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UK Financial Regulations > COBS/CASS > Flashcards

COBS/CASS Flashcards

1
Q

when a loan is made to a retail client how long should the records be kept?

A

making a loan to a client is an ancillary service and given that this is on ‘MiFID business’ the standard record keeping requirement is five years. For non-MiFID (other than pensions and life insurance) the requirement is three years.

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2
Q

when is a firmed deemed to have discharged fiduciary duty?

A

Client money ceases to be such once it has been cleared. This is normally once the funds leave the account.

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3
Q

Suitability rule

A

required to be assessed for discretionary and advisory business, but not for execution-only business. The rule covers ‘all customers’ for MiFID business (RC and PC)

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4
Q

Opting down

A

it may be given for any product or service on either a trade by trade or general basis.

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5
Q

Which of the following would ALWAYS be considered a per se professional client?
A. Special purpose vehicle

B. A corporate body whose shares are listed or admitted to trading on any EEA exchange

C. A public body

D .An overseas individual

A

Special purpose vehicles come under the definition of ‘any other institutional investor’.

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6
Q

Advising charging on fees

A

Retail Distribution Review (RDR)

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7
Q

which of the following is permissible for the presentation of past, simulated past or future performance of a UK investment?

A

The information may not be the most prominent feature of communication. If the performance is presented as gross, the commissions etc. must be disclosed. If the currency is in a non-home currency it must be stated that there is a possible currency impact.

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8
Q

Cancellation rights

A

firms must tell consumers of their rights in good time before (or where that is not possible, immediately after) the consumer is bound by the contract; and they must do so in a durable medium

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9
Q

Trail comission

A

NOT ALLOWED - dvisers have been prohibited from receiving any trail commission (including from existing clients) as from April 2016 according to RDR

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10
Q

What happens during the reconciliation process if discrepancies are noticed?

A

Firms must make up for the shortfall

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11
Q

Aggregation policy

A

The firm should believe that aggregation will not work to the disadvantage of the clients. However, they should also notify the clients that a disadvantage is possible. Firms should also have an aggregations policy.

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12
Q

Cold calls

A

The calls must be made at an appropriate time of day.
Geared products are not considered appropriate of cold calls and existing clients can be called if they envisage a call.
The client must be given a contact point, the identity of the individual and the firm and be allowed to terminate the conversation at their request.

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13
Q

When do the promotion rules apply? What kind of client?

A

The financial promotion rules need to be applied when communicating financial promotions to retail clients.

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14
Q

A firm may treat a client as an elective professional client for non-MiFID business if

A

The qualitative test and a statement of protection loss are always required. The client must state that it wishes to be treated as a professional client, the firm must warn the client that the loss of protection might occur and the client has to state, in writing, separate to any contracts, that it is aware of this loss of protection.

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15
Q

Confirmation of trade for a RC should be sent by…

A

The notice must be given as soon as possible and not later than one business day as specified in COBS.

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16
Q

collective investment schemes

A

Per se professional clients

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17
Q

To whom do the client money rules apply?

A

ALL CLIENTS
RC PC and ECP

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18
Q

packaged product according to COBS

A

regulated CIS

A personal pension scheme

An interest in an investment trust savings scheme

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19
Q

Research recommendation - what rule should we look at?

A

All research recommendations are considered as being non-independent; research is to be considered as a marketing tool and so as a financial promotion

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20
Q

MiFID business, a firm must keep a copy of the periodic reports for

A

5 years from dispatch
3 years for nonmifid

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21
Q

Proper fees inducement rules

A

Proper fees necessary for the provision of the business (e.g. custody costs, settlement fees and legal fees) are permissible under the MiFID II inducement rules.

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22
Q

Limit orders not executed immediately must be made public to

A

Regulated market

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23
Q

When must a firm disclose charges to a retail client?

A

Explanation - Correct Answer: A
A firm must notify RETAIL CLIENTS of the amount or basis of charges IN WRITING, BEFORE any work is done. The FCA is comfortable with professional clients agreeing the basis of charges in arrears of any dealings, but this arrangement is not appropriate for retail clients.

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24
Q

Record keeping according to MIFID

A

up to 5 years after the relationship ceases

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25
Q

Limit orders not executed immediately must…

A

be made public to a regulated/unregulated market or an MTF.

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26
Q

Image advertising such as An advert in a national newspaper communicating the logo of the firm, a contact point and the regulated activities provided

A

would not have to follow the COBS promotion rules

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27
Q

Cancellable contracts period

A

14 days generally
life policies and some pensions it is 30 days.

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28
Q

The FCA requires that the firm discloses its charges to that client. When should this disclosure occur

A

Before doing the business

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29
Q

Which products are permitted to be sold on the cold call to a Retail Client?

