Chapter 3: The Regulation of Financial Markets and Institutions p3. Flashcards
An FCA-regulated firm Bob & Bills issues an investment advertisement which invites readers to apply for units in a unit trust. A tear-off slip is provided. What criteria is the advertisement required to meet?
a. Be fair and not misleading
b. Include details of charges or expenses
c. Be tailored to the likely level of sophistication of the reader
An FCA-regulated firm, Bob & Bills issues a financial promotion that is not a direct offer promotion. What must the firm ensure it does?
a. Apply appropriate expertise
b. Ensure that the advertisement is clear, fair and not misleading
c. Ensure that the advertisement identifies it as the issuer.
What is exempt from financial promotions rules under FSMA 2000?
a. Communications with certified high net worth individuals
b. Communications with certified sophisticated investors
c. Generic advertising
When are cold (unsolicited) calls permitted?
Cold/unsolicited calls are not allowed unless an existing customer envisages such a call, or the call relates to generally marketable packaged products, or it relates to a controlled activity/service regarding readily realisable securities. AN adviser should identify themselves and their firm, and should call ‘at an appropriate time of the day’.
Bob Bill, a retail investment adviser (RIA), is not required to supply a suitability letter to his client. This is because of what?
A suitability letter is not supplied if the client is making the transaction on an ‘execution only basis’, as advice is then ‘neither being sought nor given’.
Bobbills Investments is not required to assess appropriateness in respect of part of its business. This is because the firm is executing client orders in what?
Units in a collective investment scheme – an appropriateness check is not required for certain non-complex financial instruments. Non-complex products include shares listed on a regulated market, money market instruments and units in a UCITS collective investment scheme. Complex products include warrants, derivatives and unlisted shares.
Bob has recently started a stakeholder pension plan. Bob is allowed a ‘cooling-off’ or cancellation period of what?
30 calendar days – The maximum period of reflection is 30 calendar days in this case.
What statements concern rules governing investment research activities?
a. Financial analysts can take positions in securities contrary to their current recommendations only in exceptional circumstances and with senior permission.
b. Analysts must refrain from dealing on the information contained in research until the clients have been provided with time to consider it.
c. Research analysts must not promise issuers favourable research coverage
Bill & Bobs makes a research recommendation. The firm must make disclosures in relation to all of what?
Shareholding held by the issuer of over 3% of the share capital of the recommending firm.
What is true of the rule on inducements?
Third-party payments are allowed if immaterial and disclosed in the conflicts of interest policy – The rule on inducements applies to retail and professional clients. Inducements cover fees, commissions and non-monetary benefits paid to or by the client or someone on their behalf. Inducements are then only allowed if they do not impair compliance with the firm’s duty to act in the best interest of the client and are generally disclosed in the conflicts of interest policy.
What is associated with the safe custody rules?
a. Internal system evaluation method
b. Internal custody record check
c. Physical asset reconciliation
What are the types of client bank account that a firm may operate?
a. Designated client fund account
b. Designated client bank account
c. General client bank account
An investor in an OEIC requests that the fund manager send her all reports about the progress of the fund that are required by the regulator. Which reports should she receive?
A short report and a long report must be prepared half-yearly and annually. The short report is to be sent out to all unitholders, and the long report is to be made available to unitholders on request.
What describes the ‘pillars’ of the FCA’s supervision model?
a. Analysis of issues and products
b. Event-driven work
c. The firm systematic
Bob Bill Investments is given Part 4A permission to offer investment advice but a period of 13 months passes during which it carries out no business in this field at all. It is also authorised to deal on its own account which it continues to do during this period. The FCA becomes concerned that it should protect potential clients from receiving inappropriate advice. What would be the regulator’s most likely action?
Vary the firm’s permission – Given the firm is investing on its own account without apparent problem, it is unlikely that the regulator will cancel the firm’s permission. However, because the firm has not offered advice for over 12 months, the regulator is likely to vary the firm’s permission to stop them offering advice.
