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CISI UK Financial Regulations > MEMORISE > Flashcards

MEMORISE Flashcards

1
Q

MEM & IMPORTANT: How often does the FPC meet and report? What do they do?
Monday

A

Meetings 4 times a year
Issues a biannual financial stability report
Identify, monitor and take action to remove or reduce systemic risk

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2
Q

MEM & IMPORTANT Q: What are the 4 statutory objectives of the FCA and PRA?
Monday

A

1 Strategic and 3 Operational:
1. Strategic Objective - Ensuring the markets function well (regulated exchanges e.g. LSE, MTF’s & OTF’s and some OTC’s (ones that have impact on reg markets) e.g. Foreign Exchange))
Operational:
2. The consumer protection objective: not necessarily preventing ALL risk of loss to consumers. They should take some responsibility for their decisions
3. The integrity objective: Enhancing integrity of the financial system. Soundness & Stability, not connected to financial crime or market abuse, orderly operation of fin markets, transparency of price formation, listing rules
4. The competition objective: promoting healthy competition in the interests of the consumers. Need for info that enables consumers to make informed choices, ease with which new entrants can access the market, how competition is encouraging innovation

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3
Q

MEM & IMPORTANT: 3 types of work that the supervisory model is based on and whether they apply to fixed or flexible portfolios
Monday

A
  1. Proactive - pre-emptive identification of harm through view and assessment of forms&portfolios. Business Model analysis and culture. FIXED PORTFOLIO ONLY
  2. Reactive - dealing with issues emerging/have happened to prevent harm growing (FIXED+FLEXIBLE)
  3. Thematic -wider diagnostic or remedy work where there’s actual/potential harm across a number of firms. FIXED+FLEXIBLE
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4
Q

MEM & IMPORTANT: 4 tools of supervision
Monday

A
  1. Identify (identify where harm/potential harm is present)
  2. Diagnose (what is the cause, the extent and potential development of the harm)
  3. Remedy (through a range of FCA actions)
  4. Evaluate (FCA assesses how effective the actions were)
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5
Q

MEM & IMPORTANT Q: The FSMA 2000 gives legal effect to the rules and guidence of the regulators set out in their handbooks. What are the 7 provisions of the handbooks and which are binding & non-binding on authorised persons.
Monday

A

(R) - Rules, BINDING
(E) - Evidential provisions - show evidence that you’ve complied to the rule (NON-BINDING)
(G) Guidance - Shows how we comply to the rules (NON-BINDING)
(D) Directions - Directs into the course of action your should take (BINDING)
(P) - Statements of Principle - how we should be behaving (BINDING)
(C) Conduct - behaviour that doesn’t amount to market abuse (NON-BINDING)
(UK) Text from UK law - FCA links to relevent laws in the handbook rather than copy & paste large texts (BINDING cos it’s law)

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6
Q

MEM & IMPORTANT Q: The 11 Principles of Businesses
Monday

A
  1. Integrity
  2. Skill, Care and diligence
  3. Management and Control
  4. Financial Prudence - adequate financial resources
  5. Market Conduct
  6. Customers’ interest
  7. Communications with clients
  8. Conflicts of Interests
  9. Customers: relations of trust
  10. Clients’ assets
  11. Relations with regulators.

REMEMBER: “I see many fair maidens at the 5C’s regatta”
If any of these principles are breached, there will be sanctions as they are legally binding on firms.

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7
Q

MEM & IMPORTANT: How often do written reports on compliance and internal audit have to be received?
Monday

A

Annually.

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8
Q

MEM & IMPORTANT: Criminal penalties: What is the maximum penalty for carrying out regulated activites without be authorised (i.e. contravening general prohibition)? Civil law consequences: What can happen to a contact entered into by a client if advisor carried on reg activities while authorised?
tuesday

A

Criminal: Contravention is a criminal offence, max sanctions are up to 2 years imprisonment and an unlimited fine.
Civil:
-Also if the contravening party has made an agreement with another party, the party is allowed to recover any money or property transferred under an agreement and to be compensated for any loss (e.g. a broker who sold a stock in XYC company to Mrs A, but isn’t authorised, so Mrs A can sue the broker and get money back).
-The contract is voidable ith at the discretion (choice) of the client.
-Injunctions (preventing further harm e.g. shutting fown business/person conducting)

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9
Q

MEM & IMPORTANT: Exempt persons from general prohibition/authorisation (6)
tuesday

A
  1. Appointed Representatives
  2. Recognised Investment exchanges and clearing houses (run settlement systems for nearly all securities in UK and Ireland e.g. Euroclear)
  3. Recognised Investment Exchanges e.g. LSE
  4. Lloyd’s syndciate MEMBERS/Lloyd’s of London (gather together to form a syndicate for insurance activities)
    5.Members of Designated Professional Bodies (e.g. Lawyers, accountants, surveryors, acturies, conveyencers.)
  5. Other exempted bodies e.g. Bank of England, Central banks, supranationals, World Bank, IMF
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10
Q

MEM & IMPORTANT Q: Exclusions relating to regulated activity (not requiring authorisation/Part 4A) 13
tuesday

