IMC Chapter 2 - 2.1 - Authorised Persons

Question 1

What does an authorised person refer to?

Answer 1

As a general rule, an authorised person refers to a firm rather than an individual.

Question 2

What does an approved person refer to?

Answer 2

Individuals who work for an authorised firm and perform a controlled function.

Question 3

What are the 2 requirements of the Financial Services and Markets Act 2000 for any person undertaking regulated activities in the UK?

Answer 3

They must be either an authorised person or an exempt person.

Question 4

What is the name of the document that contains guidance on the necessity and process of authorisation?

Answer 4

FCA Perimeter Guidance Manual (PERG).

Question 5

As a general rule who applies to be authorised under the under Financial Services and Markets Act (FSMA) 2000?

Answer 5

Firms

Question 6

As a general rule, what does and authorised (or exempt) person refer to?

Answer 6

A firm.

Question 7

What is the term for when an individual makes an application with the FCA?

Answer 7

Individuals apply to become ‘approved’.

Question 8

Unauthorised investment activity is both a criminal and civil offence because………

Answer 8

It is a breach of the general prohibition (Section 19 Financial Services and Markets Act (FSMA) 2000).

Question 9

Name the 2 principal types of authorisation.

Answer 9

1. Part 4A permission and

2. Passporting

Question 10

Name the 4 groups which can make an application to the FCA under Part 4A of the Financial Services and Markets Act (FSMA) 2000.

Answer 10

1) An individual (sole trader)
2) A body corporate (including a branch of a body corporate) – i.e. a company
3) A partnership
4) An unincorporated association (which is not an authorised person, and which wishes to apply to carry on regulated
activities in the UK)

Question 11

What does the FCA and/or the Prudential Regulation Authority (PRA) have to satisfy itself with before approving an application?

Answer 11

The regulator (FCA or Prudential Regulation Authority (PRA)) has to satisfy itself that the applicant has sufficient financial resources and management skills to undertake the relevant functions (i.e. is ‘fit and proper’).

Question 12

As well as assessing the firm itself, what else does the regulator take into consideration when granting authorisation?

Answer 12

Although it is firms that apply for authorisation, the regulator will also consider the fitness and properness of all individuals in a position of responsibility as well as the firm itself.

Question 13

Is authorisation by the regulator general of specific?

Answer 13

Specific! Applicants must apply in respect of each business activity they wish to pursue.

Question 14

What happens if a firms application is approved for authorisation?

Answer 14

If the application is accepted, the firm will receive written notification of the decision and the regulator’s register of authorised persons is updated.

Question 15

List the different instances where the regulator doesn’t grant full authorisation to a firm.

Answer 15

The regulator can:

1. Grant authorisation subject to limitations
2. Grant authorisation for a narrower scope of business than was originally requested
3. Reject the application outright

Question 16

What does Section 41 of the Financial Services and Markets Act (FSMA) state?

Answer 16

A firm must meet and continue to satisfy the ‘threshold conditions’ for the activity concerned.

Question 17

What is the name of the document which te

Question 18

Where can guidance on the threshold conditions be found?

Answer 18

In the COND’ Sourcebook, contained within the High Level Standards block of the FCA Handbook AND in the Supervision Sourcebook (abbreviated to ‘SUP’) in the Regulatory Processes block of the FCA Handbook.

Question 19

What does the ‘legal status’ threshold condition do?

Answer 19

Sets out the legal status that the applicant must have if it wishes to carry on certain regulated activities.

Question 20

Which regulator is responsible for assessing the ‘legal status’ threshold condition?

Answer 20

Prudential Regulation Authority (PRA)

Question 21

What does the ‘location of offices’ threshold do?

Answer 21

Provides that a company must have its head office and registered office in the UK.

Question 22

Which regulator is responsible for assessing the ‘location of offices’ threshold?

Answer 22

FCA for single-regulated and Prudential Regulation Authority (PRA) for dual-regulated

Question 23

What does the ‘effective supervision’ threshold do?

Answer 23

Relates to the effect of group companies and controlling shareholders on the regulator’s ability to supervise the authorised entity. The regulator must be satisfied that a controlling shareholder will not prevent the regulator from effective regulation. For these purposes, a close link is defined as a company or individual owning 20% or more of the voting capital of the applicant.

