Part 1 Flashcards
How do gilt edged securities differ from corporate bonds
Gilts are government backed and are highly secure. Corporate bonds are a loan to a company and involve higher risk
Buying a holding of shares at a high price means…
There is a high price/earning ratio (shares are in demand and will offer higher earnings in the future)
Enterprise investment scheme is anything except
Anything except ftse’s
The tax treatment of National savings and investments income bonds
Paid gross but is taxable
A fixed income unit trust is assessable to what type of tax
Income tax
Policy fees are charged in what policy
Charged in a life policy but not open ended investment company
Unit linked Endowment do not …
Do not provide guarantee minimum return at maturity- it reflects stock market fluctuations
Staff training on anti money laundering does not cover
How to liaise with the national crime agency
What inter governmental organisation established to coordinate the internal fight against money laundering
Financial action task force
To undertake a certified role you must be
Fit and proper
Maximum prison sentence for a senior manager is …
7 years
Maximum prison sentence for a individual who recklessly makes a false or misleading statement is
2 years
An eligible counterparty
An authorised insurance company
A non permitted method of attracting new mortgages
Real time promotions (calls)
What report is not necessary for a mortgage
Suitability report
How is property defined with regards to money laundering
Assets of every kind
Unearned income
Interest from savings, dividends from shares, rental income, trust income.
Income not liable for tax
Interest from national savings & premium bonds, income from ISAs, proceeds from qualifying life policies
Dividends are what
Distribution from company profits to people who own shares
Capital Gains Tax is paid from what
Tax payable on a gain or profit made from disposal of certain assets
What are exempt from CGT
Private residence, GILTS, gains on qualifying life policies disposed of by the owner,ISAS and other savings accounts
Capital loss
Loss on the disposal can be offset against capital gains made on other assets.
Losses first must be offset against gains made that tax year
Any losses still outstanding can be offset against gains to be made in future years
Exempt from VAT
Loans/ mortgages
Supply of health, educational services
Insurance policies
How is new style paid
Is paid gross and is taxable and paid for 6 months
What are Fixed interest securities
Gilts- interest is paid half yearly
Dates gilts according to the financial press
Short - 0-5 years
Medium - 5 - 15
Long 15+
Dated gilts (UK debt management office)
Short 0 - 7
Medium 7 - 15
What are Corporate bonds and what is the rate of interest
Investment into a company and have a fixed rate of interest, redemption date and term
Interest paid gross but is taxable
No CGT
What are GILTS
Low risk into gov
Fixed rate of interest for fixed period paid half yearly
Can be traded early on the stock market
Interest is paid gross but taxable
No CGT
Script issues
Free shares to existing shareholders
Rights issue
More shares to current shareholders at a discount
What are Warrants
Give the holder the right to buy the companies ordinary shares at a fixed price with a an agreed future date
What can you do with Ordinary shares and what is received
Can vote at shareholder meetings
Dividends received without deduction of income tax
CGT applies is sold for a gain
What is involved in Unit trusts
Trustees over see the trust
Open ended
Value of fund is divided into units
Fund manager buys and sells units and can create more
No ability to gear up (borrow further investment)
What type of Taxation do you get on unit trusts
Income received from equity unit trust is classed as dividend income and subject to dividend taxation
What are Investment trusts
Purchase shares in the investment company
Not open ended
Available at discount
Can fear
What is an OEIC
Depositary oversees OEIC
Investors purchase shares
Open ended
No gearing
What are Investment bonds
Unit linked, single premium, non qualifying, whole of life policies
To be qualifying
Premiums must be payable for 10 years minimum
What is a Gift inter vivos and what does it cover
Decreasing term assurance contracts to cover a IHT liability
Flexible whole of life
Combines life cover with investment
Universal whole of life
Combines life cover with other health insurances
Income protection
Regular monthly long term income up to 65% of pre illness income
Accident sickness & unemployment
Regular short term income usually lined to mortgage amount for max 2 years
What is an Endowment
Savings plan in addition to mortgage payments - equal to mortgage balance on maturity
Period of bankruptcy
1 year
Intestacy
A person who dies with no will or valid will.
The grant of letters of administration will be applied for by the administrator
Prudential regulation authority
Has responsibility for the supervision of the banks, building societies and insurance companies
Financial conduct authority (FCA)
Has responsibility for the conduct and behaviour of all financial firms
The FCAs objectives are
(PIC)
Protect, integrity & competition
The FCA handbook
Binding obligations
High level standards (authorisation rules)
Prudential standards (soundness)
Business standards (conducting business)
Regulatory process
FCA is committed to reducing financial crime which is:
Market abuse - insider dealing
Market manipulation- false misleading info
Money laundering
MIFID
Market in financial instruments directive
Training records must be kept for:
3 years non mifid
5 years mifid
The FCAS disciplinary actions :
Removal of specific permissions
Withdrawing authorisation
Injunction
Restitution
Redress
What advice is give to Eligible counterparts
No advice given
Professional client
Advice given
Retail client
Little knowledge of financial services
Client agreement is for
Designated investment business
Product disclosure is for who
For those selling packaged products must provide a key features document
When should a Key information document (KID) be given to
Must be provided if a customer is buying a packaged retail and insurance based investment product - products subject to risk
What is a Suitability letter required for
Are required for life policies, pensions and unit trusts
Under EU rules criminal activity is:
Any criminal activity specified in the Vienna convention or by a member state of the eu
Money laundering offences
Concealing criminal property
Arranging relating to criminal property
Acquiring or using criminal property
Evidence of ID must be kept for
5 years minimum after the relationship has ended
Each firm has a what
Money laundering reporting office who reports to the national crime agency
Anyone convicted of concealing, arranging or acquiring could sentenced up to
14 years in prison or unlimited fine or both
Failing to disclose or tipping off will get you
5 years in prison and or an unlimited fine
If a company fails to comply with an enforcement notice what is the maximum fine
Higher of 17.5m or 4%
Firms must aim to resolve complaints in how long
8 weeks
Pension ombudsman can decide about complaints in relation to
The running of a pension not the marketing or sale of one
