The Financial Services and Markets Act 2000 & Financial Services Act 2012 Flashcards
are mortgages specified investments
first charge on primary residence is
buy to let isn’t
commercial isn’t
what are the threshold conditions for 4A permission (list)
legal status location of offices effective supervision appropriate resources appropriate non-financial resources prudent conduct suitability (fitness and propriety) business model
what is the criminal penalty for contravening the general prohibition (S19 FSMA 2000)
criminal offence -> crown court -> two years imprisonment and/or an unlimited fine
do the enforcement officers have the power to investigate any employee?
they have the power to interview any employee however they can only investigate approved persons
what does a warning notice lead to
disciplinary action
what is the prescribed responsibility function of senior management functions
given to senior manager who is most senior person responsible for that activity or area
set out in statement of responsibilities
what are the powers of enforcement officers (S165) by the FCA/PRA
enter the premises of an authorised firm without notice, demand documents (file, tapes, data), interview any employee
what is the directory
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
what are the ‘first tier’ conduct rules
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
what does the threshold condition of effective supervision mean (4A permission)
how effectively can the regulators supervise.
If owned by shell & someone in South America -> don’t know, need disclosure of close links >20%
is authorisation blanket permission
no, a firm will seek permission to perform specific activities in specific investments
who is subject to fit and proper assessment
senior management functions certification functions (significant harm functions)
what is loan stock
unsecured corporate bond
can warning notices be published
can be published with recipient consent
what is a county court judgement
legal decisions handed down by the county court if you fail to pay money you owe
what is FSMA and when was it from
financial services and markets act 2000
who assesses the fitness and propriety of SMF (senior management functions)
the regulator
which notices are known as statutory notices
warning notices,
decision notices,
supervisory notices
what does censure mean
express severe disapproval of (someone or something), especially in a formal statement
what are the possible disciplinary measures
withdrawal or variation of authorisation or approval,
prohibition,
restitution order,
public censure, statements of misconduct and financial penalties,
prosecution
what are the three things that the fit and proper test test (FIT)
honesty, integrity and reputation competence and capability financial soundness (bankruptcy)
what is the list of specified investments
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)
what is commercial paper
short term corporate bond
what will the FCA/PRA do if they receive insufficient information about the applicant for the fit and proper test (FIT)
they will continue to process the application, but will ask for further clarification
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
what is the SM&CR regime
senior management and certification regime
what is an OTF
organised trading facility (OTF) - permit trading of derivatives and other non-equity financial instruments
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
are options on FX a specified investment
options on FX are specified investments even though FX isn’t
what are the threshold conditions for 4A permission (descriptive not actual)
minimum requirements
where do dual regulated firms apply for 4A permission to
PRA
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
what are the two ways you can be an authorised person
4A permission (UK firms) passport (regulated in EEA, MiFID)
for dual regulated firms who assesses the non-financial appropriate resources
FCA
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
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)
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)
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
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)
what is a debenture
secured corporate bond
what is a regulated activity
specified activity in a specified investment in or into the UK
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
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)
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
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)
what is one notable exception under insurance contracts that is not a specified activity
car breakdown insurance
who assesses the fitness and propriety of certification function employees
certificate issued by the firm
who does the code of conduct cover
all relevant employees:
senior management functions
certification functions
other conduct rules staff
not ancillary staff
how long does it take for regulators to come to a decision about 4A permission
up to 6 months
what is a private warning
regulator decides not to take formal disciplinary action,
remains on firm’s and individual’s disciplinary record
what is fsa and when was it from
financial services act 2012, amendments to FSMA 2000
what is a depositary receipt
certificate issued by a bank representing shares in a foreign company traded on a local stock exchange
what is the legislation that protects whistleblowers
public interest disclosure act (PIDA) 1998
what does the threshold condition of suitability (fitness and propriety) mean (4A permission)
senior managers
what is a warrant
entitles owner to buy shares at specified price until expiry
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)
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
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
what does a supervisory notice lead to
alternative to warning notice,
aim is preventative rather than disciplinary,
action can be effective immediately
what is true of the CISI code of conduct
all members of the institute are obliged to follow it
what is the competence and capability aspect of the fit and proper test (FIT)
exam success
experience and training
who does the burden of proof lie with
the FCA
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
are final notices published
yes
what is an MTF
multilateral trading facility - formal marketplace for trading of investments outside an exchange
what does SYSC 3 cover
requirements for ensuring that employees meet high-level competency requirements
what are CFDs
cash settled derivatives
does a recognised investment exchange confer authorisation as an investment business (acc q)
yes
does a recognised investment exchange guarantee a market place where investors can always deal at fair prices (acc q)
no
are shares in an unincorporated business a specified investment under the Regulated Activities Order (acc q)
yes
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
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
do decision notices set out a time limit for remedial action (acc q)
no
can decision notices be issued to firms and individuals (acc q)
yes
are life assurance policies and certificates of deposit regulated investments, as defined by the Regulated Activities Order (acc q)
yes
