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Cemap 1 Flashcards

1
Q

What is the Net Asset Value (NAV) formula?

A

Total Assets - Total Liabilities.

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2
Q

It is compulsory for Employers to maintain continuing competency records of their employees after they leave the company.
How long must they be kept for Pension Transfer Staff?

A

Indefinitely.

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3
Q

When planning financially, what is usually the recommended priority for young families

A

Financial Protection

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4
Q

What is the maximum contribution you can make into an ISA in each tax year?

A

£20,000.

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5
Q

What is the maximum partial surrender value for investment bonds?

A

5% of original investment each year, up to a total of 20 years.

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6
Q

What does ‘Equity’ mean?

A

The same as stocks. Shares in a company.

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7
Q

Regarding client identification, businesses must retain records for how long?

A

5 years after the relationship has ended.

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8
Q

Under the FCA’s Conduct of Business rules, in what format should the charges be made by an adviser, which are disclosed to a client?

A

In writing only.

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9
Q

It is compulsory for Employers to maintain continuing competency records of their employees after they leave the company.
How long must they be kept for MiFID business?

A

5 years.

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10
Q

What is the THIRD tier of UK Regulation?

A

UK Regulatory Bodies E.G PRA & FCA

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11
Q

What is the first pillar of solvency II??

A

Capital requirements and valuation of assets

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12
Q

Basic rate tax payers pay how much on income from dividends?

A

7.5% above the £2,000 allowance via self assessment

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13
Q

What is Maturity Transformation?

A

The practice by financial institutions of borrowing money on shorter timeframes than they lend money out

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14
Q

What is ‘PSNCR’

A

Public Sector Net Cash Requirement; If a Budget Deficit Exists then the government will need to meet the shortfall.
PSNCR is a cash measure of the public sector’s short term net financing requirement

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15
Q

Consumer Credit Act 1974 only regulates credit agreements not exceeding how much?

A

£25,000

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16
Q

Modifications to a will are recorded on a…

A

Codicil

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17
Q

The illustration for a Pre Application Disclosure should be provided in which prescribed format?

A

European Standardised Information Sheet (ESIS)

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18
Q

What is the overall maximum yearly contribution that can be made into a pension?

A

£40,000. Anything over is taxable.

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19
Q

Who do firms report to if there is a significant data breach?

A

The Information Commissioner

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20
Q

What is a Rights Issue?

A

A rights issue is an invitation to existing shareholders to purchase additional new shares in the company.

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21
Q

The term ‘bancassurance’ was created to describe a situation where?

A

A bank owns an insurance company or an insurance company owns a bank.

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22
Q

How are people classed as a resident in the UK?

A

If they spend 183 days or more in the UK during a tax year

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23
Q

What is the overall aim of ICOBS?

A

The overall aim of ICOBS is to ensure that businesses treat customers fairly.

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24
Q

What is a Mutual Organisation?

A

Owned by the members, not the shareholders. E.G Building Societies.

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25
Q

What must be quoted for all regulated loans? Under the terms of the Consumer Credit Act 1974

A

Annual Percentage Rate

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26
Q

What is the income tax free allowance for additional rate tax payers?

A

£0. There is no tax free allowance for additional rate tax payers

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27
Q

What does ‘Probate’ mean?

A

It is the process whereby a will is ‘Proven’

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28
Q

A regulated mortgage contract is one secured on land, at least what percent is used as a dwelling?

A

at least 40% of the land is used, or is intended to be used

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29
Q

What is the automatic accrual method?

A

Deceased’s share is automatically shared among surviving partners

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30
Q

Who pays the individual under Statutory Sick pay Benefit

A

The Employer.

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31
Q

Are Treasury Bills Long term or short term?
Also how long typically?

A

Short Term, typically last 91 days

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32
Q

What does the term ‘Flotation’ mean?

A

The process of converting a private company into a public company by issuing shares available for the public to purchase

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33
Q

What are the other two macroeconomic objectives(4)?

1:
2: Low Unemployment
3:
4:Stable Economic Growth

A

1: Price Stability
3: Balance of payments equilibrium

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34
Q

What happens if a person dies intestate with a spouse but no children?

A

Spouse receives all of the estate absolutely.

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35
Q

MCOB 5 states that pre-application disclosure must include an indication of the amount by which an applicant’s mortgage would increase for every:

A

1% rise in interest rates.

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36
Q

What is a Credit Union?

A

Financial organisation similar to retail banks, however a member-owned nonprofit financial cooperative.

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37
Q

Who issues PIBS (Permanent Interest Bearing Shares) and why?

A

Issued by building societies to raise capital

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38
Q

What is the Capital Adequacy Margin formula?

A

Capital ÷ Risk-Weighted Assets

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39
Q

Give 3 examples of ‘Product sales’ intermediaries

A

1) financial advisers2) insurance brokers3) mortgage advisers

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40
Q

What happens if a person dies intestate with children but no spouse?

A

Estate is shared equally amongst children.

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41
Q

What is a defined benefit?

A

The same as ‘Final Salary Scheme’
A pension product that invests a fraction of your final salary for every year of service up to a total of 40 years.

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42
Q

How long does a borrower have to withdraw from a credit agreement?

A

14 days from conclusion of the agreement.

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43
Q

What does Non Qualifying mean?

A

Does not qualify for any level of tax.

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44
Q

What is annual allowance reduction?

A

If someone has income in excess of £260,000. £1 of the allowance is reduced for every £2 over the threshold

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45
Q

What do Endowment Policies have built into them?

A

Life insurance - known as ‘death benefit’

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46
Q

What is the Earnings Per Share Formula?

A

Net Profit Dividend ÷ Number of Shares = EPS

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47
Q

What is an Eligible Counterparty?

A

Someone or an organization with a high degree of financial knowledge.

