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Investment Environment > authorised and approved persons > Flashcards

authorised and approved persons Flashcards

1
Q

what do UK firm require to be granted permission for carrying out regulated activities

A

Part 4A authorisation of FSMA 2000

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2
Q

how can EEA firms be granted authorization

A

MiFID passport

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3
Q

what are the hthreshold conditions for a UK firm to be granted Part 4A authorisation that also need to be ongoin

A

Minimum requirements:
legal status
location
effective supervisions
appropriate resources
appropriate non financial resources
prudent conduct
suitability (fit and proper)
business model

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4
Q

part 4A permission may need up to how many months

A

6

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5
Q

guidance on the necessity and process of authorisation can be found in

A

the FCA Perimeter Guidance Manual (PERG)

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6
Q

MAR

A

Market abuse regulation

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7
Q

Mifid business =

A

core activity (& ancialliary service) + mifid instrument

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8
Q

regulated activity =

A

specified activities + specified investments

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9
Q

core activities are the types of business that can be passported under MiFID

A

1) reception & transmission of orders
2) execution of orders
3) portfolio management
Dealing on own accounts
4) investment advice
5) underwriting and placing
6) operating on MTF or OTF

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10
Q

Ancillary services include

A

1) safekeeping & administration
2) loans to allow the investor to execute
3) advice on capital structure & industrial strategy
4) foreign exchange connected to investment services
5) recommending financial instruments
6) services relating to underwriting
7) emissions allowances

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11
Q

MiFID instruments

A

1) transferable securities
2) units in collective investment schemes
3) money market instruments
4) derivatives on securities, currencies, interest rates or yields
5)commodity derivatives
6) credit derivatives
7) fiinancial contracts for differences (CFD)
8) other derivatives

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12
Q

what instruments cannot be passported

A

sports spread betting and tangible assets

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13
Q

responsibilites of home state regulators

A
  • authorisation
  • fitness & propriety
  • conduct of business rules, when conducting business in home state
  • cross-border services
  • prudential supervision
  • client asset rules
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14
Q

responsibilities of host state regulators

A
  • conduct of business in the host state performed by a branch office in that host state
  • host state domestic rules and regulations
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15
Q

for client what rules apply

A

home rules

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16
Q

if for conduct of business rules then if crossing borders and client and staff are in the same country then …. if in a different country then ……

A

host rules, home rules

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17
Q

exempt persons are

A

-lloyd’s syndicated members
- appointed representatives
- designated professional bodies
- recognised investment exchanges (RIEs)
- recognised clearing houses
- other exempted bodies e.g. BoE

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18
Q

Exempt persons recognised by the FCA as exempt

A

recognised investment exchange

19
Q

Exempt persons recognised by the BoE as exempt

A

recognised clearing house

20
Q

to be recognised as an exempt body must

A
  • sufficient resources, act with integrity & cooperate with regulators
  • conduct business in an orderly manner & monitor & record transactions
  • procedures for defaults
  • complaint handling arrangements
21
Q

PRIN (Block 1 FCA handbook)

A
  1. integrity
  2. skill, care & dilligence
  3. mgmnt & control
  4. financial prudence
  5. mrkt conduct
  6. customers’ interests
  7. communications with clients
  8. conflicts of interest
  9. customers : relationship of trust
  10. clients’ assets
  11. relations with regulators
22
Q

SYSC is guidance for …

A

principle 3 from PRIN

23
Q

SYSC’s main rules (SYSC 4, SYSC 5, SYSC 6, SYSC 18)

A

SYSC 4: General organisational requirements
SYSC 5: Employees, agents and other relevant persons
SYSC 6: Compliance, internal audit and financial crime
SYSC 18: Whistleblowing (Public Interest Disclosure act 1998)

24
Q

Main purposes of SYSC

A

1) encourage directors and senior managers to take responsibility for their firm’s arrangements
2) amplify ppl 3 from PRIN - MANAGEMENT AND CONTROL
3) encourage firms to take responsibility for an effective and responsible organisation in specific directors and managers
4) create common platform of systems and controls for all CRD and MiFID firms

25
Q

Senior manager and certification regime (SMCR)

A

senior management functions: senior managers, directors, MLRO
certification functions: functions that can cause harm
other conduct rules staff
ancillary staff

26
Q

senior management function and certification function approval

A

approval for senior management function given by the FCA + PRA
and for the certification function approval issued by firm

