2. The Financial Services and Markets Act 2000 and Financial Services Act 2012

Question 1

IMPORTANT: What does general prohibition state? What happens if you go against general prohibition?

Answer 1

No person can carry on a regulated activity in the UK unless they are either authorised (by the PRA and/or FCA) or exempt from the requirement to be authorised.

Question 2

MEM & IMPORTANT: Criminal penalties: What is the maximum penalty for carrying out regulated activites without be authorised? Civil law consequences: What can happen to a contact entered into by a client if advisor carried on reg activities while authorised?

Answer 2

Criminal: Contravention is a criminal offence, max sanctions are up to 2 years imprisonment and an unlimited fine.
Civil:
-Also if the contravening party has made an agreement with another party, the party is allowed to recover any money or property transferred under an agreement and to be compensated for any loss (e.g. a broker who sold a stock in XYC company to Mrs A, but isn’t authorised, so Mrs A can sue the broker and get money back).
-The contract is voidable ith at the discretion (choice) of the client.
-Injunctions (preventing further harm e.g. shutting fown business/person conducting)

Question 3

If an authorised firm is conducting unauthorised regulated activities, this will be considered to be which ONE of the following?
AA criminal matter
BA civil matter
CA regulatory matter
DA due diligence matter

Answer 3

A) FSMA makes the breach of the general prohibition a criminal offence; therefore the criminal offence is the best answer.

Question 4

IMPORTANT: What is the definition of regulated activity and what order is it defined under?

Answer 4

Defined under the Regulated Activities Order: Specified activity undertaken with a specified investment.

Question 5

IMPORTANT: Which of the following constitutes a regulated activity under the FSMA 2000?
A Acting as a manager of an authorised unit trust
B Using options to limit identifiable risks as a jeweller
C Arranging deals in investments as a personal executor of a will
D Operating an employee share scheme for one’s employees

Answer 5

A

Question 6

MEM & IMPORTANT: Exempt persons from general prohibition/authorisation (6)

Answer 6

1. Appointed Representatives
2. Recognised Investment exchanges and clearing houses (run settlement systems for nearly all securities in UK and Ireland e.g. Euroclear)
3. Recognised Investment Exchanges e.g. LSE
4. Lloyd’s syndciate members/Lloyd’s of London (gather together to form a syndicate for insurance activities)
   5.Members of Designated Professional Bodies (e.g. Lawyers, accountants, surveryors, acturies, conveyencers.)
5. Other exempted bodies e.g. Bank of England, Central banks, supranationals, World Bank, IMF

Question 7

IMPORTANT Q: Members of which of the following professional bodies must be authorised by the FCA before they can give investment advice and charge a fee for doing so?
a) Chartered Institute of Securities and Investments (CISI)
b) Institute of Chartered Accountants in England and Wales (ICAEW)
c) Institute of Actuaries
d) Royal Institution of chartered surveyors (RICS)

Answer 7

A
Think about the exempt persons!

Question 8

Which of the following would not be exempt from requiring authorisation?
A
Recognised investment exchange
B
Appointed representative
C
Lloyd’s of London
D
Members of certain professions

Answer 8

C - it’s MEMBERS of Lloyd’s that are exempt. Lloyd’s of London is another way of saying Lloyd’s Syndicate.
I thought it was D originally because it didn’t say ‘bodies’ but I guess all people in those professions are members of the professional bodies.

Question 9

What question does the perimeter guidence manual answer?

Answer 9

Do I need Part 4A access/am I conducting specified activities in specified investments?

Question 10

IMPORTANT: A client has purchased a National savings &Investments (NS&I) bond, depositary receipts and local authority loan stock. Which of these are specified investments under the Regulated Activies Order?

Answer 10

Depositary Receipts and loan stock only. NS&I is specifically excluded

Question 11

IMPORTANT: For which type of product must a financial adviser be fully qualified before giving advice, even under supervision?
1. Securities
2. Non-investment insurance
3. Cash ISAs
4. Friendly society endowments

Answer 11

1. Securities

Question 12

IMPORTANT: For which of the following activities must a person be fully qualified before performing the role, even under supervision?
a) providing basic advice
b) acting as a pension transfer specialist
c) advising on non-investment insurance
d) dealing in securities

Answer 12

B

Question 13

IMPORTANT: Which one of the following activities is regulated in accorance with FSMA 2000 (RAO)?
1. Provising BBG share price informaiton
2. Writing tip sheets
3.Writing a newspaper column advising on investments
4. Hositng a financial programme on television

Answer 13

if the principal purpose of a publication was the provision of investment advice (i,e, tip sheets) then the authorisaton would be required.
Newspapers and broadcasters have a specific exemption and so do providers of factual share price info.

Question 14

IMPORTANT: Spectified investments with the Regulated Activities Order (RAO)

Answer 14

Ones you’d expect:
-Shares/depositary receipts (certificates representing shares)/Warrants
-Debt instruments e.g. bonds, Gilts, loan stock (unsecured corp bonds)
-Units in collective investment schemes (unit trust/open ended investment company (OEIC)/ investment company with variable capital (ICVC)/ Hedge funds
-Options
-Futures
-Contracts for difference (CFDs) e.g. swaps and spread bets

Ones you’d not expect:
-Lloyd’s syndicates (society for insurance), insurance contracts, funeral plan contracts
-Pensions
-Regulated mortgages and home finance
- Deposits and electronic money
- Rights to specified investments, e.g. sale & repurchase agreements (Repos) (using as collateral for loans
-Loans and other forms of credit
-Emissions auction products (e.g. carbon credit)
- Benchmarks e.g. LIBOR
- Forward rate agreement
-Floating rate agreement

Question 15

According to the Regulated Activities Order 2001, which of the following are specifiedinvestments?
A
Commercial property, including buy-to-let investments
B
Gold bullion
C
Insurance covering vehicle breakdown
D
Units in a collective investment scheme

