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Investment Environment > Questions > Flashcards

Questions Flashcards

1
Q

What are thresholds for higher tax bracket

A

37.5k - 150k

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2
Q

What is the maximum annual VCT subscription to attract tax relief?

A

£200,000

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3
Q

What is additional tax rate on interest?

A

45% (with zero allowance)

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4
Q

What is higher rate of income tax?

A

40% (on 37.5k - 150k)

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5
Q

How much is personal allowance reduced above £100k?

A

£1 for every £2 above £100k

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6
Q

What is full basic rate tax?

A

Not allowing for personal allowance - 20% of £37.5k is £7500

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7
Q

What is FATCA?

A

Foreign financial institutions must report information to IRS. If you don’t participate, 30% withholding tax

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8
Q

Who pays class 2 NICs?

A

Self-employed

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9
Q

What is basic CGT?

A

10%

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10
Q

What is higher/additional CGT?

A

20%

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11
Q

What is CGT allowance?

A

£12,300

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12
Q

What is CGT on residential property?

A

18%, 28% higher/additional - main home exempt

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13
Q

What is CGT paid on?

A

ONLY YOUR PROFITS!

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14
Q

What is personal savings allowance?

A

£1000 basic, £500 higher, £0 additional

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15
Q

Do companies pay income or capital gain tax?

A

NO!

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16
Q

What is max pension lump sum can take?

A

25% before taking annuity

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17
Q

What is additional tax band?

A

45% on 150k+

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18
Q

What is basic dividend rate?

A

7.5%, £2000 allowance

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19
Q

What is higher dividend rate?

A

32.5%

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20
Q

What is additional dividend rate?

A

38.1%

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21
Q

What is top for personal income tax allowance?

A

£125,000

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22
Q

What is corporation tax?

A

19%

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23
Q

What are the three bands for income and savings?

A

20%, 40%, 45%

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24
Q

What is income tax relief in EIS?

A

30%

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25
Q

Are portfolio management fees subject to VAT?

A

Yes

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26
Q

What is SDRT?

A

0.5% of sale proceeds - paid by buyer - Stamp Duty Reserve Tax

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27
Q

Do companies pay CGT?

A

Yes - and corporation tax

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28
Q

Do you pay CGT on your main home?

A

No

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29
Q

Do gifts to charities pay IHT?

A

No

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30
Q

When are gifts to kids exempt from IGT?

A

liable for tax if donor dies within seven years

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31
Q

How to you pay on gifts to discretionary trusts?

A

20% on payment, 20% on death

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32
Q

Do VCT and EIS pay CGT?

A

No

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33
Q

Do bonuses and cars count as income for tax?

A

Yes

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34
Q

How much can be taken from a life assurance bond annually tax-free?

A

5%, can be carried forward

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35
Q

How far can terminal losses be carried back?

A

Three years

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36
Q

What is a VCT most similar to?

A

Investment trust company

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37
Q

Are shares packaged products?

A

No - investment trust savings schemes are packaged products, but not shares in investment trusts.

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38
Q

What is a Retail Investment Product but not a Packaged Product?

A

Shares in investment trusts, unregulated collective investment schemes and structured products

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39
Q

What is tax status of investment trusts?

A

Pay corp tax but no CGT.

Investors pay tax on div income and CGT on sale

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40
Q

What is tax status of unit trusts?

A

Unit trusts pay tax on income at a fixed rate of 20%, but do not pay tax on capital gain. The investors receive distribution - they receive it gross and tax is based on dividend or savings income. The investors will pay capital gains tax on any capital gain.

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41
Q

Do AIM shares trade on SETS?

A

Only the most-traded, ie the most liquid

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42
Q

Where a financial adviser only provides advice, what is the VAT charge to the customer?

A

20% - execution only is VAT free though

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43
Q

How does personal allowance change above £100,000 income?

A

The personal allowance is reduced at a rate of £1 for every £2 of non-savings income above £100,000

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44
Q

Can the ICO impose custodial sentence?

A

No - only financial penalty (20m euros or 4% of turnover, whichever is higher)

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45
Q

What did MIFID II do?

A

Created organised trading facilities (OTF)
More control on algorithmic trading
Restrictions on third party research
Added requirement to consider investor’s whole portfolio

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46
Q

Are there restrictions on trust activity?