E.G Government, Banks, Building Societies.

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48
Q

A firm must keep records of identity of customers for how long after the relationship has ended?

A

5 years.

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49
Q

What is an Enterprise Investment Scheme?

A

Similar to Venture Capital Trusts, however investor buys shares in one specific start-up company.

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50
Q

Name 2 of the 3 main money laundering offenses under the Proceeds of Crime Act.

A
  1. Concealing criminal property
  2. Arranging relating to criminal property
  3. Acquiring or using criminal property
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51
Q

Higher rate tax payers pay how much on income from dividends?

A

33.75%

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52
Q

What is an IFPRU 50K Firm?

A

A firm that does not deal on its own account, and is required to hold capital of at least €50,000

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53
Q

What does ‘zero rated’ mean?

A

Zero Rated refers to items subject to 0% VAT. Such as Prescriptions, Books, or food

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54
Q

What are personal representatives known as if there isn’t a will?

A

Administrators.

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55
Q

What does MCOBS stand for?

A

Mortgage Conduct of Business Sourcebook.

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56
Q

Give 3 examples of the FCAs disciplinary powers.

A
  1. Varying the firms permissions. (specific permission e.g mortgages)
  2. Withdrawal of approval/authorization. (approved person being struck off)
  3. Seek an injunction. (FCA freezes the assets of the firm)
  4. Seek restitution. (FCA applies for a court order to have proceeds forfeited to them)
  5. Seek redress. (court order forces the gains to be returned to the clients)
  6. Enhanced Supervision. (intense supervision)
  7. Disciplinary action. (minor issues can be dealt e.g statement of misconduct or financial penalty)
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57
Q

What is ratification?

A

The action of giving formal consent or signing a contract/agreement making it officially valid.

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58
Q

What is the name for someone who creates a will?

A

Testator.

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59
Q

For investment products, when is the latest that a suitability report should be provided to a client?

A

date of issue of the cancellation price

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60
Q

What is Proactive Servicing?

A

Anticipating customer needs and actively reaching out with a solution.

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61
Q

What is ICOB?

A

Insurance Conduct of Business.

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62
Q

What does SM&CR? stand for?
What is SM&CR?

A
  1. Senior Managers and Certification Regime
  2. It’s a financial services regulation designed to impose personal accountability on senior managers at financial services firms and improve the conduct of all employees at these firms.
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63
Q

What is the FIRST tier of Uk Regulation?

A

European Legislation (Regulations and Directives).

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64
Q

What is a death benefit?

A

A payout to the beneficiary when the insured dies

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65
Q

What is a Whole of Life Policy?

A

A policy that guarantees an insurance provider will pay out a lump sum to your family when you die.

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66
Q

What is the 3rd pillar of Solvency II?

A

Disclosure and transparency rules

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67
Q

What does Means Tested mean?

A

Someone that is after a benefit needs to PROVE that they genuinely need the benefit before receiving it.

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68
Q

What is the interbank market?

A

The interbank market is a Global Network used by financial institutions to trade currencies between themselves.

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69
Q

What is the MAXIMUM limit that Building Societies are able to raise funds on the wholesale market?

A

50% of their total liabilities

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70
Q

What’s the definition of insurance?

A

a means of shifting the burden of risk by pooling to minimise financial loss’

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71
Q

What is the income tax free allowance for higher rate tax payers?

A

£500

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72
Q

Regarding money laundering, what MUST each firm have in place?

A

A Money Laundering Reporting Officer (MLRO)

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73
Q

What is an Investment Bond?

hint: Single Premium,…..

A

Single Premium, Unit Linked, Non-qualifying, whole of life policies.

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74
Q

What is the primary legislation on data protection?

A

General Data Protection Regulation (GDPR)

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75
Q

What is demutualisation?

A

The conversion of the building society to a company.

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76
Q

What is an occupational pension scheme?

A

A pension set up by employers for their employees.

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77
Q

Whats the main factor to do with Fixed Portfolio Firms?

A

The FCA considers that they require the highest level of supervisory attention.

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78
Q

What are the other two asset classes(4)?

1:
2: Fixed interest
3:
4: Property

A

1: Cash
3: Equity

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79
Q

According to The Bribery Act 2010 what is the punishment for an individual convicted of bribery?

A

10 years imprisonment and an unlimited fine

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80
Q

What is an IFPRU 125k Firm?

A

A firm that does not deal on its own account, and is required to hold capital of at least €125,000

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81
Q

What is the second category of NIC (national insurance contributions)?

A

Class 2 - Self-employed flat rate contributions collected via self-assessment

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82
Q

What is the Price/Earnings Ratio Formula?

A

Share Price ÷ Earnings Per Share

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83
Q

Do Investment Trusts have the ability to gear up?

A

Yes.

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84
Q

What is the main factor in Convertible Term Assurance?

A

Includes an option to convert it to either an ENDOWMENT or WHOLE OF LIFE plan at any stage during the term.

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85
Q

What is a Venture Capital Trust (VCT)?

A

A VCT is a high risk investment listed on the stock exchange. -You buy shares in the VCT company and they manage the investment, buying shares into different companies.

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86
Q

What is an ex-dividend?

A

The BUYER acquires the stock itself but the next interest payment will be payable to the SELLER.

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87
Q

The role of the Financial Policy Committee (FPC) of the Bank of England is to:

A

identify risks that may threaten the stability of the economy

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88
Q

Annual charges on stakeholder investment products are capped in the first 10 years at what percent?

A

1.5% per annum.

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89
Q

What is the cooling-off period for investments, deposits and other insurance contracts E.G general insurance?

A

14 days.

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90
Q

What is Reactive Servicing?

A

Companies wait until client experiences a particular problem before taking action.

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91
Q

What is the tax relief in a VCT?

A

Tax relief at 30% on up to £200,000 per tax year.