Answer 15

D -
Learn the list and be confident. Tangible assets and car breakdown insurance are not specified investments (physical stuff)

Question 16

IMPORTANT: Specified activities under the RAO (regulated activities order)

Answer 16

One’s you’d expect:
-Dealing in investments
-Arranging deals in investments
-Managing investments
-Advising on investments
-Operating a multilateral or organised trading facility (MTF or OTF)

One’s you wouldn’t expect:
-Safeguarding and administering investments e.g. acting as a custodian
-Sending dematerialised instructions e.g. electronic money transfer
-Lloyd’s activities, insurance activities and providing funeral plan contracts
-Mortgages: provisions, administration, advising and arranging
-Home finance activities
-Managing dormant account funds
-Accepting deposits by way of business and issuing electronic money
-Providing credit insurance or credit information services
-Establishing, operating or winding up a collective investment scheme or pension scheme
-Agreeing to carry on most regulated activities

Question 17

IMPORTANT Q: Does a firm that accepts deposits from customers need to be regulated and authorised to carry out this activity?

Answer 17

Yes, we know that if a business is carrying on a regulated activity (and deposit taking is one) then it must either be authorised or exempt.

Question 18

What is dealing is a principal in shares and bonds and why is it excluded from general prohibition?

Answer 18

Someone is excluded if individuals or companies are not in the business of dealing in investments and which invest only for THEMSELVES in the hope of making a profit.

Question 19

What is NOT an exclusion in Newspaper/Media investment advice

Answer 19

If the principal of a publication is the provision of investment advice, with the view to encourage investors to undertake investment activity, authorisation is required - TIP SHEETS

Question 20

MEM & IMPORTANT Q: Exclusions relating to regulated activity (not requiring authorisation/Part 4A)

Answer 20

-Dealing as principal and end used (for yourself only)
-Primary market sale or buyback (company issues shares to public or buyback from public)
-Derivatives for risk management (hedging)
-Precious metals
-Foreign exchange
-NS&I Premium bonds (not actually bonds)
- Group or Joint Enterprises - Firms undertaking intra-group dealing (SUBSIDIARY provides services to parent)
- Advice in Newspapers and other media - unless it’s a tip sheet
-Providing information (Bloomberg, Reuters etc)
- UNPAID Trustees, Nominees and Personal Representatives - acting as the representative of the other party, e.g. executer of someone’s will or charity worker.
- Employee Share Schemes - Companies to set up schemes enabling employees to hold shares in the company they work for
- Oversees Persons - They carry on regulated activity from a permanent place of business outside of the UK.

Question 21

In relation to rules governing regulated and unregulated activities, Part 9A of
theFinancial Services and Markets Act 2000
empowers the FCA to do which one of the following?
A
Make rules that are legally binding on authorised firmsconcerning regulated activity only
B
Suggest rules to HM Treasury that would be legally binding onauthorised firms concerning regulated activity only
C
Create rules that are legally binding on authorised firmsconcerning regulated activity and also activity that is notregulated
D
Propose rules to HM Treasury that would be legally binding onauthorised firms concerning regulated activity and also activitythat is not regulated

Answer 21

C

Question 22

A defence against a charge of carrying out a regulated activity without authorisation could be:
AManaging own portfolio
BThey did not believe that it was a regulated activity
CThey had applied and were awaiting confirmation
DThey dealt on their own account and held themselves out to others

Answer 22

A - dealing for yourself is excluded from the need of getting authorisation

Question 23

A subsidiary company acts as broker for its parent company and arranges a deal in the shares of a public company. Which of the following statements is true?
AThe subsidiary company is performing a regulated activity and requires Part 4A permission under the RAO
BArranging deals in the shares of public companies is not a regulated activity so no Part 4A permission is required
CAs the activity is conducted within the company group, it creates an exclusion from the need for Part 4A permission
DAs the activity is conducted within the company group, a breach of conflict of interest rules has occurred

Answer 23

C, a subsidiary is excluded from the need to get part 4a,; don’t need to specify if parent is authorised or not.

Question 24

IMPORTANT: What is the regulatory states of a trustee or personal representative carrying out regulated activities for which they are separately remunerated?

Answer 24

They are required to be authorised. Trustees or personal representatives carrying out regulated activities for which they are separately renumerated require authorisation. There’s an exclusion under FSMA 2000 from the need for authorisation if a person carrying on a regulated activity is a trusee or personal representatives and not receiving renumeration for providing investment services.

Question 25

IMPORTANT Q: An exclusion from the need for authorisation under the FSMA 2000 regulated Activities Order applies to which specfic category of individual? 1. Trustees 2. Fund Managers 3. Politically exposed persons 4. Board Directors

Answer 25

1. Trustees

Question 26

IMPORTANT Q: Is a market maker required to be regulated and authorised when carrying out on such activity for a firm?

Answer 26

Yes, people acting as market makers and who regularly solicit the public with the purpose of inducing them to deal are required to be authorised or exempt.

Question 27

IMPORTANT Q: Exemptions of the FSMA: Appointed Representatives, what are they? How are they exempt?

Answer 27

It's a person who has entered into a contract with an authorised person (the principal) for the purpose of conducting regulated activiity. The authorised person becomes the principal and accepts legal responsibility for the regulated activity conducted by the appointed representative. The principal must conduct reviews of suitability and conduct of the authorised representative. However, some people within an appointed representative firm must be approved for controlled functions like governors and individuals who perform customer functions.

Question 28

What are Recognised Investment Exchanges (RIEs) and Recognised Clearing Houses (RCHs)? Who regulates?

