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IMC Unit 1 > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

which funds aim to maximise returns

A

DC schemes
CIS
Investment trusts

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2
Q

which funds aim to meet liablities

A

DB schemes
Life assurance companies
General insurance companies

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3
Q

what type of investment do funds that meet liabilities do

A

liability driven investment

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4
Q

what are the 2 types of liability

A

real - ones that are affected by inflation
nominal

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5
Q

what do fund regulations apply to

A

open ended investment schemes in the UK
- unit trusts
- OICs / ICVCs

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6
Q

what function does a depositary for an OIEC have

A

the same as a trustee in a unit trust

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7
Q

what are the 2 different types of CIS schemes in the UK

A

authorised - UK firms, authorised by the FCA to advertise to retail client
recognised - UCITs (europe), can sell to retail clients through passporting

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8
Q

examples of unregulated CIS schemes

A

ones who are not marketable to retail investors
e.g. hedge funds

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9
Q

who can unregulated CIS schemes advertise to

A

sophisticated and institutional investors

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10
Q

what are the 2 different types of CIS schemes in the UK

A

authorised - UK firms, authorised by the FCA to advertise to retail client
recognised - UCITs (Europe), can sell to retail clients through passporting

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11
Q

what is the UCITS directive

A

a directive used to form the single market

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12
Q

how are CIS’s in the EU regulated

A

they are regulated by a directive known as the Undertakings for Collective Investments in Transferable Securities UCITS

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13
Q

before a CIS can promote itself across the EU what must they do

A

Obtain a UCITS passport from it’s home regulator
Be open ended
Follow all UCITS regulations

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14
Q

what 2 parts is the UCITs directive split into

A

management directive
product directive

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15
Q

what is the purpose of the management directive

A

it increases the scope of management companies’ activities that can be passported to include discretionary management, safekeeping and admin
aims to protect investors by ensuring that management companies have sufficient risk controls in place

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16
Q

what is the product directive

A

it expands the range and type of financial instruments that are permitted within the UCITS fund

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16
Q

what is the product directive

A

it expands the range and type of financial instruments that are permitted within the UCITS fund

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17
Q

what is the purpose of the new UCITS IV directive

A

to promote greater efficiency in pan-European management of funds

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18
Q

what is a management company passport

A

a management company located in one country will be able to set up and run a fund in another

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19
Q

what is the aim of the alternative investment fund managers directive

A

it aims to regulate fund managers rather than the fund to encourage tax transparency and compliance
it does not regulate the funds chosen

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20
Q

what does AIFMD allow

A

allow the cross border EEA selling of fund by either
- being authorised by a regulator in the EU
- outside the EU if they meet certain fiscal and regulatory requirements

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21
Q

what does the AIFMD require in terms of reporting

A

fund managers must submit quarterly, semi annual or annual reports to their respective member state regulators

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22
Q

what must the annual report contain

A

funds financial statements
activities
info about the total remuneration paid to staff

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23
Q

what is the value for money assessment

A

where authorised fund managers are required to
- assess the value for money for each fund
- take corrective action if it does not offer good value for money
- explain the assessment annually in a public report

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24
what are the criteria needs to be considered for the value for money assessment
- quality of service - fund performance - authorised fund manager costs - economies of scale - comparable market rates - comparable services - classes of units
25
when are pensioners subject to income tax
once the pension fund starts paying the recipient
26
what are the different types of pension scheme
personal private pension plan occupational pension scheme
27
what is a stake holder pension
aimed at lower income people low monthly payments
28
what does the pensions act 2008 mean for pensions
auto enrollment for eligible employees - above 22 and earning over £10,000 employers have to enroll them in DC or something else national employment savings trust
29
who approves DB schemes
the HMRC
30
what do you have to ensure there is when setting up an occupational pension scheme
a statement of principles
31
what is the SIP
it is similar to the investment policy statement but instead of for client its for funds it sets out the principles governing how decisions about investments must be made
32
what does an SIP include
- type of investments - risks and how they will be managed - realising investment - whether and how any rights will be used
33
how often does the SIP need to be updated
at least every 3 years scheme specific funding requirements have to be check annually
34
what is the scheme specific funding requirements
it is included in the SIP as an appendix it is the numerical part that describes how each particular part of funding will be met
35
when is the pensions regulator allowed to act
when it believes that an employer is deliberately avoiding their pensions
36
what are the objectives of the pension regulator
- protect the members of work based schemes - reduce the risk of compensation claims - promote good admin in schemes - maximise employer compliance
37
what act set up the pensions regulator
the Pensions Act 2004
38
what are the powers of the pensions regulator
- can give firms a contribution notice - give restoration orders - give forced financial support directions
39
what is a contribution notice
a statutory requirement for the employer to make a payment into the fund to cover debt
40
what is a restoration order
if there has been a transaction that undervalues the schemes asset then the regulator can put in place an order to get assets revalued and restored to the scheme correctly
41
when are forced financial support directions required
for an underfunded scheme
42
what is the purpose of the Pension Protection Fund
to provide compensation to members of eligible DB schemes on insolvency
43
What pension schemes does the pension protection fund apply to
DB schemes
44
what happens when a pension fund becomes insolvent
the assets of the fund are put into the pension protection fund
45
when a scheme is insolvent what will the PPF provide to pensioners / those not yet retired
100% benefits to existing pensioners 90% those not yet retired
46
how is the PPF funded
levies on all eligible schemes
47
what are the different products that insurance companies provide
term assurance whole of life endowment with profits
48
what does term assurance provide
provides pure protection doesn't provide a payment if you die during the period covers the life of an individual over a specific period
49
what is a whole of life insurance product
pays a fixed capital sum and gives money on death regardless of when you die doesn't have a set term
50
what is an endowment insurance policy
it has a basic sum assured on death or on maturity it is similar to a bond if you die during the term then you get a lump sum if you don't die then you get a maturity lump sum
51
what is a with profits insurance policy
aims to pay a fixed return
52
what is a life assurance companies attitude to short term risk
positive
53
what is a life assurance company's liquidity
low
54
what is a life assurance company's liablity
nominal
55
what is a life assurance company's asset choice
equities bonds mutual fund
56
what is a general insurance companies attitude to short term tisk
very negative
57
what would be the asset choice for a general insurance company
cash money market instruments
58
to what pension schemes does the minimum funding requirement apply (from the Scheme specific funding requirement)
DB pension schemes to ensure that they remain adequately funded
59
AIFMDs require fund managers to only select brokers and counterparties that
are financially sound are subject to regulatory supervision have the necessary organizational structure to provide the services
60
what are the benefits of investing into indirect investment?
- a reduction in transaction costs - ability for a small investor to invest into large properties
61
what type of financial investment would the warning you might lose more than you invested suitable
future
62
what financial instrument would the warning - the value may go up and down apply
income and growth fund
63
do pension funds pay tax
no
64
if risk of inflation increases are you more likely to invest in equities or bonds
equities
65
who authorises ICVCs
FCAs
66
who authorizes Unit Trusts
FCAs
67
who is responsible for the SIP
the trustees
68
what must the trustee do when preparing the SIP
- written advice from a person considered to have appropriate knowledge of investment matters - consult with the scheme sponsor
69
members of which pension scheme does the pensions regulator aim to protect
work based pension scheme members
70
when must a fund seek authorisation with AIFM
If they have assets under management above - 100 mill euros if AIF uses leverage - 500 mill euros if AIF doesn't give investors right of redemption within 5 years of investment
71
which pension does the pensions act 2004 regulate
work based pensions
72
what are examples of CIS
unit trust OEIC ICVC
73
what are examples of Investment trust companies
VCT REITs
74
what are the 2 types of regulated CIS schemes
authorised - trade in UK recognised - trade inEEA
75
what is AIFMMD relationship to UCITs directive
the AIFMD allows fund managers to crossborder sell the UCITS directive allows open ended schemes to cross border sell
76
how often must the SIP be reviewed
3 years
77
whos complaints does the pension ombudsman consider
complaints relating to personal or occupational pension scheme

IMC Unit 1 (11 decks)

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