Global Glosssary: Includes FCA Definitions & Handbook references

Scammer requests an upfront payment, promising a future service or huge return on investment.

Scammer targets members of an identifiable group (e.g., cultural, religious, or ethnic community) and curries favor with them to rope them into a fraudulent investment opportunity.

Approver permission  a permission given by the FCA following determination of a firm’s application under section 55NA of the Act, which entitles that firm to approve certain financial promotions for the purposes of section 21 of the Act, whether generally or subject to terms set by the FCA.

Approver permission exemption an exemption from the approver permission requirement, provided under the Financial Promotion Requirement Exemption Regulations, which enables a firm to approve a financial promotion in prescribed circumstances without the need for approver permission.

Approver permission requirement the general requirement imposed on a firm by section 55NA(1) of the Act not to approve (or purport to approve) the content of a financial promotion for the purposes of section 21 of the Act without approver permission.

Scam by a third party requiring a fee to “recover” funds lost in a prior fraudulent transaction.

A scam to mislead buyers, whereby a seller advertises an appealing but ingenuine offer to sell a financial product or service that the seller does not actually intend to sell. Instead, the seller offers a sub-par, defective, or unwanted product or service. For crypto, this might be most relevant to non-fungible tokens.

A type of distributed ledger which records transaction information in ‘blocks’, distributed amongst a network of nodes that work together to reach consensus on updates to the shared ledger, creating an auditable ‘chain’ of transactions.

Sending cryptoassets to a wallet that has no access key, for the purpose of taking them permanently out of circulation.

Certified high net worth investor - a person who meets the requirements set out in article 21 of the Promotion of Collective Investment Schemes Order, in article 48 of the Financial Promotion Order or in COBS 4.12B.38R.

Certified sophisticated investor - a person who meets the requirements set out in article 23 of the Promotion of Collective Investment Schemes Order, in article 50 of the Financial Promotion Order or in COBS 4.12B.39R.

Financial promotion

A financial promotion communicated, or approved or in relation to which the firm has confirmed compliance(subject to exemptions). 

Financial promotion: competence and expertise

Evidence of how the firm has satisfied the competence and expertise requirement in COBS 4.10.9AR

Compliance of financial promotions

Firms encouraged to consider recording why a financial promotion is considered compliant.

Non-mass market investments: certification of compliance

Certification by the person allocated the compliance oversight function or employees of the firm reporting to and supervised by that person confirming that the financial promotion is compliant with the restrictions in section 238 of the Act and COBS 4.12B, as applicable. Which exemption applies and the reason why that exemption applies. Where the exemption requires a certificate, investor statement, warning or indication, a copy of that certificate, investment statement, warning or indication.

Restricted mass market investments: consumer journey

Records of the outcomes of the firm’s categorisation (COBS 4.12A.21R) of retail clients and in relation to appropriateness assessments undertaken (COBS 4.12A.28R)

Protection language

Basis for omitting reference to investors being unlikely to be protected in risk warning

Any change to the rules specifying the form and content of the investor statements in COBS 4 Annex 2R to COBS 4 Annex 5R does not affect the continuing validity of a statement complying with the relevant rule in force at the time that it was completed and signed.

Risk summaries

Grounds for using an alternative form of risk summary

The reasonable steps defence to an action for damages

(e) arranging (bringing about) deals in investments (paragraph 4(1));

(f) making arrangements with a view to transactions in investments (paragraph 4(2));

(g) managing investments (paragraph 5);

(i) advising on investments (except P2P agreements) (paragraph 7(1));

A messaging protocol that enables interoperability between blockchains by holding or storing cryptoassets and creating token representations of the same value on another blockchain, allowing for cross-chain transactions.

Scammer sends emails or physical mails to victims saying they have personal information about the victim or embarrassing or compromising photos or videos. They scammer then threatens to make these things personal information public unless the victim pays them in cryptocurrency.

A period in which a stablecoin loses its value relative to the underlying asset. During this period, the stablecoin will usually be traded at a discount on the secondary market.

DeFi is a segment of the crypto ecosystem, which utilises blockchain networks and smart contract technology to provide a range of financial service activities without an intermediary.