Answer 28

The formal exchanges conducts the trading&issuance of securities. A clearing system is connected to the formal exchange and it facilitates the settlement of the trades that take place. FCA regulates , recognises and supervises changes and clearing houses. Once the exchange/clearing house is recognised by the FCA, they are referred to as Recognised Investment Exchanges (RIEs) and Recognised Clearing Houses (RCHs) and these are EXEMPT PERSONS once recognised. Therefore they don't have to seek authorisation from the FCA to carry out regulated activities. They are exempt fromg eneral prohibition under the FSMA.

Question 29

IMPORTANT Q: Investment exchanges in London have to be recognised by which organisation? a) LSE b) FCA c) PRA d) BoE

Answer 29

B - FSMA gives the FCA responsibility of recognising, regulating and supervising exchanges and clearing houses. Think about FCA responsibilities!

Question 30

What are central banks exempt from?

Answer 30

Exempted from the need to be authorised to carry on any regulated activity exept from carrying out contracts of insurance.

Question 31

Who are exempt from the need to be authorised for the regulated activity of accepting deposits?

Answer 31

Muncipal banks, local authorities and charities

Question 32

IMPORTANT What are the five professions where individual firms are permitted to carry on particular regulated activities without the need to apply to the regulators for authorisation? Who do they require permission from instead?

Answer 32

Accountants. Solicitors. Actuaries. Chartered surveyors. Licensed conveyancers. Required to apply to their relevant professional body for permission to conduct the activities.

Question 33

**IMPORTANT**: What permission does the FRA and/or PRA grant for a person to be authorised?

Answer 33

Part 4A permission - means that authorisation is granted. Can carry out designated regulated activities without breaching general prohibition. It specifies precisely which regulated activities the firm can carry on, the investments those activities may related to and any further requirements/special conditions attached to the permission. The activities which a firm is given permission to conduct can be limited. E.g. it may be permitted to deal as principal but only for a particular type of client.

Question 34

What's the process if a firm is likely to be dual-regulated? Who do they apply to?

Answer 34

The firm will make a single application (application pack) to the PRA as its lead regulator. If the FCA consents to the firm's authorisation, the PRA has the final decision whether to authorise.

Question 35

Who is the regulator of insurance firms?

Answer 35

PRA: need to make sure there's money for claims!

Question 36

**IMPORTANT Q**: What are the Threshold Conditions (TCs) for bring granted and remaining to have Part 4A permission? I.e. how do we get it?

Answer 36

- Legal status in UK / solo: N/A / dual reg (DR): PRA -Location of offices (needs to be UK) / solo: FCA / DR: PRA -Effective supervision (disclose close links e.g. significant shareholder)/ solo: FCA/ DR: FCA & PRA - Appropriate resources (sufficient finance and staff etc)/ solo: FCA/ DR: N/A -Appropriate non-financial resources: solo: FCA/ DR: FCA -Prudent conduct: solo: N/A / DR: PRA -Suitability (fitness and propriety): solo: FCA / DR: FCA & PRA -Business model (impact on FCA objectives): Solo: FCA / DR: FCA

Question 37

IMPORTANT Q: Q: Which of the following threshold conditions applies to PRA regulated firms only? a) suitability b) effective supervision c) Legal status d) business model

Answer 37

C

Question 38

IMPORTANT Q: The threshold condition of location of offices requires UK registered company to have its head office registered in which geographical area? a) EEA b) EU c) UK d) UK or EU only

Answer 38

C

Question 39

MEM & IMPORTANT: How long does it take to get a decision to be granted authorisation?

Answer 39

Up to 6 months (can grant, refuse or authorisation with limitations (some of the activities applied for but not all)

Question 40

Senior Manager and Certification Regime (SM & CR) aka Individual Accountability Regime: 4 types of staff/functions, who are approved by regulator, who are subject to the fit and proper test? Who are subject to conduct rules?

Answer 40

1. Senior Management Functions - NEED PRIOR APPROVAL FROM REGULATOR and FIT AND PROPER TEST and SUBJECT TO CONDUCT RULES 2. Certification Functions (client dealing/significant harm functions): NEED CERTIFICATE ISSUED BY FIRM, SUBJECT TO FIT AND PROPER TEST AND SUBJECT TO CONDUCT RULES 3. Other conduct rules staff (e.g. general compliance, legal, middle office, operations) SUBJECT TO CONDUCT RULES] 4. Ancillary staff: catering, hospitality, health and safety staff. Not subject to any rules

Question 41

Fatima's role involves dealing with customers, specified as a significant harm function bythe regulator. Under the certification regime, which of the following is true? A Fatima needs regulatory pre-approval by the regulator beforeperforming the role B Fatima needs to be certified by her firm before performing therole only C Fatima needs to be certified by her firm before performing therole and annually thereafter D Fatima could perform the role without the need for anassessment of fitness and propriety

Answer 41

C - this is the fit and proper test

Question 42

All of the following are specified by the FCA as a certification function except: A Material risk takers B Dealing directly with clients C Supervisors of Certification Functions D Information providers

Answer 42

D - Certification functions are: CASS oversight, proprietary trader, significant management, functions requiring qualifications, managers of certification functions, material risk takers and client dealing

Question 43

Which of the following functions in an authorised firm is LEAST likely to require approvalunder the individual accountability regime? A Chief Financial Officer B Manager responsible for certified persons C Money laundering reporting officer D Customer advisor on investments

Answer 43

D - it is the most likely to require certification, notapproval.. B means like a head of a team or dept.

Question 44

Which one of the following conduct rules applies to all persons captured by the SM&CR regime? You must: ATake reasonable steps to ensure the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system BTake reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively CDisclose appropriately any information of which the FCA or PRA would reasonably expect notice DObserve proper standards of market conduct

Answer 44

D) all staff are subject to conduct rules

Question 45

Examples of SMFs (senior manager functions)

Answer 45

Chief of -, Chair, DIrector, Compliance oversight, Money laundering money officer (MLRO)

Question 46

IMPORTANT: What does the Accountability Regime set out?