A

A generally marketable low volatility packaged product

Where it comes to shares, they must be readily realisable. Only the services relating to these shares that can be sold on the cold call, NOT the shares themselves

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30
Q

Elective Elegible Counter Party (ECP) requirements

A

Quantitative requirements to be met by a COMPANY NOT individual
Net turnover of >=€40
Company funds of at least €2M

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31
Q

MiFID business, how long must a firm retain records of trade confirmations sent to a client?

A

records have to be kept for five years from date of dispatch.

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32
Q

MiFID business, when a loan is made to a retail client how long should the records be kept?

A

Making a loan to a client is an ancillary service and given that this is on ‘MiFID business’ - Five years from the date the loan ended

For non-MiFID (other than pensions and life insurance) the requirement is three years.

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33
Q

When can a UK firm communicate an unsolicited real time financial promotion to an overseas person?

A

The firm can communicate with clients in overseas countries via a cold call if it is compliant with the UK financial promotion COBS.

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34
Q

If a firm performs an ancillary service for a client, how long should the firm hold on to the records of the client agreements?

A

some agreements that must be kept indefinitely (pension transfers etc.). These, however, are not ancillary services. For ancillary services the best answer is ‘whichever is longest five years or the duration of the relationship with the client’.

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35
Q

Durable Media

A

Media that can be accessed by clients and allows unchanged reproduction of the information

It may be offered to the client, though there is no necessity of provision unless specified by a rule. Websites are not considered durable media.

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36
Q

Professional Client

A

Per se professional clients are, generally, those which fall into any of the following categories
• An entity required to be authorised or regulated to operate in the financial markets. This includes:
• a credit institution
• an investment firm
• any other authorised or regulated financial institution
• an insurance company
• a CIS or the management company of such a scheme
• a pension fund or the management company of a pension fund
• a commodity or commodity derivatives dealer
• a local
• any other institutional investor.
• Large undertakings – companies whose balance sheet, turnover or own funds meet certain levels

e.g. designated investment exchange, limited liability partnership, national body that manages public debt

The local authority must have met certain requirements to be eligible to opt up (e.g. portfolio exceeding £10m).

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37
Q

Examples of execution venues

A

Regulated market
Systematic internalisers
MTF multilateral trading facility

A RETAIL BROKER IS NOT AN EXECUTION VENUE

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38
Q

Appropriateness for retail clients

A

Appropriateness needs to be assessed and risks need to be highlighted to retail clients for derivative and warrant transactions.

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39
Q

For which kind of client would the Financial Promotions regulations need to be applied?

A

The financial promotion rules need to be applied when communicating financial promotions to retail clients.

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40
Q

which legislation would you find details of whether a firm is subject to the Conduct of Business rules contained within the FCA Handbook?

A

This information is contained within FSMA 2000.

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41
Q

A retail client would normally expect to get a periodic statement of their non-leveraged security based account at least:

A

A retail client will generally get a periodic statement every three months.

If the portfolio is LEVERAGED then monthly.

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42
Q

LIMIT PRICE ORDER, what happens when the firm is not willing to buy

A

Limit orders must be executed immediately or made public. As the firm is unwilling to execute the trade, they must place the order on a regulated market such as the LSE.

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43
Q

When considering best execution criteria for a retail client, what needs to be considered when obtaining the best possible result?

A

The characteristics of the client, the order, the investment and the execution venue will all be taken into consideration

In addition for a retail client, costs directly relating to execution - including execution venue fees and clearing and settlement fees - must also be considered.

Costs payable to the firm that the client is dealing with are not to be included in this assessment.

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44
Q

Trade confirmation notice elements included

A

The date on which the trade took place
The time at which the trade took place
The total consideration paid/received in the transaction
Execution venue

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45
Q

When is the FCA’s Conduct of Business Rule relating to suitability required?

A

when the firm is performing Discretionary MiFID services on behalf of retail and professional clients

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46
Q

To whom should a firm produce a document about compensation claims when carrying on MiFID business?

A

ALL CLIENTS should know about fees

must make available to any client who has used or intends to use those services, the information necessary for the identification of the compensation scheme or any other investor compensation scheme of which the firm is a member or any alternative arrangement provided for in accordance with the investor compensation scheme.

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47
Q

When carrying out a reasonable assurance Client Assets Report the auditor must take into account:

A

B the firm’s own risk assessment

During the audit the auditor will conduct a risk assessment, having considered the firm’s own risk
assessment, as to whether the firm has maintained systems adequate to comply with the CASS rules,
and has complied with the rules. It will conduct this assessment against each of the CASS rules.

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48
Q

The Supervision Manual (SUP)

A

determines whether a ‘reasonable assurance client assets report’ or
‘limited assurance client assets report’ must be completed

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49
Q

What is the overriding principle to be applied in determining the categorisation status of a client?

A

Any client is a retail client unless they meet the criteria of a professional investor or eligible counterparty

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50
Q

Which one of the following bodies is responsible for identifying and monitoring systemic risks with a view to protecting the UK financial system?