A securities settlement mechanism that links a securities transfer and a funds transfer in such a way as to ensure that delivery occurs if and only if the corresponding payment occurs.

A type of technology that enables the sharing and updating of records in a distributed way.

Electronic money is stored monetary (including magnetically) value as represented by a claim on the electronic money issuer which is issued on receipt of funds for the purpose of making payment transactions and is accepted as a means of payment by third parties other than the issuer.

A government-issued currency that is not backed by a physical commodity, such as gold or silver.

Financial Promotion Requirement Exemption Regulations the Financial Services and Markets Act 2000 (Exemptions from Financial Promotion General Requirement) Regulations 2023 (SI 2023/966).

Scammer develops a fraudulent website or application and convinces victims to deposit funds to the platform under the guise of providing victims access to a unique investment opportunity. The fraudulent platforms appear legitimate, even going as far as replicating price movements and producing artificial gains.

A functionality that disables the transfer of a stablecoin, so that they can no longer be used for economic activity.

The state of being interchangeable with and indistinguishable from another

Exploiting a computer system or private network inside a computer with the intent of stealing personal information, such as passwords and bank account information, for financial gain.

Ponzi schemes promise passive income and high returns in short periods through an investment of crypto assets. These schemes often offer payment structures similar to that of multi-level marketing or pyramid schemes to recruit new investors, promising early investors a percentage of the profits of other investors they recruit. These schemes are usually heavily promoted through social media and may use paid social media promoters to market their product. Initially, the investment platform will appear legitimate and produce positive returns consistently. However, the scammer will eventually take off with the invested funds and freeze the platform under the guise of technical issues, before completely shutting down the platform.

This means that information or transaction history held on the blockchain cannot be modified or altered once created.

Scammer impersonates a legitimate business, government agent, or well-known figure to gain access to a user’s systems and personal information for financial gain (e.g. to steal the user’s assets).

Investment trust a company which:

(a) …

(b) (for the purposes of COBS 4.12B and the definitions of nonmainstream pooled investment and packaged product only) is resident in an EEA State and would qualify for such approval if resident in the United Kingdom.

Liquidity mining is an investment strategy used to earn passive income with crypto assets. Investors stake their crypto assets in a liquidity pool to provide traders with the liquidity to conduct transactions. In exchange, investors receive a portion of the trading fees.

In the liquidity mining scam, victims move cryptocurrency from their wallets to the liquidity mining platform and see the purported returns on a falsified dashboard^[1]. Believing their investments to be a success, victims purchase additional cryptocurrency. Scammers ultimately move all stored cryptocurrency and investments made to a scammer-controlled wallet.

A smart contract arrangement in DeFi that holds two or more cryptoassets to enable financial activity to take place, such as trading or lending

Scammer broadcasts a livestream event through an online streaming platform (e.g., YouTube) to market a fraudulent promotion or product. Promotions typically offer questionable terms that are too good to be true and may request payment through crypto assets.

Local authority security any of the following:

(a) a non-readily realisable security or non-mass market investment (other than a unit in an unregulated collective investment scheme) issued, or to be issued, by a local authority;

(b) a P2P agreement entered, or to be entered, into by a local authority as borrower;

(c) a P2P portfolio consisting exclusively of agreements entered, or to be entered, into by one or more local authorities as borrower.

Acquiring of payment transactions is defined in regulation 2 of the PSRs as “a payment service provided with a payment service provider contracting with a payee to accept and process payment transactions which result in a transfer of funds to the payee.” This includes traditional ‘merchant acquiring’ services enabling suppliers of goods, services, accommodation or facilities to be paid for purchases arising from card scheme transactions.

Creating new digital coins or tokens on a blockchain network.

MMFs are a type of open-ended investment fund used in many jurisdictions, that gives investors a way to diversify credit risk and a place to hold rather than grow their assets.

Multi-party computation is a cryptographic method used to increase the security of asset storage and transactions on the blockchain. It works by securely distributing the private data required to validate transactions in such a way that the data held by one user is kept secret to the other users taking part in the protocol.

A system which aggregates and offsets multiple payments between banks.

