7 Flashcards
Re Fair Treatment of Customers (FTOC), what are the first three consumer outcomes?
- Fair treatment of customers
- Products and services are designed to meet needs
- Consumers are appropriately informed
Re Fair Treatment of Customers (FTOC), what are the last three consumer outcomes?
- Advice is suitable
- Products and services are of acceptable standard
- No unreasonable post-sale barriers
What is Fair Treatment of Customers (FTOC) about? (2)
- Not about standardising services and products
- It’s about firms focus on outcomes for customers and how they deliver
Is FTOC a rule that affects all businesses?
Not a rule and is different for every type of business and business model
What is the FCA’s role on FTOC?
FCA provide suggestions of what outcomes may look like
What do you need to know about interacting with vulnerable clients? (3)
- They’re less able to represent their own interests
- Adviser decides whether a client is treated as vulnerable
- Vulnerability can be permanent or temporary
The four key drivers of vulnerability are:
Health
Resilience
Life events
Capacity
How should dvisers adapt their approach to accommodate vulnerable clients’ needs? (3)
- Have trusted family members present at meetings
- Appropriate authority on file (POA)
- Document steps taken
What kind of evidencing is required in Know your customer (KYC)?
Must be able to show collection of sufficient KYC data to show that u r acting on client’s best interest
In KYC, advisers must gather what information?
AI PIANOE
- Attitude to risk
- Investment preferences
- Personal information
- Income and expenditure
- Assets and liabilities
- Nationality, residence and domicile
- Objectives
- Employment details
What responsibilities do intermediaries have to their clients and what are their obligations? (2)
- have a fiduciary responsibility
- Obligations vary based on nature of the relationship
What are the different Fiduciary Duties?
LCD CAMM
- Duty of loyalty
- Duty of care
- Duty to disclose information
- Duty of confidentiality
- Duty to avoid unauthorised transactions
- Duty to monitor and review
- Duty to manage conflicts of interest
When should the complaints-handling procedures of a firm be disclosed? (3)
- Disclosed at first point of contact
- On request
- When a complaint is received
The complaints-handling procedure of a firm must be available to clients in what form?
In writing
What should the complaints-handling procedures of a firm be like? (2)
- Appropriate and effective
- Readily available for customers
Complaints-handling procedures should provide which key details? (4)
- How to complain
- What response to expect
- How complaints are investigated
- How to escalate to the FOS
What are two key turnaround times for complaint handling?
- Acknowledge a complaint promptly
- Final response within eight weeks
What should be communicated to a client if a complain is unresolved? (2)
- Explain why and when it’s likely to be resolved
- Let complainant know they can contact the FOS within six months
What information should the complaint summary report sent to the FCA contain? (5)
- Total complaints received
- Number of complaints resolved
- Number of complaints outstanding
- Number of complaints with the FOS
- Total amount of redress paid
In complaint handling, who are eligible complainants? (6)
Consumer
Micro-enterprises
Small business
Charities
Trusts
Guarantor
What records should kept about complaints? (2)
- Total complaints received
- Number of complaints completed and outstanding
How long should records about complaints be held for?
Records kept for three years
How often should a complaint summary report be sent to the FCA?
Summary report sent to FCA every six months
What is the role of The Financial Ombudsman Service (FOS)?
Free dispute resolution service for eligible complainants
What must you do before escalating a complaint to the FOS?
Complainant must’ve approached the firm concerned first
For complaints, what are the possible redress?
Money award as compensation or direction to take appropriate action
What’s the maximum award for winning a complaint?
£415,000 (plus reasonable costs)
What are the reasonable costs that can be added to the maximum award of a complaint? (4)
- Financial loss
- Pain and suffering
- Damage to reputation
- Distress
What happens when a complainant accepts/rejects the compensation offered by a firm?
- If accepts award, it is binding on the firm
- If rejects award, can pursue matters through the courts
Who is under compulsory jurisdiction of the FOS?
Regulated and ancillary services of authorised firms - defined in the FCA handbook
Who can be under voluntary jurisdiction of the FOS?
Businesses not covered by compulsory jurisdiction - defined in the FCA handbook
What kind of complaints can be put under voluntary jurisdiction of the FOS?