A

The Financial Policy Committee

the UK’s risk regulator with responsibility and powers
to reduce systemic risk. As an official committee
of the Bank of England it focuses on the macroeconomic
and financial issues that may threaten
long-term growth prospects, holding powers of
direction and recommendation over the PRA.

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51
Q

In line with the FCA Conduct of Business Sourcebook, what method of information storage meets
the requirements for a durable medium?

A

Email from an investment manager

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52
Q

Which of the following investment firms are subject to MiFID requirements when undertaking designated investment business?

A

A Stockbrokers

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53
Q

A firm receives a complaint from a customer relating to MiFID business.
What is the MINIMUM period records should be retained?

A

A Five years from the date the complaint was received

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54
Q

Which of the following is NOT a specified investment as defined by the Regulated Activities Order 2001?

A

Commodities such as gold

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55
Q

Which of the following claimants would warrant compensation by the Financial Services Compensation Scheme?

A

The trustee of a personal pension fund

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56
Q

Which of the following is a statutory objective of the FCA?

A

To secure an appropriate degree of protection for consumers

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57
Q

When dealing for a number of clients, which of the following must a firm consider in order to provide best execution?

A

B Order of execution

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58
Q

Which of the following would be an offence under the Proceeds of Crime Act 2002, Part 7 Money Laundering?

A

A firm’s nominated officer suspects money laundering is occurring. However, she is about to travel abroad for a vital business trip and decides to delay the disclosure to the authorities by a week

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59
Q

Which of the following is a special defence that is only available to market makers against the
accusation of insider dealing?

A

They were acting in good faith

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60
Q

If a client is classified as a ‘professional client’ in respect of dealing in listed UK investments and a firm is engaged to manage investments on a discretionary basis for the client, which of the following is a firm entitled to assume?

A

The client has the necessary level of experience and knowledge in respect of such dealings

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61
Q

Authorisation by the FCA is NOT required by which of the following in relation to specified investments?

A

Trustees of an estate

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62
Q

A bank advertises securities to the public.
What must be included in this advertisement?

A

detail of where investors can obtain the full prospectus

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63
Q

Financial firms which prepare research recommendations have to comply with detailed standards in relation to presentation and disclosure in order to ensure that:

A

such recommendations are fairly presented

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64
Q

Under the personal account dealing rules, which of the following must a firm ensure when placing a personal deal?

A

It does not conflict with the interests of its clients

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65
Q

An exemption from the FCA’s CASS rules is granted in connection with:

A

ICVCs

CASS does not apply to:
• ICVCs
• incoming EEA firms other than insurers, for their passported activities
• UCITS-qualifying schemes
• a credit institution (eg, a deposit-taking institution- ‘bank’) under the Banking Consolidation Directive (BCD), in relation to deposits held in accounts with themselves
• coins held for the value of their metal
• money held in connection with a DvP transaction (unless payment does not occur after three business days)
• money due and payable to the firm
• cases where firm carries on business in its own name, but on behalf of the client where this is required by the very nature of the transaction, and the client is in agreement
• the custody rules (CASS 6) and the client money rules (CASS 7) do not apply if a client transfers full ownership of a safe custody asset or client money to a firm for the purpose of securing or otherwise covering present or future, actual contingent or prospective obligations.

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66
Q

Which of the following statements about suspected money laundering transactions is TRUE?

A

Failure to report suspicious transactions is itself a criminal offence

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67
Q

Which of the following requirements is a Statement of Principle relating to approved persons?

A

A To act with due skill, care and diligence

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68
Q

Which of the following is exposed to the offence of insider dealing under the Criminal Justice Act 1993

A

The audit partner who sells the company’s shares after reviewing the audit file prior to signing
the annual accounts

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69
Q

Which of the following statements is TRUE of a firm requesting authorisation to carry out
investment business under the FSMA 2000?

A

-Legal status
-companies established under UK law to have their headand registered offices in the UK if they are to be authorised
-It must have adequate resources
-Business to be conducted in a prudent manner
Effective supervision (including the existing close links condition-
- Suitability – the firm is required to prove itself fit and proper to be granted Part 4A permission

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70
Q

Where information in one part of a firm’s business may either encourage or discourage another part from entering into a particular transaction with a client, what must a firm do?

A

Manage the potential conflict so as to ensure fair treatment of the clients through information barriers, reporting lines and segregation of duties

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71
Q

Which of the following constitutes a regulated activity under the FSMA 2000?

A

Acting as a manager of an authorised unit trust

72
Q

A firm receives an order from Client A to buy some shares and also receives an order from Client B to sell some shares. In which case, if either, are the firm’s resulting actions NORMALLY subject to the FCA’s COBS ‘best possible result’ requirements?

A

Both

73
Q

Which types of provisions which can be incorporated by the FCA are rules which are not binding in
their own right?

A

B Evidential provisions

74
Q

A client wishes to purchase a significant holding of a ‘complex’ instrument but does not wish to
enter in to an advisory or discretionary business relationship.

