All RE5 questions
FAIS Act FAIS Act and Subordinate Legislation
The Authority receives evidence that an FSP is misappropriating client funds and that every day of delay increases client losses. What does the FAIS Act allow the Authority to do about the FSP's licence?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) Withdraw the licence at once without any process, because misappropriation of funds ends the right to be heard.
- b) Suspend the licence provisionally at once, and then give the FSP a reasonable opportunity to respond.Correct
- c) Declare the licence lapsed, because misappropriation of client funds terminates a licence by operation of law.
- d) Suspend the licence only after informing the FSP of its intention and considering the response of the FSP.
Why this is the answer
Ordinarily the Authority must inform the licensee of its intention to suspend and the grounds, and allow a reasonable opportunity to make submissions. Where there are reasonable grounds for urgency it may suspend provisionally first and hear the licensee afterwards. Withdrawal still requires a fair process, and misconduct is not one of the events on which a licence lapses.
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