A

Not if diversified and suitable investments

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47
Q

Are tangible assets covered by FSMA 2000?

A

No

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48
Q

Can the FCA jail people?

A

No - MoJ does that - but can issue fines

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49
Q

Non-MIFID business - who gets client agreements?

A

Only retail clients

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50
Q

If there is an appointed representative, who is responsible for all comms?

A

Firm

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51
Q

What is core MIFID business?

A 
Orders
Execution
Dealing on account
Portfolio management
Investment advice
Underwriting and placing
Multilateral trading facilities (MTF)
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52
Q

To move from professional to retail client, do you need a risk warning?

A

No - only written agreement

You need a risk warning if you are OPTING UP, not down

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53
Q

Do you need to ID the regulator in a suitability report?

A

No

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54
Q

What is in KIID?

A

Costs
Time restrictions
What happens if provider can’t pay

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55
Q

Is execution policy in KIID?

A

No

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56
Q

Who must specify which clients a product is suitable for?

A

Manufacturer

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57
Q

What must ensure individual clients are compatible?

A

Distributor

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58
Q

Fiduciary duty - is it ok to take on extra risk to attain projected returns?

A

No

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59
Q

Can you copy client list for personal gain?

A

No

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60
Q

How many shares does one shareholder need to have so they can force a meeting?

A

5%

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61
Q

What is takeover panel responsible for?

A

Only fairness - competition under remit of CMA

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62
Q

What can FOS force a compensation payment for?

A

Loss of reputation
Pain
Loss of cash
Distress

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63
Q

What is threshold for a whistleblowers’ champion?

A

£250m net assets

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64
Q

Who do market abuse rules apply to?

A

Individuals AND members of public

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65
Q

What can you trade on personal account?

A

UCITs, life insurance policy, independent funds you do not work on

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66
Q

Who runs the Upper Tribunal?

A

Ministry of Justice

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67
Q

What are three stages of money laundering?

A

Placement, layering, integration

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68
Q

What stages of money laundering are investment managers most vulnerable to?

A

Layering, integration

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69
Q

In best execution, are costs to the firm relevant?

A

No

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70
Q

Do you need to do another fact find if circumstances change, eg after an inheritance?

A

Yes

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71
Q

What is an advantage of an investment trust over a unit trust?

A

Flexibility

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72
Q

What can invest in a REIT?

A

ISA, SIPP, client trust fund

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73
Q

Who regulates Eurobonds?

A

ICMA

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74
Q

Who has more fixed income in pension funds - UK or France/Germany?

A

France/Germany

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75
Q

Does FTSE take ordinary listings?

A

No, only premium

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76
Q

What does a quote driver system offer?

A

Bid/offer spreads

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77
Q

What happens in an order-driven system?

A

Orders are matched automatically or by market makers. No guarantee of execution

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78
Q

What is benefit of AIM?

A

Lower regulatory threshold

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79
Q

What does CREST do?

A

Settlement - delivery vs payment. Payment is before delivery

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80
Q

How long does NYSE take to settle?

A

T+2

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81
Q

What is benefit of OTC market?

A

Flexibility

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82
Q

Do emerging markets correlate with developed markets?

A

Not very much

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83
Q

What are thresholds for premium listing?

A

PLC
Three years audited trading history
12 months working capital
Market value: £700,000 equity, £200,000 debt
Experienced management
Sponsor
25% free float, max 20% in warrants or convertibles

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84
Q

What are thresholds for standard listing?

A

PLC
Market value: £700,000 equity, £200,000 debt
Experienced management
25% free float, max 20% in warrants or convertibles

ie. NO NEED for trading history or working capital minimums

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85
Q

What are thresholds for AIM?

A

PLC - and that’s it?

Needs a NOMAD - nominated advisor, usually investment bank

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86
Q

What are thresholds for high growth segment?

A

Incorporated in EEA
Only equity - no debt
Free float of 10% - owners retain control
Average growth of 20% over three years

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87
Q

Who decides re what kind of listing you get?

A

LSE - not UKLA/FCA

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88
Q

If you get pension tax relief, how is it calculated?

A

Topped up at highest marginal tax rate

For £100, higher rate taxpayer pays £60, basic rate payer £80

If a basic rate taxpaer contributed £10,000, they get 10000/0.8 = £12,500

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89
Q

Whose rates and allowances apply in a bare trust?

