Practice Qs Flashcards
Quantitative test for large undertaking to be treated as a per se professional client for MiFID?
2/3 of:
1. Min balance sheet: €20mn
2. Min turnover: €40mn
3. Min own funds: €2mn
When are RC and when are PC given client agreements wrt MiFID and advisory svcs?
RC: all designated investment business
PC: MiFID business only
Client agreement sent for advisory svcs but not needed for advice only when no resultant deals occur.
FCA single strategic objective + operational objectives
Strategic: ensuring markets function well
Op: securing appropriate degree of consumer protection; protecting integrity of UK fin system; promoting effective competition
PRA general objective
Promoting the safety and soundness of authorised persons (PRA-authorised)
Products that are considered retail investment products but not packaged products?
Shares in an investment trust
Unregulated collective investment schemes
Structured products
Defence against bribery?
Proof that adequate procedures were in place to prevent bribery
MiFID business suitability for elective PC vs. per se PC - what else must a firm assess other than investment objectives?
Elective PC: also their financial situation
Per se PC: nothing else
Distance Marketing Directive - what is covered?
Email
Website
Market cap max in order for firm to not pay for research (exempt from inducement rules)?
How often this is assessed?
£200mn
Assessed by FCA 3 years after implementation
How is the PPF funded?
They take on assets from schemes transferred to the PPF
When must trade cofnrimation be sent to retail client?
No later than the end of the next business day
If a firm is providing advisory services consisting of basic advice, which is the only product that this would relate to?
Stakeholder pension
Funds vs. deposits wrt to terrorism and ML
Funds: terrorism can be funded from legitimate sources, ML always come from proceeds of crime
Deposits: could either be terrorism or ML
Heding and commercial loans - are they covered by COBS?
No as they are not designated investment businesses
Special defences of insider dealing:
- stabilisaiton rules
- takeovers (recipients of mkt info)
- mkt makers
What is the max amount a firm is bound to pay under FOS ?
£415,000 (plus costs)
Quantitative test for MiFID business criteria?
Any 2 of:
1. carried out avg. 10 transactions over past 4 Q’s
2. size of financial portfolio >€500k (incl cash deposits and financial instruments)
3. client works or has worked in fin svcs for >1 year on basis which requires knowledge of the transactions envisaged
What sort of financial promotion may a firm not approve on behalf of an unauthorised firm?
Telephone calls
Or any non-written communications as it could easily be changed
What does a basic written agreement have to be on? Which rulebook does this refer to
Durable medium
COBS 8A
What categorisation are all authorised or regulated firms?
Per se ECPs
Who oversees FOS
FCA
Who overseas FSCS
FCA and PRA
How often is MLRO required to orgnaise training?
every 24 months
What min frequency must firm carry out internal client money reconciliations?
Each business day
When would a further decision notice be issued?
When FCA agreed to take different course of action from that proposed in the original notice
What must a professional client be provided when firm is holding their client money under UK MiFID custody/client money rules?
Summary of steps the firm has taken to protect client money
Exemption for FCA’s CASS rules granted in connection with?
ICVCs
Max number of days after purchase that client can cancel investment in authorised UK unit trust?
14 days
Who has power to refuse application for Part 4A permission or cancel an existing permission
RDC
Professional clients and financial promotion rules?
Need not to be as identifiable as financial promotions with retail customers
Periodic report prescribed info for retail clients - most key item?
Firms name
Why would an employee be exempt from personal account dealing rules?
Deals were executed by discretionary mgmt svc with which they have no contact with
Unfair contract regs allows FCA to
Apply for court injuction to prevent a firm from using an unfair term against an existing customer
What must be disclosed to RCs when holding designated investments or client money subject to MiFID?
Details of investor comp schemes applicable
If firm is unable to provide an RC with info on costs and charges at time investment service was provided, the firm should:
Provide the basis on which the charges will be calculated
Purpose of disclosure rules:
Set out specific circumstances in which an issuer can delay the public disclosure of inside information
Who is responsible for completeness and accuracy of info and appropriateness of recommendations when a MiFID firm relies on a 3rd party firm?
3rd party firm only
General defence of insider dealing is only available to which allegation of insider dealing?
In relation to the offence of disclosure
Preventing terrorist financing - how long must firm retain customer DD records?
5 years
Domestic transactions on LSE: what time are transaction reports for settlement purposes required by CREST - latest time on each business day?
8pm
FOS purpose?
settle complaints between consumers and fin svcs firms
A firm receives instruction from a 3rd party IFA, when must firm report transaction to client following receipt?
By end of following day
Financial promotion rules are disapplied for communcations that are
subject to the takeover code
To successfully apply for exemption from the qualification requirements prescribed by the T&C regime, an employee must have relevant overseas experience covering a min period of:
3 yrs
Max level of settlement discount normally available in relation to an enforcement penalty imposed by the FCA?
30%
Under UK MAR, what happens if someone subject to PMDR wants to trade within 30 days before reporting period of co.?