Answer 46

1. Prescribe responsibility for different SMF functions - set out in a statement of responsibilities signed by SMF and sent to regulator & kept for 6 years 2. Responsibilities map - enhance transparency on reporting lines 3. Senior managers have duty of responsibility and prove how they do this and stop/remedy breaches

Question 47

MEM & *IMPORTANT*: When should the fit and proper test be done?

Answer 47

On appointment and annually of a certication function and SMF

Question 48

*IMPORTANT*: The Fit and Proper Test: what are the 3 things

Answer 48

1. Honesty, Integrity and reputation -Employment history (6 years) -criminal convictions (no time limit) -breaches of FCA/PRA rules -complaints 2. Competence and capability -exam success -experience and training 3. Financial soundness -Bankruptcy, default on loans

Question 49

*IMPORTANT Q*: A regulatory reference must capture a candidate's employment going back how many years?

Answer 49

6 years

Question 50

IMPORTANT: What does the firms fill in to get approval from regulators for SMFs and by when should they be informed?

Answer 50

Firms use Form A to apply on behalf of SMFs Should be informed within 90 days.

Question 51

*MEM & IMPORTANT*: Individual Conduct Rules

Answer 51

1. Must act with integrity (a breach would be deliberate) (1st FCA principle) 2. Act with skill, care and diligence (a breach would be careless) (2nd FCA principle) 3. Open and co-operative with the FCA, PRA and other regulators (breach would be failure to inform FCA of anything of a nature that it would reasonably expect to be informed) (11th FCA principle) 4. Must pay due regard to the interests of customers and treat them fairly (6th FCA principle) 5. Observe proper standards of market conduct (a breach would be failure to comply with the code of market conduct) (5th FCA principle)

Question 52

Which one of the following conduct rules applies to all persons captured by the SM&CR regime? You must: A Take reasonable steps to ensure the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system B Take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively C Disclose appropriately any information of which the FCA or PRA would reasonably expect notice D Observe proper standards of market conduct

Answer 52

D - remember individual conduct rules Market conduct is one of them!

Question 53

Which of the following best describes the FCA's attitude with regard to the enforcement ofthe Principles for Business? A A firm can be prosecuted for failure to comply with theprinciples B The FCA will fine firms for violation of the principles C FCA firms can be disciplined because of a principle violation D The FCA doesn't enforce the principles

Answer 53

C Not A - cannot be CRIMINALLY prosecuted for a breach of principles, but can be disciplined. FCA can only proscute in relation to Insider dealing

Question 54

Which of the following is a breach of the 'Integrity' Conduct Rule? AFailure to explain the risks of a derivative to a retail client BMisleading a client about a transaction CNot sending out a client agreement to an eligible counterparty DTrading on inside information

Answer 54

B ) The first breach (Failure to explain the risks of a derivative) would be of skill, care and diligence. The second breach (Misleading a client about a transaction) would be a breach of integrity. Not sending out a client agreement to an eligible counterparty is not a breach, and trading on inside information is a breach of the Market Conduct rule.

Question 55

Which of the following would be a breach of the Conduct Rule 'Integrity'? A Misleading a client by providing false information B Failing to take reasonable steps to apportion responsibilitiesclearly amongst those to whom responsibilities have beendelegated C Permitting transactions without a sufficient understanding ofthe risks involved D Accepting implausible or unsatisfactory explanations fromsubordinates without testing the veracity of those explanations

Answer 55

A

Question 56

IMPORTANT Q: Is the SMF 1 (Chief Executive) a PRA or FCA-designated function?

Answer 56

PRA

Question 57

MEM & IMPORTANT: What's the maximum penalty to fail to co-operate and providing false/misleading evidence when the regulators require information/documentation whilst supervising?

Answer 57

2 years in prison or an unlimited fine

Question 58

Mem& Important: Supervision of firms: Co-operation (the fca/pra has the legal power to demand info/docs) and the section numbers

Answer 58

S165 - Must be provided within a reasonsable time frame S167 - Direct the firm to appoint competent persons to provide FCA/PRA with any required info S168 - Appoint a 3rd party to carry out investigation S177 - Failure to co-operate and providing sale or misleading evidence is a criminal offence.

Question 59

IMPORTANT: What is 'the directory'? What does it do?

Answer 59

A new public register checking the details of key people working in the financial services industry.

Question 60

*IMPORTANT Q*: Which act provides the legal basis for the protection of whistleblowers?

Answer 60

Public Interest Disclosure Act (PIDA) 1998

Question 61

Who do the rules on Whistleblowing apply to?

Answer 61

Deposit takers (banks, building societies and credit unions) with over £250million in assets and insurers subject to the Solvency II Directive. They are non-binding guidance for all other firms.

Question 62

*IMPORTANT*: What is a whistleblowers' champion? Who should this be?

Answer 62

Under the SMCR, some firms (banks with the deposit-taking permission and insurance companies) are required to appoint a whistleblowers' champion. Their responsibility is to ensure and oversee the integrity, independence and efectiveness of the firm's policies and procedures on whistleblowing. This includes P&P's intended to protect whistleblowers from being victimised. Should be a non-executive director or a senior manager if a bank doesn't have one.

Question 63

Whistleblowing procedures within an authorised firm should: A Ensure all concerns are escalated to the responsible senior manager B Keep the progress on any investigation confidential, even from the whistleblower C Provide a single method of disclosure to be used by employees and other relevant staff D Include the preparation of an annual report on the effectiveness of the procedures

Answer 63

D - not C because disclosures should be able to be made through a range of methods. not B because firms should provide feedback to the whistleblower where feasible and appropriate and not A because ensure concerns are assessed and escalated where appropirate, not necessarily the senior manager (could be about them).

