Application of the Financial Services and Markets Act 2000 and Secondary Legislation Flashcards
(12 cards)
Which section of FSMA 2000 creates the requirement for FCA permission to carry on regulated activities?
A. Section 19
B. Section 22
C. Section 138
D. Section 23
A. Section 19
Explanation: FSMA 2000 s 19 makes it a criminal offence to carry on regulated activities without FCA permission
The Regulated Activities Order (RAO) lists activities under which FSMA 2000 section?
A. Section 19
B. Section 138
C. Section 23
D. Section 22
D. Section 22
Explanation: FSMA s 22 empowers the RAO to specify which activities are “regulated”
Under the Exemptions Order, when can solicitors hold client money without FCA permission?
A. When it’s incidental to their legal practice
B. Only if the sum is under £5,000
C. Never; they always need FCA permission
D. Only for mortgage deposits
A. When it’s incidental to their legal practice
Explanation: The Exemptions Order allows incidental financial steps (e.g. holding client funds) without FCA permission
Which penalty does FSMA 2000 impose for unauthorised regulated activity?
A. Community service
B. Up to two years’ imprisonment and/or unlimited fine
C. Written warning only
D. Suspension of legal practising certificate
B. Up to two years’ imprisonment and/or unlimited fine
Explanation: FSMA s 23 prescribes criminal sanctions for unauthorised activity
A firm drafts a mortgage security document without commenting on the financial merits. This activity is:
A. Exempt as incidental legal practice
B. Regulated under investment services
C. Consumer credit activity
D. Payment service
A. Exempt as incidental legal practice
Explanation: Drafting security docs without advice on merits is incidental and FCA-exempt
A solicitor begins offering standalone investment advice. To comply, they must:
A. Rely on the incidental exemption
B. Apply for FCA permission under FSMA s 19
C. Only document the activity internally
D. Refer to the Legal Ombudsman
B. Apply for FCA permission under FSMA s 19
Explanation: Standalone investment advice is regulated and requires FCA authorisation
A firm holds client deposits in an interest-bearing account. Under which order is this exempt?
A. FSMA Part IV
B. SRA Accounts Rules only
C. RAO
D. EO
D. EO
Explanation: The Exemptions Order exempts incidental deposit-accepting under legal practice
After adding insurance mediation to their services, a firm should:
A. Continue under SRA-only oversight
B. Map the activity against the RAO and check exemptions
C. Assume it is exempt if incidental
D. Seek a waiver from the PRA
B. Map the activity against the RAO and check exemptions
Explanation: Any new service must be mapped to the RAO and tested for exemption or require FCA permission
Which FSMA power allows creation of the RAO and Exemptions Order?
A. Section 19
B. Section 22
C. Section 138
D. Section 23
C. Section 138
Explanation: FSMA s 138 grants rule-making power for secondary legislation, including the RAO and EO
A firm acts as an appointed representative of an FCA-authorised broker for insurance. Which is true?
A. The firm is exempt under the EO
B. The Solicitors Regulation Authority grants permission
C. The firm holds its own FCA permission
D. The broker’s authorisation covers the firm’s regulated work
D. The broker’s authorisation covers the firm’s regulated work
Explanation: AR status places regulated activity under the principal’s FCA permission
If challenged by the FCA, the firm’s COFA should produce:
A. Evidence of SRA compliance only
B. The Permissions Matrix documenting exemptions and permissions
C. A letter from the Legal Ombudsman
D. Their practising certificates
B. The Permissions Matrix documenting exemptions and permissions
Explanation: COFA must demonstrate mapping and rationale for each activity’s exemption or permission
Which activity would never be covered by the “incidental” exemption?
A. Completing settlement cheques
B. Holding retained client funds
C. Providing discretionary portfolio management
D. Drafting mortgage deeds
C. Providing discretionary portfolio management
Explanation: Portfolio management is a regulated investment service, not incidental legal work
