Financial Advice

Question 1

What is money laundering

Answer 1

Where proceeds of crime are made to look legitimate

Question 2

What to do if you suspect money laundering

Answer 2

Inform the nominated money laundering officer who will inform the NCA

Question 3

Can you continue to act for someone you report for Money laundering

Answer 3

If you here nothing from NCA after 7 days you can continue to act
If the NCA asks you to stop but you hear nothing further after 31 days you can resume acting

Question 4

What is criminal property

Answer 4

S340- any direct or indirect benefit from criminal conduct

Question 5

Can you make a financial promotion if not authorised by FCA

Answer 5

No unless it is approved by an authorised person - FSMA 2000 S21

Question 6

Offence of failing to disclose money laundering

Answer 6

S330-
Know or suspect or has grounds to know or suspect person is engaged with ML
Info comes to S in course of business of regulated sector
Info may assist in identifying the ML or location of ML property
Doesn’t make authorised disclosure ASAP

Question 7

Defences to offence of failure to disclose ML

Answer 7

Disclosure made whilst prohibited act ongoing
Didn’t know if ML when S began to act
Disclosure ASAP after suspicion arose

Question 8

When do the SRA Financial Services (Conduct of Business) Rules 2001 apply

Answer 8

When firm carried out exempt regulated activity

Question 9

Rule 2- SRA Financial Services (Conduct of Business) Rules 2001

Answer 9

Tell C you’re not authorised by FCA and explain complaints process

Question 10

Rule 3 - SRA Financial Service (Conduct of Business) Rules 2001

Answer 10

Act in best interests of C by carrying out transactions ASAP on best terms possible

Question 11

Rule 5 SRA Financial Services (Conduct of Business) 2001

Answer 11

Record commissions received relating to regulated activities and how these were dealt with

Question 12

Rule 7 SRA Financial Services (Conduct of Business) Rules 2001

Answer 12

Write to C if it is an execution only investment and confirm C is not relying on your advice

Question 13

When do the Money Laundering Regs 2017 apply

Answer 13

To persons acting in the course of business including lawyers

Question 14

Regulation 18 Money Laundering Regulations 2017

Answer 14

firm must take steps to identify and assess risk of money laundering and terrorist financing to which the business is subject

Question 15

Regulation 27 Money Laundering Regulations 2017

Answer 15

Firm must keep identity of all clients

Question 16

What is simplified due diligence

Answer 16

When the firm determines the business relations presents a low risk of laundering. Must obtain evidence the client is eligible for simplified due diligence

Question 17

What is standard due diligence

Answer 17

Verify identify on basis of documents

Partnership- name address and nature of business

Companies - verify existence

Identify any beneficial owner where they were not a client

Question 18

What is enhance due diligence

Answer 18

Need senior management approval to act
For high risk cases
Extra steps to identify source of wealth
Enhanced ongoing monitoring if the relationship

Question 19

Steps to determine if an activity is regulated

Answer 19

1. Are you in business?
2. Is there a specified investment or does what you are being asked to do relate to info about a persons financial standing or the setting of a specified benchmark?
3. Are you carrying on a specified activity?
4. Does an exclusion apply?
   If all tests are yes and no exclusions then it is a regulated activity

Question 20

What is a specified investment when determining if an activity is regulated

Answer 20

Stocks, shares, debenture, loans, securities, trusts, insurance contracts, open-ended investment in company

Question 21

What isn’t a specified investment when determining if an activity is regulated

Answer 21

Investing in an interest in land, investing in certain national savings products, general advice

Question 22

What is a specified activity when determining if an activity is regulated

Answer 22

Dealing as an agent on behalf of a client
Buying, selling or underwriting investments on behalf of a client
Arranging (introducing client to authorised person to provide independent advice)
Managing (active participation beyond merely holding the investment)
Safeguarding and administering investments belonging to client
Advise investor on merits of investment (not advise to buy shares in specific company but can advise stocks over shares
NOT generic advice
NOT mortgages

Question 23

What are exclusions when determining if an activity is regulated

Answer 23

Introducing 
Execution only 
PR or trustee 
Take over
Professional necessity

Question 24

Can any law firm carry out a regulated activity

Answer 24

No they must be authorised by FCA - S19 Financial Services and Markets Act 2000

Question 25

A firm can carry out regulated activity without being authorised by FCA if they fulfil the requirements of S327 exemption. What are those requirements

Answer 25

The firm must account for any pecuniary advantage to the client
Activity must arise out of provision of a particular service to a particular client. Must compliment another service= specific test
Activity must not form a major part of the firms work= general test
The firm must carry out only regulated activities permitted by the SRA
The activities must not be prohibited by an order made by the treasury or FCA
The firm must not carry on any other regulated activity

Question 26

Is insurance included in the exceptions?

Answer 26

Not when done for a reward but can still use s327 exception.

Question 27

Can you be paid for work falling under s327

Answer 27

Must not retain any pecuniary award or other advantage arising from the regulated activity when relying on S327