regulated + prohibited activities

what 2 things make up a regulated activity

specified activity

specified investment

eg. advising someone about shares as a business

what is the RAO

the Regulated Activities Order 2001

RAO and FSMA relationship

the FSMA delegates the definition of regulated activities to the RAO

what are the 6 categories of things that the RAO treat as a ‘specified investment’ and should be regulated therefore

deposit-based instruments

collective + pension investments

derivatives

lloyd’s + funeral products

home finance

credit + other assets

give 8 examples of the deposit-based instruments

deposits

electronic money

rights under insurance contracts

shares

debentures

government/public securities

warrants

certificates representing securities

give 3 examples of the collective + pension investments

units in collective investment schemes

stakeholder pension rights

personal pension rights

give 3 examples of derivatives

options

futures

contracts for differences (CFDs)

give 2 examples of Lloyd’s + funeral instruments

lloyd’s syndicate capacity/membership

funeral plan contracts

give 4 examples of home finance instruments

regulated mortgage contracts

home reversion plans

home purchase plans

sale + rent-back agreements

give 6 examples of credit + other regulated assets

regulated credit agreements

consumer hire agreements

greenhouse gas emission allowances

alternative finance bonds/debentures

rights/interests in specified investments

emission allowances

what are the - categories of things that the RAO considers to be ‘specified activities’ and should therefore be regulated

banking + insurance

investment activities

home finance

collective + pension schemes

credit + debt

other

give 6 examples of banking + insurance activities

accepting deposits

issuing electronic money

effecting/carrying out contracts of insurance as principal

insurance risk transformation

assisting in administration/performance of insurance contracts

insurance mediation activity

give 5 examples of investment activities

dealing in investments (as principal or as agent)

managing investments with discretion over third-party portfolios

safeguarding + administering investments

advising on investments

sending or enabling dematerialised instructions

give 3 examples of home finance activities

arranging home finance

advising on home/land finance transactions

entering into funeral plan contracts

give 2 examples of collective + pension scheme management activities

working with…
- CISs
- UCITS + AIFs
- pension schemes

providing advice

give 3 examples of credit + debt related activities

credit broking + consumer hire agreements

operating electronic lending programs

debt services - adjusting, counselling, collecting, administration

give 3 examples of market infrastructure + trading

operating a multilateral trading facility

operating an organised trading facility

bidding in emission allowance auctions

give 3 examples of other activities

advising on lloyds syndicate participation

dormant account fund operation

specified benchmarks (eg. LIBOR administration)

who can do regulated activity under FSMA

authorised or exempt people

give 6 example exemptions under FSMA

Section 39: Appointed Representatives

Section 285: Recognised Investment Exchanges / Clearing Houses

Section 312A: Multilateral Trading Facilities

Section 316: Society of Lloyd’s members

FSMA Exemption Order 2001: e.g. central banks, charities, local authorities

Part 20 FSMA: Professional firms under Designated Professional Bodies (DPBs)

what is a prohibition order

stops an individual performing specified functions

explain the section 56 prohibition order

the FCA/PRA can prohibit an individual if they are considered not fit and proper to perform particular functions

what would happen if they breached this order

criminal offence —> fine or prosecution

what would be a reasonable defence

reasonable care + due dilligence

what does section 59 of the FSMA talk about

controlled functions

what is a controlled function

certain roles/functions that require regulatory approval

give an example of a controlled function

SMFs under SM&CR

what would be a breach

if an individual within a firm is performing a controlled function without approval

what is a civil remedy

how we r gonna fix it if someone suffers a loss because of a breach

two options for civil remedies

section 71 FSMA

section 138D FS Act 2012

s71 FSMA

private individuals can sue for damages where there is:

• breach of a prohibition order

• someone performing a controlled function without approval

s138D FS Act 2012

right to claim damages if u suffer a loss because of a breach of an FCA rule

what does dealing as principal mean

trading on your own account

is this automatically regulated

not always

when is it regulated

when the person is holding themselves out as a market maker/soliciting the public

when might it not be regulated

• if the dealing is only for their own account (not as a business)

• if the dealing is in securities/life policies by an unauthorised person

• if the dealing is in certain contractually based investments (CBIs) where:

  • the counterparty is authorised/exempt

  • the transaction is through a non-UK office with a non-UK regulated counterparty

what other activities are excluded from being regulated dealing activities

bank lending

issuing/purchasing your own securities

using CBIs for risk management (not speculation)

transactions linked to:

• bare trustees/nominees

• sale of goods/services

• intra-group or joint enterprises

• sale of corporates

• employee share schemes

• overseas persons

• e-commerce providers

give 4 more examples of RAO exclusions (would be a regulated activity but RAO decided nah)

written investment advice

trustees, nominees + personal representatives

employee share schemes

overseas persons