1
Q
Financial Services and Markets Act (FSMA)
A
No one undertake regulated activity without authorised,
- exemptions include =
- appointed rep of authorised firm
- members of designated professional body (solicitors or accountants as might advise as incidental part of business - accountant advise make a pension contribution to reduce tax bill but would need to be authorised and would become an authorised professional firm (APF)
- Central banks, local authorities and certain government bodies
2
Q
Making an application
A
via relevant regulator PRA or FCA, no regulatory activity should commence until this part 4a permission has been received
- block 9 includes the perimeter guidance (perg) sets out all the activities for which authorisation is required
3
Q
Larger firms, new insurance apply to PRA
A
PRA assess capital
FCA assess fitness from conduct perspective
4
Q
Smaller firms apply to FCA
A
all checks done by FCA
5
Q
Timescale
A
Should be 6 months but allowed 12 months
- person must be fit and proper
6
Q
Change of status
A
business change legal status sole to limited much reapply for permission (if one of two person partnership dies other partner can carry on as sole)
7
Q
Consequences of becoming authorised
A
- Compliance with regulators regulations - set out in handbook
- ensuring firm has sufficient capital
- anyone in controlled role has necessary permissions
8
Q
Approval and controlled functions
- undergone change with intro of Senior Management and Certification Regime (SM&CR)
- gives senior management responsibility
A
- authorised person = firm, only a person if sole trader
- approved person = individual to perform controlled function
9
Q
Fit and Proper test
A
Annual basis to all key staff
10
Q
Appointed representatives (AR)
A
no need to be individually authorised by FCA as principal authorised
- example of tied FA
- need to check where any conflict of interest would precent principal meeting regulatory responsbility
- whether the AR is fit and proper
- whether principal has necessary systems and controls to be responsible for AR conduct and actions
- written agreement in place for principal to accept responsibility for actions of AR (FCA must be notified within 1- days of this coming in force)
11
Q
Training and competence
A
- recruiting right level of experience
- demonstrate competence
- undertake gap analysis
- obtain correct specialist qualifications
- FA complete level 4 standard qualification within 30 months of starting their role
- records kept for 5 years after end of employment for Mifid firms and 3 years for non, records for pension transfer specialist indefinitely
12
Q
Inducements
A
forbidden to offer kind of inducement that might cause conflict with their responsibilities to customers
- any acceptable inducements that are given should be recorded and kept fo 5 years
13
Q
Notifications to FCA
A
- mostly through GABRIEL reporting system (replaced in july 2019)
- capital adequacy
- compliant levels (twice yearly detailing complaints)
- type of business transacted and number of people involved
- level of client funds held
- persistency levels
14
Q
Complaints procedure
A
- an expression of dissatisfaction which can be verbal or written and may or may not be justified due to failure to provide a service and person suffered a financial loss, material distress or inconvenience
- no requirement to be in writing
- eligible complainant would be individual consumer
- small business fewer than 10 staff under EUR2m
- charity with annual income of less than 6.5 mill or trust with net assets under 5 mill
15
Q
Complaint steps
A
Sent acknowledgment with reasonable timescale (5 days)
- after 4 weeks if not resolved customers send a holding letter
- 8 weeks further letter either the final letter or holding letter and notify right to take to Financial Ombudsman Service (FOS)
- if upheld they should make compensatory payment or action
- referral to FOS made within earlier of 6 months or 6 years of event, or 3 years of becoming aware of the event
16
Q
FOS independent adjudicator
A
look at case on its merits to establish if compliant should be upheld
- decisions binding on provider not on the complainant
- FOS can award compensation = £355K plus / Interest plus / Costs plus / Interest on costs
17
Q
FOS Paid
A
£550 flat rate case handling fee
- up to 25 cases per annum will be handled without fee
- firms not make any attempt to recover handling fee
18
Q
Financial serviced compensation scheme (FSCS) - obligations for a failed firm to be picked up by other firms
A
- deposits 100% of first £85k per investor per authorised firm and pay within 7 days
- investments and mortgages 100% of £85K
- long term insurance