A

CUSHIONED & BMX
-Dealing as principal and end used (for yourself only) D
-Primary market sale or buyback (company issues shares to public or buyback from public) B
-Derivatives for risk management (hedging) H
-Precious metals M
-Foreign exchange X
-NS&I Premium bonds (not actually bonds) &
- Group or Joint Enterprises - Firms undertaking intra-group dealing (SUBSIDIARY provides services to parent) S
- Advice in Newspapers and other media - unless it’s a tip sheet N
-Providing information (Bloomberg, Reuters etc) I
- UNPAID Trustees, Nominees and Personal Representatives - acting as the representative of the other party, e.g. executer of someone’s will or charity worker. U
- Employee Share Schemes - Companies to set up schemes enabling employees to hold shares in the company they work for E
- Oversees Persons - They carry on regulated activity from a permanent place of business outside of the UK. O
-Currency held for value of metal (C)

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11
Q

MEM & IMPORTANT: How long does it take to get a decision to be granted authorisation?
Tuesday

A

Up to 6 months (can grant, refuse or authorisation with limitations (some of the activities applied for but not all))

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12
Q

MEM & IMPORTANT: When should the fit and proper test be done?
Tuesday

A

On appointment and annually of a certication function and SMF

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13
Q

MEM & IMPORTANT: Individual Conduct Rules, what can breaches be
Monday

A
  1. Must act with integrity (a breach would be deliberate) (1st FCA principle)
  2. Act with skill, care and diligence (a breach would be careless) (2nd FCA principle)
  3. Open and co-operative with the FCA, PRA and other regulators (breach would be failure to inform FCA of anything of a nature that it would reasonably expect to be informed) (11th FCA principle)
  4. Must pay due regard to the interests of customers and treat them fairly (6th FCA principle)
  5. Observe proper standards of market conduct (a breach would be failure to comply with the code of market conduct) (5th FCA principle)
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14
Q

MEM & IMPORTANT: Which body has the power to refuse an application for Part 4A permission or cancel an existing
permission?
A Financial Conduct Authority
B Training and Competence Committee
C Regulatory Decisions Committee
D Prudential Regulation Authority
Tuesday

A

C ) after an investigation

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15
Q

MEM & IMPORTANT: What’s the maximum penalty to fail to co-operate and providing false/misleading evidence when the regulators require information/documentation whilst supervising?
Tuesday

A

2 years in prison or an unlimited fine

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16
Q

MEM & IMPORTANT Q: Julie began her new career with a firm of independent financial advisers in June. By what LATEST date must she obtain the full qualification as a financial adviser if she is to avoid having to cease carrying out her duties, even under supervision?
a) June one year hence
b) December one year hence
c) June 2 years hence
d) December two years hence

I.e. what is the max number of months that someone has to obtain full qualification?
Tuesday

A

D
Max number of months is 30.

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17
Q

MEM & IMPORTANT: What is the MAXIMUM level of settlement discount normally available in relation to an enforcement penalty imposed by the FCA?
A 15%
B 25%
C 30%
D 40%
Tuesday

A

C

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18
Q

Which enforcement notices can:
a) lead to an appeal?
b) be published?
c) Be labelled as ‘statutory’ notices?
d) be issued by the FCA only with the consent of the recipient?

A

A) Decision and supervisory
B) Final, supervisory and if client gives consent, warning notice.
C) Warning, Supervisory and Decision
D) Further Decision Notice

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19
Q

What is the Upper Tribunal attached to? How many days can a firm appeal to upper tribunal after getting notices?

A

Ministry of Justice. 28 days.

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20
Q

MEM & IMPORTANT: What is the max penalty for Insider Dealing? Is it a criminal or civil offence?
Tuesday

A

7 years imprisonment and/or an unlimited fine, criminal offence

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21
Q

MEM & IMPORTANT: What is the max penalty for misleading statements and impressions? Is it a criminal or civil offence?
Tuesday

A

7 years imprisonment and/or an unlimited fine, criminal offence

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22
Q

MEM & IMPORTANT: What is the max penalty for market abuse? Is it a criminal or civil offence?
Tuesday

A

Unlimited fine, civil offence

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23
Q

MEM & IMPORTANT: What ‘act’ deals with insider dealing?
Wednesday

A

Criminal Justice Act 1993

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24
Q

MEM & IMPORTANT: Instruments covered under insider dealing and excluded investments
Wednesday

A

Just regulated market
Included (all instruments that are traded on a secondary market):
-Shares, depositary receipts (ADR is an american one), warrants (rights to buy shares)
-Tradable debt (bonds, GILTs, loan stock)
-Options, futures, CFDs on shares&debt

Excluded:
-Assets with no secondary market e.g. bank account, unit trusts, collective investment schemes (ICVCs, OEICs etc)
-Commodities and commodity derivatives
-Spot and forward FX
-Insurance products

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25
Q

MEM & IMPORTANT: Scope of MAR (market abuse regulation)- a lot larger than the criminal act (insider deals&misleading). Where can financial instruments be traded to be an offense to MAR? What other instruments are included?
Wednesday

