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CeMAP Unit 2 > Topic 18 Regulating Firms & Individuals > Flashcards

Topic 18 Regulating Firms & Individuals Flashcards

1
Q

If a person (or corporate body) breaks Section 19 of the Financial Services & Market Act 2000

This is classed as a what?

A

A criminal offence

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2
Q

A person does not have to be authorised to carry out advice.

True or False

A

False

They do have to be

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3
Q

All the below are examples of what?

  • Accepting Deposits
  • Effecting & carrying out insurance contacts (Funeral plans)
  • Dealing in & arranging Investments
  • Managing Investments
A

Regulated Activities

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4
Q

All the below are examples of what?

  • Establishing & Operating Collective Investment Schemes
  • Establishing Stakeholder Pension Schemes
  • Advertising on Investments
  • Mortgage Lending & Administration
A

Regulated Activities

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5
Q

All the below are examples of what?

  • Advising on & arranging mortgages
  • Advising on & arranging general insurance
  • Entering into existing rights under a regulated consumer credit arrangement
  • Debt Collecting
A

Regulated Activities

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6
Q

What are the 2 categories of regulated investment described by the FCA?

A
  1. Securities
  2. Contractually Based Investments
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7
Q

All the below are examples of what?

  • Deposits
  • Electronic Money
  • Insurance Contracts (Funeral plans)
A

Regulated Investments

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8
Q

All the below are examples of what?

  • Gilt-edged stocks & local authority stocks
  • Shares, company loans stocks, debentures & warrants
  • Units in collective investment schemes
A

Regulated Investments

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9
Q

All the below are examples of what?

  • Rights under stakeholder pension schemes
  • Options & Futures
  • Mortgage Contracts
A

Regulated Investments

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10
Q

The section of the Financial Services Market Act 2000 that enables firms to carry out regulated advice is what?

A

Part 4A

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11
Q

Where can the rules relating to the appointment & activities of individuals in a firm can be found?

A

High Level standards section of the FCA handbook

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12
Q

What does the Senior Managers & Certification Regime (SM&CR) do?

A
  • Establishment of an individual accountability framework
  • Regulates individual conduct & standards
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13
Q

What is an Appointed Representative (AR)?

A

A firm or person who carries out regulated activities & acts as an agent for firm (aka the principle)

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14
Q

Who is regulated the principal firm or the Appointed Representative (AR)?

A

The principal firm

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15
Q

The policy statement 22/11 has established principals to improve understanding of their responsibilities to AR’s what do they have to do?

A
  • Exercise stronger oversight over AR’s
  • Take more responsibility towards AR’s
  • Collect information from AR’s & report it to the FCA
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16
Q

What are the 3 tiers of the SM&CR framework?

A

1.Core
2. Enhanced
3. Limited Scope

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17
Q

Which tier of the SM&CR framework is this?

Firms in this tier have to comply with baseline procedures

A

Core

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18
Q

Which tier of the SM&CR framework is this?

Firms that represent a greatest risk to customers. These have additional requirements

A

Enhanced

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19
Q

Which tier of the SM&CR framework is this?

Applied to firms already under the approved persons regime. Less baseline procedures & fewer senior management functions

A

Limited Scope

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20
Q

What are the 3 elements of the core regime?

A
  • Senior Managers Regime
  • Certificate Regime
  • Code of Conduct
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21
Q

The Senior Managers Regime (SMR) focuses on Key Individuals in relevant firms.

True or False

A

True

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22
Q

What is a “Statement of Responsibilities” when a person applies for a Senior Managers Regime (SMR) role?

A

Details aspects of the business for which they will be taking responsibility for

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23
Q

What additional requirements do enhanced firms also have to do?

A
  • “Responsibilities map” detailing responsibilities each manager is allocated should problems arise
  • Ensure each activity, business area & management function is allocated a senior manager who has responsibility
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24
Q

What does the each manager have to do regarding breaches in their area?

A

Take responsible steps to avoid them

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25
Q

What is the maximum prison sentence a senior manager could receive if they are found guilty of reckless misconduct?

A

7 years

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26
Q

What Senior Management Functions for Core & SM&CR firm is the below?

SM 1

A

Chief Executive

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27
Q

What Senior Management Functions for Core & SM&CR firm is the below?

SM 3

A

Executive Director

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28
Q

What Senior Management Functions for Core & SM&CR firm is the below?

SM 27

A

Partner Function

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29
Q

What Senior Management Functions for Core & SM&CR firm is the below?

SM 9

A

Chair

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30
Q

What Senior Management Functions for Core & SM&CR firm is the below?

SM 16

A

Compliance Oversight Function

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31
Q

What Senior Management Functions for Core & SM&CR firm is the below?

SM 17

A

Money Laundering Reporting Function

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32
Q

What is the Certification Regime (CR)?

A

Actions of people in more junior roles but still cause harm to their firm or customers

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33
Q

For a Certified Regime (CR) position does the person need to be approved by the FCA?