A

The beneficiary

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90
Q

What kind of tax is VAT?

A

Indirect

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91
Q

What is ‘further dividend’ code for?

A

That the allowances are all used up

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92
Q

What are IHT allowances?

A

£325,000, plus £175,000 for property - so £500,000 total

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93
Q

What is CGT allowance?

A

£12,300 - and losses can be carried forward indefinitely

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94
Q

When do you pay tax on an OEIC?

A

On disposal

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95
Q

How is a UK resident/domiciled taxed?

A

Arising

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96
Q

How is a UK resident but non-dom taxed?

A

Remittance

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97
Q

How is an overseas resident but UK domiciled taxed?

A

Only on UK income

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98
Q

Do CFDs, property, ETFs count for CGT?

A

Yes

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99
Q

How do insurance payouts get taxed?

A

No CGT, pay out net of tax already

If qualifying!

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100
Q

How is IHT on a discretionary trust?

A

20% on transfer, 20% on death

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101
Q

What is IHT on a charitable donation?

A

Exempt

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102
Q

What is tax relief on an EIS?

A

30% up to £1m

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103
Q

What is IHT on gifts?

A

People you give gifts to will be charged IHT if you give away more than £325,000 in the 7 years before your death.

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104
Q

What is gift with reservation re IHT?

A

Gift but owner retains benefit

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105
Q

How are occupational pensions taxed?

A

Deductible from employer profits
Exempt from CGT
Employee liable for income tax

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106
Q

What do wider bid/ask spreads say?

A

WIDER SPREADS = MORE LIQUIDITY

Quote spreads are wider in liquid markets.
In order-driven markets, liquidity can be judged by the difference between the best buy and sell prices in the order book.

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107
Q

What does transparency do to spreads?

A

Transparency reduces bid-ask spreads, which benefits investors

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108
Q

What does the GEMMA do?

A

The Gilt-Edged Market Makers’ Association (GEMMA) provides data at the end of each day to the DMO relating to gilt prices.

NOT the gilt regulator

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109
Q

What must AIM companies disclose?

A

Scheduled interim and full-year results

Price-sensitive information

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110
Q

Where do training and competency rules appear?

A

High-level Standards.

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111
Q

Where do Conduct of business rules, Code of market conduct, Client assets rules appear?

A

Business Standards block of the Financial Conduct Authority’s handbook

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112
Q

What does General Prohibition do?

A

The legal requirement that firms must be properly authorised before being permitted to carry out regulated activities

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113
Q

What new controls did MIFID II introduce to derivatives?

A

Establishing position limits on commodity derivatives

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114
Q

Under the Senior Managers’ Regime, where will you find which directors are responsible for specific areas of the organisation as a whole?

A

The responsibility map

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115
Q

How often will a firm need to assess as fit and proper those staff who pose the risk of significant harm to the firm or its customers

A

Annually

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116
Q

Under MiFID II, when might a local authority be considered a professional client?

A

Only when acting for a local government pension scheme (opt up - usually retail clients)

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117
Q

What are responsibilities of distributor under product governance rules?

A

Determine the actual target market for the product

Have product governance controls in place to ensure compatible with the needs, characteristics and objectives of an identified target market and its distribution strategy is consistent with the identified target market

Ensure it can obtain all required information from the product manufacturers

Comply with the normal MiFID rules on disclosure, suitability and appropriateness assessment, inducements and conflicts of interest rules.

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118
Q

Does an aggregation policy appear on a KID?

A

No

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119
Q

What appears on a KID?

A

Complaints procedures
What happens if manufacturer can’t pay
Risk/reward profile, inc summary

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120
Q

Can FCA take original documents?

A

No - only copies.

Can enter premises with reasonable notice, interview ALL staff, demand printouts

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121
Q

What does a market order include?

A

Buy or sell
Volume

Will execute at current best price - immediately. So no price or expiry specified.

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122
Q

Who hears appeals re FCA?

A

Upper Tribunal

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123
Q

When does an EU directive apply?

A

When the UK legislates

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124
Q

When must you notify company of holding of more than 3%

A

Two business days

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125
Q

What is the non-MIFID threshold for professional clients?