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92
Q

How many data protection principles are there under the General Data Protection Regulation?

A

Six. 6

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93
Q

What is the FCAs 2nd (3) operational objective?

A

Enhance the integrity of the UK financial system

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94
Q

What is a reversionary bonus on a with-profits policy?

A

A payment that is declared regularly and once added to the policy, cannot be removed.

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95
Q

How long do contribution based jobseekers allowance benefits last for?

A

6 months

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96
Q

What does arrears mean?

A

money that is owed and should have been paid earlier.

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97
Q

Do OEIC have the ability to gear up?

A

No.

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98
Q

Basel III requires credit institutions to keep a solvency ratio of at least what percent?

A

7%

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99
Q

What is the maximum compensation that the FSCS will award for an investment loss following bank insolvency?

A

£85,000

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100
Q

What happens if a person dies intestate with no spouse and no children?

A

Estate goes to parents, if not alive then siblings.

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101
Q

What is the third category of NIC (national insurance contributions)?

A

Class 3 - Voluntary contributions

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102
Q

An authorised firm needs to requisition a report from its Money Laundering Reporting Officer (MLRO) at least how often?

A

once in a calandar year

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103
Q

Gross Domestic Product (GDP) is…

A

The measure of value of goods and services over a period of time.

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104
Q

What is MCOB 3?

A

Financial Promotions.

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105
Q

What is the Lifetime allowance?

A

£1,073,100

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106
Q

What is the cancellation price?

A

The cancellation price is the minimum permitted bid price.

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107
Q

What is the punishment for someone convicted of failing to disclose or tipping off?

A

5 years imprisonment and/or unlimited fine.

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108
Q

What is a data controller?

A

THE legal ‘person’ who is responsible for handling and processing data. Normally the business that controls the data.

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109
Q

The minimum monthly contribution to a stakeholder pension cannot exceed how much?

A

£20

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110
Q

What is the 2nd pillar of Solvency II?

A

Governance and risk-management requirements

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111
Q

What happens to deceaseds share in a property with tenants in common ownership?

A

It passes to the beneficiaries of his estate.

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112
Q

What is the purpose of liquidity ratio?

A

To work out a business’s ability to pay debt obligations without raising external capital.

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113
Q

What does Capital Adequacy Mean?

A

The required minimum reserve of capital in which a bank must have available.

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114
Q

What is the main difference between a basic bank account and a typical current account.

A

Basic Bank Accounts have no overdraft facility. - Aimed at people on low incomes/poor credit history

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115
Q

What is a borrower granted after a mortgage offer?

A

A 7 day reflection period to consider the offer.

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116
Q

Consumer Price Index is…

A

The official measure of inflation used by the government.

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117
Q

What is a data subject?

A

THE individual whose data is processed

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118
Q

What is the FOURTH tier of UK Regulation?

A

Complaince Policies of individual financial institutions

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119
Q

What is the FCAs 3rd (3) operational objective?

A

Help maintain and promote effective competition

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120
Q

How is income tax paid if you are employed?

A

income tax is paid by the employer at source under the ‘PAYE scheme’.

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121
Q

What is a defined contribution?

A

The same as ‘money purchase schemes’.
A pension product that invests contributions to create a fund, Pension is then dependent on investment performance.

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122
Q

What is the maximum permitted annual charge for investment products?

A

1.5% for the first 10 years and 1% thereafter

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123
Q

What age can you take from a stakeholder pension?

A

55 years old.

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124
Q

What is the maximum possible contribution into an ISA in a tax year?

A

£20,000

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125
Q

What is an IFPRU 730k firm?

A

Any firm that does deal on its own account, and is required to hold capital of at least €730,000

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126
Q

When managing Unit Trusts what does ‘open ended’ mean

A

That the fund manager can create more units

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127
Q

What are personal representatives known as if there is a will?

A

Executors.

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128
Q

What percentage of income tax must be paid on a child benefits claim

A

None. It is a tax free benefit.

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129
Q

What is the aim of consumer credit legislation?

A

To regulate, supervise and control certain types of lending.

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130
Q

What is a Professional Client?

A

Customer with some knowledge of financial services.

Main difference from an eligible counterparty is that advice is being given.

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131
Q

What is the FCAs 1st (3) operational objective?

A

Protect consumers

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132
Q

What is the role of a power of attorney?

A

Acts on behalf of others.

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133
Q

What is the maximum investment for a Friendly Society Plan?

A

£270 lump sum, or £25 per month, or £75 per quarter.

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134
Q

What is the FIFTH tier of UK Regulation?

A

Rulings from ARBITRATION and ombudsmen schemes following customer complaints.

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135
Q

Which type of intermediaries have access to the whole market and give unrestricted advice?

A

Independent advisers only

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136
Q

Fund manager sells to investors at this price. What is it?

A

Offer Price.

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137
Q

Concerning Adviser charges, commission is still allowed in relation to the sale of:

A

Insurances.

E.G Term assurance, critical illness, income protection.

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138
Q

What are the three marriage gifts exemptions?

A

£5000 from each parent, £2500 from each grandparent, £1000 from others

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139
Q

What does intestate mean?

A

Not having made a will before one dies.

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140
Q

What are the two types of property?

A
  1. Realty - land, and everything attached to land
  2. Personalty - any property which is not land.
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141
Q

What age can you open a Lifetime ISA?

A

18-40.

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142
Q

What is a warrant?

A

A right to buy shares at a specified price

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143
Q

What is Deemed Domicile?

A

Deemed Domicile is when a person is not UK Domiciled but has lived in the UK for 15 of the last 20 years.

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144
Q

What is the arrangement known as that ensures staff maintain competence?

A

Continuing Professional Development (CPD)

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145
Q

How much CGT is taxed on encashment in a VCT?