A

-Applies to financial instruments traded, admitted to trading or for which a request to admission to trading on a regulated market, multilateral trading facility (MTF) or organised trading facility (OTF) and traded over-the-counter (OTC) if they have an affect on the price/value of the above markets.
-Applies to emissions allowance (e.g. carbon credits) as well as the usual from criminal justice act)
-Commodity derivatives and commodity spot markets

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26
Q

MEM & IMPORTANT: The 3 stages of Money Laundering. Who are most at risk of facilitating at each stage?
Wednesday

A
  1. Placement (proceeds of any crime placed into a bank or building society) - banks most at risk
  2. Layering (Payments are taken from the bank and used to buy different investments to cover the audit trail) - Investment firms/fund managers most at risk
  3. Integration (Money appears as a legitimate source of income) - Anyone can be at risk here. A business or property?
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27
Q

According to the Terrorism Act 2000, by when must any suspicions of terrorist financing and money laundering be reported?

A

As soon as reasonably practicable

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28
Q

MEM & IMPORTANT: How many years should a firm keep records of money laundering suspicions?
Wednesday

A

5 years

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29
Q

MEM & IMPORTANT: criminal offences for directors/senior managers and max penalties
Wednesday

A

-Failure to comply with the money laundering regulations
-Recklessly making a statement in context of money laundering which is false or misleading
BOTH (2 years and/or unlimited fine)

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30
Q

MEM & IMPORTANT: How often does the MLRO report to senior management?
Wednesday

A

At least once every 12 months

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31
Q

MEM & IMPORTANT: Five offenses linked to Money Laundering under POCA (proceeds of crime act) 2002. What’s the punishment for these offences?
1. Concealing
2. Arrangements
3. Acquisition, use and possession
4. Knowingly prejudicing an investigation
5. Failure to disclose/report
6. Tipping off
Wednesday

A

General - up to 14 years and/or unlimited fine

  1. Concealing - conceal or disguise criminal property.
  2. Arrangements - being concerned in an arrangement which the person
    knows, or suspects, facilitates the acquisition, retention, use or control of criminal property for another person.
  3. Acquisition, use and possession- acquiring, using or having possession of criminal property. The person must know or suspect that the property arose out of criminal conduct

General - 5 years and/or an unlimited fine
4. Knowingly prejudicing an investigation

Regulated Sector
5. Failure to disclose/report – there is a duty on employees in the regulated sector to make reports if they know or suspect that another person is engaged in ML or terrorist financing activity. 5 years and/or an unlimited fine
6. Tipping off - It is committed if a person knows or suspects that by disclosing the information this is likely to prejudice the money laundering or the terrorist financing investigation. 2 years and/or an unlimited fine

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32
Q

MEM & Important: Who is the NCA led by and who is it accountable to?
Wednesday

A
  • Led by senior chief constable
    -Accountable to Home Secretary
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33
Q

MEM & important: What are the max penalties for not reporting terrorism suspicions
Wednesday

A

5 years and/or unlimited fine

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34
Q

MEM & important: Who does the counter terrorism act 2008 give extra powers to impose directions on firms suspected on handling funds to be used for terrorist activities

A

Her Majesty’s Treasury (HMT)

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35
Q

MEM & important: What is the Bribery Act’s max penalties?

A

Individuals: 10 years in jail and/or unlimited fine
Company: unlimited fine (not inadequate procedures)

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36
Q

MEM & Important: The 6 data protection act principles of data protection “processing must be…”

A

-Processing must be Lawful and fair**
-Purposes of processing must be specified, explicit and legitimate**
-Personal data must be adequate, relevant and not excessive**
-Personal data must be accurate and kept up to date
-Personal data must be kept for no longer than is necessary
-Personal Data must be processed in a secure manner

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37
Q

MEM and important: What can the Information Commissioners Office do?

A

Can prosecute people who breach the Data Protection Act

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38
Q

MEM & Important: Higher (breaching data protection principles, data subjects rights or transferring data to 3rd countries) and Standard (e.g. administrative (no evidence of processing data securely, no docs to prove security is tested, no evidence of policies etc.)penalties for breaching the Data Protection act:

A

Higher:
Up to £17.5m or 4% of global turnover for: breaching data protection principles, data subjects rights or transferring data to 3rd countries

Standard:
(half of higher) Up to £8.7m or 2% of the global turnover for other failures e.g. administrative (no evidence of processing data securely, no docs to prove security is tested, no evidence of policies etc.)

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39
Q

MEM & IMPORTANT: What is the purpose of the Disclosure and Transparency Rules?
Wednesday

A

The purpose of the Disclosure Rules, in accordance with the EU provisions for dealing with inside information and preventing market abuse, is to:
* promote prompt and fair disclosure of relevant information to the market
* set out specific circumstances in which an issuer can delay the public disclosure of inside information, and
* set out requirements to ensure that such information is kept confidential in order to protect investors and prevent insider dealing by limiting number of people accessing inside information

The purpose of the Transparency Rules is to implement the requirements of the Transparency Directive and to ensure there is adequate transparency of and access to information in the UK financial markets.