A

Companies with share capital or net assets of at least £5 million, are classified as professional clients for non-MiFID business.

This is also true for partnerships with net assets of at least £5 million.

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126
Q

What are regulated investment activities?

A

Dealing,
Arranging deals,
Managing investments,
Advising on investments,
Safeguarding and Administering investments, and
Establishing, Operating or Winding up a CIS [including unit trusts].

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127
Q

Is a decision not to deal on the basis of inside information an offence?

A

No

The criminal offence of insider dealing was created by the Criminal Justice Act 1993, not the Fraud Act 2006.

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128
Q

Are inducements covered by 11 Principles of Business?

A

no - COBS

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129
Q

Is an occasional report (confirmation) required for a discretionary managed portfolio?

A

No

Yes for selling ordinary shares, buying investment trust shares, writing options

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130
Q

How is market abuse judged?

A

Effect

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131
Q

Do all firms need a MLRO

A

Yes, regardless of size

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132
Q

Who handles Eurobond settlement?

A

Euroclear, Clearstream

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133
Q

If a shortfall in reconciliation, what must the firm do?

A

Make it up themselves - no need to report to FCA

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134
Q

What law established FCA rule on fair, clear and not misleading statements?

A

Financial Services Act 2012

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135
Q

Are commodities investments?

A

No - tangible assets. NOT SPECIFIED

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136
Q

What is minimum market cap for listing on LSE?

A

£700,000

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137
Q

Are general insurance companies taxed on their profits?

A

Yes

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138
Q

Are pension funds subject to tax

A

No

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139
Q

Are dividends paid pre or post tax?

A

Dividends paid from post-tax profits

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140
Q

Do execution policies need third party review?

A

no - but need customer consent

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141
Q

What are conditions for being non-resident of UK?

A

They visit the UK for fewer than 16 days during the tax year; or
They are non-UK resident in all of the previous three tax years and visit the UK for fewer than 46 days during the tax year; or
They work full-time overseas and visit the UK for fewer than 91 days during the tax year.

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142
Q

What are conditions for being resident?

A

They are present in the UK for 183 days or more during the tax year; or

They have their only home in the UK, This must be for a period of at least 91 days and they must live there for at least 30 days; or

They carry out full-time work in the UK.

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143
Q

Do unit trusts, OEICs, ETFs pay CGT?

A

No - but investors do on realised gains

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144
Q

What is problem with order-driven markets?

A

No guarantee of execution

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145
Q

First priority before recommending any investment products?

A

Determine the financial situation of the investor

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146
Q

What is scope of fit and proper test?

A

Any company, any jurisdiction

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147
Q

What are responsibilities when communicating a promo from overseas?

A

Must explain:

That the rules for the protection of investors will not apply

The extent to which the UK compensation scheme arrangements will be available (and if they will not, that fact), and

If the communicator wishes to do so, the details of any overseas compensation and/or the deposit protection scheme applicable.

The firm must not communicate and/or approve the promotion unless it has no doubt that the overseas firm will deal with its UK clients honestly and reliably.

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148
Q

Does corporate governance cover reporting?

A

No - it ensure shared management responsibilities and accountability

Reporting is an ongoing obligation, but NOT GOVERNANCE

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149
Q

Benefit of LSE CCP?

A

Settlement netting - ie multiple fills on order book will settle as one transaction

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150
Q

Who sets rules for LSE member firms?

A

LSE (not FCA)

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151
Q

Are gifts between spouses exempt from IHT

A

Yes

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152
Q

Are transfers to discretionary trusts exempt from IHT

A

NO - chargeable lifetime transfer

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153
Q

Does residential allowance apply to IHT if you have no children?

A

No! (ordinarily it would be 175k per spouse)

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154
Q

What is CGT rate for higher rate taxpayers?

A

20%

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155
Q

Who approves prospectus?

A

UKLA - (not LSE) - needed for retail clients.

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156
Q

Who do you apply to for MIFID passport?

A

FCA

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157
Q

What must a promotion be?

A

Fair, clear and not misleading

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158
Q

Is annoyance at being on a mailing list grounds for FOS?

A

No

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159
Q

Which trades are covered by criminal justice act?

A

Exchange and professional intermediaries -

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160
Q

What are investment brokers?