A

No CGT on entaxment. Deemed to have been already taxed during the policy.

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146
Q

Insolvency occurs when…?

A

the value of a persons liabilities are greater than their assets and are unable to meet their financial obligations.

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147
Q

What does Single Premium mean?

A

(Life Insurance) A policyholder pays a lump sum upfront in exchange for a guaranteed death benefit.

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148
Q

What is the Final Salary Scheme?

A

A fraction of your final salary paid for every year of service up to a total of 40 years.

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149
Q

What is a Unit Linked Insurance Plan?

A

A unit-linked insurance plan gives investors both insurance and investment under a single integrated plan.

150
Q

According to MCOB rules, what are the only two levels of service that a mortgage adviser can provide?

A
  1. Advised Sale
  2. Execution Only
151
Q

What is the first category of NIC (national insurance contributions)?

A

Class 1 - Employees’ and employer’s contributions

152
Q

If an adviser transacts designated investment business for a client, the amount or basis for charges would normally be disclosed in the:

A

Client Agreement

153
Q

What is a Discounted Rate?

A

A discount off the Standard Variable Rate (SVR) for a specific period - E.G 1% off SVR for 2 years

154
Q

What is inflation?

A

a sustained increase in the general level of prices of goods and services.

155
Q

What age must you be to open a Cash ISA?

A

16.

156
Q

What are the two identifiable sectors in the financial services industry?

A
  1. The Surplus Sector ‘Lenders’
  2. The Deficit Sector ‘Borrowers’
157
Q

How far can partial surrenders be carried forward?

A

5% yearly allowance, if not used, can be carried forward and accumulated up to 100% of the original investment.

158
Q

Who issues Treasury Bills?

A

Treasury Bills are issued by the Treasury’s Debt Management Office

159
Q

What are the 2 main types of private pension?

A
  1. Occupational schemes
  2. Personal pensions
160
Q

Under normal circumstances, how long does a bankruptcy order last for?

A

1 year.

161
Q

Additional rate tax payers pay how much on income from dividends?

A

39.35%

162
Q

Basel III requires credit institutions to keep a solvency ratio of at least:

A

10.5%

163
Q

If an individual is found guilty of recklessly making a statement in the context of money laundering that is false or misleading, what is the punishment?

A

They face a fine and/or maximum 2 year jail sentence.

164
Q

What is the role of an OEIC?

A

pools investors’ money and spreads it across a wide range of investments, such as equities or fixed-interest securities

165
Q

What are the two Occupational Pension Schemes?

A
  1. Money Purchase Scheme
  2. Final Salary Scheme
166
Q

Which category of customer is likely to be offered the LOWEST level of investor protection?

A

Eligible Counterparty.

167
Q

How long should advisors keep documents relating to Life Policies, Pension Contracts or MiFID business?

A

5 years.

168
Q

What is operational risk?

A

risk of losses caused by failed internal processes SUCH AS employee error, data breaches from cyber attacks

169
Q

What is a coupon?

A

An interest rate paid throughout the term of a bond

170
Q

What is the role of a Personal Representative?

A

They represent deceased people in order to support distribution of their estate.

171
Q

What is Wholesale Banking?

A

Banking that provides financial services to larger clients E.G other banks

172
Q

How long should the KID (Key information document) be?

A

No longer than 3 sides of A4.

173
Q

What is the Cross Option Method?

A

The deceaseds estate has the option to sell the deceaseds share to the partners within a specified time.

174
Q

Investment trusts are ‘closed ended’ because?

A

the number of shares remain constant.

175
Q

What is a remainderman?

A

A person who is entitled to inherit the principle of a trust once it is dissolved.

176
Q

What MAXIMUM amount of redundancy payments are not liable for income tax

A

The first £30,000

177
Q

Financial Promotions -
A copy of the promotion must be kept for how long?

A

minimum of 1 year after it was last used.

178
Q

What is the Bid Price?

A

The price at which the fund managers will buy back units from investors who wish to cash in all, or part of their unit holding.

179
Q

What is the meaning of a Redemption date?

A

The date the government will repay the capital

180
Q

Why cant Eligible counterpartys complain to the FOS?

A

An eligible counterparty is a category of client that includes country’s and local authorities. They would not be allowed to complain to FOS.

181
Q

What is an individual known as during the period of bankruptcy?

A

Undischarged Bankrupt. - Cannot borrow more than nominal amounts of money.

182
Q

What was the value of the intial voucher that the government supplied to kids with a Child Trust Fund

A

£250.

183
Q

The Price/Earnings Ratio is calculated as the:

A

share price / earnings per share

184
Q

Which category of customer is likely to be offered the HIGHEST level of investor protection?

A

Retail Client.

185
Q

What is a Chargeable Lifetime Transfer?

A

An immediate Inheritance Tax Charge if a gift received over the last 7 years is in excess of the nil rate band.

186
Q

What age must you be to open a stocks and shares ISA?

A

18.

187
Q

How do Equity Release Arrangements work?

A

Equity release is an agreement that lets you access the equity (cash) tied up in your home. You usually need to be at least 55 years old. You may be able to take the money that you release as a lump sum or regular smaller payments or both.

188
Q

What does restitution mean?

A

Being forced to forfeit any profit made from the activity that brought about enforcement action.

189
Q

What is a cum-dividend?

A

The BUYER acquires the stock itself and entitlement to the NEXT INTEREST PAYMENT.

190
Q

What is the solvency ratio formula, and what is the purpose of it?

A

The sum of a company’s Total assets - total liabilities
(a measurement for how well a company’s cash flow can cover its long-term debt.

191
Q

How much IHT tax is paid on a Chargeable Lifetime Transfer?

A

20%

192
Q

According to the FCA, a firm must aim to resolve a regulated complaint within how long?

A

8 weeks.

