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RO1 Feb 2021 > Apply Principles & Rules, Regulatory Advice > Flashcards

Apply Principles & Rules, Regulatory Advice Flashcards

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
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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

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3
Q

Larger firms, new insurance apply to PRA

A

PRA assess capital

FCA assess fitness from conduct perspective

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4
Q

Smaller firms apply to FCA

A

all checks done by FCA

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5
Q

Timescale

A

Should be 6 months but allowed 12 months

- person must be fit and proper

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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)

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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
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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

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9
Q

Fit and Proper test

A

Annual basis to all key staff

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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)
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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
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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

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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
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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
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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
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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
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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
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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)
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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)
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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)
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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
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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
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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
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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
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25
Q

RDR major changes to advice market

A
  • 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
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26
Q

Status Disclosure

A
  • 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
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27
Q

Customer Types

- categorised by the regulator

A
  • 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
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28
Q

Categorisation of general insurance business

A
  • consumer person not acting in respect to their business
  • commercial customer anyone not covered by definition of a consumer
  • customer both consumer and commercial
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29
Q

Communicating with customers
FCA set out rules
- govern way firms communicate with their clients en masse

A

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
Q

Direct offer sales

A

allowed subject to certain restrictions

- write to client and offer product which can accept

31
Q

Ecommerce

A

firm transacts business online

32
Q

Fair treatment of customers

- based on 6 outcomes

A
  • 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
Q

Term fiduciary relationships

A

means a trust where all the parties can trust each other

34
Q

knowing your customer

- both hard facts and soft facts

A

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
Q

Demonstrating suitability

A
  • 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
Q

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)
A
  • 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
Q

Application Forms

A

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
Q

Cancellation rights

A

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
Q

Acting without or against advice

A
  • non advised = client enough info to make decision
  • execution only = client acting on own
  • insistent customer = client decides course of action against adviser
40
Q

Reviews

A 
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
Q

Stakeholder products

  • simplified products accessible
  • take up limited as not particularly attractive
A
  • 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
Q

Max monetary limits the FOS can apply

A

£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
Q

What is the principle of best execution

A

A stockbroker must seek to find the lowest price for buying client and highest price for selling client

44
Q

Bancassurer

A

European Financial Adviser

45
Q

FCA financial promotions rules would apply to

A

Mortgages

46
Q

Max cooling off period for Stakeholder pension

A

30 Days

47
Q

Body power to confiscate assets of criminals

A

SARRSA

48
Q

Which recorded for financial promotions

A

The name of the person who checked it

49
Q

Per se professional client

A

An IFA

50
Q

pension policy projections

A

reasonably assumed rates

51
Q

Not an FCA client type

A

statutory counterpart

52
Q

non MiFiD firm keep approvals for mortgage key facts

A

3 years

53
Q

applying for FCA permissions firm disclose

A

all info about which regulator could reasonably expect to be informed

54
Q

Unit trust with no advice

A

no cooling off refection applies

55
Q

Financial Promotions period covered

A

5 years

56
Q

Financial services compensation scheme funded

A

by levy on authorised firms

57
Q

Reviews upon customer request

A

firm wishes to remove any liability attached to failure to provide future advice

58
Q

Controlled function

A

must be individually approved by registered with FCA

59
Q

Maintain public register of data controllers

A

The information commissioner

60
Q

Rival bank asked to do some consultancy work

A

not permitted

61
Q

principles of customer fair treatment - objectives laid down

A

6

62
Q

customer complaint

A

not acceptable to cover lost costs incur if complaint not upheld

63
Q

Client identity

A

5 years after end of the relationship

64
Q

Not exempt from FCA/PRA authorisation

A

High street bank

65
Q

Obtain copy of personal information

A

£10

66
Q

money laundering prevention

A

NCA

67
Q

Max FOS award as compensation

A

£350,000

68
Q

Firm submit an fica return on complaints

A

6 monthly

69
Q

saving through a product un stakeholder range - not considering

A

medium to long term savings scheme

70
Q

tied agent offering restricted advice, no suitable product

A

recommend client takes independent advice

71
Q

ACME mutual established with profit insurer

A

name of the document must produce is PPFM

RO1 Feb 2021 (7 decks)

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