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40
Q

What are the Threshold Conditions (TCs) for bring granted and remaining to have Part 4A permission? I.e. how do we get it?

A
  • Legal status in UK / solo: N/A / dual reg (DR): PRA
    -Location of offices (needs to be UK) / solo: FCA / DR: PRA
    -Effective supervision (disclose close links e.g. significant shareholder)/ solo: FCA/ DR: FCA & PRA
  • Appropriate resources (sufficient finance and staff etc)/ solo: FCA/ DR: N/A
    -Appropriate non-financial resources: solo: FCA/ DR: FCA
    -Prudent conduct: solo: N/A / DR: PRA
    -Suitability (fitness and propriety): solo: FCA / DR: FCA & PRA
    -Business model (impact on FCA objectives): Solo: FCA / DR: FCA
41
Q

MEM & IMPORTANT: What are the thresholds for the EU transparency directive (when a shareholder has to disclose how much ownership of shares they have):

A

When they get to 5%, 10% 15%, 20%, 25%, 30%, 50% and 75% ownership

42
Q

MEM & important: Who are exempt from the UK disclosure directive?

A

Custodians and bare nominees (they look after the assets of others)
Shares held as collateral

43
Q

MEM & IMPORTANT:What are the thresholds for the UK disclosure rules and within HOW MANY DAYS does the shareholder have to notify? Generally, for fund managers and market makers. For ‘Generally’ when should you disclose (who for)?

A

Generally (disclose for yourself, shares held by spouse/minor children, concert parties, connected parties):
Disclosure needs ot be within 2 business days
-Reach 3% (and above 3%) every change up or down to the next whole % (even if it goes up from 3.9% to 4% or 4% to 5.1%. Then fall below 3% again).

Fund managers: at 5%, 10% then every % point
Market makers: exempt below 10%

44
Q

MEM & IMPORTANT: When is the trade reporting period in the LSE system? When should you report between:
-If trade is executed between 7:15 and 8:00
-In last three mins of reporting period
-If trade is executed outside of the trade reporting period

A

The trade reporting period is the period when the LSE system is able to accept trade reports. It runs from 7.15am to 5.15pm every business day.
- before 8:00 or within 3 mins if later
-Before 5:15
-Start of next trade reporting period

45
Q

MEM & IMPORTANT: differences between a trade report and a transaction report: Why do the report? Who does the report? When should the report be sent? To whome should the report be sent?
AND what’s the difference between a transaction report and a transaction CONFIRMATION?

A

Why?
Trade: MiFID post-trade transparency
Transaction: Market Surveillance

Who?
Trade: Senior/selling firm (if not automatic order book. A senior person would be e.g. a member of the LSE rather than a non-member. If no seniority then selling firm)
Transaction: Both counterparties

When?
Trade: Either automatic order book or within 3 minutes
Transaction: by T+1 (end of next day)

Whom?:
Trade: The exchange via SETS (Stock Exchange Electronic Trading Service) or IOB (internal orderbook)
Transaction: To the regulator via approved reporting mechanisms (e.g. Unavista and TRAX)

Transaction is more detailed than the trade report.

Transaction report is as above (to regulator for market surveilliance), Transaction confirmation is to client (all clients) to advise them of essential details of the transaction. Always has to be sent for MiFID. For non-mifid they can request not to get them. Timing is the same.

46
Q

MEM & IMPORTANT: What are the 3 pillars of the CRD (Capital Requirements Directive) framework?

A

Based on Basel framework
*Pillar 1 – minimum capital requirements for credit, market and operational risks
* Pillar 2 – Supervisory review - discussion with the regulator on whether additional capital should be held (are there risks unique to the firm)
* Pillar 3 – disclosure of information about risks, capital and risk management to improve market discipline.

Capital Resources of firm > capital adequacy requirement set by regulator (FCA or PRA)

47
Q

MEM & IMPORTANT: What are examples of designated Investment business? Mifid instruments and Non-Mifid?

A

Dealing
Broking (/Arranging)
Advising
Managing

MIFID instruments:
Shares
bonds
derivatives

Non-Mifid DI:
Packaged products (retail investment products) e.g. regulated CISs (ICVCs, OEICs), pension contracts, life assurance.

Insurance but not general insurance (so life assurance)

Appointed Representatives (indirect)

48
Q

MEM & IMPORTANT: A client is considered an eligible counterparty for the execution of orders. Which of the following is true?
AThe client receives regulatory protection for the execution of orders
BThe client will be classified as a per se professional client for advisory services
CThe firm must assess the client against large undertaking criteria
DNeither firm nor counterparty may transact due to potential conflicts of interest

A

B - Eligible counterparty (ECP) status only applies to eligible counterparty business, i.e. dealing activities. ECP status does not apply to advisory services. Any client considered an ECP for dealing will be a per se PC for advisory services.