193
Q

How many bands of income tax are there for an individual whos only source of income is from employment?

A

3.

20%,40%,45%

194
Q

Who is the FSMA?

A

Financial Services and Markets Authority

195
Q

What represents the difference between the Offer and Bid Price?

A

Management charge. Which goes to the fund manager

196
Q

What is the maximum borrow amount for an equity release arrangement?

A

55% of the property value

197
Q

How does Term Assurance differ from WOL policies?

A

There is ONLY a payout if death occurs during the term of the policy

198
Q

What is an endowment policy?

A

Essentially a ‘savings plan’ that you make regular monthly payments into all while also making monthly payments on a interest-only mortgage.

Idea is that by the end of the mortgage term, this ‘savings plan’ will be at the very least equal to the mortgage balance.

199
Q

How does Whole of Life Assurance differ from Term Assurance?

A

Whole of life assurance pays out on the death of the assured whenever it occurs so there is a guaranteed pay out.

200
Q

What happens in Decreasing Term Assurance?

A

The PREMIUMS are level however SUM ASSURED decreases over time.

201
Q

What happens to the deceaseds share in a property with joint tenancy ownership?

A

The survivor inherits it without probate being needed.

202
Q

If an individual would like to take out a partial surrender from their investment bond, what maximum % can be withdrawn each year?

A

5%. Each year up to a total of 20 years.

203
Q

What is a capital repayment mortgage?

A

A reducing loan (monthly interest payments) with the outstanding balance decreasing all the time

204
Q

How often must firms submit to the FCA statistics on the number of complaints received?

A

Twice a year. Every 6 months

205
Q

What happens if a person dies intestate with a spouse AND children?

A

Spouse receives first £270,000 plus half of anything above £270,000. Other half is split between kids.

206
Q

An individual or creditor can petition for their own bankruptcy if they are owed??

A

£5000 or more.

207
Q

What is the legislation that applies to bribery?

A

The Bribery Act 2010

208
Q

What is IFPRU?

A

Prudential Sourcebook For Investment Firms.

209
Q

When should an initial disclosure document be provided and
what does it tell the client?

A

At first contact with customer.
Shows whether the adviser is whole of market, multi-tied or a tied adviser.

210
Q

Bankruptcy occurs when…?

A

An INSOLVENT person is subject to a bankrupcy order by court.

211
Q

For advertisements relating to credit, what MUST be included?

A

The term ‘Representative APR’

212
Q

Do Unit Trusts have the ability to gear up?

A

No.

213
Q

Who is the FATF and what is their role?

A

Financial Action Task Force.
Their aim is to lead the fight against money laundering internationally - they arent law enforcement.

214
Q

What is a Retail Client?

A

Someone with very little knowledge of financial services.

  • ‘person in the street’
215
Q

Anyone convicted of concealing, arranging, or acquiring could be sentenced up to a maximum of how long?

A

14 years imprisonment and/or unlimited fine.

216
Q

What is an Individual Voluntary Arrangement (IVA) ?

A

An alternative to bankruptcy. Debtor will arrange with creditor for debts to be payed over a 5 year period.

217
Q

What is Standard variable rate?

A

Rate of interest set by each individual lender as their standard product; rate will vary from lender to lender.

218
Q

If a £3000 annual gift is not used, how many years can it be carried over for?

A

1 year.

219
Q

What is the SECOND tier of UK Regulation?

A

Acts of Parliament E.G Building Societies Act 1986

220
Q

What is the income tax free allowance for basic rate tax payers?

A

£1,000

221
Q

What is the cross option method?

A

Gives the surviving shareholders the option to buy the shares from the personal representatives of the deceased.

222
Q

How long is the term for a Friendly Society Plan?

A

10 year term.

223
Q

What does ICOBS stand for?

A

Insurance Conduct Of Business Sourcebook

224
Q

What is a Rights Issue?

A

An invitation to existing shareholders to purchase additional new shares in the company, typically at a discounted price.

225
Q

What does the key features document only include?

A

The key features document includes product details ONLY

226
Q

What is the meaning of RESTITUTION?

A

Being forced to forfeit any profit made from the activity that brought about enforcement action.

227
Q

What is the name of someone that creates a trust?

A

The settlor

228
Q

What does MiFID stand for?

A

Markets in Financial Instruments Directive (MiFID)

229
Q

What is the primary global standard for the global prudential regulation of banks?

hint: TBCOBS

A

The Basel Committee on Banking Supervision

230
Q

What is a Eurobond?

A

A Eurobond is a fixed interest investment that uses a different currency.

231
Q

It is compulsory for Employers to maintain continuing competency records of their employees after they leave the company.
How long must they be kept for non-MiFID business?

A

3 years.

232
Q

What are the four elements of intermediation?

A

1) Geographic location2) Aggregation3) Maturity transformation4) Risk transformation

233
Q

Why were the Basel Accords Created?

A

To set out the minimum capital requirement for banks.

234
Q

What are the two requirements needed for a company to be apart of The Main Market?

A
  1. At least 25% of the companies share capital in public hands.
  2. Trading for at least 3 years.
235
Q

What is the punishment for a partner or director who fails to comply with money laundering regulations?

A

2 years imprisonment and or fine.

236
Q

What are investment trusts?

A

Investment companies whose business is to invest in stocks and shares (not actually trusts at all)

237
Q

What is a scrip issue?

A

A bonus issue which is an offer of FREE additional shares to EXISTING shareholders

238
Q

What is COBS?

A

Conduct Of Business Sourcebook.

239
Q

If a policy is regarded as ‘qualifying’, what does that mean?

A

A policy regarded as ‘qualifying’ means that the payout is tax-free. Due to benefits already being deemed to have been taxed at 20% within the fund.

240
Q

What is the maximum monetary award that the FOS can award?

