1.3. Fitness and Propriety

Financial Services and Markets Act 2000, every firm conducting ...?

... conducting investment business | must be fit and proper.

Senior Managers Regime (SMR). Individuals will be in a position where they...

... control and manage the firm’s business (on a day-to-day basis).

Senior Managers and Certification Regime were introduced by PRA and FCA in order to...

... to bring individual accountability | to staff working in the banking industry.

Senior Managers and Certification Regime (SM/CR) three parts:

Senior Managers Regime. | Certification Regime. | Conduct Rules.

Appointed Representative is an individual or a company, who must be a party to a contract with an authorised person, that allows them to...?

to carry on certain regulated activities.

The SM/CR applies to all FSMA-authorised firms, except ...?

Appointed Representatives | and Benchmark Administrators.

Certification Regime essence:

Individuals will not be approved by the regulators, | rather they will be given a ‘certificate’ by their firm | to confirm that they are ‘FIT AND PROPER’ to perform their role.

FCA applied the SM/CR to ‘solo-regulated’ firms and implemented a proportionate regime, introducing three types of firms with different levels of application.

Core scope, | Limited scope, | Enhanced scope.

A set of Conduct Rules apply to...?

... to all relevant employees based in the UK, | or who deal with customers in the UK.

Money Laundering Reporting Officer (MLRO) A senior employee who is responsible for the prevention of financial crime, for assessing internal suspicion reports, and for reporting those suspicions to the ____?

... National Crime Agency (NCA).

Approved Persons (APER) are Individuals who are approved by FCA to undertake...?

... controlled functions.

Senior Managers Regime (SMR) captures certain individuals performing defined senior management functions (SMFs). These individuals typically comprise: ...?

CEO, CFO and CRO.

Certain individuals holding an SMF may also be apportioned specific ‘___’ identified by the PRA and FCA.

‘prescribed responsibilities’

An individual may only perform a Senior Management Function after the regulator has granted them ___?

'approved person' status.

FSMA imposes a statutory obligation on the FCA and PRA to reach a determination on a person’s fitness and propriety as SMF within __ days of receiving 'Form A'.

within 90 days of receiving 'Form A'.

Requirements and classifications the SM/CR (responsibility):

Prescribed Responsibilities. | Management Responsibilities Map. |||||||||| Duty of Responsibility.

Prescribed Responsibilities must be allocated to...?

... to the most senior individuals of those performing SMFs.

Management Responsibilities Map essence:

Documents a firm’s management arrangements,| including how the prescribed responsibilities have been allocated.

Duty of Responsibility requires SMF holders to...?

to fulfil any prescribed responsibilities | and prevent breaches.

SMF for UK Banks. FCA functions are...?

Executive Director function. | chair of the Nominations Committee function. | Compliance Oversight function. | Money Laundering Reporting function.

SMF for UK Banks. PRA functions:

Chief Executive. | Chief Finance. | Chief Risk.| Head of Internal Audit. | Head of Key Business Area.| Group Entity Senior Manager.| Credit Union SMF. | Chairman. | Chair of the Risk Committee.| Chair of the Audit Committee.

Application to FCA Solo-Regulated Firms. Limited Scope Firm examples:

Authorised professional firms, | Sole traders, | Service companies, ||||| Energy market participants, | Oil market participants.

Limited Permission Consumer Credit firms that would have had an CF8 under APER are in scope of...?

SMF29

Sole traders with no employees are in scope of...?

SMF16

Authorised professional firms whose only regulated activities are non-mainstream regulated activities are in scope of...?

SMF16, SMF17 and SMF29

Oil market and energy market participants, service companies, subsidiaries of local authorities, registered social landlords are in scope of...?

SMF16 and SMF17

Insurance intermediaries whose principal business is not insurance intermediation are in scope of...?

... SMF29

Core and Enhanced Firms are in scope of...?

SMF1, 3, 9 | 16, 17, 18 | 27

Senior Managers have been tasked with: The Consumer Duty should be reflected in...?

... in firm’s strategies, governance, leadership and people policies.

Individuals subject to the Certification Regime (CR) are not...?

... not approved by the regulators.

The CR requires firms to assess, both at the__ and on an __ thereafter, the fitness and propriety of certain employees within the firm who could pose a risk of significant harm to the firm

at the recruitment stage and | on an annual basis thereafter,

MRTs stands for:

‘material risk takers’

The Certification Regime. FCA approach includes individuals performing their function who:

previously performing a significant influence function (SIF) | are performing a significant harm function, | are in customer-facing roles, | supervise or manage a Certified Person, | is an individual is employed by a UK bank*

Significant-harm functions include:

CASS oversight, | Benchmark administration, | Proprietary trader, | Management (significant), | Material risk takers.

‘Material risk taker’ is defined in the PRA Remuneration Rulebook as:

individual whose activities, carried out on behalf of the firm, could have a material impact on the firm’s risk profile.

CR. How often do firms must provide a ‘certificate’ to individuals?

annually

The term ‘code staff’ refers to employees whose activities have __?

have a material impact on the firm’s risk profile.

The Conduct Rules are:

a framework of behavioural standards which are applicable to all individuals.

Individual Conduct Rules which all relevant employees are required to adhere to.

Integrity, | Due care, | Openness to cooperate with FCA and PRA, | Customers interest acting. | Market conduct observing.

Conduct Rules for Senior Managers (SC):

You must to ensure that the business is controlled effectively.| Business complies with relevant requirements and standards.| Ensure that delegation of your responsibilities is to an appropriate person.| Disclose any information of which the FCA and PRA.

SYSC 27 (Senior Management Arrangement, Systems and Controls) title:

Senior managers and certification regime: Certification regime.

Fit and Proper Test (FIT) essence:

Individuals performing SMFs are required to be approved by the regulator as fit and proper before taking on that function.

Fit and Proper Test (FIT). A person the regulator will look at a number of factors against a set of criteria:

Honesty and reputation, | Competence and capability,| Financial soundness.

Honesty and reputation. The FCA will have regard to whether a person has been:

Convicted of a criminal offence, | subject of an adverse finding in a civil case, | previous investigation by any regulator, | the subject of a justified complaint, | insolvent business, | disqualified as a director.

Competence and Capability. FCA will have particular regard to whether the person:

Satisfies the requirements from Training and Competence Sourcebook. | Has relevant experience and training. | Has adequate time to perform the controlled function

Financial Soundness. A regulator will have particular regard to whether the person:

Has been subject to any judgement to repay a debt. | Has filed for bankruptcy,

FCA Handbook. The document containing...

containing the FCA rules and guidance which authorised firms must comply. The Handbook is divided into a number of separate Sourcebooks.

The FCA will hold ___ accountable for the implementation and ongoing compliance with their regulatory obligations under the Consumer Duty,

senior managers

Consumer Support Outcome essence:

Firms must ensure that communications are fair, clear and not misleading.

Appointment of claims representatives. This condition is only relevant to ___?

motor insurers