Chapter 2 - FSMA Scenarios

Question 1

A financial app allows users to deposit money, which is then pooled and invested in money market instruments. The app is operated by a start-up with no FCA authorisation.

What offence, if any, might be committed here, and what is the likely regulatory classification of the activity?

FSMA 2000 s.19; PERG 2.2.1

Answer 1

An offence has occurred.

Accepting deposits is a specified regulated activity. Under FSMA s.19 (the general prohibition), it is a criminal offence to carry out such activities without authorisation.

The activity is classified as a regulated activity under the Regulated Activities Order.

Question 2

A sales agent provides investment advice to clients while acting as an appointed representative of a regulated firm. Explain whether the agent needs their own FCA authorisation.

PERG 2.10; FSMA s.39

Question 3

A consumer signs a contract with a firm that provides portfolio management services. The firm is not authorised and does not fall under any exemption. Later, the consumer wants to exit the contract.

Assess the enforceability of the agreement and the process involved.

FSMA s.26; PERG 2.2.2