Question 24

Which regulator is responsible for assessing the ‘effective supervision’ threshold?

Answer 24

FCA for single-regulated and both for dual-regulated.

Question 25

What does the ‘appropriate resources’ threshold do?

Answer 25

Relates to the appropriateness of an applicant’s financial resources and non-financial resources such as human capital.

Question 26

Which regulator is responsible for assessing the ‘appropriate resources’ threshold?

Answer 26

FCA for single-regulated only

Question 27

What does the ‘appropriate non-financial resources’ threshold do?

Answer 27

Relates to the appropriateness of an applicant’s non-financial resources such as human capital.

Question 28

Which regulator is responsible for assessing the ‘appropriate non-financial resources’ threshold?

Answer 28

FCA for dual-regulated only.

Question 29

What does the ‘business to be conducted in a prudent manner’ threshold do?

Answer 29

Relates to the appropriateness of an applicant’s financial resources and non-financial resources.

Question 30

Which regulator is responsible for assessing the ‘business to be conducted in a prudent manner’ threshold?

Answer 30

Prudential Regulation Authority (PRA) only

Question 31

What does the ‘fitness and propriety (suitability) of the applicant’ threshold do?

Answer 31

Relates to the ethical suitability of the applicant, i.e. the firm must be considered to be ‘fit and proper’ in particular the management and staff of the firm must be competent.

Question 32

Which regulator is responsible for assessing the ‘fitness and propriety (suitability) of the applicant’? theshold

Answer 32

FCA for single regulated and both for dual-regulated.

Question 33

What does the ‘business model’ threshold do?

Answer 33

This requires a firm’s business strategy to be suitable for the type of firm carrying on comparable regulated activities. The Firm will further need to conduct its activities in the interests of consumers and with the integrity of the UK financial system in mind.

Question 34

Which regulator is responsible for assessing the ‘business model’ threshold?

Answer 34

FCA for single regulated and both for dual-regulated.

Question 35

Who is the ‘apportionment of a claims representative’ threshold relevant to?

Answer 35

Insurance companies only.

Question 36

Which regulator is responsible for assessing the ‘Apportionment of a claims representative’ threshold?

Answer 36

Prudential Regulation Authority (PRA) only.

Question 37

Which regulator must a a dual-regulated firm apply to in order to vary or cancel its Part 4A permission?

Answer 37

Prudential Regulation Authority (PRA).

Question 38

Does the Prudential Regulation Authority (PRA) have sole authority about whether a dual-regulated firm can vary its Part 4A permission?

Answer 38

No it does not. . The Prudential Regulation Authority (PRA) may determine an application to vary permission only with the consent of the FCA.

Question 39

Do FCA regulated firms only need to apply to the FCA to vary or cancel its Part 4A permission?

Answer 39

It depends! An FCA-only regulated firm will have to apply to the FCA to vary or cancel its Part 4A permission except where it seeks to vary its permission to include a PRA-regulated activity, in which case it must apply to the Prudential Regulation Authority (PRA).

Question 40

Define ‘passporting’

Answer 40

Giving authorisaition

Question 41

Define ‘passporting’

Answer 41

Gives a firm authorisation to conduct regulated activity in the UK via a European Directive.

Question 42

Name 2 directives which allow a firm already authorised in one EEA state to carry on investment business in the UK.

Answer 42

1) Markets in Financial Instruments Directive (MiFID).
2) The UCITS (Undertakings for Collective Investments in Transferable Securities) Directive. The UCITS
Directive allows Collective Investment Schemes (CIS) to be passported.

Question 43

What does Markets in Financial Instruments Directive (MiFID) allow?

Answer 43

Markets in Financial Instruments Directive (MiFID) allows investment services firms to be passported into the UK using the ‘Temporary Transitional Powers’ granted by HM Treasury, without the need for Part 4A permission.

Question 44

What do ‘Temporary Transitional Powers’ do?

Answer 44

‘Temporary Transitional Powers’ enable EU firms, with a branch in the UK, or looking to set up a branch in the UK, to continue to comply with the respective EU legislation as it stood on 31 December 2020 until the end of the temporary transitional period – which is 31 March 2022.