Chapter 6 Qs Flashcards
BFT 63 to 67 & 88-92
*What is the difference between an authorised person and an approved person?
A) An authorised person is able to perform regulated activities, whilst an approved person is able to act as an introducer
B) An authorised person and an approved person are interchangeable terms with the same definition
C) An authorised person carries out governing functions and an approved person carries out customer functions
D) An authorised person is the business that carries on regulated activities and an approved person is someone who carries out the controlled functions
D) An authorised person is the business that carries on regulated activities and an approved person is someone who carries out the controlled functions
Authorised person - Business that carries on regulated activities
Approved person - Someone who carries out controlled functions
The FCAs controlled functions include a list of ‘governing functions’ and ‘customer functions’ approved persons can carry out either of these.
When should a firm notify the FCA of its address change
A) Should inform the FCA immediately
B) No requirements to inform the FCA
C) Within 6 months of the address change
D) In advance of the address change
D) In advance of the address change
Information such as address changes should be sent to the FCA in advance of change. The FCA should be notified Immediately if a firm has identified any incorrect information that they have previously sent to the FCA and immediately on any matters that would have significant regulatory impact.
*What is not one of the stages of the money laundering process?
A) Integration; process of converting laundered money into a legitimate portfolio
B) Placement; depositing illegal money into a deposit account
C) Fraud; falsifying names to open bank accounts
D) Layering; moving cash from a bank account, into an insurance policy, cancelling early and then investing into a packaged investment
C) Fraud; falsifying names to open bank accounts
Placement, layering and integration
Falsifying names is normally part of the placement process, rather than the process itself.
Why would a client who has a history of small regular savings arouse suspicion if he proposed a substantial investment to his IFA?
A) It might indicate that there had been missed opportunities within the client fact find
B) It might affect the clients existing estate planning recommendations
C) It is inconsistent with the IFAs previous knowledge and experience of the client
D) It might imbalance or jeopardise the clients overall portfolio
C) It is inconsistent with the IFAs previous knowledge and experience of the client
Under the anti money laundering regulations, a regulated firm should monitor their ongoing business with a client, so they can identify any inconsistencies with their previous knowledge of the client. For example, a client who has only been able to save small regular amounts suddenly having a substantial amount of money to invest. The other answers are considerations for the advisers, but not in relation to money laundering.
(MA) Which of the following regulated activities are defined under the FSMA 2000 (regulated activities) Order 2001?
A) Introducing
B) Advising on home finance activities
C) Assisting in the administration and performance of contract and insurance
D) Safeguarding and administering investments
B) Advising on home finance activities
C) Assisting in the administration and performance of contract and insurance
D) Safeguarding and administering investments
Introducing is an exclusion that does not require authorisation.
(MA) *Which are the following bodies are exempt from FCA authorisation?
A) The European Central Bank
B) The Bank of England
C) Local authorities
D) Lloyds of London
A) The European Central Bank
B) The Bank of England
C) Local authorities
All of these are exempt from FCA & PRA authorisation. Lloyds of London does not fall under these and is authorised by both FCA & PRA.
(MA) *Client records must be kept indefinitely for which of the following?
A) Life policies B) Regular pension policies C) Pension Transfers D) Free standing additional voluntary contributions E) Pension opt outs
C) Pension Transfers
D) Free standing additional voluntary contributions
E) Pension opt outs
Life policies and Regular pension policies should be kept for 5 years under FCAs record keeping requirements.
(MA) *Which documentation/procedure would be deemed acceptable to help verify client identification?
A) Valid passport
B) National Identity card
C) Firearms Certificate
D) Record of home visit by a member of staff
A) Valid passport
B) National Identity card
C) Firearms Certificate
D) Record of home visit by a member of staff
Under the money laundering regulation ‘identification procedures’ a clients details must be obtained and then verified. All the answers would be valid forms of identification.
(MA) *Who would be regarded as an ‘eligible complainant’ under FCA rules?
A) A local authority
B) A consumer
C) A charity with £8m income
D) A guarantor
B) A consumer
D) A guarantor
Under FCA rules, an eligible complainant is a consumer; a micro-enterprise with fewer than 10 employees and a turnover or balance sheet total of no more than 2m euros; a charity with an annual income of less than 6.5m; a trustee of a trust with a net asset value of less than £5m; a consumer buy to let consumer; a small business with an annual turnover less than £6.5m and fewer than 50 employees or a balance sheet total less than £5m or a guarantor.
*Which of the following is NOT covered under the Financial Services and Markets Act 2000 (FSMA)?
A. Home reversion plans
B. Life policies
C. Electronic money
D. Commercial loans
D. Commercial loans
Commercial loans are not regulated under the FSMA.
*Which of these is currently an example of a ‘required function’ under the FCA’s main controlled functions?
A. Director
B. Chief executive
C. Compliance oversight
D. Systems and control
C. Compliance oversight
There are five main types of FCA controlled functions: governing functions, required functions, systems and controls functions, significant management functions and the customer-dealing function. Of the options listed in our question, only the compliance oversight function is an example of a required function. Note that these will be superseded by SM&CR on 9 December 2019.
*Under the Money Laundering Regulations 2017 what does Customer Due Diligence (CDD) involve?
A. Holding on file photographic evidence of the client’s identity
B. Verifying the identity of the customer and obtaining information on the purpose
and intended nature of the business relationship
C. Requesting 2 forms of identification; one for verification of the client’s name and
the other to verify their address
D. Protecting any sensitive client data held within a firm
B. Verifying the identity of the customer and obtaining information on the purpose
Customer due diligence must be carried out when a regulated firm begins a business relationship with a customer. Verification of the customer’s identity must be sought along with the nature of the intended business relationship. This allows the firm to assess the potential risks of, for example, money laundering or terrorist financing.
An authorised firm must report changes to its business, in line with the FCA ad hoc reporting requirements, in which circumstances below?
I) The appointment of a new director
II) The appointment of a new customer service manager
III) The head office premises being established
Iv) The appointment of a new pension transfer adviser
V Reissuing a sales aid
A) I,III abd IV only
B) I,II and IV
C) II,IV and V
D) III,IV and V
A) I,III and IV only (6:1)
Three financial advisers have transacted business over the past 12 months as follows
Adviser Type of business
Rob - Pension Transfers and Life assurance
Derek - PTs, Regular contribution stakeholder pensions
Tim - Cash ISAs, Equity release
From this information, it can be deduced that
A) Tim will not need to keep his suitability records indefinitely
B) Rob will be subject to the greatest supervisory monitoring requirements
C) Derek will need to keep his training and competence records the longest
D) Rob and Derek are likely to be supervisors
A) Tim will not need to keep his suitability records indefinitely (6:2)
Following settlement of a Financial Ombudsman Service (FOS) case, the complainants costs were £5000 and the respondents costs were £10000. The FOS recommend monetary award was £150,000 plus costs. If the complaint was referred to the FOS on 1st August 2017 excluding interest, how much was the respondent obliged to pay to the complainant?
A) 105,000
B) 150,000
C) 155,000
D) 165,000
C) 155,000 (6:3)