Complaints not covered by compulsory jurisdiction
What should the parties of the FOS’ voluntary jurisdiction do during investigation? (2)
- Firm must be a ‘willing participant’
- Parties allow investigation deemed necessary by the FOS
What does the Financial Services Compensation Scheme (FSCS) do?
Allows clients to claim for losses when a firm goes into liquidation
How is the FSCS funded?
Funded via an annual levy on authorised firms
What are the current limits on FSCS claims for deposits? (3)
- £85,000 per person per firm
- £170,000 for joint account
- £1million for temporary high balances (for up to six months)
What are the current limits on FSCS claims for investment / home finance / debt management?
£85,000 per person per firm
What are the current limits on FSCS claims for insurance business? (2)
1.100% of claim protected for compulsory insurance
2. 90% of claim for other insurance
What is the legislation on insider dealing?
Criminal Justice Act 1993, Part V (CJA 1993)
What is considered ‘inside information’? (3)
- Specific
- Not public
- Price-sensitive
What are the statutory offences regarding insider dealing? (3)
- Dealing with inside information
- Telling others to deal on inside information
- Improper disclosure of inside information
Who can commit insider dealing statutory offences?
These offences can only be committed by an individual
Who is considered an insider [insider information]? (2)
- someone who knows it is inside information
- someone who knows it is from an inside source
In insider dealing, an inside source has access in which forms?
Access as director, employee or shareholder (directly or indirectly)
Which securities are listed in the CJA? (2)
- Shares, debt securities, warrants, depositary receipts
- Derivatives on securities
What are the general defences to insider dealing? (3)
- Did not expect to make a profit
- Information was sufficiently widely held
- Would have dealt without the information
What are the special defences to insider dealing? (3)
- Acted in normal course of business (market makers)
- It was reasonable to deal despite the information
- Acting in accordance with ‘price stabilisation’ rules
What is the Magistrates’ Court’s maximum penalty for insider dealing?
Six months imprisonment and/or £5,000 fine
What is the Crown Court’s maximum penalty for insider dealing?
Ten years imprisonment and/or unlimited fine
What does the Crown Court need to have before they can charge someone with insider dealing? (2)
- Criminal standard of evidence
- Beyond all reasonable doubt
Which offences are in the Market Conduct Sourcebook (MAR)? (6)
- Insider dealing
- Improper Disclosure
- Manipulating transaction
- Manipulating devices
- Dissemination
- Misleading behaviour and distortion
What are the common defences to market abuse? (2)
- Reasonable belief that behaviour is not market abuse
- Took all reasonable precautions to avoid market abuse allegation
What is money laundering?
Use financial institutions to hide the proceeds of criminal activities, avoid conviction and confiscation of funds
What is the maximum penalty to ‘market abuse’? (2)
- No custodial sentence
- Unlimited fine
What kind of legal offence is ‘market abuse’?
Civil offence
What level of evidence is required to be charged of ‘market abuse’?
Lower burden of proof
What is terrorism?
Use of violence or threat of violence in pursuit of political, religious or ideological objectives
What makes terrorist financing challenging to identify? (2)
- Can involve small sums of money
- Can be financed using legitimate funds
What legislation covers money laundering?
Proceeds of Crime Act 2002
What are the three stages to money laundering?
Placement, layering and integration
What are the different offences that can be comitted under money laundering? (6)
- Concealing
- Arranging
- Acquisition
- Failure to disclose
- Tipping off
- Assistance
What are the penalties to money laundering?
Maximum penalty is 14 years imprisonment and/or an unlimited fine
What are the guiding principles of Joint the Money Laundering Steering Group (JMLSG) guidance? (3)
- Verifying proof of client identities
- Staff training
- Reporting suspicious activity
What are the common defences to money laundering prosecution? (4)
- Threats to safety
- Did not know or suspect ML had occurred
- Not had required training
- Occurred outside UK, and is not unlawful in the country it occurred
How should the JMLSG guiding principles affect regulated firms? (2)
- Procedures are based on JMLSG guiding principles
- Done using risk-based approach
How should the JMLSG guiding principles affect clients?
Not burdensome for honest clients
What is the aim of the JMLSG guiding principles?
Make it harder to break the law
What does the MLR 2017 check regarding firm’s policies and procedures? (4)
- Appoint a director for compliance with regulations
- Have procedures for identification
- Appointment a MLRO
- Cooperate with NCA
The MLR suggests what education and training should be provided for employees? (4)
- Regulations relating to AML
- Recognising suspicious transactions
- Proper ways to report
- Training is appropriate to responsibility of employee
The MLR suggests what kind of record keeping regarding money laundering?
Retention of relevant records (identity checks, etc.) for five years
When do you decide to do simplified due diligence on a client?
When risk of money laundering is deemed low
What is checked during simplified due diligence? (2)
- Customer identification
- Reputational searches
What happens if a customer’s identity cannot be identified during simplified DD?
The firm should not proceed with the business relationship
When should you do Enhanced Due Diligence (EDD) on a client?
Applied on a risk sensitive basis
Which specific circumstances is EDD mandatory? (3)
- Politically Exposed Person (PEP)
- Where false/stolen documents have been used
- Complex transactions where there is an unusual pattern of behaviour
JMLSG suggests EDD should be carried out in wealth management to understand the client’s: (3)
- The origins of the client’s wealth
- Business structures
- The chain of title to the beneficial owner
What is the impact of financial crime on the firm?
CLW CREDIT
- Criminal prosecutions
- Legal costs
- Weaking financial position and stability
- Civil lawsuits
- Restrictions of business activities
- Erosion of public trust and confidence
- Damage to reputation
- Increased scrutiny
- To combat financial crime, firms need to invest in robust compliance systems
What does the data protection act apply to?
Applies to manual data and electronic data
Data is widely defined but includes: (3)
Telephone
CCTV recordings
Photographs
Can sensitive information be disclosed to 3rd parties?
Not without proper authority from client
What kind of data systems does GDPR apply to?
The GDPR applies to both automated personal data and to manual filing systems where personal data is accessible
How is GDPR implemented and what kind of data does it apply to?
Through the Data Protection Act (DPA) and applies to personal data
Under the GDPR, firms need to appoint a what?
Data Protection Officer
For GDPR, the definition for ‘personal data’ provides for a wide range of personal identifiers, including: (3)
Name
Identification number
Location data or online identifier
What is Personal data?
information that can be used to identify an individual
What is Sensitive personal data?
this term is used in respect of a person’s race, beliefs, health, sexual orientation or criminal record
For GDPR, what is Processing?
activities that affect personal data, including disclosure to a third party
What is a data subject?
the individual whose personal data is held
What is a data controller?
Someone who decides how personal data is processed
What is a data processor?
A body that processes data on behalf of data controller
What are the GDPR principles?
A PLAIDS
Accuracy
Purposes limitation
Lawfulness, fairness and transparency
Accountability
Integrity and confidentiality (i.e. security)
Data minimization
Storage limitation
What does the ‘storage limitation’ GDPR principle entail? (2)
- Personal data should be kept no longer than necessary
- Firms remove data no longer required
What does the ‘integrity and confidentiality (i.e. security)’ GDPR principle entail?
Data handled to ensure ‘security of data including protection against unlawful processing, loss, or damage’
What does the ‘lawfulness, fairness and transparency’ GDPR principle entail?
Data subject consented to data processing, and there is evidence in writing
What does the ‘accountability’ GDPR principle entail?
Firms have appropriate records to demonstrate compliance
What does the ‘data minimization’ GDPR principle entail?
Data collected should be ‘adequate, relevant and limited to what is necessary ‘
What does the ‘purposes limitation’ GDPR principle entail?
Data is obtained only for specified explicit and legitimate purposes
What does the ‘Accuracy’ GDPR principle entail?
data must be ‘accurate and where necessary kept up to date’
What are the GDPR offences? (3)
- Failure to notify Information Commissioner
- Failure to comply with an information notice
- Processing data without authorisation
What are the GDPR penalties?
unlimited fines and penal notices issued by the Commissioner
What is professional integrity? (3)
- Acts beyond mere compliance
- Strive to exceed standards expected
- Following ethical principles
In integrity and ethics, what is the order of priorities? (3)
Client first
Firm second
Self third