Question 64

IMPORTANT: What happens when the regulator raises an investigation on a firm? General stages

Answer 64

-Investigation launched -Regulator puts together preliminary findings Either: -They find a tiny problem that has pushed boundaries but not far enough for disciplinary action, they issue a PRIVATE WARNING and this stays on their record if a problem arises again. OR: -Regulator hands over to Regulatory Decisions Committee to investigate further -RDC issue a: -Firstly a Warning notice (inform the recipient that the regulatory has the intention of providing disciplinary action, can be published with consent); Supervisory notice (things going wrong but we can help put them right -> leading to support) or Notice of Discontinuance (shouldn't discipline) can happen any time -Firms can respond and can their side of the story - Then a Decision Notice (decided to take disciplinary action), supervisory notice or Notice of discountinuance -The firm can apppeal to the Upper Tribunal within 28 days -Then Final decision ('we are going to take disciplinary action on this date', will be published), Final supervisory ('we are going to help on this particular date'), Notice of discontinuance -Disciplinary measures

Question 65

Can a third party appeal to the Tribunal on behalf of an authorised firm against a decision notice? A Yes, if the appeal is made within 28 days of the notice being issued B No, unless the time limits for the disciplinary procedures are extended C Yes, if all other parties agree to this appeal being made D No, only the firm to whom the notice was issued can appeal

Answer 65

A

Question 66

Which of the following is TRUE of the statutory notices issued by the RDC? A A decision notice may suggest actions that differ from thewarning notices B There is no right to appeal against a supervisory notice C There is no right to appeal a further decision notice D A supervisory notice will lead directly to disciplinary action

Answer 66

A - not C. You can only not appeal for final notice.

Question 67

The FCA intend to take action against a firm for a breach of a rule. Which of the followingwill inform the firm of the action proposed? AWarning notice BDecision notice CFinal notice DNotice of discontinuance

Answer 67

A The warning notice gives the recipient details about the action proposed and why the FCA proposes to do so, INTENTION, so havent DECIDED they definitely will discipline

Question 68

The FCA has decided to discipline a firm or employee for a breach of a regulation. Whichof the following notices are used to inform them? A Supervisory notice B Warning notice C Decision notice D Enforcement notice

Answer 68

C - deffo going to discipline: just don't know how or when yet (that will come in Final Notice).

Question 69

*IMPORTANT* Q: What does the Regulatory Decisions Committee (RDC) have the power to do?/key responsibilities, who are the RDC accountable to?

Answer 69

FCA/PRA hand over an investigation to the RDC if they find a problem to issue statutory notices (warning/decision/final decision notices or supervisory/final supervisory Notice). They then have the power to refuse an application for Part 4A permission or cancel an existing permission. They are independent of the FCA, but close links as they are a committee in the FCA and accountable to them, but the perople deciding are independent of people launching the investigation initially.

Question 70

MEM & IMPORTANT: Which body has the power to refuse an application for Part 4A permission or cancel an existing permission? A Financial Conduct Authority B Training and Competence Committee C Regulatory Decisions Committee D Prudential Regulation Authority

Answer 70

C ) after an investigation

Question 71

Following an FCA investigation, the Regulatory Decisions Committee can issue a range ofstatutory notices. What is the best description of a warning notice? A Sent by the RDC when the RDC believes no wrongdoing hasbeen done but proper procedures have not been followed B Sent by the FOS when a customer complaint has not beenresolved C Sent by the FSCS if a firm is in danger of becoming insolvent D Sent when the FCA believes that there is sufficient evidence tosuggest wrongdoing has taken place and it intends todiscipline

Answer 71

D - The warning notice is sent after the FCA investigation. A firm can make a representation to the RDCbased on this notice.

Question 72

**IMPORTANT Q**: The 3 types of Statutory Notices

Answer 72

1. Warning Notices 2. Supervisory Notice 3. Decision Notices - there could also be a further decision

Question 73

Important: What statuatuory notices can lead to appeal?

Answer 73

Decision notice and Supervisory notice

Question 74

Important: Which statutuory notices can be published?

Answer 74

Final and supervisory notices can be published and the warning notice can be published with consent. The reason you would give consent for warning is to show the regulator that you are being cooperative.

Question 75

IMPORTANT: Which of the following pieces of info is given in a decision notice issued by te FCA? 1. Decision not to proceed with the action 2. Details of the effective date 3. Right of appeal by the recipient 4. Terms of the final action

Answer 75

3. Right of appeal by the recipient

Question 76

*IMPORTANT Q*: Different disciplinary measures

Answer 76

-Public statements of misconduct -Public Censures (formal expression of severe disapproval) -Financial penalties -Prosecution if a crime -Restitution order (reg apply to the courts which foreces the firm to restore to position they were in before they started providing to that client). -Prohibition order (can only get fined for this, not imprisonable) -Issue a private warning -Take supervisory action e.g.: varying/cancelling firm's part 4A/removing authorisation, withdrawing regulatory approval for a persion performing an SMF

Question 77

IMPORTANT Q: What are examples of remedial or protective actions from the FCA?

Answer 77

1. Issuing a private warning 2. Varying or cancelling a firm's part 4A permission 3. Withdrawing regulatory approval to perform a senior management function 4. Prohibiting an individual from performing a particular role in relation to a regulated activity.

Question 78

IMPORTANT: One of the prescribed situations which could cause the FCA to withdraw a firm's Part 4A permission would be where: 1. The firm is overdrawn at its bank for more than six months 2. The firm employs an individual who has previousy fialed that fit and proper test 3. The firm gives poor advice to a client on more than 6 occasions 4. The firm's regulated activities have come to an end

Answer 78

4.The firm's regulated activities have come to an end and has not applied for cancellation of its part 4A permission.

Question 79

IMPORTANT Q: What is a Private Warning? What is the aim?