A

No but the firm must ensure they are “fit & proper” to carry out their role

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34
Q

All the below are what?

  • Significant management function
  • Proprietary traders
  • CASS operational oversight functions
  • Functions that require qualifications
  • Client dealing functions
  • Supervising or managing a certificate function (not a senior function)
  • Material risk taker
  • Algorithm trading responsibilities
A

Examples of Certification Regime (CR) set by the FCA

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35
Q

Who is responsible for the Certification Regime (CR) in a firm?

A

A designated senior manager

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36
Q

What is the code of conduct?

A

Rules set by the regulator that apply to the below in a firm.

  • Senior managers
  • Certified Persons
  • Other employees
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37
Q

What tier one individual conduct rule is this?

CR1

A

Must act with integrity

38
Q

What tier one individual conduct rule is this?

CR2

A

Must act with skill, care & diligence

39
Q

What tier one individual conduct rule is this?

CR3

A

Must be open & co-operative with the FCA, PRA & other regulators

40
Q

What tier one individual conduct rule is this?

CR4

A

Must pay due regard to the interest of customers & treat them fairly

41
Q

What tier one individual conduct rule is this?

CR5

A

Must observe proper standards of conduct

42
Q

What tier one individual conduct rule is this?

CR6

A

Must act to deliver good outcomes for retail customers

43
Q

What tier two senior managers conduct rule is this?

SM1

A

Reasonable steps to ensure the business of the firm for which they are responsible for is controlled effectively

44
Q

What tier two senior managers conduct rule is this?

SM2

A

Reasonable steps to ensure the business of the firm for which they are responsible complies with relevent requirement standard of the regulatory system

45
Q

What tier two senior managers conduct rule is this?

SM3

A

Reasonable steps to ensure the delegation of your responsibilities is to an appropriate person & you oversee the discharge of delegated responsibility effectively

46
Q

What tier two senior managers conduct rule is this?

SM4

A

Must disclose appropriately any information of which the FCA or PRA would reasonably expect

47
Q

What must firms do regarding the code of conduct rules?

A
  • Make individual subject to rules aware of this
  • Take action when staff fall below standards
48
Q

When must a firm report a breach to the FCA against a senior manager

A

Within 7 days

49
Q

All the below are what?

  • Criminal Record
  • Disciplinary Hearings
  • Known contravention of FCA or regulations with companies that have contravened regulations
  • Complaints about regulated activities
  • Insolvency or management of companies that have become insolvent
  • Dismissal from a position of trust or disqualified as a director
A

How Honestly, Integrity & Reputation is assessed against a person applying for a senior position in a firm

50
Q

The below is what?

FCA Training and Competance

A

A person applying for a role which requires SM&CR must have Competance or Capacity

51
Q

The below are examples of what?

  • Current financial position
  • Previous bankruptcy or adverse credit rating
A

A person applying for a role which requires SM&CR must have Financial Soundness

52
Q

To stop a person with poor conduct from moving from employer to employer what is done?

A
  • Fit & Proper to carry out duties
  • Prospective employer caries out criminal record & credit check
  • References be taken from the previous 6 years
53
Q

What is the Financial Services Register?

A

Public record of all individuals, firms & other bodies that have been regulated by the FCA

54
Q

What is the FCA Directory?

A

FCA publishes directory of certified & associated persons on the financial services register so people can check the details of key individuals in a firm

55
Q

How do senior managers demonstrate their compliance with the FCA’S rules?

A
  1. Management Information (MI)
  2. Staff have defined responsibilities & monitored appropriately
  3. Monitoring of compliance procedures & updating them regularly
56
Q

All the below are?

  • Establishment of clear chains or responsibility
  • Compliance
  • Assessment & Reporting of risk
  • Competence & honesty of staff
  • Strategy for controlling business risks
  • Adequate & readily accessible records
  • Audit of systems
A

Systems & Controls

57
Q

What are the first 4 of the FCA’S principals for supervision are?

A
  1. Being forward looking & pre-emptive
  2. Focusing of the firms & the FCA’S business strategy
  3. Focusing on firms culture & governance
  4. Emphasis on individual strategy
58
Q

What are the second 4 of the FCA’S principals for supervision are?

A
  1. Taking a proportion based risk approach
  2. Engaging in 2 way communication (Industry, firms & customers)
  3. Ensuring messages provided are co-ordinated & consistent
  4. Fixing systemic harm & preventing re-occurance
59
Q

What approach does the FCA take to Supervision?

A

Proportionate

60
Q

What are the 2 proportionate approaches the FCA takes to supervision?

A
  1. Portfolio
  2. Dedicated oversight
61
Q

What is the below FCA supervisory group?

  • Banking & Insurance groups with a large number of retail customers Investment banks
  • Subject to the highest level of supervision
  • Supervised using continuous assessment
  • Have a named supervisor
A

Dedicated Supervisory Oversight

62
Q

What is the below FCA supervisory group?

