Glossary - Enterprise Incubator and Consultancy

AIFMD

The Alternative Investment Fund Managers Directive is a piece of EU legislation pertaining to the EU wide regulatory framework for AIFs and AIFMs.

Anti Money Laundering is a broad term relating to legislation, regulation and even internal procedures and process that protect against money acquired through illegal activity appearing as though it has been acquired via a legitimate source.

Appointed Representative

An appointed representative (‘AR’) is a person or firm which is able to arrange deals in investments and advise on investments by being authorised under the umbrella of a firm which is directly authorised by the FCA (the “principal”) which is already authorised to arrange deals in investments and advise on investments.

Approved Person

A person who has been approved by the FCA to perform a controlled function

AR

Stands for Appointed Representative, where a person or firm is able to carry out certain regulated activities under the ‘Umbrella’ or oversight of a directly authorised firm (The Principal). ARs need to still comply with the regulatory requirements relating to their activities and must allow their principal firm access to carry out the necessary compliance checks and ongoing monitoring.

AR Agreement

The written contract between a Principal firm and an AR. It includes some terms prescribed by the FCA. It will impose responsibilities and limitations on both parties.

AUM

Assets Under Management is the term given to the total sum of financial assets an investment manager manages on behalf of its clients.

Authorised Person

A person or firm who has a Part 4A permission to carry on one or more regulated activities.

BoE

Bank of England

CF

Controlled Function. This is an activity or function that an individual must be approved for by the FCA prior to carrying out. Some controlled functions are known as SIF’s , significant influence functions and these apply to those is control of the running of the firm for example a Director will need to be approved as a CF1. Those in a customer function relating to certain activities will need to be approved as CF30

CMP

Compliance Monitoring Programme. This is a tool used by authorised firms to ensure a thorough ongoing assessment of whether a firm’s compliance processes and procedures are being implemented and recorded effectively in order to meet FCA requirements. A compliance monitoring plan should be proportionate to the scale and complexity of the business and vary based on the firm’s assessment of their regulatory risks.

COBS

The FCA’s Conduct of Business Sourcebook. Its contains a combination of rules and guidance that apply to directly authorised firms and their appointed representatives regarding the way they conduct regulated business.

Connect

The online system used to make notifications and applications to the FCA.

Designated Investment Business

A list of various activities specified in Part II of The Regulated Activities Order. This includes, but isn’t limited to, the regulated activities of‘arranging (bringing about) deals in investments’,‘making arrangements with a view to transactions in investments’ and ‘managing investments’.

Direct Authorisation

Commonly used term to describe the process of applying to become an FCA regulated firm.

EIP

Enterprise Investment Partners, the sister firm of EIC and the regulated entity through which EIC offer AR service.

ESMA

The European Securities and Markets Authority, an independent EU regulatory authority.

FCA

Financial Conduct Authority, the UK financial services regulator.

Financial Promotion

Defined under Section 21 of the Financial Services and Markets Act 2000 (FSMA) it is almost any communication that amounts to an invitation or inducement to engage in investment activity communicated by a person in the course of business. As a rule, it must be approved by an authorised person and must be ’fair, clear and not misleading’.

Financial Services Register

The public record containing a list of all individuals and firms that are, or have previously been, authorised by the FCA. It lists the key individuals within the firm, the registered address of the firm the activities they are permitted to carry out.

Fit and Proper Test

This is a benchmark test used by the FCA to assess whether a person is suitable to be an Approved Person and therefore able to carry out Controlled Functions. Its assessment is based on a range of factors including financial soundness, competence, honesty and integrity.

FRN

Firm Reference Number given by the FCA to directly authorised firms and appointed representatives. FRNs can be found on the FCA Register and authorised firms will display this number on their website and promotional material.

FSMA

Financial Services and Markets Act 2000 which is the primary legislation that establishes a framework for the regulation of the financial services industry in the United Kingdom and gives statutory power to the regulator.

GABRIEL

The FCA’s reporting system used by firm’s holding direct authorisation with the FCA. Stands for, ‘Gathering Better Regulatory Information Electronically’.

HNWI

High Net Worth Investor is a category of retail client, given to an individual whose financial circumstances fall within the FCA’s definition of a HNWI. Once certified, such a person can receive certain promotional communications which a firm is normally prohibited from circulating to other types of retail clients.

ICAAP

Internal Capital Adequacy Assessment Process is a summary of all the risks faced by the firm and how the firm mitigates against them. These risks should then be subjected to stress testing and an appropriate level of capital should be identified to cover those risks. It is required for all BIPRU and IFPRU firms.

Incubator

Another term for a Principal firm providing AR services.

IRN

Individual Reference Number given to an individual that is an Approved Person. This can be searched for on the Financial Services Register.

JMLSG

The Joint Money Laundering Steering Group publish industry specific guidance to assist firms with interpreting and adopting best practice anti-financial crime controls. Whilst this is guidance rather than legal rule, both a court and the FCA would take into consideration adherence with JMLSG guidance when determining if an individual or firm has breached or complied with the Money Laundering Regulations.

KID

Key Information Document

MiFID

Markets in Financial Instruments Directive

MiFID

The Markets in Financial Instruments Directive is an EU directive concerned with increasing competition and consumer protection in the investment sector. This has recently been updated by MiFID II which is set to come into force in January 2018.

NMPI

Non-mainstream pooled investment is a term the FCA often use to describe investment funds or similar pooled investment structure.

NPPR

National private placement regime. This allows AIFMs, in certain circumstances, to market AIFs to investors where a marketing passport is not available.

NRRS

Non-readily realisable security refers to investments that are illiquid in nature and difficult to value as a result.

OTC

Over the Counter

OTF

Organised Trading Facility

Principal

The directly authorised firm that allows another firm to use their FCA permissions to carry out certain regulated activities and in doing so takes regulatory responsibility for an AR.

RAO

Regulated Activities Order is a piece of secondary legislation deriving from FSMA, it specifies the activities that a firm requires permission to carry out and any exemptions or exclusions that apply to those activities as well as the specified investments those activities refer to.

Regulated Activity

An activity specified in Part II of the Regulated Activities Order. Prior to commencing one of these activities a firm requires either permission to be granted by the regulator or to be able to make use of an exemption.

Restricted Investor

In relation to NRRS, these investors are sometimes referred to as an ‘everyday investor’ and are retail investors that have confirmed they will not invest more than 10% of their net assets in unlisted shares or unlisted debt securities in a 12-month period.

Scope of Permission

The list of regulated activities a directly authorised firm can carry out by virtue of the authorisation granted to them by the FCA under Part 4A of FSMA.

SIF

Significant Influence Function, for example CF1, Director function.

SME

Small and medium size enterprise

Sophisticated Investor

This type of investor can be certified by a regulated firm or self-certify and they are considered to have sufficient investing experience and knowledge to understand the risks and nature of an investment opportunity based on their experience and/or professional background.

SUP

The FCA’s Supervision Manual which sets out the relationship between the regulator and the authorised firms it supervises. SUP contains a combination of rules and guidance covering a vast range of regulatory areas, including the FCA’s powers in relation to monitoring and supervising firms, as well as undertaking enforcement action, their approach to approved persons and the limitations placed upon appointed representative.