Answer 79

Issued by the regulator when the behaviour of the firm/individual is wrong but they decide it's not appropriate to bring formal disciplinary action. E.g.'s include cases of potential/unproven market abuse or where the FCA considered making a prohibition order but decided not to. It's helpful to let the recipient know so they have to seriously consider that person's ability to carry out the SMF. The benefit is that it avoids reputational damage from public sanctions. The recipient needs to acknowledge receipt and give an appropriate response. It stays on the company's record.

Question 80

IMPORTANT: Which one of the following statutory notices gives the recipient the right to make representations to the FCA? 1. Decision Notice 2. Final Notice 3. Supervisory Notice 4. Warning Notice

Answer 80

4. Warning . Not the same as appealing.

Question 81

Difference between when Public censure and Statement of Misconduct are issued

Answer 81

Public Censure - when FIRMS have contravened a requirement imposed by the regulator State of Misconduct - for INDIVIDUALS if a person has failed to comply with conduct rules, senior conduct rules or knowingly been involved in a firm's contravention of a requirement. Warning notice, followed by decision notice and provides firm with the right to appeal to the Upper Tribunal

Question 82

The Tax and Chancery Chamber of the Upper Tribunal is operated by: AThe PRA BTrading Standards CAn independent body of financial practitioners DA government department

Answer 82

D

Question 83

The role of the Upper Tribunal

Answer 83

After receiving a decision notice, any person has the right to refer the regulator's decision to the Upper Tribunal within 28 days of receiving the notice. The regulator must give the firm 28 days to decide. It's independent of the regulator and appointed by the Government's Ministry of Justice. Involves a full rehearing of the case and evidence whether the regulator's decision was appropriate.

Question 84

Important: Powers of Intervention and enforcement FSA 2021, what do they say can be banned and for how long?

Answer 84

FCA can be products posing unacceptable risks to consumers - can be banned ffor up to 12 months without consultation. Allows time to makea permanent rule. FCA can ban financial promotions deemed to be misleading - no need to go through normal enforecement process as it's too slow.

Question 85

IMPORTANT: A client has purchased a National savings &Investments (NS&I) bond, depositary receipts and local authority loan stock. Which of these are specified investments under the Regulated Activies Order?

Answer 85

Depositary Receipts and loan stock only

Question 86

IMPORTANT: Which one of the following activities is regulated in accurance with FSMA 2000 (RAO)? 1. Provising BBG share price informaiton 2. Writing tip sheets 3.Writing a newspaper column advising on investments 4. Hositng a financial programme on television

Answer 86

if the principal purpose of a publication was the provision of investment advice (i,e, tip sheets) then the authorisaton would be required. Newspapers and broadcasters have a specific exemption and so do providers of factual share price info.

Question 87

IMPORTANT: What power does the FCA have under s.165 of FSMA 2000? 1.Impose a financial penalty of a firm for a rule breach 2. prohibit an authorised firm form transacting business 3. Require Information about an authorised person 4. Vary a firm's Part 4A permission where it fails to meet a threshold condition

Answer 87

3. Require Information about an authorised person

Question 88

IMPORTANT: If a firm has allowed a controlled function to be carried out without prior approval, what redress does a private person have under Section 71 of FSMA? 1. A privateperson has no direct means of seeking redress, it is for the FCA to take action 2. They can apply for the FSCS for reimbursement of their inital investment costs only 3. a Private individual can only claim compensation for breaches of limited number of specified controlled 4. They can sure the firm for damages if they suffer loss

Answer 88

4. They can sure the firm for damages if they suffer loss

Question 89

IMPORTANT: Which one of the following measures is most likely to be used by the FCA where a firm no longer meets its threshold conditions? 1. Financial penalty 2. Public Censure 3. Prohibition 4.Variation of Part 4A permision

Answer 89

4. Where a firm is no longer able to meet the threshold conditions to one or moreof its regulated activiites, the FCA would be likely to issue a variation of Part 4A permission to limit its ability to perform reg activities to those areas where it still meets the threshold conditions.

Question 90

IMPORTANT: Giving investment advice in the money column of a national newspaper is: 1. Only permitted by an authorised person 2. An excluded activity under FSMA 2000 3. Covered by the execution-only selling rules 4. Subject to compliance sign-off by an authorised firm

Answer 90

2. if a newspaper includes investment advice and that is not the principal purpose of the newspaper, then it's excluded form the regulated activity of advising on investments,

Question 91

IMPORTANT: A firm's application for FCA authorisation was rejected. Under what circumstances, if any, will the application fee be refunded? 1. Always 2.Only if the application was for advising and arranging 3. Only if the application was for managing investments 4. Never

Answer 91

4 Never. Neither is the the PRA's fee.

Question 92

MEM & IMPORTANT: What's the maximum penalty to fail to co-operate and providing false/misleading evidence when the regulators require information/documentation whilst supervising?

Answer 92

2 years in prison or an unlimited fine

Question 93

IMPORTANT Q: Which one of the following types of specified investment might represent a foreign investor's rights over a UK company's shares? a) bonds b) depository receipts c) Futures d) Unit trusts

Answer 93

B) rights over shares /certificates that represent shares

Question 94

IMPORTANT Q: What is the position of a trustee with regard to FCA authorisation under FSMA 2000 (Regulated Activities Order)? a) If the settler and beneficiary of the assets are authorised, the trustee doesn't need to be authorised b) As the trustee has legal ownership of the assets, the trustee must be authorised c) A trustee that does not offer investment services does not need to be authorised d) The size of the trust business will dictate the need for authorisation

Answer 94

C Think about the exempt activities: Unpaid trustees. Also think about the RAO: specified activity undertaken on specified investments. Trustees aren't one of these. A trustee is an overseer of a manager of a portfolio, they make sure the manager is acting in best interests of investors of a portfolio.

