Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

i10 > 5 - Legal and Regulatory Issues > Flashcards

5 - Legal and Regulatory Issues Flashcards

1
Q

What are the 2 main areas of regulatory responsibility for the FCA, in respect of insurance broking firms?

A
  1. Authorisation.
  2. Conduct of business.

Authorisation:
- Referred to as ‘Prudential regulation’ by the FCA.
- The aim is to ensure firms are financially sound.

Conduct of business:
- Referred to as ‘Conduct regulation’ by the FCA.
- The relationship an authorised firm has with its customers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who must an insurance broking firm be authorised by?

A

Any firm conducting ‘insurance mediation’ must be authorised directly by the FCA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

In terms of insurance mediation, what are the 4 main activities that are regulated by the FCA?

A
  1. Arranging (the purchase of general insurance policies).
  2. Advising (on insurance purchases).
  3. Dealing (as agent).
  4. Assisting (in the administration & performance of insurance policies).

Introducing insurance business, and administrating (i.e. notification of a claim) are also regulated activities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Is the introduction of business to an insurer or an insurance broker a regulated activity?

A

According to the Insurance: Conduct of Business Sourcebook (ICOBS) - yes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Describe the 6 steps to authorisation that insurance brokers need to follow?

A

Step 1: Decide the scope of authorisation.

Step 2: Understand the FCA’s Principles for Business.

Step 3: Prepare a business plan that addresses the FCA’s requirements.

Step 4: Calculate the minimum financial requirements for the business to operate.

Step 5: Decide if the firms systems & controls meet the FCA’s requirements & are adequate to manage the business.

Step 6: Decide which people will be ‘authorised persons’ within the firm. They take responsibility for regulated activities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When authorising a firm what does the FCA focus on?

A

The firm’s:
1. Business model (how it makes its money).

  1. Governance (how the firm’s managed, directed, & controlled).
  2. Culture (shared values, standards and beliefs).
  3. Systems & controls.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What does the FCA assess to ensure a firm is ‘treating its customers fairly’?

A
  1. Corporate culture (how effectively a firm identifies, manages, and reduces risk in the way it operates).
  2. Sales procedures (how effectively the firms systems & controls in relation to the sales process operate).
  3. Product design (whether a firm’s products or services meet customer needs and are targeted accordingly.)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Once authorised, what are insurance broking firms subject to?

A

Ongoing supervision by the FCA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What approach have the FCA adopted to supervision?

A

A risk-based approach to supervision.

i.e. The FCA directs its resources to firms it believes pose the greatest risk to customers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the primary objective of the FCA’s ‘risk-based approach’?

A

Consumer protection through the fair treatment of customers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How is each firm categorised under the FCA’s ‘risk-based approach’?

A

According to risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What were the FCA’s OLD risk categories for insurance broking firms?

A

Risk categories:

C1: (large banking & insurance groups with a very large number of retail customers).

C4: (smaller firms including most intermediaries).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How does the FCA’s NEW model categorise firms?

A

Firms are categorised as either:

‘Fixed portfolio’ or ‘Flexible portfolio’.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What supervision does a ‘Fixed Portfolio’ firm require?

A

Fixed portfolio firms require the highest level of supervision because they have a significant market presence. They are a small population of firms. They will be subject to firm or group-specific supervision.

They are allocated a named individual supervisor and are supervised using a continuous assessment approach.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What supervision does a ‘Flexible Portfolio’ firm require?

A

Flexible portfolio firms are subject to event-driven reactive supervision. The majority of firms are classified as flexible portfolio firms.

They are supervised through programmes of communication, engagement and education activity aligned with the risks identified for the sector in which the firms operate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Who are the first points of contact for a ‘Fixed Portfolio’ or a ‘Flexible Portfolio’ firm?

A

‘Fixed Portfolio firms’: Are provided a named individual supervisor.

‘Flexible Portfolio firms’: Their first point of contact with the FCA is the ‘FCA Customer Contact Centre’.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the 3 subdivisions of insurance brokers?

A
  1. Small firms - around 98% of regulated firms.
  2. Medium-sized firms - with higher risk profile.
  3. Significant businesses.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are the 3 pillars of the FCA’s ‘supervision model’?

A
  1. Firm Systematic Framework (FSF).
  2. Event-driven work.
  3. Issues and products.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Explain the purpose of each of the FCA’s 3 pillar supervision model?

A

Firm Systematic Framework (FSF):
- Designed to assess a firms conduct risk.
- i.e. Are the interests of customers at the heart of how business is run?

Event-driven work:
- Supervisory activity in response to issues that are emerging or have recently happened.
- i.e. Higher supervisory attention to firms with a spike in reported complaints.

Issues and products:
- Work on sectors of the market/products in a sector of the market that are putting consumers at risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the name for a firm who deals directly with clients?

A

A ‘retail firm’.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How does the FCA monitor the regulatory position of ‘retail firms’?

A

The FCA requires them to report on certain activities. Firms do this by completing a ‘Retail Mediation Activities Return (RMAR)’.

22
Q

How often do retail firms produce a ‘Retail Mediation Activities Return (RMAR)’?

A

(Firms with revenue under £5m): Small firms produce reports every 6 months.

(Firms with revenue over £5m): Produce these reports every 3 months.

23
Q

What did the FCA’s ‘Approved persons’ regime require?
What REPLACED the ‘Approved Persons’ regime?

