Responsibilities of regulated firms
Regulated firms have the responsibility,
- To make certain that they are authorised and have permission for the category of regulated activity they undertake.
- For their employees,
- For their appointed representatives,
- For advice they give,
- For their own compliance, systems and controls,
- That persons carrying out controlled functions are approved.
Offences
There are a number of offences under the FSMA for which the FSA can institute prosecutions.
These include:
- Carrying on a regulated activity without authorisation or exemption;
- Describing oneself as authorised or exempt if this is not true;
- Promoting an investment unless you are authorised or the promotion is approved by an authorised person;
- Breaching a prohibition order;
- Failure to co-operate with an FSA investigation or falsifying, concealing or destroying documents in connection with an FSA investigation;
- Failure to inform the FSA of a change of control of an authorised firm;
- Giving materially false or misleading information to the FSA.
It is also an offence under s.397:
A to make a statement, promise or forecast known to be misleading, false or deceptive in a material particular; or
B dishonestly conceal any material facts; or
C recklessly make (dishonestly or otherwise) a statement, promise or forecast which is misleading, false or deceptive in a material particular;
If this is for the purpose of inducing another person to enter into, or offer to enter into, or refrain from entering into a regulated investment or to exercise, or refrain from exercising rights under a regulated investment.
Any offence by a company could also an offence by an officer of that company.
The FSA’s principals of business
The FSA has set out the following principals for authorised firms.
The Principles are:
- Integrity. A firm must conduct its business with integrity.
- Skill, care and diligence. A firm must conduct its business with due skill, care and diligence.
- Management and control. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
- Financial prudence. A firm must maintain adequate financial resources.
- Mark et conduct. A firm must observe proper standards of market conduct.
- Customers’ interest. A firm must pay due regard to interests of its customers and treat them fairly.
- Communications with clients. A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
- Conflicts of interest. A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
- Customers; relationship of trust. A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely on its judgment.
- Clients’ assets. A firm must arrange adequate protection for clients’ assets when it is responsible for them.
- Relations with regulators. A firm must deal with its regulators in an open and co-operative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.