Question 95

IMPORTANT Q: What type of approach does the FCA take towards the supervision of firms? a) Measurement-based b) model-based c) principles-based d) risk-based

Answer 95

d

Question 96

IMPORTANT Q: The financial services act 2012 gave the FCA additional enforcement powers in relation to which specific form of selling? a) Short selling b) Execution-only selling c) Online selling d) Platform selling

Answer 96

A Short selling disclosure rule-making powers to impose financial penalties those who breach short-selling rules

Question 97

MEM & IMPORTANT Q: Julie began her new career with a firm of independent financial advisers in June. By what LATEST date must she obtain the full qualification as a financial adviser if she is to avoid having to cease carrying out her duties, even under supervision? a) June one year hence b) December one year hence c) June 2 years hence d) December two years hence I.e. what is the max number of months that someone has to obtain full qualification?

Answer 97

D Max number of months is 30.

Question 98

IMPORTANT: Which activity falls within the scope of the Training and Competence Sourcebook and requires an individual to have a full qualification before commencing that activity? A Providing basic advice on stakeholder products B Advising on friendly society tax-exempt policies C Advising on regulated sale and rent back agreements D Providing advice on non-investment insurance products

Answer 98

B

Question 99

MEM & IMPORTANT: What is the MAXIMUM level of settlement discount normally available in relation to an enforcement penalty imposed by the FCA? A 15% B 25% C 30% D 40%

Answer 99

C

Question 100

Steve is a director within a broking firm. Under the general requirements in the Senior Manager Arrangements, Systems and Controls Sourcebook, the FCA would expect Steve to have which of the following characteristics? AAn appropriate career history and qualifications BAn ability to transcend the need to segregate duties within the firm CSufficient remuneration to ensure he remains at the firm DHe must be of good repute and sufficiently experienced

Answer 100

D Though fit and proper tests for SM & CR will test career history and qualifications/exam success

Question 101

**IMPORTANT**: Spectified investments with the Regulated Activities Order (RAO)

Answer 101

Ones you'd expect: -Shares/depositary receipts (certificates representing shares)/Warrants -Debt instruments e.g. bonds, Gilts, loan stock (unsecured corp bonds) -Units in collective investment schemes (unit trust/open ended investment company (OEIC)/ investment company with variable capital (ICVC)/ Hedge funds -Options -Futures -Contracts for difference (CFDs) e.g. swaps and spread bets Ones you'd not expect: -Lloyd's syndicates (society for insurance), insurance contracts, funeral plan contracts -Pensions -Regulated mortgages and home finance - Deposits and electronic money - Rights to specified investments, e.g. sale & repurchase agreements (Repos) (using as collateral for loans -Loans and other forms of credit -Emissions auction products (e.g. carbon credit) - Benchmarks e.g. LIBOR - Forward rate agreement -Floating rate agreement

Question 102

IMPORTANT: Specified activities under the RAO (regulated activities order)

Answer 102

One's you'd expect: -Dealing in investments -Arranging deals in investments -Managing investments -Advising on investments -Operating a multilateral or organised trading facility (MTF or OTF) One's you wouldn't expect: -Safeguarding and administering investments e.g. acting as a custodian -Sending dematerialised instructions e.g. electronic money transfer -Lloyd's activities, insurance activities and providing funeral plan contracts -Mortgages: provisions, administration, advising and arranging -Home finance activities -Managing dormant account funds -Accepting deposits by way of business and issuing electronic money -Providing credit insurance or credit information services -Establishing, operating or winding up a collective investment scheme or pension scheme -Agreeing to carry on most regulated activities

Question 103

The FCA intend to take action against a firm for a breach of a rule. Which of the followingwill inform the firm of the action proposed? AWarning notice BDecision notice CFinal notice DNotice of discontinuance

Answer 103

A The warning notice gives the recipient details about the action proposed and why the FCA proposesto do so

Question 104

As part of the requirements set out in SYSC, which of the following is TRUE? A Responsibilities must be split equally among all directors B All firms must maintain clear apportionment of significantresponsibilities among directors C Records of responsibilities must be held for a five-year periodof time D Directors cannot be held liable for rule breaches by employees

Answer 104

B - not A because doesn't have to be split equally.

Question 105

2x In the event that a firm breaches the general prohibition under S19 of the FinancialServices and Markets Act 2000, which of the following is TRUE? A All of the firm's contracts are void B Any agreements with the firm are unenforceable against the client C Contracts are voidable at the discretion of the court D Contracts are voidable at the discretion of the FCA

Answer 105

B. Contracts can be voided with discretion of the client.

Question 106

Section 168 of the Financial Services and Markets Act 2000 permits the FCA to appointcompetent persons to carry out investigations on its behalf if: A An offence has been committed B Too many complaints have been received C The firm is being liquidated D The Ombudsman insists that this is the case

Answer 106

A

Question 107

According to the Regulated Activities Order 2001, which of the following are specifiedinvestments? A Commercial property, including buy-to-let investments B Gold bullion C Insurance covering vehicle breakdown D Units in a collective investment scheme

Answer 107

D - Learn the list and be confident. Tangible assets and car breakdown insurance are not specified investments (physical stuff)

Question 108

Where would a firm seeking authorisation to perform certain regulated activities find thestatutory procedures for seeking permission to perform regulated activities? A The Financial Services and Markets Act B The Criminal Justice Act 1993 C The Financial Services Act 2012 D The Companies Act 2006

Answer 108

A - authorisation is all FSMA. Not C- only thing relating to FSA is the 'powers of intervention and enforcement' = fca can ban products with unacceptable risk for up to 12 months and ban fin promos deemed to be misleading.