A

The rules on ‘appropriateness’ for ‘non-advised’ sales must be considered

75
Q

A professional client receives a financial promotion. Which one of the following statements relating to this promotion is TRUE?

A

The promotion need not be clearly identifiable as a financial promotion as it is being made to a professional client

76
Q

The primary purpose of the regulator’s supervision arrangements is to

A

mitigate and manage risks to the achievement of the statutory objectives

77
Q

Which ONE of the following is a defence against an accusation of bribery?

A

Adequate procedures to prevent bribery were put in place

78
Q

A firm has received an instruction from a third party IFA(?)
When must the firm report the transaction to the client following receipt?

A

A By the end of the following day

79
Q

Which of the following is TRUE of the FCA’s principles based approach to money laundering

A

The firm has to have appropriate and adequate systems and controls based on the firm’s business activities

80
Q

When looking for a personal recommendation for a client, why is it necessary to obtain so much
information concerning their financial situation, investment objectives, knowledge and
experience?

A

so that the firm can make recommendations that are suitable for the client

81
Q

The general defence of ‘not expecting any person to deal….’ is only available against an allegation
of insider dealing:

A

in relation to the offence of disclosure

82
Q

5 Who is responsible for the completeness and accuracy of information and the appropriateness of
recommendations when a MiFID firm relies on a third party firm

A

The third party firm only

83
Q

Which of the following payments are permitted to a third party on behalf of a client, by an
introducer of business?

A

Fees which are necessary for the provision of the service - such as custody fees

84
Q

The FCA deems a financial promotion poses an unacceptable risk to consumers. What powers of
intervention does it have?
Ban the product:

A

for up to 12 months without consultation

85
Q

A client’s portfolio is managed on a discretionary basis.
A key risk to the client in these circumstances is that:

A

B churning may take place

“Discretion” in this context refers to discretionary trading, which is when a broker makes trades in a customer’s account without first consulting the customer.

86
Q

Your role involves dealing with clients of your firm. One client’s dealings make you suspect money
laundering.
Who has INITIAL responsibility to report this suspicious activity and to whom?

A

You, to report to the Money Laundering Reporting Officer

87
Q

0 A client wants to cancel her investment in an authorised UK unit trust.
What is the maximum number of days after her original purchase that she can cancel without incurring possible charges?

A

14 days

88
Q

1 For retail clients, periodic reports must contain prescribed information, which includes:

A

the firm’s name

89
Q

A life office is launching a new product in the retail market. In order to satisfy the FCA’s treating customers fairly consumer outcomes, this product must be:

A

appropriately targeted

90
Q

In order to comply with the Data Protection Act 1998, for how long should personal data be held?

A

No longer than necessary

91
Q

Which of the following is TRUE for a regulated firm under Money Laundering rules and regulations?

A

Staff must be trained to recognise and deal with suspicious transactions

92
Q

Which of the following is TRUE in relation to a portfolio manager’s duty to act in a client’s best interest when transmitting client orders?

A

The portfolio manager must provide appropriate information to the client in respect of its execution policy

93
Q

With respect to clients, what is the general purpose of the provision of information rules within FCA’s COBS?

A

B To enable the client to assess the performance of the firm
4.2.5

94
Q

The main focus of the FCA’s supervisory approach on which its resources are focused is to

A

C achieve its statutory objectives

95
Q

Which of the following imposes the anti-money laundering requirements of criminal law on a stockbroker?

A

Proceeds of Crime Act 2002

96
Q

Where a £1,000 cheque paid to a firm comprises £900 of client money and £100 to pay the firm’s
fees, under what circumstances would this cheque be treated as client money?

A

Always because it is in the client’s account. once it clears then not client money anymore

97
Q

Which of the following is TRUE in respect of the Client money rules?

A

Client money must be separate from the firm’s bank accounts

98
Q

Which of the following is eligible to lodge a complaint with the Financial Ombudsman Service?

A

A trustee of a trust with a net asset value of less than £1 million

99
Q

Eligible complainants

A

consumers – any person using or contemplating using the services of an authorised firm or an appointed representative
• micro-enterprises – any person engaged in economic activity, irrespective of legal form, employing fewer than ten persons and having a turnover or balance sheet figure not exceeding €2 million at the time the complaint is raised
• charities with an annual income of less than £6.5 million at the time the complaint is raised
• a trustee of a trust with a net asset value of less than £5 million at the time the complaint is raised
• certain SMEs – with an annual turnover of less than £6.5 million and a balance sheet threshold of £5 million, or fewer than 50 employees.

100
Q

in which of the following circumstances do the FCA’s Conduct of Business Sourcebook rules apply to a trader dealing on their own personal account?

A

They work for a UK firm and the trader buys UK or international shares

101
Q

What is the role of the Financial Ombudsman Service?

A

Administer and operate a dispute resolution service for clients of FCA-authorised firms

.

102
Q

FOS Financial Ombudsman Service

A

The FOS is designated to resolve complaints about financial services firms quickly and with minimum formality. Importantly, it is free to complainants, which removes the deterrent effect of anxiety over legal costs. The FOS does not replace the court system, however, and any complainant is entitled to take
civil action against a firm regardless of whether or not the complaint has been considered by the FOS

103
Q

Which activity falls within the scope of the Training and Competence Sourcebook and requires an
individual to have a full qualification before commencing that activity?

A

Advising on friendly society tax-exempt policies

104
Q

The following activities fall within the scope of the TC Sourcebook, when they are conducted with or for
retail clients:

A

providing basic advice on stakeholder products
• advising on/giving personal recommendations in the following investments – securities*, derivatives*, packaged products*, friendly society life policies, friendly society tax-exempt policies*, long-term care insurance contracts*, corporate finance advice*, and advising on Lloyd’s syndicate
participation*
• giving personal recommendations and dealing in the following investments – securities* (which are not stakeholder pension schemes, personal pension schemes or broker funds)
• dealing – securities (which are not stakeholder pension schemes, personal pension schemes or
broker funds), derivatives
• acting as broker fund adviser*
• acting as pension transfer specialist*
• managing investments*
overseeing CISs*, safeguarding assets or client money*, administrative functions relating to
managing investments*, administrative functions concerning contracts of insurance*, and the
operation of stakeholder pension schemes*
• advising on and overseeing various activities concerning regulated mortgages (non-business
purpose* and business purpose) and equity release transactions*
• advising on non-investment contracts of insurance
• advising on and overseeing regulated sale and rent-back agreements.

activities marked with an asterisk , the individual must have attained the full qualification before commencing the activity

105
Q

If a firm is unable to provide a retail client with the total adviser charge it will levy before it makes a personal recommendation, then the firm must:

A

provide its charging structure before it gives any advice

106
Q

When the FCA requires a firm to provide specified information, how much notice MUST be given to the firm?

A

A A reasonable period

107
Q

In accordance with the rules on client classification for a MiFID firm, which of the following is in the Quantitative test in respect of elective professional clients?

A

The client’s portfolio exceeds Euro 500,000

108
Q

How would a trading venue typically become aware of a suspicious transaction?

A

B When arranging or executing a transaction

109
Q

An authorised firm holds client money and is subject to the MiFID client money rules. A retail client must be informed:

A

what will happen if the third party that holds its funds becomes insolvent

110
Q

In assessing the appropriateness of an investment for a client, a firm must

A

determine the client’s understanding of the investment

111
Q

Under what legislative framework can certain consumer bodies alert the FCA to super-complaints?

A

Financial Services Act 2012

112
Q

Super-Complaints

A

Under the Financial Services Act 2012, certain consumer bodies are allowed to make what are referred to
as ‘super-complaints’. A super-complaint allows the consumer body to raise competition and consumer
issues with the FCA where a feature of the UK financial services market is, or appears to be, significantly
damaging to the interests of consumers

113
Q

Which of the following must be disclosed to a retail client when holding designated investments or client money subject to MiFID?

A

Details of any investor compensation scheme applicable

114
Q

Firms holding client money or investments for retail clients, professional clients and ECPs subject to the MiFID custody/client money rules also have to provide the following information, as appropriate

A

that the investments/money may be held by a third party on the firm’s behalf

  1. what the firm’s responsibility is for any acts and/or omissions of that third party
  2. what will happen if the third party were to become insolvent
  3. if the investments cannot be separately designated in the country in which they are held by a third party, what this means for, and what the risks are to the client
  4. that the investments are subject to the laws of a non-EEA jurisdiction and what this means for their clients’ rights over them
  5. a summary of the steps the firm has taken to protect the client’s money and/or investments, including details of any relevant investor compensation or deposit guarantee schemes available to them
  6. if the money or investments are subject to any security interest, lien or right of set-off, full details of this fact and the terms of it
  7. full and clear information, in a durable medium, in good time before entering into securities detailing clearly what the firm’s obligations are with regard to those investments and what the risks may be.
115
Q

In accordance with the SYSC rules on conflicts of interests, where a conflict arises, which of the following must the firm do as a MINIMUM requirement?

A

Email the client with sufficient information and ask the client to decide how to proceed

has to be in writing

116
Q

A firm wishes to approve a financial promotion for an overseas bank that is well known to the firm
and is considered highly reputable.
What must the communication to its UK retail clients contain?

A

The extent to which UK compensation scheme arrangements will be available, or if it is not, a statement to that effect

117
Q

In which of the following circumstances is a client agreement required when non-MiFID designated investment business is supplied?

A

To a Retail Client

118
Q

Under the Proceeds of Crime Act 2002, criminal property is defined as:

A

any benefit derived from criminal behaviour

119
Q

What is the status of the Joint Money Laundering Steering Group guidance?

A

It provides an indication of how firms should apply the law

120
Q

One of the key purposes of the Capital Requirements Directive is to ensure that firms

A

hold adequate capital and systems to manage their business and its associated risks

121
Q

Who is primarily responsible for the regulatory compliance of a mailshot issued by a firm’s appointed representative (AR)?

A

The authorised firm that is the AR’s principal

Firms must also ensure that their appointed representatives comply with the COBS rules when they communicate financial promotions. Particular reference is made of this in COBS because, technically, a financial promotion communicated by an appointed representative is an exempt promotion and so
does not need approval. Therefore, by making reference to this matter in COBS, the FCA reminds firms that they are responsible for the content of the financial promotions communicated by their appointed
representatives.

122
Q

70 Which body has the power to refuse an application for Part 4A permission or cancel an existing permission?

A

Regulatory Decisions Committee

123
Q

A firm produces a circular to existing retail clients promoting an Individual Savings Account (ISA)
product.
What must this promotion contain?

A

A statement that tax treatment depends on individual circumstances and is subject to change

124
Q

If an individual receives a ‘notice of discontinuance’ from the FCA, this indicates that

A

proceedings set out in a previous notice are being withdrawn

125
Q

Under the FCA’s COBS Financial Promotion rules, a firm must take reasonable steps to ensure that an individual who makes a non-written financial promotion on its behalf:

A

always identifies themselves and the firm that they represent

126
Q

Which of the following circumstances requires a regulated firm to seek approval for an individual to be an approved person?
If the individual is going to be:

A

a non-executive director

127
Q

5 One of the key aims of the Disclosure and Transparency rules is to limit:

A

A the number of people accessing inside information

128
Q

Which of the following parties are the FCA most likely to prosecute?
A Money Laundering Reporting Officer (MLRO) has not organised any money laundering training in the firm for the past 30 months.
Two new employees, who joined the firm last month, have been found to have been involved in handling criminal funds. The criminals have since fled the UK.

A

As an approved person, the MLRO will be prosecuted by the FCA for breach of the Money Laundering Regulations (MLR).
The MLRO is required to organise training at least every 24 months, and therefore the two new employees have a defence against an accusation of money laundering. They have not received the necessary training, and thus did not know any better.

129
Q

Which body oversees the macro-economic and financial issues that could cause instability in the UK?

A

This is the role of the FPC. Its aim is to gain a bigger picture of the financial services and markets in order to better predict problems that may occur. It exists within the Bank of England.

130
Q

Who is responsible for reducing risks to the financial system as a whole?

A

FPC has responsibility for reducing risks to the financial system as a whole.
The PRA takes instructions from the Financial Policy Committee (FPC) at the Bank of England.

131
Q

Who is responsible for reducing risks to the financial system as a whole?

A

FPC has responsibility for reducing risks to the financial system as a whole.
The PRA takes instructions from the Financial Policy Committee (FPC) at the Bank of England.

132
Q

Who is responsible for the regulation of individual savings accounts (ISAs)?

A

HM Revenue and Customs is responsible for the regulation of Individual Savings Accounts (ISAs). ISAs are tax efficient savings and investments.

133
Q

The Financial Conduct Authority is funded by contributions from?

A

Although the FCA is answerable to the Treasury, it is in fact a limited liability company. It is also funded by the financial services industry - businesses authorised under the FSMA 2000.

134
Q

The Panel on Takeovers and Mergers is:

A

The Panel on Takeovers and Mergers (the ‘Panel’) is an independent body, established in 1968, whose main functions are to issue and administer the City Code on Takeovers and Mergers (the ‘Code’) and to supervise and regulate takeovers and other matters to which the Code applies in accordance with the rules set out in the Code.

135
Q

The Panel on Takeovers and Mergers

A

does not play a part in assessing the impact of the takeover or merger on competition or consumer detriment.

The Panel focuses on the fair treatment of affected parties during the process of the takeover or merger. These fair processes are set out in the Takeover Code.

136
Q

FCA

A

The FCA board is appointed by the Treasury, not by ‘the Crown’ (this would generally refer to the Monarch herself). The FCA has one strategic and three operational objectives. The FCA is the conduct regulator for all firms, whether single-regulated or dual-regulated.

137
Q

What is the purpose of the Pension Protection Fund?

A

The PPF is there to compensate members of insolvent final salary (or defined beneifit) pension schemes. If their employers become insolvent, and their pension schemes cannot afford to pay people their promised pensions, the PPF will compensate them financially for the money they have lost.

138
Q

Which of the following bodies oversees the macro-economic and financial issues that could cause instability in the UK?

A

This is the role of the FPC. Its aim is to gain a bigger picture of the financial services and markets in order to better predict problems that may occur. It exists within the Bank of England.

139
Q

According to the provisions under Senior Management Arrangements, Systems and Controls in the Regulator’s Handbook, the responsibilities of directors must be:

A

A firm must take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among its directors and senior managers. The records must be kept for six years.

140
Q

objective of conduct risk regulation?

A

The FCA takes a balanced approach to the management of conduct risk. The rules do matter, but outcomes for consumers and markets are the principal focus of regulatory concern.

