by a bank representing shares in a foreign company traded on a local stock exchange
53
what is the legislation that protects whistleblowers
public interest disclosure act (PIDA) 1998
54
what does the threshold condition of suitability (fitness and propriety) mean (4A permission)
senior managers
55
what is a warrant
entitles owner to buy shares at specified price until expiry
56
what is a collective investment scheme
open ended mutual fund (eg unit trust) that can be regulated (investment companies with variable capital (ICVC), UCITS (EEA)) or unregulated (Hedge Funds)
57
what is the honesty, integrity and reputation aspect of the fit and proper test (FIT)
``` employment history (5 years) criminal convictions (lifetime) breaches of FCA/PRA rules compaints ```
58
what is the RDC
``` regulatory decisions committee, exercises certain decision making powers on behalf of the FCA/PRA, appointed by the FCA board, Accountable to the FCA board only chairman of RDC is an FCA employee ```
59
what does a supervisory notice lead to
alternative to warning notice, aim is preventative rather than disciplinary, action can be effective immediately
60
what is true of the CISI code of conduct
all members of the institute are obliged to follow it
61
what is the competence and capability aspect of the fit and proper test (FIT)
exam success | experience and training
62
who does the burden of proof lie with
the FCA
63
what are excluded activities
newspapers and other media (not tipsheets) (for incidental activities) providing information unpaid trustees eg nominees, executors employee share schemes dealing as principal and end user, no service offered to others
64
are final notices published
yes
65
what is an MTF
multilateral trading facility - formal marketplace for trading of investments outside an exchange
66
what does SYSC 3 cover
requirements for ensuring that employees meet high-level competency requirements
67
what are CFDs
cash settled derivatives
68
does a recognised investment exchange confer authorisation as an investment business (acc q)
yes
69
does a recognised investment exchange guarantee a market place where investors can always deal at fair prices (acc q)
no
70
are shares in an unincorporated business a specified investment under the Regulated Activities Order (acc q)
yes
71
what is a premium bond
in uk, a government security that offers no interest or capital gain but is entered in regular draws for cash prizes
72
would not immediately producing adequate information for an FCA inspection be considered an act of misconduct by a firm (acc q)
no, firms are permitted a reasonable time period to produce adequate information for an FCA inspection
73
do decision notices set out a time limit for remedial action (acc q)
no
74
can decision notices be issued to firms and individuals (acc q)
yes
75
are life assurance policies and certificates of deposit regulated investments, as defined by the Regulated Activities Order (acc q)
yes

UK Financial Regulation (7 decks)

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