Question 109

If an applicant for approved person status has a criminal history covered by theRehabilitation of Offenders Act 1974 which of the following describes the right of the FCA to take thisinto account? A It will not be taken into account B It might be taken into account if relevant C It would be taken into account if the offence occurred withinfive years D It would be taken into account if the offence occurred within tenyears

Answer 109

B

Question 110

When the FCA grants an exchange with recognised status, it: A Confers authorisation to do investment business B Requires cooperation from the exchange with overseasregulators C Requires that the exchange must be fit and proper D Implies that all transactions will be settled in a timely manner

Answer 110

C - exchanges and clearing houses need to be fit and proper for their purpose. Not A - because they are exempt from authorisation (they are instead recognised)

Question 111

For which of the following actions can a firm NOT appeal to the Tax and ChanceryChamber of the Upper Tribunal? A Refusal of Part 4A permission B Imposition of penalties under the Market Abuse Regime C Refusal of listing on the LSE D Imposition of penalties under the Criminal Justice Act

Answer 111

D - The courts decide the penalties under the Criminal Justice Act as it's criminal (FCA just prosecutes but doesnt decide punishment for criminal activity). The regulator just decides on Part 4A permission, market abuse and listing on the LSE.

Question 112

Which of the following is true of exempt persons under the Financial Services and Markets Act 2000? A They can be exempt from and authorised for the same activities B They can be exempt from certain activities and authorised for others C They cannot be both authorised and exempt regardless of activities D There is no distinction between exempt status and authorised status

Answer 112

C

Question 113

Which one of the following is ALWAYS a specified activity under the Financial Services and Markets Act 2000? A Acting as a currency dealer B An accountant offering investment advice C Operating a stakeholder pension scheme D Acting as a trustee for a trust

Answer 113

C - pensions are specified investments and this is a specified activity. Not D - currencies aren't specified investments unless on options or futures Not B - Incidental to his main services Not D - Unpaid trustees are exempt

Question 114

Which of the following is not a sanction available to the FCA in relation to a breach of the conduct of business rules? A Public censure B Fine C Prohibition order D Disqualification of directors

Answer 114

D - Directors may only be disqualified through a court order.

Question 115

Which of the following best describes the objective of conduct risk regulation? A Rules do matter, but outcomes for consumers and markets are the principal focus of regulatory concern B Prescriptive rules to manage the conduct of employees of financial firms are the only regulatory concern C Outcomes for consumers and markets do matter, but rules are the principal focus of regulatory concern D Outcomes for consumers and markets are the only regulatory concern

Answer 115

A

Question 116

The FCAs ‘management and control’ Principle for Businesses requires firms to have adequate systems in place specifically relating to: A. customer fairness B. cashflow resources C. risk management D. staff training

Answer 116

C A is customer interest B is prudential D is a training sourcebook thing

Question 117

Which of the following is a statutory consequence of contravening the general prohibition? A. Approved persons lose their approved status B. A firm may not conduct any business within the UK C. Civil proceedings may commence D. Financial services agreements are likely to be unenforceable

Answer 117

statutory means legal. The others are more civil.

Question 118

11. Which factor is typically NOT considered in regulators’ assessment over the fitness and propriety of a person performing Senior Management Functions (SMFs) within authorised firms? A. Honesty, integrity and reputation B. Competence and capability C. Experience and seniority D. Financial soundness

Question 119

Which of the following does NOT summarise any of the Chartered Institute for Securities & Investment (CISI) Principles? A. To act honestly and fairly at all times when dealing with clients B. To ensure that staff for whom you are responsible maintain relevant standards of competence C. To observe standards of market integrity D. To identify and manage conflicts of interest to the best of your ability

Answer 119

B - super similar to FCA principles

Question 120

Which type of statutory notice can be issued by the FCA only with the consent of the recipient? A. Final Decision Notice B. Further Decision Notice C. Notice of Discontinuance D. Supervisory Notice

Answer 120

B -not about publishing

Question 121

Which of the following is an excluded person in the conduct of regulated activity? A. A member of the Society of Lloyd’s B. A firm dealing as principal C. The London Stock Exchange (LSE) D. An appointed representative

Answer 121

D - different to exempt to part 4A, firms who the appointed rep works on behalf of take legal responsibility for the behavior and conduct of the appointed rep.

Question 122

When a firm's application for authorisation is reviewed, the FCA follows a set of principles. Which of the following is NOT such a principle? A Ensure that the firm does not pose a significant risk to the statutory objectives B Structure processes to support operational objectives C Be open with applicants throughout the process to ensure they understand what is required of them D Look closely at the business model and the viability of the firm over the long-term

Answer 122

The business model looks at the medium term rather than the long term.

Question 123

Which of the following set out regulations ensuring firms control information to prevent the exchange of information that may harm the interests of one or more clients? A Financial Stability Board B Financial Conduct Authority C Basel Committee D Competition and Markets Authority

Answer 123

B - principles

Question 124

Which of these is true in relation to the Tax and Chancery Chamber of the Upper Tribunal? A It is a department of the Treasury B An upfront fee must be paid for the initial investigation C Cases are judged by an independent solicitor D Its decisions are binding on the FCA

Answer 124

D because investigations can be appealed to the Upper Tribunal which are higher than the FCA in that sense.

Question 125

Who does the Regulatory Decisions Committee report to? A The Financial Conduct Authority B The Bank of England C The Financial Ombudsman Service D The Treasury Select Committee

Answer 125

A - RDC is a committee within FCA and accountable to FCA but independent of people who wanted to investigate a firm.

Question 126

With which of the below principles for business would you associate the outcomes of fair treatment of customers? A Principle 3 B Principle 4 C Principle 6 D Principle 8

Answer 126

C - interests of customers

Question 127

Which of these is described as exempt from the need for authorisation under FSMA Exemption Order 2001, but only for accepting deposits? A Lloyds Member B Designated Professional Body C Authorised Firm D Local Authority

Answer 127

D - all others are exempt from any sort of authorisation from the regulator.