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Fit & Proper FSP License (Fit & Proper/Operational Ability)
A company is appointed as a juristic representative of an FSP. Its liabilities exceed its assets. The FSP argues that financial soundness is required only of licensed FSPs. Which statement is correct?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) The FSP is wrong, because every representative, natural or juristic, must be financially sound.
- b) The FSP is right, because a representative of any kind is never subject to financial soundness.
- c) The FSP is wrong, because the financial soundness requirements also apply to juristic representatives.Correct
- d) The FSP is right, provided the FSP itself is solvent and guarantees the debts of the representative.
Why this is the answer
The financial soundness requirements apply to FSPs and to juristic representatives. They do not apply to representatives who are natural persons. An insolvent juristic representative therefore fails the requirement, and the FSP's own solvency does not cure that.
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