IMC 1 5

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  1. FSA
    a private limited company with somewhat diminished powers since MiFID and Bank of Egland
  2. Statutory Immunity
    FSA, under FSMA 2000 has immunity except when acting in bad faith or in breach of human rights legislation
  3. s2(4) FSMA 2000
    general functions of FSA
  4. FSAs 5 statutory objectives
    • 1. market confidence
    • 2. public awareness
    • 3. financial stability
    • 4. consumer protection
    • 5. reduction of financial crime
  5. Public awareness is being replaced by
    CFEB which was created by the FSA
  6. CFEB
    Consumer Financial Education Body which is taking over responsibilites of public awareness from FSA
  7. Principles, rules and regulations a firm must adhere to are found in the
    FSA handbook
  8. Consultation process
    when new rules are added to FSA handbook
  9. FSA handbook includes
    Principles of businesses and Conduct of Business Sourcebook
  10. 7 main blocks of FSA handbook
    • High level standards
    • Prudential Standards
    • Business Standards
    • Regulatory Processes
    • Redress
    • Specialist Sourcebooks
    • Listing, Prospectus and Disclosure
  11. Examples of handbook guidesq
    • additional guides, pointing firms to information relevant to them
    • guides for
    • energy market participants
    • oil market participants
    • for service companies
  12. Examples of regulatory guides
    • enforcement guide
    • perimeter guidance manual (PERG)
  13. R
    Rule, a rule places a binding duty on a firm
  14. E
    evidential provision, firms complieing with an evidential provision which will tend to establish compliance with the linked rule of R
  15. G
    Guidance, which is NOT binding
  16. D
    directions and reguirements are binding
  17. UK
    the UK flag icon, no FSA, UK legislative material
  18. EU
    EU legislative material
  19. P
    statements of Principles for approved persons which are binding on approved persons
  20. C
    compliant behaviors that do not amount to market abuse
  21. Industry Guidance
    • includes codes of practice and similar statements generated by trade associatis and professional bodies
  22. A firm may be authorised by 1 of the 2 routes
    • FSA
    • MiFID
  23. Part IV permission
    • permission given by the FSA which will play a crucial role in defining a firms business scope
    • -not a crime to go beyond permissions but may raise claims
  24. Before granting permission, FSA must establish that a firm is
    • Fit and proper
    • following threshold conditions
  25. 5 Threshold conditions set out in COND
    • 1. legal status
    • 2. location of offices
    • 3. close links to the company
    • 4. Adequate resources (both capital and personel)
    • 5. suitability, competance
  26. CALLS
    • Close links
    • Adequate Resources
    • Legal Status
    • Locations of offices
    • Suitability
  27. fit and proper
    • satisfy threshold conditions
    • FSa will operate a risk assessment process
  28. If FSA decides to refuse application or impose limits
    must give recommendation to the RDC who will make final decision
  29. RDC
    Regulatory Decisions Committee
  30. How does an applicant appeal?
    to the Financial services and markets tribunal
  31. FSAs approach to supervision includes these 3 concepts
    • 1. the FSAs regulatory objectives
    • 2. responsibility of senior management
    • 3. principle that burdens or restrictions on firms should be proportionate to benefits to be provided
  32. FSAs policy is grouped into 4 headings
    • 1. Diagnostic
    • 2. Monitoring
    • 3. Preventative
    • 4. Remedial
  33. ARROW
    Advanced Risk-Responsive Operating frameWork, FSAs overall approach of risk based supervision
  34. ARROW 2
    revised model introduced in 2006, improved assessment of risk through cross-firm 'thematic' work
  35. Impact of probability assessment
    • on each firm to determine the risks that the firm poses to the 5 regulatory objectives
    • -in terms of probability, this is analyzed in risk groups
  36. Risk groups entails these 5 general procedures
    • 1. preliminary assessment of impact of reg objectives
    • 2. Probability assessment-detail will depend on impact rating and complexity of the firm
    • 3. validation panel reviews various firms categorisations
    • 4. a letter is sent to firm outlining category
    • 5. FSA ensures on going review of risk assessment
  37. FSA will use a broad range of tools in the supervisory process
    • desk-based reviews
    • meetings with the firm
    • on site inspections
    • issueing public statements
    • imposing conditions on the firm
  38. Fundamental change of FSAs approach to supervision
    from evidence based regulation to regulation based on judgements about the future
  39. Turner review
    following the Northern bank problems of 2007, turner review was published in response 'regulatory response to the global banking crisis'
  40. turner review results
    • -bank capital and liquidity regulations
    • -remuneration policies to discourage excessive risk taking
    • -changes in FSA supervisory approach in regards to systems wide risks and business strategies
    • -increaased national powers and new european regulatory authority
  41. More outcomes focused regulation and intensive regulation
    is now the focus
  42. SEP
    Supervisory Enhancement Programme, changes are being implemented through SEP
  43. SEP =
    macro risk assessment
  44. Financial Services Act 2010
    • -rules about remuneration policies
    • -increased disclosure including directos/executives remuneration
    • -firms must create recovery and resolution plans (living wills)
    • -wider FSA powers, including regulation of short selling
    • -increased disciplinary and information gathering powers
  45. DEPP
    Decision Procedures and penalties manual set out FSAs powers in this area
  46. FSA has wider powers these 3 areas
    • 1. information and documents
    • 2. investigators
    • 3. entry to premises
  47. s177 FSMA 2000
    • criminal offense to falsify, conceal, destroy docs,
    • max penalty 2 years and unlimited fine
  48. 2 types of restitution powers
    • 1. required by court
    • 2. FSA imposed
  49. FSA Enforcement division
    investigates firms when they breach FSA rules and FSMA 2000 provisions
  50. Statutory Notice decisions
    more significant decisions passed on to the FSAs RDC
  51. FSA Executive procedures
    for less serious cases, FSA can for example request to provide reports
  52. IF the RDC decides to take action
    • a warning notice will be sent and the person concerned may make oral or written representation to the RDC
    • RDC will then issue a decision notice
    • When decision notice accepted or appeals finalized, a Final notice is sent to the person
  53. FSA must commence disciplinary action within ___ years of first being aware of the misconduct
  54. Statutory notices
    • Warning notice
    • Decision Notice
    • Further Decision Notice
    • Supervisory notice, first and second included
  55. Non Statutory Notices
    • Notice of discontinuance
    • Final notice
  56. FSA can issue a private warning
    • -cause for concern but no intention to take formal proceedings
    • -added to firms compliance history
    • -recipient is asked to acknowledge receipt and comment
  57. Credible deterrence philosophy
    more proactive approach to enforcement
Card Set
IMC 1 5
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