A

Requires individuals who conduct controlled functions to be approved by the FCA within an authorised firm.

This is part of the Senior Managers and Certification Regime (SM&CR).

24
Q

What is the aim of ‘The Senior Managers & Certification Regime (SM&CR)’?

A

Aims to increase individual accountability within firms.

25
Q

What are the 3 key features of (SM&CR)?

A
  1. Senior Managers Regime.
  2. Certification Regime.
  3. Conduct Rules
26
Q

What does the ‘Senior Managers Regime’ part of (SM&CR) include?

A

This focuses on the most senior individuals of a firm (SMF’s - senior management functions).

Each senior manager must have a ‘statement of responsibilities’ - setting out the areas for which they are personally accountable.

SMF’s must be assessed for fitness & proprietary at least annually.

These individuals must be FCA approved.

27
Q

What does the ‘Certification Regime’ part of (SM&CR) require?

A

Applies to individuals in a firm (not SMF’s) whose role could still cause significant harm to the firm.

Must be assessed as fit and proper.

But do NOT need to be FCA approved.

28
Q

What does the ‘Conduct Rules’ part of (SM&CR) require?

A

Applies to all employees of a firm.

29
Q

Name some discipline and enforcement methods of the FCA?

A
  1. Public censure - issuing mg a public statement of misconduct. Can damage a firms reputation & hinder future success.
  2. Financial penalties - on a firm/individual.
  3. Prosecution for criminal offences.
  4. Civil and less formal remedies - i.e. withdrawing permission/authorisation.
30
Q

When is it a criminal offence to carry on regulated activities?

A

It is a criminal offence for a firm to carry on regulated activities without authorisation.

31
Q

What are the FCA’s (PRIN)? How many are there?

A

The FCA has 11 principles for business.

Some include:
1. Integrity.
2. Skill, care & diligence.
3. Market conduct.
4. Conflicts of interest.
5. Client’s assets.
6. Financial prudence.

32
Q

What was ‘TCF’? What does the FCA refer to this concept as now?

A

The old regulator initiated ‘Treating Customers Fairly’.

FCA refers to the concept as ‘the fair treatment of customers’, which is the key to putting customers at the heart of their business.

33
Q

What is the aim of the FCA’s Consumer Duty?

A

To achieve a higher level of consumer protection in retail financial markets.

The overarching principle is that firms must act to deliver good outcomes for their clients.

Was thought that too many firms were not meeting their customers needs.

34
Q

How does the FCA define a ‘Vulnerable customer’?

A

Someone who, due to their personal circumstance, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

35
Q

Name some examples of vulnerability?

A
  • Poor health
  • Recent bereavement
  • Poor literacy
  • Poor numeracy skills
36
Q

What does the FCA expect in terms of vulnerable customers?

A

To provide them with an appropriate level of care to ensure they are treated fairly.

Senior managers should create/maintain a culture that reduces potential harm to vulnerable customers.

37
Q

What is in the ‘Insurance: Conduct of Business Sourcebook (ICOBS)’?

A

The rules and guidance in ICOBS are the specific actions firms should adopt to support the PRIN (principles for business).

38
Q

What are the 3 KEY areas of ‘training and competence’ that all firms need to consider?

A
  1. Assessing competence
  2. Maintaining competence
  3. Record keeping
39
Q

Explain how the 3 KEY areas of ‘training & competence’ are implemented in the workplace?

A

Assessing competence:
- Employees must be supervised until assessed to be competent.

Maintaining competency:
- Competency must be maintained through continuing professional development (CPD).
- Competent people added to a list all firms must maintain.

Record keeping:
- Records of training must be kept for at least 3 years.

40
Q

In terms of financial crime, what are the 2 key issues?

A
  1. Money laundering
  2. Bribery & corruption
41
Q

What is Money Laundering?

A

The process by which criminals convert money that has been obtained illegally into legitimate funds.

42
Q

Describe the 3 stages of the Money Laundering process?

A
  1. Placement (purchase of an insurance policy).
  2. Layering (to conceal the origins of the money additional transactions are made).
  3. Integration (criminal gains the ‘clean’ money legitimately).
43
Q

What act relates to Money Laundering?

A

POCA: Proceeds of Crime Act (2002):
Make it an offence to:
- Fail to disclose someone else is engaged in money laundering.
- ‘Tipping off’ - let a money launderer know they are under investigation.

44
Q

Who must employees report suspicions of money laundering to within a firm?

A

The money laundering reporting officer (MLRO).

45
Q

Name the 4 criminal offences under the ‘Bribery Act 2010’?

A
  1. Giving a bribe.
  2. Receiving a bribe.
  3. Bribing a foreign public official.
  4. Failure to prevent a bribe.
46
Q

In what form should client verification be? How long should records be kept for?

A

Client verification should be photographic.

Records should be kept for 5 years.

47
Q

Why are sanctions imposed?

A

As a way of controlling the access to funds for regimes, individuals, companies or personas who are felt to be less that desirable.

48
Q

Why was (ELTO) The Employers’ Liability Tracing Office introduced?

A

ELTO was introduced by the insurance industry to make it easier for employees to search for employers liability insurance policies using a central database.

49
Q

What information does the UK GDPR apply to?

A

Personal data of an identified living individual.

50
Q

Who does the GDPR apply to?

A

Data controllers and data processors.

i10 (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions