Chapter Six: The FCA Handbook Flashcards
What is the FCA Handbook?
The FCA Handbook sets out a firm’s main regulatory obligations and is the collective term for the various source books and handbooks making up the body of FCA rules that apply to regulated firms.
What are the High Level Standards (HLS)?
This is the first section of the FCA Handbook
It contains the regulatory obligations for all firms, senior management and approved persons
What are the Principles for Business (PRIN)?
They are a general statement of the main regulatory obligations of the firm
What is the Senior Management Arrangements, Systems and Controls (SYSC)?
It is the rules and guidance on how key responsibilities for managing the business should be allocated among the firm’s senior management team and the systems and controls the firm should have in place
Define Code of Conduct (COCON).
It is the rules about conduct and to whom they apply.
N.B. This covers most employees of all firms covered by the senior manage and certification regime (SMCR) except approved persons.
What are Threshold Conditions (COND)?
The minimum standards the firm must satisfy to become and remain authorised by the FCA.
- Location of offices
- Effective supervision
- Appropriate resources
- Suitability (fit and proper)
- Business model - compatible, sound and prudent to the affairs being conducted, interest of consumers, integrity of the financial system
What are the Statements of Principles and Code of Practice for Approved Persons (APER)?
They set out the conduct requirements for approved persons.
N.B. These are primarily people carrying out a senior management or customer facing function in a firm which is NOT covered by the senior management and certification regime (non-SMCR firm).
What is the Fit & Proper Test for Employees and Senior Personnel (FIT)?
This sets out the criteria which the FCA uses to assess whether an individual is suitable to perform a senior management or certified function.
Define Financial Stability and Market Confidence (FINMAR).
Provisions relating to financial stability, market confidence and short selling
Define the Training & Competence (T&C) manual.
These set out detailed competence requirements such as exam requirements, for advisers, their supervisors and those that oversee certain administration functions.
What are the requirements of the Senior Manager Arrangements (SYSC2)?
To appoint and document responsibility for controlled functions.
Under Systems and Controls (SYSC3), what should firms have in place?
- Compliance functions
- Risk Assessment
- Employee competence
- Monitoring systems and controls
- Business and Remuneration Strategy
- Record keeping
- Business continuity
What area does SYSC5 cover?
Employees and ensuring they have the appropriate skills, knowledge and expertise.
What areas does SYSC6 cover?
Maintaining policies and procedures dealing with compliance, internal audits, financial crime.
What area does SYSC8 cover?
Business outsourcing.
It specifically highlights how the business should ensure that outsourced work remains compliant.
What area does SYSC9 cover?
Record keeping.
Specifically how record keeping should be sufficient enough to enable FCA monitoring and compliance.
The Public Interest Disclosure Act, states each company should have a whistle blowing policy, what type of concerns can be raised?
Crimes, failure to comply with law, miscarriages of justice, health and safety risks, environmental risks, any suspicious activity.
The remuneration code has twelve principles, how would you summarise them?
- Good governance structures of remuneration policy approval that do not encourage risk taking.
- Fair remuneration structures, taking into account future risks and quality of business.
- Bonus payments based on long term performance
- Avoid over reliance on performance related pay
- Consider deferral so employees are paid over time
Why has the FCA used its powers to restrict short selling?
In order to promote its statutory objectives of protecting customers and enhancing financial integrity.
Could a firm use the ‘key facts’ logo on all of its material for customer use?
No, the logo can only be used on those documents prescribed by the FCA and must not be reproduced.
If giving a business card to a customer, does it have to have a status disclosure on it?
No, but it is best practice.
If a firm wants to significantly vary its authorisation status, would it need to pay an application fee to the FCA?
Yes.
What are the 3 types of FCA fee?
- Application
- Change to permissions
- Annual (periodic)
What is INSPRU?
The Prudential sourcebook for Insurers.
What is MIPRU?
The Prudential sourcebook for Mortgage and Home Finance providers.
Are intermediary firms subject to the Capital Requirements Directive (CRD)?
Most are exempt from the directive but are subject to financial tests according to their size and activities?
Under ICOBS - what must be provided before any advice is given?
Initial Disclosures and Terms of Business.
What are the cancellation periods under ICOBS?
- 14 days for general insurance
- 30 days for pure protection and PPI
Under what circumstances does a cancellation period under ICOBS not need to be provided?
- Traded life policies
- Life policies for 6 months or less
- Pure protection contracts effected by trustees of an occupational pension scheme
- Policies issues to corporate bodies
- Policies where the client is not resident in the U.K.
What is the definition of ‘Information’ under MCOB?
Providing accurate and neutral facts, with no comment or opinion as to its merits relative to other products or options.
ICOBS introduces three product categories, what are they?
- General Insurance
- Pure Protection (Term Assurance inc. CIC and IPI)
- Payment Protection Insurance
What are the implications with Home Reversion Plans?
- Eligibility for State Benefits
- Inheritance tax & Estate Planning
- Long-term financial planning
What replaced the KFI for mortgages in March 2019?
European Standardised Information Sheet (ESIS).
What must an investment business create if it is holding client funds?
Client Assets (CASS) Resolution Pack (RP).
Referred to as CASSRP when combined.
How often would the FCA expect a business to reconcile client funds?
Daily.
If a business held client money over £1M or assets over £10M, what would they need to do?
Make a senior manager or director responsible for Client Assets (CASS) and complete a monthly Client Money & Assets Report (CMAR).
Under PROD (Product Intervention and Governance) what requirements should products meet?
- Meet the needs of one or more identifiable target market
- Sold to clients in the target market by appropriate distribution channels
- Deliver appropriate client outcomes
The FCA is required to notify anyone under its investigation, what are the exceptions to this?
- Insider dealing
- Market abuse
- Misleading statements
- Breaches of the restriction of financial promotion or promoting collective investment schemes
