topic 18 - regulating firms & individuals

Question 1

The general prohibition

Answer 1

Section 19 of the Financial Services and Markets Act 2000 states that a person must not carry on a regulated activity or purport to do so unless they are an authorised or exempt person

Question 2

Senior manager regime (SMR)

Answer 2

• Focuses on individuals in key roles in relevant firms
• Where an individual applies for a senior management role, they must be pre-approved by the regulator.
• There is a statutory duty for senior managers to take reasonable steps to prevent regulatory breaches in their area of responsibility
• Penalties are wide potentially severe. Can even lead to a prison sentence of up to 7 years or an unlimited fine.

Question 3

Certification regime (CR)

Answer 3

• more junior roles, below senior management level, could still cause major damage to a business and its customers
• individuals in certified functions are not required to secure direct approval from the FCA but the firm certifies their fitness to carry out the role.

Question 4

Reporting to FCA if disciplinary action is taken

Answer 4

FCA requires firms to report within 7 days if they take disciplinary action against a senior manager breach

Question 5

Rules on fitness and propriety

Answer 5

References must be provided for the last 6 years
- For a senior manager role – criminal records and credit checks are completed

Question 6

Injunction

Answer 6

If a person has contravened a regulation, the FCA can apply for an injunction to prevent that person from benefitting from the action

Question 7

Restitution

Answer 7

If a person has benefited from a contravention of a regulation, the FCA can ask the court for an order requiring that person to forfeit any profit made form that activity

Question 8

Redress

Answer 8

If a person has benefited from a contravention of a regulation, the FCA can ask the court for an order requiring that person to forfeit any profit made form that activity

Question 9

Disciplinary action

Answer 9

If judged to be guilty of misconduct, the FCA can issue a warning notice/publish a statement of misconduct/impose a financial penalty

Question 10

Part 4A permissions

Answer 10

in order to carry out regulated activities, firms must have permission for each activity. Under Part 4A of the FSMA 2000