A

£355,000

241
Q

What is the nil rate band

A

£325,000

242
Q

Concerning financial promotions, information about past performance should be based on an appropriate period of no less than:

A

5 years.

243
Q

What is the cooling-off period for Life & pensions or pure protection policies E.G critical illness?

A

30 days.

244
Q

What is the maximum period that Statutory Maternity Pay and Maternity Allowance is payed for?

A

39 Weeks.

245
Q

What does intestate mean?

A

When a person dies without leaving a valid will, estate is shared according to ‘rules of intestacy’

246
Q

What is the fourth category of NIC (national insurance contributions)?

A

Class 4 - Self-employed profit related contributions

247
Q

What is the maximum period that Statutory Sick Pay is paid for?

A

28 weeks.

248
Q

How long are customers given to pay back arrears?

A

15 working days after the lender becomes aware of the arrears.

249
Q

What is Marginal rate of tax?

A

The highest rate someone can pay on their income

250
Q

What happens in Level Term Assurance

A

The SUM ASSURED as well as PREMIUMS are level throughout the term

251
Q

What is retail banking

A

Banking that provides financial services to individuals and small business

252
Q

What is a Propriety Organisation?

A

Limited companies owned by the shareholders

253
Q

What is MCOB 6?

A

Disclosure at the mortgage offer stage

254
Q

What is the Automatic Accrual Method?

A

Deceaseds share is automatically shared among surviving partners.

255
Q

What happens if a person dies intestate and has no spouse or blood relative alive?

A

The estate is inherited by the crown

256
Q

What is the ‘ASA’?

A

Advertising Standards Authority (ASA).

257
Q

Market abuse is split into two kinds of financial crime, which are:

A
  1. Market manipulation
  2. Insider dealing
258
Q

What do investment bonds invest into?

A

A range of assets, such as fixed interest, shares or even property

259
Q

What tax do limited companies pay?

A

corporation tax

260
Q

What is the Buy and Sell Method?

A

Deceaseds executors desired to offer to sell the deceaseds share of the business to the surviving partners

261
Q

What is a Child Trust Fund or (CTF)?

A

It was a tax free savings account for children born AFTER 31st August 2002.

262
Q

What term would a key person term assurance policy usually be assumed to be for?

A

5 years.

263
Q

What is the purpose of an Annuity?

A

An annuity converts your savings into an annual pension, giving you a regular guaranteed income in retirement, or a specified period.

264
Q

How long should a record of a complaint be kept?

A

A minimum of 3 years.

265
Q

How long should a record of a complaint be kept relating to collective portfolio management services?

A

A minimum of 5 years.

266
Q

Where a complaint relates to MiFID business, how long should a record of it be kept?

A

A minimum of 5 years, maximum of 7.

267
Q

What is the role of the FSCS?

A

Protects customers with compensation when authorized financial services firms fail

268
Q

What is the FSCS?

A

Financial Services Compensation Scheme.

269
Q

What is intermediation?

A

The process whereby members of the surplus sector lend money to the deficit sector through an intermediary (E.G Bank Borrows from Surplus Sector and Lends to Deficit Sector).

Surplus Sector - Cash Rich individuals/firms who want to lend their surplus funds to earn money.
Deficit Sector - Prepared to pay money to anyone who will lend to them

270
Q

What is disintermediation?

A

Where Lenders and Borrowers interact directly, cutting the middle man (intermediary) out.

271
Q

What is the role of the Financial Policy Committee?

A

Identifies and monitors threats to the uks financial stability and has tools at disposal to take action and reduce or remove those threats.

They have no direct responsibility over financial firms within the uk.

272
Q

Who is responsible for the issuing of gilts?

A

Debt Management Office (DMO)

273
Q

Who implements Fiscal Policy?

A

The Treasury

274
Q

What is the Fiscal Policy?

A

The adjustment of levels of taxation and public spending in a way that is intended to achieve the governments macroeconomic objectives.

Involves influencing the money supply and overall level of economic activity by manipulating the finances of the public sector

275
Q

Financial firms fall into two categories:

A

Solo Regulated Firms: Firms Governed only by the FCA (Independent financial advisors)

Dual Regulated Firms: Firms Governed by the FCA and PRA (Banks, Building Societies or Designated Investment Firms)

276
Q

What is a Quesi-Government firm? (kwaazee)

A

Supported by the government but managed privately. (E.G The FCA)

277
Q

What type of department is The Treasury a part of?

A

Its a Government Department.

278
Q

What type of department is the FCA a part of?

A

A Quesi Government Department.

279
Q

What type of department is the PRA a part of?

A

Established within the Bank Of England. (BOE)

280
Q

What type of department is the FPC a part of?

A

Established within the Bank Of England. (BOE)

281
Q

What is a Building Society?

A

Mutual organization owned by its members, no shareholders so profits are given back to customers through better borrowing and savings rates.

282
Q

What is Balance of Payments Equilibrium?

A

This concerns trade (imports and exports of Goods + Services)

The balance of payments is a record of one country’s trade with the rest of the world

283
Q

What is Bid-Offer Spread?

A

The difference between the price at which a unit is offered to an investor and the price at which the fund manager will buy it back

284
Q

What is the offer price?

A

The price at which investors buy units from the fund managers

285
Q

What is the Blind Person’s Allowance?

A

£2870 (2023/24) to those registered as blind with a local authority
If the allowance cant be used by the individual, it can be transferred to their spouse or civil partner.

286
Q

What is a balanced budget?

A

Effect on economy is neutral - same amount taken in tax is put back into public spending

287
Q

What is a budget surplus?

A

Amount taken in taxation is greater than amount put back into public spending - the economy contracts

288
Q

What is a budget deficit?

A

Public spending is greater than amount taken in taxation - economy expands

289
Q

What is a direct tax?

