Chapter 7 Flashcards
- Under the Senior Managers and Certification Regime, each of the following is an example of a systems and controls function, with the exception of:
A. Chief finance
B. Chief risk
C. Head of internal audit
D. Compliance oversight
D - Under SM&CR, senior management functions (SMFs) are divided into governing, required and systems and control functions. Each of those listed is a systems and controls
function, with the exception of compliance oversight, which is a required function.
- GlenMcFarrars Advisers are moving offices. When should they notify the FCA of their address change?
A. Should inform the FCA immediately
B. No requirement to inform the FCA
C. Within 6 months of the address change
D. In advance of the change in address
D - Information such as an address changes should be sent to the FCA in advance of the 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 in 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 account
D. Layering; moving cash from a bank account, into an insurance policy, cancelling early and then investing in a packaged investment
C - The three stages of Money Laundering are placement (depositing illegal money), layering (moving the money around in the financial system so it becomes hard to trace), and integration (converting the money into a legitimate portfolio). Falsifying names to open a bank account is usually part of the placement process, rather than a 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’s fact find
B. It might affect the client’s existing estate planning recommendations
C. It is inconsistent with the IFA’s previous knowledge and experience of the client D. It might imbalance or jeopardise the client’s overall portfolio
C - Under 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 that 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 adviser, but not in relation to money laundering.
- Which of the following are regulated activities as defined under the FSMA 2000 (Regulated Activities) Order 2001? Tick all that apply.
A. Introducing
B. Advising on home finance activities
C. Overseas pensions
D. Safeguarding and administering investments
B, D - The FSMA 2000 (Regulated Activities) Order 2001 (RAO) details the specific investments and activities that require authorisation; these include answers b) and d). Introducing and overseas pensions are examples of exclusions and do not require authorisation.
- Which of the following bodies are exempt from Financial Conduct Authority
authorisation? Tick all that apply.
A. The European Central Bank
B. The Bank of England
C. Local authorities
D. Lloyd’s of London
A, B, C - The European Central Bank, the Bank of England and local authorities are all exempt from FCA & PRA authorisation. Various other government bodies and the central banks in the European Economic area are the other exemptions, but Lloyd’s of London does not fall into these categories and is authorised (by both the FCA & PRA).
- Client records must be kept indefinitely for which of the following? Tick all that apply.
A. Term assurance policies
B. Regular contribution pension policies
C. Pension transfers
D. Free Standing Additional Voluntary Contributions
E. Whole of life policies
C, D - Client records should be kept indefinitely for pension transfers, FSAVCs & pension opt outs. Life policy and regular pension policy records should be kept for five years under the FCA’s record-keeping requirements.
- Under anti-money laundering regulations, which documentation/ procedure would be deemed acceptable to identity a client without the need for further evidence? Tick all that apply.
A. Valid passport
B. National Insurance Card
C. Firearms certificate
D. Record of home visit by member of staff
A, C - Under the Money Laundering regulation ‘identification procedures’, a client’s details must be obtained and then verified. Government-issued documents, including passports and firearms certificates are sufficient on their own (although details will still need to be cross-checked). Government-issued documents without a photo, for example, an NI card, will require secondary evidence. A home visit can be used as secondary evidence.
- Who would be regarded as an ‘eligible complainant’ under Financial Conduct
Authority rules? Tick all that apply.
A. A local authority
B. A consumer
C. A charity with a £8m annual income
D. A guarantor
B, D - 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 of less than £6.5m and fewer than 50 employees or a balance sheet total of less than £5m; or a guarantor.
