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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

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
Q

what is the enforcement process of the regulator

A

investigation -> preliminary findings -> RDC issue -> firm response -> RDC issue -> appeal to upper tribunal within 28 days -> RDC issue -> disciplinary measures

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26
Q

what is the SM&CR regime

A

senior management and certification regime

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27
Q

what is an OTF

A

organised trading facility (OTF) - permit trading of derivatives and other non-equity financial instruments

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28
Q

the regulator take action against a senior manager if they can show that:

A

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

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29
Q

are options on FX a specified investment

A

options on FX are specified investments even though FX isn’t

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30
Q

what are the threshold conditions for 4A permission (descriptive not actual)

A

minimum requirements

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31
Q

where do dual regulated firms apply for 4A permission to

A

PRA

32
Q

what are general requirements of the training and competence (T+C) sourcebook

A

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
Q

what are the two ways you can be an authorised person

A 
4A permission (UK firms)
passport (regulated in EEA, MiFID)
34
Q

for dual regulated firms who assesses the non-financial appropriate resources

A

FCA

35
Q

who is also exempt from the need for authorisation (not exempt persons)

A

Lloyd’s syndicate members

designated professional bodies (DPBs) - accountants, solicitors etc as long as incidental

36
Q

what are the powers of intervention and enforcement given under FSA 2012

A

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
Q

who are exempt persons

A 
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
Q

what are specified activities

A

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
Q

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”

A

the General Prohibition (S19 FSMA 2000)

40
Q

what is a debenture

A

secured corporate bond

41
Q

what is a regulated activity

A

specified activity in a specified investment in or into the UK

42
Q

what is S19 of FSMA 2000 (General Prohibition)

A

no person may carry on a regulated activity in the UK unless he is an authorised person or an exempt person

43
Q

what are sections S165, S167, S168, S177 FSMA 2000 regarding co-operation of firms

A

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
Q

what are the civil law consequences of contravening the general prohibition (S19 FSMA 2000)

A 
injunctions (firm prohibited from continuing activities)
restitution orders (restoring)
contracts are voidable at the discretion of investor
45
Q

what are excluded investments

A 
property
tangible assets (oil, metal, antiques)
currencies (spot and forward)
premium bonds
national savings certificates (all National savings and Investment products)
46
Q

what is one notable exception under insurance contracts that is not a specified activity

A

car breakdown insurance

47
Q

who assesses the fitness and propriety of certification function employees

A

certificate issued by the firm

48
Q

who does the code of conduct cover

A

all relevant employees:
senior management functions
certification functions
other conduct rules staff

not ancillary staff

49
Q

how long does it take for regulators to come to a decision about 4A permission

A

up to 6 months

50
Q

what is a private warning

A

regulator decides not to take formal disciplinary action,

remains on firm’s and individual’s disciplinary record

51
Q

what is fsa and when was it from

A

financial services act 2012, amendments to FSMA 2000

52
Q

what is a depositary receipt

A

certificate issued by a bank representing shares in a foreign company traded on a local stock exchange

53
Q

what is the legislation that protects whistleblowers

A

public interest disclosure act (PIDA) 1998

54
Q

what does the threshold condition of suitability (fitness and propriety) mean (4A permission)

A

senior managers

55
Q

what is a warrant

A

entitles owner to buy shares at specified price until expiry

56
Q

what is a collective investment scheme

A

open ended mutual fund (eg unit trust) that can be regulated (investment companies with variable capital (ICVC), UCITS (EEA)) or unregulated (Hedge Funds)

57
Q

what is the honesty, integrity and reputation aspect of the fit and proper test (FIT)

A 
employment history (5 years)
criminal convictions (lifetime)
breaches of FCA/PRA rules
compaints
58
Q

what is the RDC

A 
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
Q

what does a supervisory notice lead to

A

alternative to warning notice,
aim is preventative rather than disciplinary,
action can be effective immediately

60
Q

what is true of the CISI code of conduct

A

all members of the institute are obliged to follow it

61
Q

what is the competence and capability aspect of the fit and proper test (FIT)

A

exam success

experience and training

62
Q

who does the burden of proof lie with

A

the FCA

63
Q

what are excluded activities

A

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
Q

are final notices published

A

yes

65
Q

what is an MTF

A

multilateral trading facility - formal marketplace for trading of investments outside an exchange

66
Q

what does SYSC 3 cover

A

requirements for ensuring that employees meet high-level competency requirements

67
Q

what are CFDs

A

cash settled derivatives

68
Q

does a recognised investment exchange confer authorisation as an investment business (acc q)

A

yes

69
Q

does a recognised investment exchange guarantee a market place where investors can always deal at fair prices (acc q)

A

no

70
Q

are shares in an unincorporated business a specified investment under the Regulated Activities Order (acc q)

A

yes

71
Q

what is a premium bond

A

in uk, a government security that offers no interest or capital gain but is entered in regular draws for cash prizes

72
Q

would not immediately producing adequate information for an FCA inspection be considered an act of misconduct by a firm (acc q)

A

no, firms are permitted a reasonable time period to produce adequate information for an FCA inspection

73
Q

do decision notices set out a time limit for remedial action (acc q)

A

no

74
Q

can decision notices be issued to firms and individuals (acc q)

A

yes

75
Q

are life assurance policies and certificates of deposit regulated investments, as defined by the Regulated Activities Order (acc q)

A

yes

UK Financial Regulation (7 decks)

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