- general insurance (endeavour to ensure continuity of cover)
19
Q
Anti Money Laundering
- money for proceeds of crime and converting it into legitimate money by washing though the financial system
- 3 stages
A
- Placement (placed in financial product bank account or investment)
- layering (moved around the system)
- integration (investment product surrendered and clean money can be paid into another account)
20
Q
Proceeds of crime act 2002
- should not tell if suspicion as known as tipping off
- should report it
A
- each firm designated money laundering reporting officer (MLRO)
- decide if matter should be passed to national crime agency (NCA) by filling a suspicious activity report (SAR)
21
Q
Customer Due Diligence (CDD)
A
- Req to verify identity of client
- and validate address
- further tests if client politically exposed person (PEP) from outside the UK
- keep for 5 years
22
Q
Data Protection
- brought about by replacement of the data protection act 1998 with the new european general data protection regulation (GDPR)
A
- intro 25 may 2018
- aim for individuals to have more control on personal data
- have to have a reason to hold data
- data controllers
- penalties the higher of 20m or 4% of global gross revenue
- ensured by information commissioners office (ICO)
- breach should whistle-blow within 72 hours notifying the ICO
23
Q
Sources of advice and guidance
- information dating the facts (money and pension service set up by government)
- advice expression of opinion (financial advisers)
A
- FA either tied to one company or independent
- also multi-tied to more than one provider
- advisers who advise on products from any provider and don’t accept payment in form of fees are whole of market
24
Q
Advisers
A
- independent (whole of market and advise on range of products - unbiased and unrestricted)
- restricted - may operated as tied selfing products of single provider / multi tied selling products on panel / whole of market selling products across the market
- non-advised client buys on execution only
25
RDR major changes to advice market
- payment by adviser charge - ongoing charges only permitted where justified by ongoing work and all fees disclosed
- upskilling and demonstrating professionalism must also meet req of CPD continued professional development and maintain annual statement of professional standing
26
Status Disclosure
- level of service if offer advice or not
- basis of advice are they independent or restricted and nature of restriction
- feed and commissions
- how to make a complaint and right to go to FOS
- the firm covered by FSCS
- loans and ownership
- regulatory status
- quite often combined with terms of business or client agreement
27
Customer Types
| - categorised by the regulator
- Retail makes up most customers, highest duty of care
- professional lower duty of care as should have knowledge = per se professional & elective professional
- Eligible counterparty lowest duty of care
28
Categorisation of general insurance business
- consumer person not acting in respect to their business
- commercial customer anyone not covered by definition of a consumer
- customer both consumer and commercial
29
Communicating with customers
FCA set out rules
- govern way firms communicate with their clients en masse
distinct groups
- realtime financial promotions in social hours clear and not misleading and given a contact point
- non real time financial promotions written and subject to sign off, records need to be kept
- not allowed to cold call
30
Direct offer sales
allowed subject to certain restrictions
| - write to client and offer product which can accept
31
Ecommerce
firm transacts business online
32
Fair treatment of customers
| - based on 6 outcomes
- outcome 1 consumers confident dealing with firms where fair treatment customers is central
- outcome 2 products and services marketed designed to meet needs of identified consumer groups
- outcome 3 consumers provided with clear information during and after point of sale
- outcome 4 where consumers receive advice, advice is suitable
- outcome 5 provided with products that perform as firms have led them to expect
- outcome 6 consumers do not face unreasonable post sale barriers
33
Term fiduciary relationships
means a trust where all the parties can trust each other
34
knowing your customer
| - both hard facts and soft facts
wants - gots = needs
- if client will not give all info then can offer limited advice and client can choose to transact on execution only basis
35
Demonstrating suitability
- what customer hoping to achieve
- budget
- attitude to investment risk
- need quantified and solution targeted explaining which budget going to meet the need