A

Eligible counterparties

As an authorised firm an investment broker would be classified as a per se professional client and as an eligible counterparty for eligible counterparty business.

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161
Q

Where are the COBS rules?

A

Block 3 of the FCA Handbook.

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162
Q

Does advice on tangible assets need authorisation?

A

No - cars, commodities

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163
Q

Does advice given to intermediary require authorisation?

A

No

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164
Q

Does advice to opt out of an occupational pension scheme require authorisation?

A

Yes

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165
Q

What is CGT on property?

A

18% for basic, 28% for higher/additional - NOT ON PRIMARY HOME

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166
Q

Are warrants subject to insider dealing reg?

A

Yes

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167
Q

Are currency derivatives subject to insider dealing reg?

A

No - OTC markets not covered

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168
Q

Are unit trusts subject to insider dealing regs?

A

No - because there is no secondary market

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169
Q

How long after making a complaint does the complainant have to wait to refer the matter to the Financial Ombudsman Service?

A

Eight weeks

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170
Q

Is this regulated: trustee of an authorised unit trust

A

Yes

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171
Q

Is this regulated: third party custodian

A

Yes

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172
Q

What is income tax relief on an EIS?

A

30%

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173
Q

What are requirements for standard listing?

A

25% free float, minimum £700,000 market ca - no need for working capital, three year trading record, sponsor

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174
Q

How are interest bearing securities taxed?

A

As interest - 20/40/45, allowance 1000/500/0

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175
Q

What is ‘starting rate’ of income tax?

A

i think it’s under basic rate?

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176
Q

How does voting work at shareholder meetings?

A

On a show of hands, each member present at the meeting who is entitled to vote has one vote.

On a poll vote, due regard is given to those who hold a large number of shares

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177
Q

Is the European Systemic Risk Board a supervisory authority?

A

No - ESMA, EBA, European Insurance and Occupational Pensions Authority are

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178
Q

What do you pay if you buy a commercial property?

A

SDLT - not CGT

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179
Q

What is the SDLT on properties up to £125,000?

A

Zero (+3% if second home)

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180
Q

What is the SDLT on properties 125k - 250k??

A

2% (+3% if second home)

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181
Q

What is the SDLT on properties 250k - 925k?

A

5% (+3% if second home)

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182
Q

What is the SDLT on properties 925k - 1.5m?

A

10% (+3% if second home)

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183
Q

What is the SDLT on properties 1.5m plus?

A

12% (+3% if second home)

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184
Q

What is the minimum for stamp duty?

A

£1000

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185
Q

How long after a trade for CGT to kick in?

A

30 days

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186
Q

Are depositary receipts standard or premium listings?

A

Standard

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187
Q

What is power of ESMA?

A

Investigate non-compliance with EU law

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188
Q

What are the three pillars of FCA supervision?

A

Pillar 1: Firm systematic framework – preventative in nature
Pillar 2: Event-driven work – reactive work
Pillar 3: Issues and products – campaign focused on specific sectors or issues within a sector, e.g. market abuse in asset management

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189
Q

Is governance and culture FCA pillar of supervision?

A

No

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190
Q

How does MIFID II increase consumer protection?

A

Enhanced product disclosures
Enhanced product governance
Remuneration of intermediaries

191
Q

Is a misleading impression a market conduct issue?

A

Yes

192
Q

Who can become an elective counterparty?

A

Per se professional client, not SPV

193
Q

Who can’t be elective counterparty?

A

Individuals, elective professionals

194
Q

Who collects stamp duty on equity trades?

A

CREST

195
Q

What are retail investment products?

A

Life policies, regulated unit trusts, investment trust savings schemes and personal pension plans

196
Q

What does the Scheme Specific Funding Requirement, introduced by the Pensions Act 2004, apply to?

A

Certain occupational defined benefit schemes

197
Q

What does churning violate?

A

Customers’ interests

198
Q

Who regulates the Eurobond market?

A

ICMA

199
Q

Do LSE market makers need to offer continuous bid and offer prices?

A

yes - and indicate max number of shares they will trade

200
Q

Is a prospectus required for a takeover?

A

No - or up to 150 people

201
Q

Apart from the Competition and Markets Authority, who else decides whether or not a merger should go ahead?