141
Q

FCA’s strategic objective

A

ensuring that the markets function well.

the FCA has 3 operational objectives:
-Securing an appropriate degree of consumer protection;
Protecting the integrity of the UK financial system and
Promoting effective competition

The PRA has been given a single general objective of promoting the safety and soundness of PRA-authorised persons.

142
Q

The FCA is granted the power to enforce their rules and sanction and discipline those who do not follow them. Which of the following would the FCA not seek disciplinary action for?

A

Not following FCA guidelines

A firm may choose not to follow FCA guidelines (on cold calling hours for example) but failure to comply with rules and principles is an offence.

143
Q

If an authorised firm is unhappy with the results of an FCA investigation, they may go to the Tax and Chancery Chamber of the Upper Tribunal under which of the following notices?

A

If a firm receives a decision notice, supervisory notice or is refused authorisation, it may refer this to the Tax and Chancery Chamber of the Upper Tribunal.

A final decision by the Tribunal can be appealed in the Court of Appeal and then the Supreme Court, but only if it relates to a point of law.

144
Q

If a retail client wishes to ensure that they do not lose any money in a deposit, which of the following is the most suitable deposit or investment?

A

£85,000 is the amount is guaranteed by the FSCS.

145
Q

The FCA requires that firms maintain records of complaints for a period of three years from the date of the receipt of the complaint for non-MiFID business. These records need to include details of:

A

Any correspondence between the firm and the complainant, including details of any redress offered by the firm

The substance of the complaint

The name of the complainant

146
Q

When must a firm normally send a final response to a complainant?

A

within eight weeks, send a written response to the complainant. This will either be a final response or a holding response

147
Q

If an insurer becomes insolvent, who would a small partnership apply to for compensation in light of a general insurance contract?

A

Small partnerships can claim off the FSCS.

The FSCS was established to pay compensation to eligible claimants in the event of a default by an
authorised firm, which is typically the firm’s insurance cover becoming exhausted and the firm suffering
insolvency.

148
Q

How is the Financial Services Compensation Scheme funded?

A

The Compensation Scheme is funded by authorised investment business in the UK.

149
Q

If an eligible claimant wins a claim against a deposit placed in a UK based credit institution, what is the maximum payout that can be made?

A

The question is testing your knowledge of the Financial Services Compensation Scheme: Who can pay out on losses suffered by eligible claimants with regard to deposits, investments and insurance - subject to limits. The maximum payout for deposits is now £85,000.

150
Q

Firm A is not required to subscribe to the Financial Ombudsman Service (FOS), but decides to submit to the ‘voluntary jurisdiction’. Which of the following is then true?

A

The FOS decides which complaints about Firm A to investigate

Activities that are covered by the voluntary jurisdiction are listed in the FCA Handbook and have been set by the Ombudsman Service.

151
Q

In what circumstances could a claim on the Financial Services Compensation Scheme be made?

A

When an authorised firm becomes insolvent

The Financial Services Compensation Scheme was established to provide compensation where authorised persons and appointed representatives are unable to satisfy claims against them. Although the scheme mainly applies to retail clients, it can also apply to professional clients and eligible counterparties.

152
Q

All of the following are true of the Financial Services Compensation Scheme in relation to investments

A

It applies to the appointed representative of an FCA firm

For the scheme as a whole, the total payout for compensation in any one year is unlimited

Each claim has a maximum payout of £85,000

The Financial Services Compensation Scheme is funded by levies on the authorised community only. The maximum claim for investments is now £85,000.

153
Q

If a complaint has not been resolved by a firm who should the complainant turn to next?

A

The Ombudsman is approached only if the firm has not resolved the complaint.

154
Q

procedures of an authorised firm for dealing with client complaints

A

Although it is a requirement for relevant firms to ‘report’ data and statistics regarding numbers of complaints to the FCA, it is not a requirement to ‘refer’ complaints to the FCA. Internal complaints procedures must be in writing and cover the receipt of complaints, methods of response and how they will be investigated. Complaints should be handled by a member of staff with sufficient experience and authority, and who was not involved in the matter.
If a complaint cannot be resolved, the firm must inform the client about their rights to complain to the Financial Ombudsman and provide the client with the explanatory leaflet about the Financial Ombudsman Service.

155
Q

Which of the following is an eligible complainant under the FCA regulations?

A

A private individual who has never worked in the financial sector

The others (professional client, FTSE100 company, CIS) are not considered eligible complainants. An eligible complainant is a small retail customer.

156
Q

Which of the following is not an obligation on a regulated firm when ensuring complaints receive a proper response?

A

Send a copy of all complaints to the FCA

The regulator does not need to receive copies of all complaints. However, a summary report on how complaints were handled does need to be sent.

157
Q

Per the complaints procedures, how often are firms required to file a summary report of complaints received?