A computational device operated by blockchain network participants to store a copy of all transactional data, check the validity of new blocks and broadcast information to other nodes in the network.

Non-mass market investment either of the following:

(a) a non-mainstream pooled investment;

(b) a speculative illiquid security.

Non-readily realisable security a security which is not any of the following:

…

(c) non-mass market investment;

…

(e) a deferred share issued by a credit union; or

(f) credit union subordinated debt;

(except in COBS 4.12B, COLL and for the purposes of the definition of non-readily realisable security):

Notifiable concern has the meaning in SUP 16.30.7R.

The process of exchanging cryptoassets for fiat currency

The process of exchanging fiat currency (such as US dollars) for cryptoassets.

A system which allows the transfer of value between different parties through a payment scheme. Commonly initiated by the merchant to issuing and acquiring bank.

Any personalised device or personalised set of procedures agreed between a customer and the payment service provider (such as a bank) used by the customer to initiate payments. This includes debit and credit cards as well as payments made online and through mobile applications.

The interface as referred to in Article 30 of the Regulatory Technical Standards on Strong Customer Authentication. Interface enables secure communication with account information service providers, payment initiation service providers and payment service providers issuing cardbased payment instruments.

A ‘payment order’ is, in summary, an instruction to a PSP to fall within the definition of ‘payment instrument’. It is a set of procedures that enables the consumer to instruct a payment initiator to transfer funds to a merchant

A natural or legal person permitted under the Payment Services Regulations 2017 (PSRs) to provide payment services in the UK, including those authorised or registered under the PSRs, credit institutions, agents, governmental departments, and local authorities.

Payment services are listed in Schedule 1 Part 1 to the PSRs 2017. This includes but is not limited to services such as the execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider; issuing payment instruments or acquiring payment transactions; money remittance; payment initiation services and account information services.

The PSRs 2017 govern the authorisation and associated requirements for authorised or registered payment institutions (PIs). They also set the conduct of business rules for providing payment services.

A payment system allows settlement of payment transactions through the transfer of value. There are eight designated payment systems in the UK: BACS, CHAPS, Credit and Cheque, Faster Payment Scheme, Link, Mastercard, Visa Sterling, Finality Payment system which used DLT to transfer funds.

The process of initiating the placing, transferring, or withdrawing funds. Examples include payments with credit cards, transferring funds from a bank account to pay bills or using a mobile application to send funds.

A stablecoin’s targeted reference value (eg 1:1 with the US dollar)

Permitted approver in relation to a financial promotion, a firm that is entitled to approve that financial promotion under the terms of its approver permission.

A scammer may use a variety of methods to establish a relationship (either social, romantic, or business focus), and then gain the victim’s confidence and gradually introduce the victim to a fraudulent investment opportunity. In most cases, Scammers will approach victims through social media or dating apps, ask to take the conversation offline (e.g., WhatsApp, WeChat), and then communicate regularly with the victim to establish the relationship. Once Scammer has the victim’s trust, Scammer will then propose an investment opportunity related to crypto assets. The scammer will offer to train the victim to set up an account on an exchange to purchase crypto assets, and then provide a website or wallet address for the victim to transfer funds in order to participate in the investment opportunity. The fraudulent platform investment opportunity is often designed to appear legitimate and often produces artificial gains to keep the victim engaged in the platform and possibly deposit more funds. However, the victim is never able to withdraw their funds from the site and may be asked to transfer even more funds before anything can be withdrawn through a variety of excuses (e.g., service fees, IRS taxes, etc.).

• (1) A firm must support retail customer understanding so that its communications:

• • (a) meet the information needs of retail customers;
  • (b) are likely to be understood by retail customers; and
  • (c) equip retail customers to make decisions that are effective, timely and properly informed.
• (2) A firm must communicate information to retail customers in a way which is clear, fair and not misleading.

A firm must act to deliver good outcomes for retail customers.

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.

An alphanumeric string that is univocally associated to a blockchain address and enables the possessor of the key to sign (i.e., authorise, send, validate) transactions.

Proof of Reserves (or PoR) is an independent audit process which cryptoasset firms can use to verify that the client assets they are holding in custody correspond 1:1 with the assets they hold in reserve.

