1 Flashcards
Financial services 4 essential functions
Protect customer savings
Allow savings to be lent to others
Provide protection against risk
Disperse risk
GILT
Pay a fixed level of interest over a term then the investment is returned
Discretionary management
Act within a remit for client so do not ask for permission per transaction
Advisory management
Need to ask permission per transaction
Fiscal policy
Government’s control of taxation and their borrowing and spending
Monetary policy
Control interest rates and supply of money
Quantitative easing
creating new money and then using it to ‘buy back’ loans from institutions, such as banks and companies
Customers hierarchy of needs
BMBPSRET - budgeting no. 1
What did MAPS replace?
Pension wise, pension advisory service and money advice service
Debt repayment plan
Informal agreement with creditor
Debt management plan
Agent carries out agreement with credit for repayment of debt
IVA
75% of creditors must agree, carried out by an insolvency practitioner, pay back % of overall debt
Brankruptcy
Min. Of £5k, carried out by a trustee and lasts 12months
Home reversion scheme
Sell a % of the house which is repaid upon death or sale of property. Pay rent whilst live i property for proportion not owned.
Peppercorn rent
Rent paid for home reversion scheme
Fixed repayment lifetime mortgage
An agreed premium is added to debt each month for sale of property and no interest is paid.
Diminishing Musharaka
The firm facilitating the arrangement buys the property and each repayment transfers a share of the property to the purchaser
Convertable term assurance
Gives the opportunity to turn into a life policy without further medical questioning
Renewable term assurance
Can renew policy for additional term without further medical questioning
Whole of life assurance
Life assurance with no end date
HTB ISA
Max. Of £12k put I on own, can put in £200pm, max of £1,200 for first instalment, 16+
LISA
£4k max. Per year, latest opt in 40 and last payment at 50 then withdraw from 60, stocks and shares aswell as cash, 18+
Personal savings allowance
£12,750 plus £5k for savings income
Derivative
This is the option to buy shares at a price in the future, set now.
Tax evasion
Illegally dodging tax
Self employment NIC
2 & 4
Limited liability partnership
Separate legal identity but same tax as sole trader so class 2 & 4 NIC
Limited liability company
Must be set up with memorandum of association and pay corporation tax
Public limited company
25% min. must be on stock exchange
Difference between insolvency and bankruptcy
Business goes insolvent and a person goes bankrupt
Bankruptcy order of repayment preference to corporate insolvency
- Fees 2. Preference debts 3. Unsecured debts
- Secured debts 2. Fees 3. Preference debts eg wages 4. Unsecured debts 5. Interest
What is needed for a contract to be valid
Offer, acceptance and intention
How to buy freehold
Must have 21 years remaining on lease and have lived in the property for 2 years and must have 50% agree to it if block of flats
General power of attorney
Enduring power of attorney
Lasting power of attorney
General - ends at mental incapacity
Enduring - continues beyond mental incapacity but no provision for health care
Lasting - provisions for health care also
What is the only thing to effect a lasting power of attorney
Bankruptcy stops health and welfare decisions
Where is a lasting power of attorney registered
Office of public guardian
Requirements for a valid will
2 people as witness and in writting
Actions that revoke a will
Marriage/civil partnership, writing a new will, deliberately destroying a will
What happened with estate if died intestate
With wife then spouse gets all chattels plus £270,000 then 50% over this
Children - grandchild - parent - sibling - grand parent - aunt/uncle
Grant used for with and without will
Will - probate
Intestate - grant of administration
Types of trust
Express
Implied
Resulting
Bare/absolute
Successive
Power of appointment
Interest in possession
Discretionary
Statuatory
Express - expresses wishes
Implied - implied as a result of an action
Resulting - takes effect when another will fails
Bare/absolute - fixed or unchangeable beneficiary
Successive - passed to family successors
Power of appointment - get to assign trust to appoint within class of beneficiaries
Interest in possession - person has immediate right to income
Discretionary - trustees have openness and power to choose within a group of beneficiaries
Statuatory - created by law eg intestate
FCA 3 operational objectives
PIC
Protection, integrity, competition
Occupational pensions registary and what other register is kept by the TPR
This register is to help individuals who are trying to trace old company schemes and other register is for those that are banned from acting as a trustee
Max punishments by The Pension Regulator
£5k for individuals and £50k for businesses and daily charges of £400-£10k for on-going issues
Information commission officer
Enforce compliance for GDPR
EU decisions, directives and regulations
Decisions - enforceable immediately and measures that effect an individual or state eg something that effects an individuals rights
Directives - binding but state decides how to reach within date
Regulations - do not require ratifications and immediately effect state eg change to currency
How are you subject to MiFID II
If you hold client moneys
What did MiFID do?