A

This tax applies to individuals and their assets (income tax, capital gains tax, inheritance tax, National Insurance)

290
Q

What is an indirect tax?

A

Applied to goods and services at the time they are purchased. (EG VAT, Stamp duty)

291
Q

What is liquidity?

A

Assets (E.G Cash) that can quickly be made available to meet an institution’s liabilities without affecting the market price of those assets

292
Q

What is a Financial Intermediary?

A

An entity that acts as the middleman between two parties in a financial transaction.
(Banks and building societies are the best known examples)

293
Q

What is the Dividend Allowance (DA)

A

£1000 (23-24)

294
Q

Who can take advantage of jobseekers allowance?

A

People who are unemployed, or working less than 16 hours and actively seeking work

295
Q

What is a coupon?

A

It is a fixed interest rate payable on a bond, paid half-yearly, gross but taxable

296
Q

What is a gilt?

A

A UK government bond, which is a type of fixed interest security.

297
Q

What is a Redemption Date?

A

The date on which the government must redeem the gilt by paying back its par value

298
Q

What does par value mean?

A

It is the originally stated value/face value of a financial instrument

299
Q

What is the full name for ‘gilts’?

A

Gilt-Edged Securities

300
Q

What is Statutory Maternity Pay?

A

Women who become pregnant while employed may be entitled to receive SMP

301
Q

What are Index-linked gilts?

A

Gilts where the interest payments and the capital value move in line with inflation

302
Q

How long do short-dated gilts run for?

A

Less than 7 years until redemption

303
Q

How long do medium dated gilts run for?

A

In between 7-15 years until redemption

304
Q

How long do long-dated gilts run for?

A

More than 15 years until redemption

305
Q

How are gains from a gilt taxed?

A

Any gains from a gilt are exempt from capital gains tax. (sold for profit or reaching redemption)

305
Q

Why are Gilts regarded as ‘safe investments’?

A

Backed by the full faith of UK government,

306
Q

What is Statutory Maternity Pay?

A

An employee benefit for women who become pregnant while employed.

307
Q

How does a women qualify for Statutory Maternity Pay?

A
  • If their average weekly earnings are above a certain threshold.
  • They have been working for their employer continuously for 26 weeks prior to their ‘qualifying week’
308
Q

What is the ‘Qualifying Week’ in consideration to Statutory Maternity Pay (SMP)

A

The 15th week before the week in which the baby is due

309
Q

How is Statutory Maternity Pay paid?

A

For the first 6 weeks: Amount paid by employer is equal to 90% of employees AVERAGE weekly earnings.
After that: Payments are at a standard flat rate OR 90% of employees average weekly earnings (whichever is lower)

310
Q

How does tax work for Statutory Sick Pay (SSP)?

A

SSP is subject to tax and to NI deductions, just as normal earnings would be.

311
Q

What is the Residence Nil Rate Band for this year?

A

£175,000

312
Q

What is a potentially exempt transfer?

A

PETs enable an individual to make gifts of unlimited value which will become exempt from Inheritance Tax (IHT) if the individual survives for a period of seven years after making the gift.

313
Q

How is gilt interest paid?

A

Paid gross, without deduction of tax

313
Q

What is the basic IHT threshold for this year?

A

£325,000

313
Q

What is the meaning of Nil Rate Band?

A

The maximum value of estate which can be passed on free from inheritance tax.

314
Q

What is the maximum age child benefits can be claimed for?

A

19 if the child is still in full time education

315
Q

The European Union has issued a new directive, how should a member state go about this?

A

They have the CHOICE of how to meet the objectives of the directive.

316
Q

Who is allowed to use expenses to reduce income tax liability?

Employees Only
Sole Traders Only
Sole Traders And Partners Only
Employees, Partners And Sole Traders

A

Employees, Partners And Sole Traders.

317
Q

What is the phrase used to describe allowable business expenses for self-employed people to set against income tax? The expenses must be:

A

‘Wholly and exclusively’ for the business.

318
Q

What is the rate of withholding tax?

A

20%. Regardless of where they are resident

319
Q

What is the maximum amount that can be invested into Premium Bonds?

A

£50,000

320
Q

The interest rate on a base rate tracker mortgage is usually higher or lower than the base rate?

A

Higher than the base rate.

321
Q

Under a lifetime mortgage, how is the outstanding loan normally repaid?

A

By income from a purchased life annuity.

322
Q

When land is owned by two or more parties, what is the term where each party owns a defined share of that land?

A

Tenancy in common.

323
Q

If interest is paid ‘gross’ what does this mean?

A

Interest is paid without deduction of tax.

324
Q

How much more SDLT do you have to pay on top of existing rates when purchasing a second property

A

3%

325
Q

What percentage of SDLT is chargeable if the property value is £650,000

A

10%

326
Q

What percentage of SDLT is chargeable if a second property is being purchased with a value of £1,000,000

A

13%

327
Q

Basic income tax rate on dividend income

A

8.75%

328
Q

What is the personal allowance for 23/24

A

£12,570

329
Q

What is the Basic income tax rate band?

A

£12,571 - £50,270

330
Q

What is the Higher income tax rate band?

A

£50,271 - £125,140

331
Q

What is the Additional income tax rate band?

A

Anything over £125,140

332
Q

What are 3 examples of commercial property

A

Offices, shopping centres, hotels

333
Q

How long are T-Bills typically issued for?

A

91 days (short term)

334
Q

What are Bearer Securities?

A

Securities that’re deemed to be owned by whoever PHYSICALLY possesses the document that confers ownership.

335
Q

What is a certificate of deposit??

A

A ‘receipt’ confirming that a (substansial) deposit has been made with a bank/building society for a fixed period at a fixed rate of interest.

336
Q

What is the meaning of Accumulation Units?