An alphanumeric string that is univocally associated to a blockchain address and which has two main functions: to enable the generation of (read-only) addresses for the reception of messages and/or transactions, and to enable the decoding and verification of a signed message and therefore allows recipients of the message to verify and accept it.

Qualifying cryptoasset (as defined in paragraph 26F (Qualifying cryptoasset) of Schedule 1 to the Financial Promotion Order):

(1) Any cryptoasset (other than a cryptoasset falling in (2)) which is:

(a) fungible; and

(b) transferable.

(2) A cryptoasset does not fall within (1) if it is:

(a) a controlled investment falling within any of paragraphs 12 to 26E or, so far as relevant to any such investment, paragraph 27 of Schedule 1 to the Financial Promotion Order;

b) electronic money (as defined in regulation 2(1) (Interpretation) of the Electronic Money Regulations);

(c) fiat currency;

(d) fiat currency issued in digital form; or

(e) a cryptoasset that:

(i) cannot be transferred or sold in exchange for money or other cryptoassets, except by way of redemption with the issuer; and

(ii) can only be used in a limited way and meets one of the following conditions:

(1) it allows the holder to acquire goods or services only from the issuer;

(2) it is issued by a professional issuer and allows the holder to acquire goods or services only within a limited network of service providers which have direct commercial agreements with the issuer; or

(3) it may be used only to acquire a very limited range of goods or services.

(3) For the purposes of this definition, a cryptoasset is any cryptographically secured digital representation of value or contractual rights that:

(a) can be transferred, stored or traded electronically; and

(b) uses technology supporting the recording or storage of data (which may include distributed ledger technology)

Qualifying cryptoasset (as defined in paragraph 26F (Qualifying cryptoasset) of Schedule 1 to the Financial Promotion Order):

(1) Any cryptoasset (other than a cryptoasset falling in (2)) which is:

(a) fungible; and

(b) transferable.

(2) A cryptoasset does not fall within (1) if it is:

(a) a controlled investment falling within any of paragraphs 12 to 26E or, so far as relevant to any such investment, paragraph 27 of Schedule 1 to the Financial Promotion Order;

b) electronic money (as defined in regulation 2(1) (Interpretation) of the Electronic Money Regulations);

(c) fiat currency;

(d) fiat currency issued in digital form; or

(e) a cryptoasset that:

(i) cannot be transferred or sold in exchange for money or other cryptoassets, except by way of redemption with the issuer; and

(ii) can only be used in a limited way and meets one of the following conditions:

(1) it allows the holder to acquire goods or services only from the issuer;

(2) it is issued by a professional issuer and allows the holder to acquire goods or services only within a limited network of service providers which have direct commercial agreements with the issuer; or

(3) it may be used only to acquire a very limited range of goods or services.

(3) For the purposes of this definition, a cryptoasset is any cryptographically secured digital representation of value or contractual rights that:

(a) can be transferred, stored or traded electronically; and

(b) uses technology supporting the recording or storage of data (which may include distributed ledger technology)

A scammer gains access to a victim’s computer systems or private network, encrypts sensitive information or data, and demands a ransom from the victim to restore access to the encrypted information or data upon payment. The scammer will then provide detailed instructions on how to pay the fee to get the decryption key and may accept payment in crypto assets.

...
(in COBS 4.12B, COLL and for the purposes of the definition of nonreadily realisable security):
…

The process whereby the stablecoin issuer returns, at the request of the stablecoin holder, the monetary value held by the issuer when it issued the stablecoin.

Registered person (as defined in article 73ZA of the Financial Promotion Order) a person who is:

(a) a cryptoasset exchange provider or custodian wallet provider, as defined in regulation 14A (cryptoasset exchange providers and custodian wallet providers) of the Money Laundering Regulations;

(b) included on the register maintained by the FCA pursuant to regulation 54(1A) (duty to maintain registers of certain relevant persons) of those Regulations; and

(c) not an authorised person.

Restricted mass market investment any of the following:

(a) a non-readily realisable security;

(b) a P2P agreement;

(c) a P2P portfolio.

whether or not any of (a) to (h) are held within an ISA or a CTF.