49
Q

MEM & IMPORTANT: What are the criteria for reclassifying a retail client as an elective professional client? MIFID and NON-MIFID
Tuesday

A
  • Qualitative test (MiFID and non): the firm has assessed their (or its) expertise, experience and knowledge and believes that they can make their own investment decisions and understand the risks involved

*Quantitative test (MiFID) :
- the client carried out 10 significantly sized transactions PER QUARTER on the relevant market OVER the past 4 quarters
- Client’s financial portfolio > €500,000 (cash deposits and financial instruments)
- the client works or has worked as a professional in the financial services sector for at least 1 year on a basis which requires knowledge of the transactions envisaged.

Assuming the client passes the qualitative and, for MiFID business, the quantitative test, the client must put in writing to the firm their wish to be reclassified

Non-MiFID: firm has to assess as being capable of making their own investment decisions can be reclassified as elective professional clients (just qualitative)
E.g. If a firm considers a client sufficiently sophisticated that the firm is able to promote non-mainstream investments to them, that client is likely
to satisfy the qualitative assessment for an elective professional client.

50
Q

MEM & IMPORTANT Q: List the main exceptions to the financial promotion approval rules (7)

A

Excluded communications:
1. exempt under the Financial Promotion Order (FPO) (oversees or domestic)– an HM Treasury order which allows unauthorised persons to communicate specified types of promotion, or, in specified circumstances, without the communication having to be approved by an authorised firm)
2. originate outside the UK and cannot have an effect within the UK (obvs)
3. are subject to (or exempted from) the TAKEOVER CODE
4. are PERSONAL QUOTES OR ILLUSTRATION FORMS / Image advertising
5. are ONE-OFF promotions that are not cold calls (subject to certain conditions)
6. Promotions about qualifying credit, a home purchase plan, home reversion plan, a promotion for a non-investment insurance contract and unregulated CISs which are permitted because they fall within one of the exemptions in FSMA 2000 (Promotion of Collective Investment Schemes (Exemptions) Order 2001). or the promotion of an unregulated CIA
7 Communications by a government

51
Q

MEM: how many years do you have to display of past performance?):

A
  1. Other things to be aware of:
    *the past performance is NOT THE MOST PROMINENT ELEMENT/FEATURE OF A PROMOTION
    * it COVERS AT LEAST THE IMMEDIATELY PRECEDING FIVE YEARS (or the whole period for which the investment has been offered, and/or the financial index has been established, and/or the service has been provided if this is less than five years); in any event, it must show complete 12-month periods
    * reference periods and relevant sources are clearly shown
    * there is a clear and prominent warning that the data and/or figures refer to the investment’s past performance and that past performance is not a reliable indicator of future results
    * if the figures are in a currency other than that of the EEA state in which the client is resident, that the currency is stated and there is a warning about the possible effects of currency fluctuations, and
    * if the performance is cited gross, that the effects of commissions, fees, tax and other charges are disclosed.
52
Q

MEM & IMPORTANT Q: When should the suitability report be provided in terms of timing, for:
-Life policies
-cash isas
-personal pension schemes
-any other case

A
  • Life policy: BEFORE CONTRACT IS CONCLUDED – unless the necessary information is provided orally, or cover is required immediately (in which case the report must be provided in a durable medium IMMEDIATELY after the contract is concluded), or

-CASH ISAs and a personal PENSION scheme or a stakeholder pension, if the cancellation rules apply, within 14 days of concluding the contract, or

  • in any other case: BEFORE CONTRACT IS CONCLUDED unless the agreement is concluded using a distant marketing communication and if the client consents AS SOON AS POSS after the transaction is effected or executed.
53
Q

MEM & IMPORTANT: How is a company labelled as a ‘large undertaking’, criteria? (MiFID and non-MiFID)
tuesday

A

MiFID: 2/3 of:
Balance sheet: EUR 20m
Net turnover: EUR 40m
Own funds: EUR 2m

Non-MiFID: 2/3 of:
Balance sheet: 12.5m
Net turnover: 25m
Avr no. 250 employees

54
Q

MEM& IMPORTANT: For who should be produce:
1) A KID
2) A KIID
3) A KFD
Tuesday

A

1) PRIIPs products e.g. collective investment schemes but also other ’packaged’ investment products (PRIIPS) offered by banks or insurance companies: investment funds, insurance-based investment products, retail structured securities, structured term deposits
2) UCITS
3) Non-PRIIPS e.g. cash-based ISAs , cash-based child trust funds and packaged product includes life policies and personal pension schemes

55
Q

MEM & IMPORTANT Q: Cancellation periods for different products , when does the cancellation period start?
Monday

A

*Generally 14 days (such as cash deposit Individual Savings Accounts (ISAs), non-life and pensions products (advised, non-distance contracts) , non-life and pensions products (distance contracts)
* life and pension products – 30 calendar days
The cancellation period starts from the day the contract concludes or client receives the contractual info

56
Q

MEM & IMPORTANT Q: After executing a purchase order, when is a written statement confirmation normally expected to be dispatched?

A

For a retail client, a notice should be sent asap, but no later than 1 business day.

57
Q

MEM & IMPORTANT Q: When a retail trade confirmation is received from a 3rd party, within what time period must the firm pass it on?