  • Variety of firms across all sectors
  • Small firms and intermediaries
  • Business model supervised
  • Contact point is the FCA
A

Supervised as portfolio

63
Q

Which of the 3 Pillars of the FCA’S Supervisory model is this?

Pre-emptive identification of harm through review & assessment of firms & portfolio (including business models)

A

Pillar 1: Proactive firm or group supervision

64
Q

What is the below FCA supervisory group?

Dealing with issues that are emerging or have happened to prevent harm growing

A

Pillar 2: Event driven reactive supervision

65
Q

What is the below FCA supervisory group?

Wider diagnostic or remedy work where there is actual harm across a number of firms

A

Pillar 3:
Issues & Products

66
Q

What are the ways the FCA supervises the impact on customers & market integrity in a firm?

A
  • Business Model & strategy
  • Culture
  • Frontline business processes
  • Systems & Controls
    Governance
67
Q

What 3 types of employee does the FCA’S Training & Competence (TC) particularly apply to?

A
  1. Financial advisors (investments)
  2. Supervisors of those advisors
  3. Supervisors of back office adminstration
68
Q

Where was the Training & Competence (TC) sourcebook moved in 2011

A

High level standards

69
Q

With regards to training when must it be conducted?

A

At appropriate intervals for each employee

70
Q

What must advisers do before they can commence activities under an employer?

A
  • Achieved an adequate level of knowledge & skill to operate under supervision
  • Passed regulatory module of an appropriate qualification
71
Q

What must advisers do before they can commence activities under an employer without supervision?

A
  • Pass all models of a appropriate exam
  • Able to demonstrate ability to act competently under minimum supervision
72
Q

When must the regulation module of a investment qualification be achieved?

A

Within 48 months of starting

73
Q

What are the below in relation to a competence?

  • Technical Knowledge
  • Skills & Expertise
  • Changes in the market & products, legislation & regulation
A

How firms maintain the competence of staff

74
Q

How many hours of Continued Professional Development (CPD) must a financial advisor must complete?

A

35 hours

75
Q

How many hours of Continued Professional Development (CPD) must be structured?

A

21 hours

76
Q

How long must records be kept for employees carrying out non-MiFID business?

A

3 years

77
Q

How long must records be kept for employees carrying out MiFID business?

A

5 years

78
Q

What must advisors obtain each year from an FCA accredited body?

A

Statement of Professional Standing (SPS)

79
Q

What are the below?

  • Details of prior competence
  • Initial Assessments
  • Training courses
  • Assessment by exam
  • Success in exams
  • Summary of discussions with supervisor
A

Records of competence assessment

80
Q
  • Contravening regulations
  • Providing false information
  • Falsifying documents
  • Acting outside of scope

Are all examples of what

A

Examples of misconduct by an authorised person

81
Q
  • Participating in money laundering
  • allowing persons who are not approved or certified to carry out functions within the remit of the SM&CR

Are all examples of what

A

Examples of misconduct by an authorised person

82
Q

What does the person appointed by the FCA have the power to do during an investigation?

A
  • Demand the person being investigated answer all questions
  • Any person (regardless of being investigated) answer all questions or provide information
83
Q

Which FCA enforcement power is this?

May involve removal of one of the firms permitted activities or a narrowing of the description of a particular activity

A

Variation of a firm’s permissions

84
Q

Which FCA enforcement power is this?

FCA might withdraw or suspend a person’s approval or certification to carry out some or all of their role

A

Withdrawal of approval

85
Q

Which FCA enforcement power is this?

If a person has contravened a regulation, The FCA can apply for an Injunction to prevent a person benefiting from that action

A

Injunction

86
Q

Which FCA enforcement power is this?

If a person has resisted from a contravention of regulation. The FCA can apply for a court order for the person to forfeit any profit made from the activity

A

Restitution

87
Q

Which FCA enforcement power is this?

If it can be shown that losses have been made identifiable. FCA can obtain a court order requiring losses to made good.

A

Redress

88
Q

Which FCA enforcement power is this?

If a authorised person or firm is guilty of misconduct. The FCA has a range of options regarding sanctions it might apply.

  • Issue a “warning notice”
  • Publish a statement of misconduct
  • Impose a financial penalty
A

Disciplinary Actions

89
Q

Which FCA enforcement power is this?

FCA can announce that it has begun disciplinary action again a firm. The FCA must consult the receiptant of the warning notice before making such an action

A

Disclosure

90
Q

Which FCA enforcement power is this?

  • Intensive supervisory Regime designed to deal with firms that have serious governance failings
  • FCA can enforce a range of actions which include requiring the firms board to commit to specified remedial action. The process of which can then be reviewed
  • FCA can impose binding requirements on a firm in respect of certain actions it must take
A

Enhanced Supervision

CeMAP Unit 2 (11 decks)

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