[Note: Section 238 of the Act and COBS 4.12B set out restrictions on the promotion of non-mass market investments to retail clients. See also COBS 9.3.5G and COBS 9A.2.22G Investments subject to restrictions on retail distribution).]

Scammer adopts a fake online profile to gain a victim’s affection and trust and then uses the illusion of a romantic or close relationship to manipulate and/or steal from the victim.

Derived from the expression “pulling the rug out”. Variation of investment scheme where a developer attracts investors to a new cryptocurrency project (e.g., a new token or initial coin offering) through online crowdfunding, pumps up the value of the investment, and then pulls out before the project is built, leaving investors with a worthless currency.

Self-certified sophisticated investor a person who meets the requirements set out in article 23A of the Promotion of Collective Investment Schemes Order, in article 50A of the Financial Promotion Order or in COBS 4.12B.40R.

An account containing money and/or assets that is held with a central bank, central securities depository, central counterparty or any other institution acting as a settlement agent, which is used to settle transactions between participants or members of a commercial settlement system.

A single company that is not part of the same group as the single-company holding vehicle investing in it and which:

(a) …

(b) does not undertake any of the activities in COBS 4.12B.50R(2)(a) to (e) subject to COBS 4.12B.52R and COBS 4.12B.54R(1) (for these purposes, COBS 4.12B.50R(2)(a) to (e), COBS 4.12B.52R and COBS 4.12B.54R(1) must be read as though references to the issuer are to the single company)

Single company holding vehicle a single body corporate which:

(3) ensures that neither the single company, nor members of its group, will use any of the monies received from the single-company holding vehicle directly or indirectly for one or more of the purposes in COBS 4.12B.50R(2) as modified by limb (b) of the single company Glossary definition.

Programmes stored on a blockchain that offer blockchains functionality to run self-executing code to automatically enforce pre-specified terms when certain conditions are met.

Speculative illiquid security has the meaning in COBS 4.12B.50R

55X(1)(f) - when the FCA is proposing to grant an application for approver permission but subject to terms which were not sought in the application

55X(1)(g) - when the FCA is proposing to grant an application to vary the terms of a firm’s approver permission but making different changes to those sought in the application

55X(1)(e) - ...

55X(2) - when the FCA is proposing to refuse an application for the variation of a requirement imposed under section 55L or for the imposition of a new requirement

55X(2) - when the FCA is proposing to refuse an application for approver permission

55X(2) - when the FCA is proposing to refuse an application for the variation or cancellation of a firm’s approver permission

55X(4)(e) - ...

55X(4)(ea) - when the FCA is deciding to grant an application for approver permission but subject to terms which were not sought in the application

55X(4)(eb) - when the FCA is deciding to grant an application to vary the terms of a firm’s approver permission but making different changes to those sought in the application

55X(4)(f) - when the FCA is deciding to refuse an application for the variation of a requirement imposed under section 55L or for the imposition of a new requirement

55X(4)(f) - when the FCA is deciding to refuse an application for approver permission

55X(4)(f) - when the FCA is deciding to refuse an application for the variation or cancellation of a firm’s approver permission

55Z(1) 55Z(2) - when the FCA is proposing or deciding to cancel a firm’s Part 4A permission or approver permission otherwise than at its the firm’s request *

55XA(1)(f) - ...

55Y(4) 55Y(7) 55Y(8)(b) - when the FCA is proposing to exercise, is deciding to exercise or is, with immediate effect, exercising its own-initiative variation power to vary a firm’s Part 4A permission or its power to vary the terms of a firm’s approver permission or is deciding, after considering any representations made by the firm, not to rescind a variation of either sort

Tech support scammers want victims to believe they have a serious problem with their computer, like a virus. They want victims to pay for tech support services the victims don’t need, to fix a problem that doesn’t exist. They often ask victims to pay by wiring money, putting money on a gift card, prepaid card or cash reload card, or using a money transfer app because they know those types of payments can be hard to reverse.

Two assets that can be traded for each other on an exchange. This can either be crypto to crypto, or crypto to fiat.

A device or service that stores users public and private keys allowing them to interact with various blockchains and allows them to send and receive cryptoassets.