Chapter 7 Flashcards
- What does the ‘general prohibition’ rule within s.19 of the FSMA refer to?
A. The fact that intermediaries are generally restricted to certain activities
B. It is an offence for someone to carry out a regulated activity unless the person is
authorised or exempt
C. The FCA will seek to stop unauthorised individuals working within the financial
services sector
D. The powers granted to the FCA by the FMSA in relation to authorising individuals
B - The ‘general prohibition’ rule within s.19 of the FSMA states that it is a criminal offence to carry out regulated activities, unless the person is authorised or exempt. Answers a), c) and d) are not relevant to s19 of the FSMA.
- What is required in order for a firm to qualify for exempt status?
A. It must be contracted to an authorised person responsible for their activities
B. A firm would gain exempt status if it merely acted as an introducer
C. The firm must be comprised entirely of appointed representatives
D. The firm must be a specialist firm selling protection and savings products
A - A firm can qualify for exempt status if it is contracted to an authorised person who takes full responsibility for all their regulated activities. An appointed representative is a ‘firm’ that has such a contract with an authorised person. An introducer is excluded from regulation but is not deemed to have ‘exempt status’. Firms selling protection and savings products would need authorisation and would not be exempt.
- Within a SM&CR financial services firm, to whom do the Conduct rules (COCON) apply?
A. Senior managers and certificated individuals only
B. Senior managers only
C. Certificated individuals only
D. Nearly all staff, apart from ancillary staff
D - COCON are high-level rules that apply to nearly all staff of SM&CR firms. Firms must ensure that staff who are subject to the rules are aware of them and how they apply to their jobs.
- What does Part 4A permission as set out by the FSMA refer to?
A. Where a partnership is allowed to remain authorised in the event of one partner’s death
B. A firm wishing to change its legal status e.g. from a partnership to a limited
company
C. The public record of all the successful FCA authorisation applications in the past year
D. Applying to the FCA for direct authorisation to allow the firm to carry out the
regulated activities they have applied for
D - Applying for a Part 4A permission refers to applying to the relevant regulator (the FCA or PRA) for authorisation to carry out the regulated activities they have applied for. If their application is successful, they will be sent a ‘scope of permission’ form, which is the formal part of the Part 4A permission. Answer c) is not relevant to a Part 4A permission, and answer a), would not require the Part 4A permission.
- A new insurance company must apply to which of the following for authorisation?
A. HMRC
B. The PRA
C. The FCA
D. The FPC
B - New insurance companies must apply to the PRA for direct authorisation. The PRA is the regulatory body set up as a result of the FSA 2012 to regulate large financial institutions. The FCA regulates smaller firms such as financial advisers. It is not the role of HMRC or the Financial Policy Committee to authorise financial services firms.
- What regular reports must an authorised firm provide to the Financial Conduct
Authority? Tick all that apply.
A. Number of clients within their client bank
B. Amount held in client bank accounts
C. Persistency statistics
D. Number of complaints received
B, C, D - Authorised firms must send regular reports to the FCA regarding their business. This must include details of the amount held in client bank accounts, persistency statistics and number of complaints. They must also report their annual accounts, value of clients’ assets in discretionary portfolios, the types of business being conducted and the number of staff (not the number of clients).
- What factors should a firm take into account when recruiting and training a new
employee who will be dealing with retail clients? Tick all that apply.
A. Ethnicity
B. Sexual orientation
C. Previous training
D. Date of birth
E. General market knowledge
C, E - When recruiting and training a new employee to deal with retail clients, of the items listed the firm should consider previous training and general market knowledge. They can then properly assess a new employee’s training needs. An individual’s age, ethnicity, and sexual orientation are, of course, irrelevant.
- What criminal offences were created in the Proceeds of Crime Act 2002 as part of the UK’s fight against money laundering? Tick all that apply.
A. Disguising criminal property
B. Removing criminal property from the UK
C. Allowing policyholders to surrender investment bonds within 30 days
D. Failing by a commercial organisation to prevent bribery
E. Allowing individuals to transfer their pension fund proceeds to an overseas bank
A, B - The Proceeds of Crime Act 2002 is the UK’s principal statute on anti-money laundering. The Act created several criminal offences including disguising criminal property and removing criminal property from the UK. While it is a criminal offence for an organisation to fail to prevent bribery, this is an offence under the Bribery Act 2010, not the Proceeds of Crime Act. It is not a criminal offence to surrender investment bonds within 30 days or to transfer policy proceeds overseas; however, it should be noted that both these methods could be used as a way for a money launderer to move money through the financial system.
- In relation to the Electronic Identity Verification (eIDV) of clients, which of the
following statements are correct? Tick all that apply.
A. It is no longer being used to identify clients.
B. It is limited to publicly available databases.
C. It can flag-up early if there are inconsistencies.
D. The outcome could be a match, a non-match, or a partial match.
C, D - eIDV is increasingly being used to identify clients and systems use both public and private databases. The result of trying to confirm an individual’s identity could be a match, a non match or a partial match. eIDV can be quick and can flag-up inconsistencies early.
- In relation to the General Data Protection Regulation and the Data Protection Act 2018, which of the following would be regarded as client data? Tick all that apply.
A. Employer’s name
B. National Insurance records
C. Family circumstances
D. Bank details
B, C, D - Under the Data Protection Act 2018 and the GDPR, client data is regarded as national insurance records, family circumstances and bank details, (other client data would include address, date of birth and medical records). Employer’s name is not considered client data.
Name 2 exempt bodies
Bank of England
Local authorities
Prior to SM&CR, what was an approved person?
An individual approved to carry out a controlled function
Under SM&CR, what are the 3 main categories of senior management functions? (SMF’s)
Governing Functions
Required functions
Systems and controls functions
What is the upper Tribunal (Tax and Chancery Chamber)
An appeal body for those aggrieved by FCA decisions/Independent Judicial body