A

For retail clients, no later than the business day following receipt

58
Q

MEM & IMPORTANT Q: A firm, under MiFID rules, must retain copies of trade confirmations issued to clients for what period (and from when)? What about for non-MiFID?

A

At least 5 years from date of dispatch for MiFID and at least 3 years for non-MiFID

59
Q

MEM & IMPORTANT Q: When must written portfolio statements from investment managers normally be sent to private customers?

A

-At least every 3 months
-If they include derivatives/leveraged portfolio: every month
- If a client receives deal-by-deal confirmations and there’s no high risk investments involved, then can be every 12 months.

60
Q

MEM & IMPORTANT: Who and what are exempt from the CASS rules?

A

Who?:
-ICVC and UCITS schemes (they have their own rules)
-Incoming EEA firms (other than insurers) (use COBS instead)
-BCD (banking consolidation directive) credit institution (banks have their own rules)

What?:
-Coins held for value of the metal
-money held for delivery versus payment (DvP) (e.g. if i put in 1000 shares at £2.10 with broker and I pay £2100 immediately+execution fees then they are holding onto that money for 2 days before they hand over to pay for shares) MAX 3 DAYS BEFORE HAVING TO SEGREGATE.
-Money due and payable to the firm (if holding money on behalf of client and client owes them)

61
Q

MEM & IMPORTANT Q: The CASS rules only apply to money held in connection with a delivery vs payment (DvP) transaction if payment is still outstanding after what specified number of business days?

A

3

62
Q

MEM & IMPORTANT: Enhancing the CASS regime. 3 ways:

A
  1. CASS Audit
    2.Right of use (Rehypothecation - possible for firms to use client assets as collateral for a loan)
  2. CASS Resolution pack (specific docs and info relating to client money & assets, must be made available on request)
63
Q

MEM & IMPORTANT: How often must a CASS audit be done?When should the audit be submitted to FCA?

A

Annually and submit to FCA within 4 months of audit.

64
Q

MEM & IMPORTANT: time limits for record keeping (including cancellation notices/records)
a) for different businesses, from when?
b) pensions (e.g. personal pension scheme) and life assurance/policies
c) pension transfers & opt outs and additional voluntary contributions (FSAVCs/Free-Standing AVCs) (work place pensions e.g.)
d)Telephone communications, from when?

A

a) 3 years for non-MiFID, 5 years for MiFID from date of dispatch
b) 5 years from date of dispatch
c) Indefinitely
d) 5 years from creation of record

65
Q

MEM & IMPORTANT: COBS things that apply to: Retail clients only, Retail&Professional Clients (customers) and All 3
Monday

A

Retail: Promotions (therefore cancellation rights), Suitability Report, product disclosure rules:KFDs/KIDs/KIIDs
All: Categorisation, COI, research, personal account dealing, reporting rules, CASS, Info Disclosure (initial disclosure doc)
Customers: Inducements, paid for research, suitability rules, appropriateness, best execution rules, order execution policy, client order handling, aggregation, limit orders

66
Q

MEM & Important: How long do we have to resolve a complaint before we have to send a copy of the complaints procedure?

A

3 business days

67
Q

MEM & Important: When should the complaint procedures be given to an eligible complainant? What is the ‘unless’?

A

Either:
-At first point of contact or when docs is first provided/at point of sales or immediately after
-On request
-When a complaint is received
UNLESS:
-The complaint is resolved in 3 business days

68
Q

MEM & IMPORTANT Q: What does the firm do (and timings) when a complaint is received?

A

*Complaints can be written and oral
* send the complainant a prompt written acknowledgement that the complaint is being dealt with
* keep the complainant regularly informed of progress
* within 8 WEEKS, send a written response to the complainant. This will either be a final response or a holding response.
-If complaint is unresolved in that time:
-Explain why and when it is likely to be
-Inform them that they can approach the FOS (financial ombudsman Service) within 6 months

69
Q

MEM & IMPORTANT: How long should complaints records be kept for MiFID and non-MiFID firms?

A

MiFID firms: Minimum of 5 years from when the complaint was received
non-MiFID firms: Min of 3 years

70
Q

MEM & IMPORTANT: List the types of eligible complainant.

Monday

A

They are small retail clients, NEVER authorised firms
* consumers – any individual acting in a private capacity
* micro-enterprises – businesses employing fewer than 10 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 (small&medium enterprises) – with an annual turnover of less than £6.5 million and (a balance sheet threshold of £5 million or fewer than 50 employees.)

A further condition for eligibility is that the complaint must arise out of a business relationship with the firm.

71
Q

MEM & IMPORTANT: If an individual is awarded money in respect of restitution, who is paid 1st?

A

The FCA, who then passes to the individual

72
Q

MEM & IMPORTANT: What’s the max award/compensation to complainants after going to the FOS. What happens when complaintent accepts or rejects the award?

