Unit 7 PRA/FCA Authorisation (12 of 80) Flashcards
Which activities are regulated?
dealing in investments as principal,
ancillary activities in relation to designated investment business,
home finance activity,
insurance mediation activity
accepting deposits,
the communication and approval of financial promotions
What are the FCA 12 principles?
- Integrity.
- Skill, care and diligence.
- Management and control.
- Financial prudence.
- Market conduct.
- Customers’ interests.
- Communication with clients.
- Conflicts of interest.
- Customers: relationships of trust.
- Clients’ assets.
- Relations with regulators.
- Consumer Duty.
What are the 5 purposes of the Senior Management Arrangements, Systems and Controls (SYSC)
- encourage firms’ directors and senior managers to take responsibility for their firm’s arrangements
- a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk-management systems
- encourage firms to vest responsibility for an effective and responsible organisation in specific directors and senior managers
- create a common platform of organisational systems and controls for firms subject to the CRD and/ or MiFID, and
- set out high-level organisational systems and control requirements for insurers, as well as for other firms covered by the SYSC requirements.
How should corporate governence be addressed?
Firms must have robust governance arrangements, which include clear organisational structure with well defined, transparent and consistent lines of responsibility and effective processes to identify, manage, monitor and report the risks that they are or might be exposed to
What are the compliance and internal audit regulatory requirements
> A firm must appoint an independent compliance officer who is responsible for the compliance function of the firm.
> A firm must establish and maintain an internal audit function, which is separate and independent from the other activities
What do Threshold Conditions represent and what are they?
Threshold conditions (TCs) represent the minimum conditions that a firm is required to satisfy, and continue to satisfy on an ongoing basis, in order to be approved and to retain Part 4A permission.
> Legal Status (PRA only)
> Location of offices – the head office and the place where the firm carries on business must be in the UK (PRA only)
> Prudent Conduct (PRA only)
> Effective supervision – firms must be capable of being effectively supervised by the FCA/PRA
> Appropriate resources – must be adequate and appropriate in relation to the business activities carried on/or to be carried on.
> Suitability – the firm must satisfy they are a fit and proper person having regard to all the circumstances
> Business model – It is important that firms must be able to demonstrate their ability to put forward an appropriate, viable and sustainable business model
What are the regulated specified investment types?
- Deposits
- Electronic money
- Rights under contracts of insurance
- Shares
- Instruments creating or acknowledging indebtedness
- Government and public securities
- Alternative finance investment bonds/alternative debentures – Shariah
- Instruments giving entitlements to investments – warrants
- Certificates representing certain securities – (ADRs),
- Units in a Collective Investment Scheme (CIS)
- Rights under a pension scheme
- Options
- Futures
- Contracts for differences (CFDs)
- Lloyd’s syndicate capacity and syndicate membership
- Rights under a funeral plan contract
- Rights under a regulated mortgage contract
- Rights under a home reversion plan
- Rights under a home purchase plan
- Rights under a regulated sale and rent back agreement
- Credit agreement (including Article 36H Agreement) .
- Consumer hire agreement.
- Rights to or interests in other specified investments
- Greenhouse gas emission allowance
What are the specific regulated activities?
- Accepting deposits
- Issuing e-money
- Effecting or carrying out contracts of insurance as principal
- Insurance risk transformation.
- Dealing in investments as principal or agent
- Bidding in emission auctions
- Arranging deals in investments
- Arranging home finance transactions
- Operating a multilateral trading facility (MTF)
- Operating an organised trading facility (OTF)
- Credit Broking
- Operating an electronic system in relating to lending
- Managing investments
- Assisting in the administration and performance of a contract of insurance.
- Activities in relation to Debt (Consumer Credit):
- Safeguarding and administering investments
- Advising on investments
- Sending dematerialised instructions and allowing dematerialised instructions to be sent
- Managing Undertakings for Collective Investment in Transferable Securities (UCITS)
- Establishing, operating and winding up a pension scheme
- Providing basic advice on stakeholder products
- Advising on the conversion or transfer of pension benefits
- Lloyd’s market activities
- Entering into a funeral plan contract
- Advising home finance transactions
- Agreeing to carry on specified kinds of activity.
- Activities of reclaim funds – ‘Dormant account funds’.
- Specified benchmarks.
What are the excluded investment activities?
> Exclusions from Dealing as Principal (marketmaking)
> A bank providing finance to another person
> A company or other organisation issuing its own shares
> Using options, futures and CFDs for risk-management purposes
> Advice in Newspapers
> Trustees
> Employee share schemes
> Overseas Persons
What is the purpose of the Perimeter Guidance Manual (PERG)?
to give guidance about the circumstances in which authorisation is required, or exempt person status is available, including guidance on the activities which are regulated
Which people are exempt?
> Appointed Representatives
> Recognised Investment Exchanges (RIEs) and Recognised Clearing Houses (RCHs)
> Miscellaneous Exempt Persons (the Bank of England, ECB, EIB, IBRD, IMF, EBRD
> Members of Lloyds
> Members of the Professions
- Accountants/Solicitors/Actuaries/Conveyancers/Chartered Surveyors
What happens if a Senior Manager is away from work for more than 12 weeks?
Where an ‘SMF’ is going to be absent from work for a period greater than 12 weeks but is expected to return, and their position is being left open by the firm, then the firm does not have to apply to remove their authorisation.
What is the FCA directory?
a single central location for information on Directory persons and senior managers at all FSMA firms across multiple sectors regulated by the FCA
Which activities require qualifications?
- certain advising and dealing activities
- acting as a broker fund adviser
- advising on syndicate participation at Lloyd’s, and
- acting as a pension transfer specialist
What are the 3 exemptions to passing qualifications?
- has at least three years’ up-to-date relevant experience in the activity, which they gained while employed outside the UK
- has not previously been required to comply fully with the relevant examination requirements, and
- has passed the relevant module of an appropriate examination.