Widen scope of investment products, easier to trade across EU and capital requirements introduced, changes to advice process eg recording advice or disclosure
Basel II pillars
Min. capital requirement
Need for additional capital above min.
Public risk management and capital stats
FCA 8 regulatory principles
Efficiency and economy
Proportionality
Sustainable growth
Responsibility of consumers
Responsibility of SM
Recognition of business differences
Openness and disclosure
Transparency
3 FCA areas of responsibility
Authorisation, supervision, enforcement
How long does FCA have to process an application
6 months if complete and 12 months if incomplete application
Fixed and flexible portfolio firms
Fixed - larger, higher risk companies and supervised to pillar 1
Flexible - most firms who carry smaller risk to markets and supervised to pillar 2 & 3
3 pillars of supervision
- Proactive
- Event driven
3 Thematic
Who sets punishment for FCA and who can you appeal to if disagree
Regulations Decision Comittee and if appeal Upper tribunal
Free asset ratio
Surplus assets, usually for life office
Temporary transition power
Allow UK to switch rules from EU
On shoring process
Amending EU rules to UK only
Short selling
Trader borrows shares and speculates on price movements
Types of FCA fees
Application - starts at £2.5k and if wishes to vary authorisation then is 50% of application fee but if not changing fee block then flat £250 fee
Periodic - paid annually and tariff based
Special projects - special requests eg mergers
Fixed overheads
Costs to enable a firm to run day to day. Classed as fixed as they do not change much. Eg rent, staff, etc.
Smaller firms must fulfill capital resource requirement of?
25%
Acceptable capital within CRD
Tier 1 - permenant share capital
Tier 2 - non permenant capital
Tier 3 - company debts that have short term maturity
Retail distribution review ensured any payment can only be made to intermediary unless?
Intermediary waives right and passes to customer
Another firm has been involved
Is a packaged product
Can commission increase with volume?
No
Record keeping
Record of any benefits received
Sales referrals
Benefits - 5yrs
Referrals - 1yr
What report is done for insurance?
Demands and need statement
Insurance cooling off periods
General - 14 days
Protection - 30 days
PPI cap?
20% of amount recovered
Mortgage market review brought in what 3 new things
More stringent affordability tests
stress tests
FCA accountability on advisors
Mortgage credit directive three new things
New disclosure method
7 day reflection period
New categories of BTL mortgages
When are you subject to MiFID?
If you hold client monies
Market abuse directive brought in what 2 things
Insider dealing
Market manipulation
Who decides FCA punishments and who controls them. Then who can you raise that to under point of law only?
Upper tribunal and Lord Chancellor’s Department and raise to court of appeal
Complaints commissioner must receive a complaint by when and how long to til they reply?
3months and reply in 3 days, keep you updated every 4 weeks and resolve within 12 weeks
Consumer credit agreement was for how much?
Under £25k
Cooling off period for a credit agreement
7 days
Consumer credit agreement brought in what?
removed the £25,000 limit, but it also introduced two new exemptions which are loans:
over £25,000 where these are for business purposes.
where a debtor is categorised as a high net worth individual.
FTOC 6 positive consumer outcomes
Consumers can be confident… fair treatment of customers is central to the corporate culture.
Products and services… meet needs of identified consumer groups.
Clear information provided before, during and after the point of sale.