27
Q

under SMCR which functions are subject to the fit and proper assessment

A

senior manager function and certification function

28
Q

which functions are subject to conduct rules

A

SM: subject to COCON and individual conduct rules
CF + other conduct rules staff = (individual) conduct rules

29
Q

senior manager functions

A

prescribed responsibility (set out in statement of responsibilities)
senior managers have a duty of responsibility (regulators can take action, burden of proof lies with FCA)

30
Q

FCA SMFs Executive and non-executive

A

executive : executive director, significant responsibility senior manager, MLRO
non-executive: non-executive director, chair of the nominations committee

31
Q

Individual (first tier) conduct rules

A
  1. act with integrity (FCA +PRA)
  2. act with due skill, care & diligence (FCA +PRA)
  3. co-operate with FCA, PRA (FCA +PRA)
  4. pay due regard to interests of customers and treat them fairly (FCA)
  5. must observe proper standards of mrkt conduct (FCA)
32
Q

senior manager conduct rules (second tier)

A

sm1. business controlled effectively
sm2. business complies with the relevant
sm3. any delegation of your responsibilities is to an appropriate person and that u oversee the discharge of the delegated responsibility effectively
sm4. disclose appropriately any information to FCA and PRA that would expect notice

33
Q

fit and proper test

A

-honesty, integrity and reputation
(employment history, criminal convictions, breaches of FCA/PRA rules, complaints)
-competence and capability
(exam success, experience and training)
-financial soundness
(bankruptcy)

34
Q

roles where examinations are always necessary

A
  • advice and dealing activities
  • acting as a broker fund adviser
  • advice on syndicate participation at Lloyd’s
  • acting as a pension transfer specialist
35
Q

retail distribution review (RDR)

A
  • standards of professionalism applying to providers of retail investment products
  • retail investment advisor must hold a statement of professional standing
  • SPS confirms that retail investment advisor:
    gained an approved qualification shown in FCA handbook
    completed a min of 35hrs continuing professional development (21hrs structured)
    completed an annual declaration (acted in accordance with FCA conduct rules, adhered to code of ethics)
  • firms making professional recommendations must be independent or restricted
  • disclose status, cost of service before client is bound by agreement
  • remuneration (charges agreed in advance in durable medium or website, clients can pay adviser charge upfront or deduct from investment
    -subscribe to a code of ethics
36
Q

code of ethics: ethical driven

A

prevention,
principles-based,
values-driven,
implicit,
spirit of the law,
discretionary

37
Q

code of ethics: compliance driven

A

detection
laws/rule-based
fear-driven
explicit
latter of the law
mandatory

38
Q

CFA code of ethics

A
  • act with integrity, competence, diligence, respect and in an ethical manner
  • place the integrity of the investment profession and the interests of clients above personal interests
  • use reasonable care and exercise independent professional judgement
  • practice and encourage others to practice in a professional and ethical manner
  • promote the integrity of, and uphold the rules governing, capital markets
  • maintain and improve the professional competence of themselves and others
39
Q

SYSC 4-10 are binding except for

A

insurers, managing agents and society of loyds

40
Q

after resigning for three years an individual is still liable to disciplinary action from FCA for

A

3 years

41
Q

RDR does not apply to

A
  • basic advice
  • non-advised services
  • execution only sales
  • advice on stocks and shares or structured deposits
42
Q

standards of professional conduct

A
  1. professionalism
    - knowledge of the law
    - independence and objectivity
    - misrepresentation
    - misconduct
  2. integrity of capital markets
    - non-public info
    - market manipulation
  3. duties to clients
    - loyalty, prudence and care
    - fair dealing
    - suitability
    - performance presentation
    - preservation of confidentiality
  4. duties to employers
    - loyalty
    - additional compensation arrangements
    - responsibilities of supervisors
  5. investment analysis , recommendation and action
    - diligence and reasonable basis
    -communication with current and future clients
    - record retention
  6. conflicts of interest
    - disclosure
    - priority of transactions
    - referal fees
  7. responsbilities as a CFA member of candidate
    - conduct as memebr and candidates
    - reference
43
Q

Main objectives of MiFID

A

Increase psot trade transparency across EEA
ensure best execution of trades across the EEA
ensure cost effective execution venues ara available across EEA

Investment Environment (10 decks)

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