A

Automatically reinvest any income generated by the underlying assets within a Unit Trust.

337
Q

What is the meaning of Distribution/Income Units?

A

Split off any income received and distribute it to unit holders within a Unit Trust.

338
Q

What does open-ended mean in an OEIC?

A

There is no limit to the number of shares that can be issued

339
Q

How are shares in an open ended investment company priced??

A

There is one price, based on
value of assets / number of shares

340
Q

What is a Uncrystallised funds pension lump sum??

A

Pension fund remains invested. Owner is able to use the fund to draw a series of lump sum payments to meet capital needs

341
Q

What is a Flexi-Access Drawdown??

A

Involves drawing the pension fund after PCLS has been taken and reinvesting it into a fund to provide income

342
Q

What are the three pillars that the FCA’s supervision model is based on?

A

Proactive Issues, Reactive Issues, Issues and Products

343
Q

How long do members of an occupational pension scheme have to refer a complaint to the Pensions Ombudsman after exhausting previous procedures?

A

3 years.

344
Q

What is included in a mortgage illustration?

A

Discloses all the fees associated with the mortgage

345
Q

Features of Whole of Life Assurance Policies (1)
(Match definitions with terms)

Unit-Linked
Non-Profit
Low-Cost
With-Profits
Unitised With-Profits

  1. Fixed minimum level of cover to which bonuses are added to reflect investment profits.
  2. Units issued to the planholder. A minimum level of cover is set at outset which is increased when the value of the units held rises above that amount.
    3.Fixed level of life assurance in return for payment of a fixed premium.
  3. Issues units with a guarantee that unit prices will either never fall below a certain level or will increase by at least a stated minimum amount.
  4. Promise a certain level of cover which is provided by the combination of with-profits and a decreasing term assurance. As bonuses are paid to the with-profits element, the decreasing term element reduces.
A

Non profit -
Fixed level of life assurance in return for payment of a fixed premium.

With-Profits -
Fixed minimum level of cover to which bonuses are added to reflect investment profits.

Low-cost -
Promise a certain level of cover which is provided by the combination of with-profits and a decreasing term assurance. As bonuses are paid to the with-profits element, the decreasing term element reduces.

Unit-Linked -
Units issued to the planholder. A minimum level of cover is set at outset which is increased when the value of the units held rises above that amount.

Unitised with-profits -
Issues units with a guarantee that unit prices will either never fall below a certain level or will increase by at least a stated minimum amount.

346
Q

What is the meaning of ‘Committed Expenditure’ in consideration to mortgage advice?

A

Committed Expenditure - Repayments on credit agreements or other contractual arrangements

347
Q

What is the meaning of ‘Basic Essential Expenditure’ in consideration to mortgage advice?

A

Expenditure on food and other housekeeping costs, utilities, telephone, council tax, essential travel to work and school.

348
Q

What is the difference between focussed advice and simplified advice?

A

Focussed Advice: The customer determines the parameters for areas needing discussion.
Whereas;
Simplified Advice: The adviser determines the specific areas for advice that they think best suit the client.

349
Q

What is a credit intermediary?

A

A company that helps an individual to obtain credit.
E.G Helping them to complete a loan application or find the lender offering the best rates.

350
Q

What is ‘credit’??

A

Credit is the ability to borrow money or access goods or services with the understanding that you’ll pay later

351
Q

What is critical illness cover?

A

Provides a tax free lump sum to meet the additional costs to someone that may find themselves in this situation

352
Q

What is the meaning of a ‘Waiver of premium’ ?

A

Premiums are not payable (they are waived) in the event that the insured is unable to work due to accident or sickness.

353
Q

What is ‘Income Protection Insurance (IPI)’ ?

A

Pays an income when the policy holder has suffered accident or sickness

354
Q

What is a ‘Deferred Period’ ?

A

Length of time that must elapse from the beginning of sickness/injury that prompts eligibility to claim and receives first payment of benefits.

355
Q

How long are deferred periods typically?

A

4,13,26,52 or 104 weeks

356
Q

How are premiums on Income Protection Insurance (IPI) structured?

A

Two types:

Reviewable Premiums - Premiums may start off low but will be reviewed in future and may go up every few years or so. Taking into account changing circumstances.

Guaranteed Premiums - Tend to be more expensive, however Premiums are GUARANTEED for the LIFE of the policy which may be 25 years+

357
Q

Name a factor that will influence a rate of premium

A
  1. Age of the life insured
  2. Current state of health
  3. the amount of benefit
  4. Past medical history
358
Q

How does ASU insurance differ from IPI?

A

ASU insurance is typically used to cover mortgage repayments

359
Q

What is Pecuniary loss?

A

Loss as a result from defaulting creditors.

360
Q

What is the basis of Flexible Whole Of Life cover?

A

Issued on a unit linked basis and combines life cover with investment.

361
Q

What is a Universal Whole of Life Policy?

A

An extention of a Flexible Whole of Life policy with a range of ‘bolt ons’

362
Q

What are some of the bolt ons you can add with a Universal Whole of Life Policy?

A

Income Protection Insurance
Critical Illness Cover
Waiver of Premium

363
Q

What are some benefits of Private Medical Insurance?

A
  • Avoiding the NHS wait list
  • can pay daily rate of income if there is an overnight stay in the hospital
    -Choice of hospital, consultant
    -Better quality room
364
Q

There are only two mortgage repayment vehicles available, what are these?

A

Capital Repayment
Interest Only

365
Q

What are the 3 different types of Motor Insurance?

A

Third Party
Third Party, fire and theft
Comprehensive

366
Q

What is the meaning of ‘Regulations’ under EU Law

A

These are binding in their entirety as to what is to be achieved and how

367
Q

What is the meaning of ‘Directives’ under EU Law

A

These are binding upon each member state to which they are addressed as to the result to be achieved.

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