A

£355,000 for complaints referred to the FOS on, or after, 1 April 2020 about firms’ acts or omissions on or after 1 April 2019.
* £350,000 for complaints about firms’ acts or omissions between 1 April 2019 and 31 March 2020, on or after 1 April 2019.
* £160,000 for complaints about firms’ acts or omissions prior to 1 April 2019, and which are referred to the service after that date.
For any loss (pain, suffering, financial loss, reputation damage, distress, inconvience)
Accepts: It’s binding on the firm & complainant
Rejects: can pursue matter through the courts, but it’s no longer free or private

73
Q

Who is the FOS overseen by?

A

FCA only

74
Q

MEM & IMPORTANT: Who is the Financial Services Compensation Scheme funded by?

A

Authorised firms.

75
Q

MEM & IMPORTANT: 3 claims under the FSCS that are eligible (complainants or claimants?) only and 2 that are all clients. What’s the max claim for each?
Who is FSCS overseen by? How is it funded? What is the purpose?

A

Eligible CLAIMANTS only, max claim £85,000:
-Deposits
-Investments
-Home finance

All clients (EXCLUDES MOST AUTHORISED FIRMS as FSCS is set up by auth firms for clients rather than themselves):
-Compulsory Insurance (long term) max claim: 100% of unused premium
-General Insurance (.e.g building insurance) max claim: 90% of unused premium

-Overseen by FCA and PRA.
-Funded by Authorised Firms
-allows clients to claim for losses when a firm goes into liquidation.

76
Q

MEM & IMPORTANT: How long does the FCA have to respond to super-complaints and mass-detriment references?

A

90 days CALENDAR days, explaining what the FCA intends to do

77
Q

IMPORTANT: Spectified investments with the Regulated Activities Order (RAO)
Monday

A

Ones you’d expect:
-Shares/depositary receipts (certificates representing shares)/Warrants
-Debt instruments e.g. bonds, Gilts, loan stock (unsecured corp bonds)
-Units in collective investment schemes (unit trust/open ended investment company (OEIC)/ investment company with variable capital (ICVC)/ Hedge funds
-Options
-Futures
-Contracts for difference (CFDs) e.g. swaps and spread bets

Ones you’d not expect:
-Lloyd’s syndicates (society for insurance), insurance contracts, funeral plan contracts
-Pensions
-Regulated mortgages and home finance
- Deposits and electronic money
- Rights to specified investments, e.g. sale & repurchase agreements (Repos) (using as collateral for loans)
-Loans and other forms of credit
-Emissions auction products (e.g. carbon credit)
- Benchmarks e.g. LIBOR
- Forward rate agreement
-Floating rate agreement

78
Q

IMPORTANT: Specified activities under the RAO (regulated activities order)
Monday

A

One’s you’d expect:
-Dealing in investments
-Arranging deals in investments
-Managing investments
-Advising on investments
-Operating a multilateral or organised trading facility (MTF or OTF)

One’s you wouldn’t expect:
-Safeguarding and administering investments e.g. acting as a custodian
-Sending dematerialised instructions e.g. electronic money transfer
-Lloyd’s activities, insurance activities and providing funeral plan contracts
-Mortgages: provisions, administration, advising and arranging
-Home finance activities
-Managing dormant account funds
-Accepting deposits by way of business and issuing electronic money
-Providing credit insurance or credit information services
-Establishing, operating or winding up a collective investment scheme or pension scheme
-Agreeing to carry on most regulated activities

79
Q

Per se professional clients and Per se ECPs, who can opt up to both?

A

Professional clients:
Per se:
Authorised/Regulated firms
Central Banks
Government
Supranational
Large Undertaking (there are criteria for large undertakings, if smaller then retail)
Other institutional investors (e.g. SPVs)

Elective:
Retail that have passed qualitative and quantative tests

ECP:
Per se:
Authorised/Regulated firms
Central Banks
Government
Supranationals

Elective:
Large undertaking

80
Q

What should be in the order execution policy?

A

-list of execution venues
-execution factors will affect firm’s choice of venues (price, costs, speed, liklihood of execution and settlement)
-warning about specific client instructions

81
Q

What kind of financial promotion (real time/non-written or non-real time (written) or both needs an authorised firm to confirm the promotion?

A

Non-real time

82
Q

When is do you not need to send a client agreement? (4)

A

-advice only with no resultant deals
- THE FIRM ACT AS PRINCIPAL WITH AN INSURANCE CONTRACT
-Professional clients for non-mifid
-ECP clients

83
Q

Which is related to safeguarding personal data and which provides whistleblowing protection?
-DPA
-PIDA

A

-DPA = Data Protection Act (Personal Data)
-PIDA = Public Interest Disclosure Act (Whistleblowing)

84
Q

What is the Pension Protection Fund (PPF) and who does it report to (accountable to)? How is it funded?

A

Protects benefits for defined benefit pension schemes (e.g. final salary schemes) If the employer becomes insolvent then the PPF will compensate for the money lost.
It reports to Parliament through the Secretary of State for Work and Pensions.
Funded:
-Charge a levy on all eligible pension schemes (not all schemes)
-Take on the assets of schemes that transfer to the PPF
-Recover money, and other assets, from the insolvent employers of the schemes (not members ofthe scheme), and
-Invest all income and assets.

