IMC Chapter 2 - 2.3 - Exempt Persons

Question 1

List the 5 most important exempt persons.

Answer 1

1. Appointed representatives
2. Recognised investment exchanges and clearing houses
3. Lloyd’s syndicate members
4. Members of designated professional bodies
5. Other exempted persons

Question 2

What is an appointed representative?

Answer 2

A self-employed representative of a large firm selling directly to the public.

Question 3

What is another name for an appointed representative?

Answer 3

Tied agent

Question 4

Does an appointed representative have to be a person?

Answer 4

No! Firms, as well as individuals, may also act as appointed representatives of a product provider, such as a life assurance company.

Question 5

Who is responsible for regulating an appointed person?

Answer 5

The appointing firm is responsible for ensuring that appointed representatives meet the ‘fit and proper’ criteria and must take complete responsibility for their actions and omissions.

Question 6

Name what FSMA 2000 requires Recognised Investment Exchanges (RIEs) to meet.

Answer 6

Recognition requirements.

Question 7

Name 5 of the recognition requirements set out in FSMA 2000 for Recognised Investment Exchanges.

Answer 7

1. High standards of integrity, sufficient financial resources and co-operation
   with regulators
2. Business on the exchange is conducted in an orderly manner and
   dealings are limited to investments in which there is a proper market
3. Price transparency and effective monitoring and recording of transactions
4. Rules setting out procedures in the event of a default by a member of the
   exchange
5. Arrangements for investigating complaints

Question 8

List 4 exchanges recognised by the FCA.

Answer 8

1. ICE Futures Europe
2. London Metals Exchange
3. London Stock Exchange
4. Aquis Stock Exchange (AQSE)

Question 9

What does a Clearing House do?

Answer 9

A clearing house delivers a security in return for cash.

Question 10

What do exchanges do?

Answer 10

They allow people to agree to buy and sell securities.

Question 11

What does the bank of England regulate?

Answer 11

1. Payment systems

2. Recognised Clearing Houses (RCHs)

Question 12

What does Financial Market Infrastructures (FMIs) refer to?

Answer 12

Financial Market Infrastructures (FMIs) is a collective term for clearing houses and payments systems.

Question 13

How are institutions which provide both exchange services and central counterparty systems regulated?

Answer 13

Institutions providing both exchange services and central counterparty systems will be regulated jointly by the BoE for its Recognised Clearing Houses (RCH) activities and by the FCA for its exchange services.

Question 14

List the 5 clearing houses the Bank of England recognises.

Answer 14

1. Euroclear UK and Ireland who operate the CREST system
2. LCH.Clearnet
3. ICE Clear Europe Limited
4. CME Clearing Europe
5. LME Clear

Question 15

Does a member of a Lloyd’s syndicate require approval?

Answer 15

No! Whilst the Society of Lloyd’s itself requires authorisation under FSMA 2000, a member of a Lloyd’s syndicate is an exempt person.

Question 16

Does the Society of Lloyd’s require authorisation under FSMA 2000?

Answer 16

Whilst the Society of Lloyd’s itself requires authorisation under FSMA 2000, a member of a Lloyd’s syndicate is an exempt person.

Question 17

Does advising on syndicate participation require authorisation?

Answer 17

Yes!

Question 18

Does managing a syndicate require authorisation?

Answer 18

Yes

Question 19

Does a member of a Designated Professional Body (DPB) who is carrying out incidental regulated activities require authorisation?

Answer 19

A person who is a member of a Designated Professional Body (DPB), e.g. an accountant or solicitor, and is carrying on incidental regulated activities, does not require authorisation. This recognises the fact that certain professions are regulated by their own industry bodies in such a way that their customers can have confidence in their methods of conducting investment business.

Question 20

Are member firms of Designated Professional Bodies (DPBs) automatically granted exemption from authorisation?

Answer 20

No, they are not automatically granted exemption from authorisation. Member firms of Designated Professional Bodies (DPBs) are not automatically granted exemption from authorisation but must apply to their professional body for their licence.

Question 21

What 2 conditions must be met for a Designated Professional Body to be granted an exemption?

Answer 21

1. The firm only provides incidental investment services.
2. It does not receive remuneration in respect of the investment services it
   provides other than from its clients.

Question 22

If the investment activity is a distinct and separate business from the usual core activities of the firm is authorisation required?

Answer 22

Authorisation would also need to be obtained where the investment activity is a distinct and separate business from the usual core activities of the firm.

Question 23

List 3 ‘other particular exempt persons’ defined by secondary legislation.

Answer 23

1. Supranational bodies, e.g. the International Monetary Fund (IMF)
2. Local authorities
3. Government organisations (e.g. the Bank of England, other central
   banks and the UK National Savings Bank)