Advice is suitable
Product performance and the service provided are as expected.
Consumers do not face un-reasonable post sale barriers
Retail distribution review brought in what 3 things?
minimum qualification levels, difference between sales and advice and changes in how we charge clients for services.
Sandier review brought what?
Stakeholder products
What report is written for stakeholder products
Recommendation summary
Do you need a qualification to advise on stakeholder products?
No
Lifestyle fund
Find that switches automatically to lower risk 5yrs before retirement
Elective client
Per se client
Eligible counter party
E - due to knowledge and experience
P - due to nature of role
ECP - both of above
If proceeding with an insistent client’s transaction must get what
Signed letter stating going against advice
Fiduciary duty
Highest standard of care
Fiduciary
The person who has a fiduciary duty
Kid must include what things?
ARCTIC
Aims, risks, costs, tax implications and cancellation rights
CFPPM booklet is provided to what type of insurance?
With-Profits fund
What has 30 day cooling off period
Anything with life, pension or annuity in the name
Record keeping for MiFID and non-MiFID and pensions
5yrs MiFID
3yrs non-MiFID
Pensions are indefinitely
Purpose of supplementary questionnaires on top of fact find?
To keep FF streamlined and clients engaged
What do you do if a client wishes to change priority from usual priority order?
Fully document on the fact find
Methods of ethical screening
Neutral approach
Negative screening
Positive screening
NA - choose socially responsible firms
NS - avoid certain practices
PS - actively seek out ethical firms
For what products are a suitability report not required?
Non-regulated activities. NS&I and stakeholder products are two examples of products that use a simplified advice process.
If it is FCA rules v principles which one wins?
Principles
FCA 11 principles
- Integrity
- Skill, care, due diligence
- Management and control
- Financial prudence
- Market conduct
- Customers interests
- Communications with customers
- Conflicts of interest
- Customers relationship of trust
- Clients assets
- Relationship with regulators
What must a firm do first if breach FCA principles
Inform FCA then carry out remedial action
Principle based and outcome based regulation mean
P- Encouraging types of behaviour
O - Predicting the future issues
Who is responsible for compliance within a firm
SM
Additional FCA principle
Consumer duty principle
Consumer duty principle 3 elements
Sets a high standard of conduct for marketing activities
Cross-cutting rules - sets key behaviours required
4 outcomes - sets keys for firm to customer relationships
FCA 6 key cultural drivers
Leadership
Strategy
Decision making
Controls
Recruitment/training
Reward
What form is required to give permission to be an authorised person?
CF form
FCA categories of approved person
Governing functions - directors
Significant management function- SM but non executive
Customer dealing function
FCA governing functions - responsible for conduct
7 Principles for approved person
Integrity
Skill care and due diligence
Market conduct
Openness organisation and control
Skill care and diligence in managing
Compliance
Retail distribution review within investment firms require what certification?
Statement of professional standings
- adhere to code of ethics
- Hold necessary qualifications
- Completed CPD
- Comply with code of standards
Bribery act 3 new offences
Offering, promising or giving a financial or other advantage, intending to bring about improper performance (‘Giving a bung’ basically).
Bribery of a foreign public official.
Failure of a firm to prevent bribery.
Aldermanbury declaration
general insurance sector signing up to a common set of professional standards in relation to knowledge and conduct.
An ethical framework for financial services found what 3 points
Be open, honest, responsive and accountable.
Be committed to acting competently, responsibly and reliably.
Relating to colleagues and customers fairly and with respect.
Dilemma resolution model
‘go around the loop’ more than once until the dilemma is resolved.
For MI to be effective it must be…
Seen
Challenged
Analysed and monitored
Acted on
Recorded
PRA 4 categories for intervention framework
Low risk, moderate viability, imminent risk, firm wind up
Criminal punishments for:
- money laundering and general prohibition
- failure to report suspicions
- Making misleading statements or insider dealing
- POCA 2002 offences such as concealment of criminal property or assisting others to do this
2yrs
5yrs
7yrs
14yrs