Company required to make info on these trades public
What is reflection period for cash deposit ISAs and what conditions with this?
14 days whn sold via distance contract (e.g. website) and with no advice from firm
Difference between requirements set out by SYSC and T&C and Fit and Proper Test?
SYSC - for all firms
T&A - retail firms only
Fit and proper - approved persons - firms also required to apply this to Certification function
What is in scope and what is out of scope for UK MAR?
In scope: financial instruments, commodity derivatives, auctoned products based on emissions allowances (MAR 1)
Out of scope: life assurance products e.g. endowments (doesn’t matter if secondary mkt traded or not)
What can prohibition order relate to? What offence are individuals found guilty of if they breach this and what are they liable to?
Particular regulated activity or regulated activities generally
If individual breaches, they are guilty of criminal offence and liable to a fine
Does anyone else have to assess a firms execution policy before being shown to clients? What must be shown in execution policy?
No - no need for third party firm to assess it.
However, firm must receive prior consent to execution policy from its clients.
How long must records of non-MiFID custody assets be kept under client asset rules?
3 years after they were made
Who cannot claim from FSCS?
Any authorised firm.
If a private person suffers a loss due to firm found in breach of statuatory duty, what is the person allowed to do and what lawbook is this in? And what conditions?
Private persons can sue the firm for damages
S71 of FSMA 2000 if:
- individual within a firm carries out a function in breach of a prohibition order
- individual carries out controlled function without prior approval
What about non-private persons sueing for damages - what does FSMA 2000 let them do?
They can sue as a consequence of neglicence concerning prohibition orders in prescribed circumstances
What must a KID contain?
What is product?
What are risks and return?
What happens if XX unable to pay out?
What are costs?
How long should I hold it and can I take money out early?
How can I complain?
Other relevant info
FCA disciplining firm/employee for breaching regulation - what notice is used to inform firm/employee?
Decision notice - this means FCA is taking action
FCA proposal to take action - which notice is this?
Warning notice
FCA issuing notice to assist firm in putting things right - which notice is this?
Supervisory notice
Elective PC, min value of portfolio to exceed?
€500k
How often should MLRO report to senior mgmt?
At least once a year
Who is FSCS Chairman of board appointed by? How does this relate to accountability and indepdence?
FCA
FSCS is operationally independent from regulator but must account directly to regulator for actions
Correcting shortfall discrepancy - how soon: immediately or as soon as reasonably pratical?
Immediately
Can an SPV be an ECP
No
FCA don’t have to specify time period for getting info in investigation of authorised firm
True
What is out of scope of CJA (insider dealing)
Anything non-MiFID instrument wise
So for e.g. building society share account
Can personal account notices be substituted with Chinese walls?
No
These are mandatory
How must a client be notified of a firm’s website address and what else?
Must be electronically notified of address of website and place on website where info is accessed
Must also be evidence client has access to regular internet such as provision by client of email address
If SH has 18% of shares and sells 1% of holdings, how soon should they disclose and who to?
Within 2 business days
To company
Eligible complainant criteria:
A consumer
Enterprise with <10 employees and turnover/BS <€2mn
Charities with annual income <£6.5mn
Trustee of trust with NAV <£5mn
Front running rules of invesment research - which clients does it apply to?
All clients
Therefore protects ECPs
Management fee - acceptable inducement?
Yep
Copies of suitability reports - how long must they be kept, how should they be sent to a client?
5 years
through a durable medium
What needs to be included in firm’s order execution policy?
Execution venues
What are not eligible claimants?
Authorised firms
Overseas financial institutions
Supranational orgs, govt and central admin auths
Provincial, regional, local and municipal authorities
Large companies or large mutual associations
Can an employee use another authorised firm to execute transactions, what happens in this case?
Yes
Firm notifies employee’s firm of transaction
High risk investments
Crypto assets
FATF aim?
Continuosly adapts its standards to address new risks - recommended standards rather than law
Unapproved financial promotion by an unauthorised firm - is this excluded communication?
No
criminal offence
What gives FCA power to prosecute insider dealing offences?
FSMA 2000
Can eligible complainants be small businesses customers?
Yes both individuals and small businesses customers of UK authorised firms
How soon should approved examinations be passed within for SYSC?
30 months
Threshold condition of FCA?
Appropriate non-financial resources
Decision notice vs. warnning notice?
Decision notice may suggest actions that differ from warning notices due to new info provided by the firm in the referral
Firm can appeal both a supervisory notice and a further decision notice
Decision notice - consequence?
Leads to discipline
If a firm executes a trade that isn’t to do with clients specific instruction
then firm is obliged to report itself to FCA - breach
Who appoints the MLRO
Board of co. not FCA
Scope and range of advice by financial advisors
Needs to be disclosed by all financial advisors unless advice on stakeholder products
Disclosure in durable medium
Firm initiated an unritten promotion to a person outside premises, what must it do?
Give client contact point if an appointment is arranged