- any gots should be left in place until demonstrated that unsuitable or strong argument to replace
- set out risks
- establish attitude to risk and capacity for loss
36
Product Disclosure
- KFD
- usually accompanied by Key Features Illustration KFI (sets out personalised details for customer)
- projections used by provider based on reasonable growth estimates (based on objective analysis of funds)
- must be a key features document
- can be electronic
- must contain info laid out by FCA = aims, risks, commitments, main terms of investment, cancellation rights, complaints procedure, compensation
- in addition life and income protection must include = firms name, legal form, name of EEA state, address of HO, info about commitment , definition of each benefit, term of contract, means of terminating, means of payment and premiums and duration, means of calculation and distribution etc
37
Application Forms
terms of completion and timing
- no SL needed for friendly society policies with premiums of no more than £1 per week or £50 per annum
- top ups to existing single premium policies
- increases to regular premium policies
38
Cancellation rights
30 - 14 days dependant on product
- if value of investment fallen before exercise cancellation lower value paid
- records kept for = indefinitely pension transfers / 5 years life and pension contracts / 3 years other cases
39
Acting without or against advice
- non advised = client enough info to make decision
- execution only = client acting on own
- insistent customer = client decides course of action against adviser
40
Reviews
```
annual generally taken as a minimum
- change in legislation
- change in personal circumstances
- change in economic outlook
better for commit to review for client with ongoing relationship
```
41
Stakeholder products
- simplified products accessible
- take up limited as not particularly attractive
- short term product = deposit account
- medium term product = collective investment sit in an equity ISA wrapper
- long term investment = stakeholder pension
- max charges permitted were 1.5%
42
Max monetary limits the FOS can apply
£355,000, PLUS interest PLUS Cost PLUS Interest on cost. If the complaint was referred to the FOS on or after April 2020 for something that happened on or after April 2019.
£160,000 PLUS interest PLUS Cost PLUS Interest on cost. If the complaint was referred to the FOS after April 2019 for acts before April 2019
£350,000 PLUS interest PLUS Cost PLUS Interest on cost if the complaint was referred to the FOS between April 2019 and March 2020 for acts after April 2019.
£150,000 PLUS interest PLUS Cost PLUS Interest on cost if the complaint was referred to the FOS before April 2019.
43
What is the principle of best execution
A stockbroker must seek to find the lowest price for buying client and highest price for selling client
44
Bancassurer
European Financial Adviser
45
FCA financial promotions rules would apply to
Mortgages
46
Max cooling off period for Stakeholder pension
30 Days
47
Body power to confiscate assets of criminals
SARRSA
48
Which recorded for financial promotions
The name of the person who checked it
49
Per se professional client
An IFA
50
pension policy projections
reasonably assumed rates
51
Not an FCA client type
statutory counterpart
52
non MiFiD firm keep approvals for mortgage key facts
3 years
53
applying for FCA permissions firm disclose
all info about which regulator could reasonably expect to be informed
54
Unit trust with no advice
no cooling off refection applies
55
Financial Promotions period covered
5 years
56
Financial services compensation scheme funded
by levy on authorised firms
57
Reviews upon customer request
firm wishes to remove any liability attached to failure to provide future advice
58
Controlled function
must be individually approved by registered with FCA
59
Maintain public register of data controllers
The information commissioner
60
Rival bank asked to do some consultancy work
not permitted
61
principles of customer fair treatment - objectives laid down
6
62
customer complaint
not acceptable to cover lost costs incur if complaint not upheld
63
Client identity
5 years after end of the relationship
64
Not exempt from FCA/PRA authorisation
High street bank
65
Obtain copy of personal information
£10
66
money laundering prevention
NCA
67
Max FOS award as compensation
£350,000
68
Firm submit an fica return on complaints
6 monthly
69
saving through a product un stakeholder range - not considering
medium to long term savings scheme
70
tied agent offering restricted advice, no suitable product
recommend client takes independent advice
71
ACME mutual established with profit insurer
name of the document must produce is PPFM