Not to be confused with TPR (Pensions Regulator) who regulates word based pension schemes.

85
Q

What are packaged products/retail investment product examples? What isn’t a packaged product that could be confusing?

A

Regulated CISs (which include unit trusts, OEICs and ICVCs) are packaged products. So are pensions, life assurance, and investment trust savings schemes.
However, Unregulated CISs (which means a hedge fund) are not packaged products.

86
Q

Under the Securities Financing Transactions Regulation (SFTR) which of the is true of the reporting obligations?
A Securities financing transactions do not need to be reported
B Securities financing transactions need to be reported atinitiation only
C Securities financing transactions need to be reported at initiation and for lifecycle events
D Securities financing transactions need to be reported on a dailybasis

A

C

87
Q

What is the purpose of the ‘Persons Discharging Managerial
Responsibility’ (PDMR) regime? Disclosure time? Who to disclose to?

A

It is designed to protect directors (/Persons Discharging Managerial Responsibility) from the appearance of insider dealing.
They must disclose dealing in own company’s shares to their company and FCA within 3 business days of transaction and must not deal in closed periods (yearly and half yearly results 30 days prior to announcement).

88
Q

Who are FCA and PRA directly accountable to?

A

FCA - HM Treasury
PRA - Court of Bank of England

89
Q

What’s the Retail Distribution Review (RDR)?

A

All about Advisors. Firms making personal recommendations to retail clients must either be independent (duty of care to client) or restricted (duty of care to employer)
Looks at how charges for advisors can be applied: Clients can either pay advisor charge upfront or have deducted from investment overtime - need to be agreed in advance as early is impracticable (but before service or bound by agreement) and a durable form OR website.

90
Q

If an authorised firm is conducting unauthorised regulated activities, this will be considered to be which ONE of the following?
AA criminal matter
BA civil matter
CA regulatory matter
DA due diligence matter

A

A - FSMA makes the breach of general prohibition a criminal offence, therefore A, though there also civil consequences.

91
Q

6 types of market abuse(2 obvious, 4 new)

A

Insider dealing
Improper disclosure
Manipulating transactions (e.g. market rigging)
Manipulating devices (combo of 3 and 5 e.g. get involved in dissemination in order to distort markets then take advantage)
Dissemination (rumour spreading)
Benchmark manipulation

92
Q

Which piece of legislation (act) is the FCA empowered by to issue fine for money laundering offences and insider dealing offences? What action does it allows to lead disciplinary action on?

A

FSMA 2000.
Disciplinary action on: Misleading statements and impressions and market abuse

93
Q

What is the FATF (Financial Action Task Force)?

A

Inter-governmental body which sets international standards that aim to prevent ML and Terrorist financing activities, but it also helps authorities go after criminal dealings in illegal drugs, human trafficking and other crimes, but they do not lead the prosecution.
-It’s continuously adapting for new risks.

94
Q

IMPORTANT Q: Under Section 7 of the Bribery Act 2010, the offence of vicarious liability can be committed by:
a) Public officials
b) Commercial organisations
c) Chief executive officers
d) Procurement staff

A

The commerical organisation can be guilty of this offence if the bribery is carried out by an employee, agent or another 3rd party.

95
Q

A listed firm wants to know whether a specific corporate action would be classed as a reportable transaction under the FCA rules. It was correctly advised that the key test is whether:
a) The total funds involved exceed a specified threshold
b) The share has a choice of options
c) The company has any preference shareholders
d) The shares are deemed to be above average risk

A

Corporate actions are deemed to be reportable actions where these include an element of choice.

96
Q

Which of the following best describes the relationship between the FCA, the PRA and theboard of the Financial Services Compensation Scheme (FSCS)?
A The board of the FSCS is appointed by the Bank of England on behalf of the FCA and PRA
B The Chairman of the board of the FSCS is appointed by theFCA
C There is no relationship between the FCA, the PRA and theFSCS
D The directors of the FSCS are appointed by HM Treasury onbehalf of the FCA

A

B

97
Q

When tracking investment business, cancellation rights must be provided to which class(es) of customer?
a) Retail
b) Retail and professional
c) Retail and eligible counterparties
d) Retail, professional and eligible counterparties

A

A

98
Q

Different disciplinary measures once an investigation has been done (5)

A

Different to contravening General Prohibition
-Prosecution if a crime (e.g. insider dealing and ML)
-Public Censure
-Restitution order (restore client back to position)
-Prohibition Order (prohibit them from working in part of regulated sector, limited period or forever)
-Withdrawal or variation or authorisation/approval

99
Q

When is a suitability report NOT required?

A

-Where a firm, acting as an investment manager for a retail client makes a personal recommendation in connection to a regulated CIS.
-Client is habitually resident outside EEA and is not present in UK at the time of acknowedgling consent to the proposal
-Small life policies sold by friendly societies
- If recommendation is to increase regular premiums to an existing contract
-If investing further premiums to existing packaged product into which contributions have already been paid

CISI UK Financial Regulations (6 decks)

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