6 - regulated + prohibited activities

what section of FSMA lays out the general prohibition

s19

what does FSMA section 19 say

you must be authorised (part 4A authorisation) or exempt to carry out a regulated activity

what counts as a regulated activity

specified investments

specified activities

who made this definition of regulated activity

the Regulated Activities Order 2001

what happens if you break the general prohibition

its treated as either a criminal offence or a civil case

potential consequences if treated as a criminal offence

max penalty 2 years

and/or

unlimited fine

potential consequences if treated as a civil case

the contracts are enforceable by the injured party (the investor)

and

the contracts are unenforceable by the offending person (the firm)

what is counted as a specified investment (obvious category)

“OBVIOUS” CATEGORY (DR W CUDGERS)

Debentures

Rights under contracts of insurance

Warrants

Certificates representing certain securities

Units in a CIS

Deposits

Gov + public securities

Electronic money

Rights under stakeholder and personal pension schemes

Shares

what is a debenture

an instrument creating or acknowledging indebtedness

give examples of certificates representing certain securities

ADRs (American Depository Receipts)

GDRs (Global Depository Receipts)

they both represent shares of a foreign currency but ADRs are traded in the US and GDRs are traded globally

what is a CIS

a collective investment scheme:

so like a big investment fund that everyone pools money into

what is included in the list of specified investments (less obvious category)

LESS OBVIOUS (LOCH C GAFF - pronounced “lock the gaff”)

Lloyds syndicate capacity + membership

Options on:

• precious metals (gold silver platinum palladium)

• securities

• currencies

• futures

CFDs

Home finance transactions

Credit agreements/consumer hire agreements

Greenhouse gas emissions allowance

Alternative finance investment bonds/alternative debentures

Funeral plans

Futures for investment/speculative purposes

what is lloyds of london

a market place where insurance is arranged

(big insurance like for terrorism)

what is a syndicate

a group within lloyds

what is syndicate capacity

the maximum amount of insurance business the syndicate is allowed to take on yearly

what is a CFD

a contract for difference:

a financial contract that lets someone speculate on whether the price will rise or fall without actually owning the investment

give some examples of home finance transactions

mortgage contracts

home reversion plans

home purchase plans

sale + rent-back agreements (retaining occupation of at least 40% of the property)

what do they mean by credit agreement/consumer hire agreement

literally either lending money (credit) or hiring something out for a fee (consumer hire)

what do they mean by greenhouse gas emissions allowance

literally tradable pollution permits

what do they mean by alternative finance investment bond/alternative debetures

a way of raising/investing money that’s compliant with islamic finance principles (they don’t allow interest to be paid)

what are the other purposes that futures could be used for that are NOT included

hedging/commercial purposes (what they were acc created for)

what is NOT included in the list of specified investments

property deals

curency deals

national savings (NS&I) products —> including premium bonds

for specified activities its lowk easier for u to learn what’s NOT included, so tell me what isn’t included

dealing as principal when you’re NOT acting as a market maker

FREE (not paid for) media: newspapers, TV, radio, info providers etc

trustees, nominees + personal representatives

employee share schemes

pictured is the list of specified activities just for reference x

who is exempt within the general prohibition

appointed reps

RIEs (recognised investment exchanges) + RCHs (recognised clearing houses)

supranational bodies (eg. IMF) + central banks

syndicate members of Lloyds of London

members of the professions, since they will be regulated by their DPBs (designated professional bodies)

what sorts of firms are regulated by their DPB (5 examples)

exempt professional firms:

accountant

solicitor

actuary

chartered surveyor

licensed conveyancer

what does it mean to be exempt

u don’t have to be authorised (bc u r exempt), but u can still carry out this regulated activity

how does one get authorised

send application pack to whoever regulates them (PRA with FCA consent for dual reg, just FCA for solo reg)

what will the application pack include

core details

controllers

business plan

disclosure of significant events

approved person forms

checklist + declaration

what categories of threshold conditions does a firm have to meet to stay authorised

legal status

location of offices

how business is conducted

supervision

suitability

business model

appointment of claims representatives

what legal status do they have to have to stay authorised

they need to have an acceptable legal form

where must their offices be located

registered AND head office in the UK

how must business be conducted

in a prudent manner (appropriate financial + non financial resources)

how should supervision be done

effectively, including close links (eg someone with more than 20% shares in the firm)

how suitable should they be

fit and proper

what sort of business model should they have

suitable business strategy

what type of firm needs to appoint a claims representative

motor insurers only