A

SEMMI-ANNUALLY

The FCA requires firms to provide it with periodic reports in relation to complaint volumes received and
the timescales in which those complaints were responded to. Firms are required to submit a report to
the FCA twice yearly on the following:
• complaints opened
• complaints closed within four or eight weeks
• complaints closed after eight weeks, and
• amounts of redress paid.

158
Q

Which statement about the Financial Ombudsman Service is false?

A

ONLY FOR INDIVIDUALS
It is for institutional corporate clients as well as individuals

The Financial Ombudsman Scheme is for individuals, and companies with a two million Euro turnover or less.

159
Q

To whom is the Financial Service Compensation Scheme (FSCS) PRIMARILY accountable?

A

The FSCS is accountable to the FCA and PRA primarily and to the Treasury indirectly through the regulators.

160
Q

If a firm receives a complaint with respect to MiFID business and deals with it within two weeks, how long is it necessary to keep the record of the complaint and its resolution?

A

Five years from the RECEIPT of the complaint

161
Q

statements about a firm’s internal complaints procedure

A

It is important that complaints are dealt with by someone impartial and not involved in the same area.

The procedure must detail the method of response to complaints

It must cover how complaints will be investigated

The complaints procedure must be in writing

162
Q

Which of the following is true in relation to the Financial Services Compensation Scheme (FSCS)?

A

Claims must be made within a set time limit

A claim must be brought to the FSCS within a set time (normally within six years of the date on which the event giving rise to the claim occurred). The maximum payout for a claim against an investment firm (i.e. in relation to protected investment business) is £85,000. Separate FSCS arrangements exist to protect deposit accounts at UK authorised banks and policy holders of UK authorised insurers.

163
Q

How often must an authorised firm report details concerning complaints received, closed and outstanding to the FCA?

A

Every six months
This report must be filed even if the firm has received no complaints against it.

164
Q

If a firm receives and deals with a complaint with respect to non-MiFID business, how long is it necessary to keep the records of the complaint?

A

For non-MiFID business, the records are kept for at least three years.

165
Q

To whom, in the first instance, should a consumer make a complaint?

A

Complaints should, in the first instance, be referred to the firm. If the dispute is not resolved, it may then be referred to the Financial Ombudsman Service.

166
Q

Which of the following does not have any rights under the Financial Services Compensation Scheme?

An authorised firm with respect to general insurance

A

Authorised companies are not able to claim for general insurance contracts under FSCS.

generally, all small businesses are
eligible claimants.

167
Q

Harold has lost £70,000 through a failed investment scheme. How much will be paid if his claim to the compensation scheme is successful?

A

£70,000
Investors can claim for up to £85,000 of losses with regard to investments and will receive a payout of 100% of that claim.

168
Q

Which of the following is true in relation to the FCA’s power to seek redress for consumers?

A

Includes breaches by unauthorised persons

In areas such as market abuse and money laundering the FCA have the power to seek redress from both authorised and unauthorised persons if their behaviour has an impact on consumers.

169
Q

If an individual is awarded money in respect of restitution, to whom is it paid first?

A

The money will be paid to the FCA first and then passed on to the individual concerned.
If the money had been in respect of compensation following a liquidation it would be paid out by the FSCS.

170
Q

Authorised persons

A

• Authorised person: firms that have been authorised by PRA and/or FCA to carry out regulated activities
o Have been given permission to conduct regulated activity by FCA/PRA (Part 4A FSMA)
o Overseas firms that qualify authorisation under special provisions (EEA), treaty firms and UCITS
o ICVCs and OEIC
o Society of Lloyd’s

171
Q

Authorised person:

A

firms that have been authorised by PRA and/or FCA to carry out regulated activities

  • Have been given permission to conduct regulated activity by FCA/PRA (Part 4A FSMA)
  • Overseas firms that qualify authorisation under special provisions (EEA), treaty firms and UCITS
  • ICVCs and OEIC
  • Society of Lloyd’s
172
Q

Exempt persons

A
  • Exempt persons:
    • appointed representatives of authorised persons
    • recognised investment exchanges (RIEs) and recognised clearing houses (RCHs).
    • the BoE and other central banks
    • operators of multilateral trading systems exercising certain rights
    • Person cannot be both authorised and exempt at the same time.
173
Q

FCA

A
  1. has been given a single strategic and three operational objectives within the Financial Services Act of 2012.
  2. Strategic objective: ensuring relevant markets function well
  3. Operational objectives:
  4. Protecting and enhancing the integrity of the UK financial system
  5. Promoting effective competition in the interests of consumers in the markets
174
Q

PRA:

A

single general objective of promoting the safety and soundness of PRA-authorised persons

175
Q

Provisions of the Handbooks

A
  • R-rules binding
  • Evidential provisions – non-binding
  • Guidance – non-binding
  • Directions binding
  • Statements of principle - binding on approved persons
  • Conduct – behaviour that does not amount to market abuse – non-binding
  • EU Text from EU legislation and UK Text from UK law

UK Financial Regulations (1 decks)

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