A

Secretary of state - takeover panel only monitors

202
Q

What is the most suitable risk warning stated on an advert for an income and growth unit trust?

A

The value of your units may go down as well as up

203
Q

What should the risk warning be for contingent liability transactions, e.g. futures?

A

You might lose more than you originally invested

204
Q

How often should directors evaluate own performance?

A

Annually

205
Q

Which investment services are exempt from the client agreement rules?

A

Transactions with authorised persons
Acting as the trustee of a unit trust scheme
The supply of published recommendations

206
Q

What is the dual capacity of LSE member firms?

A

They may choose to act as an agency broker for some deals and as a principal for others

207
Q

Are CFDs regulated?

A

Yes, but if for risk management

208
Q

Are physical investments regulated?

A

No

209
Q

Where does conduct of business rules appear?

A

Block 3 of the FCA Handbook

210
Q

What are the FCA high level standards (Block 1)?

A

The Statement of Principles for businesses
The Conduct Rules for certified persons
The fit and proper criteria for certified persons

211
Q

Are authorised CIS professional clients?

A

yes, always

212
Q

What is clearing?

A

Recording and matching trades and maintaining positions

213
Q

What is settlement?

A

Ensure legal obligations resulting from a trade are met

214
Q

Is it insider dealing if you tell someone not to trade?

A

Not really - if you don’t expect them to trade, or normal course of business

215
Q

What tax is deducted by foreign countries?

A

Withholding tax

Withholding tax is, literally, the tax withheld by the country in which the income is earned. Despite this, tax will be due in the country of residence for the investor too. Often there is a tax treaty between nations allowing investors to claim a relief on the lower of the two tax liabilities. Clearly, if withholding tax is greater than the tax in the country of residence, there will be no refund.

216
Q

How do you handle conflicts of interest?

A

manage them - only disclose if you can’t manage

217
Q

Low risk for a maturing investor?

A

With profits bonds offers a guaranteed capital return plus a share in any profits.

It also has a life assured element, should the investor die during the term of the bond thus offering an element of protection for his family.

218
Q

What does an unregulated scheme deliver?

A

Unregulated funds tend to be more aggressive in the market causing more market activity, higher fees but a potentially higher return (or bigger loss!).

Regulated funds have more restrictions placed upon them including how much they can charge.

This tends to lower overall cost of investment, but also potentially give lower returns.

219
Q

What must you do after reporting unethical activity and if there is no action?

A

Dissociate yourself

220
Q

Is a fact find a regulatory requirement?

A

The nature and content of the Fact Find are not governed by regulations

221
Q

How do you deliver best execution?

A

Adhere to order execution policy

222
Q

Can capital losses on an EIS be used to offset against income tax?

A

No

223
Q

What are tax benefits of EIS?

A

Income tax relief of up to 30% on shares held for over three years
Exempt from IHT if held for over two years
Exempt for CGT if held for over three years

224
Q

What do GIPS apply to?

A

Global Investment Performance Standards (GIPS) apply to investment management firms. They are intended to serve existing and prospective clients of investment firms.

225
Q

How long are records required to be kept?

A

Five years

226
Q

Is stamp duty paid on gilts or units in a unit trust?

A

No

227
Q

Investment bond - what triggers a chargeable event?

A

Cumulative withdrawals of 5% of the original capital do not trigger chargeable events.
£80,000 x 5% = £4,000 per year. After four years the cumulative total of potential withdrawals is £4,000 x four years = £16,000.
Actual withdrawals have been £2k + £3k + £4k = £9k. This means Emily has the potential to withdraw £16,000 - £9,000 = £7k without triggering a chargeable event.

228
Q

Do you pay SDRT on Eurobonds?

A

No

229
Q

Do market makers/intermediaries pay SDRT?

A

No

230
Q

What do you do if you can’t disclose exact costs?

A

Disclose the basis on which the fee will be calculated

231
Q

How much SDLT on non-residential leases of less than £150,000?

A

Zero

232
Q

What are benefits of fee-based advice?

A

With fee-based advice, it is clear what is being paid for the advice and how much is being invested
As the client is paying a fee, it will avoid product and provider bias in the advisor

Commission not in exit fees, but it can be hidden.
No guarantee paid advice will be better!

233
Q

What is penalty for insider dealing?

A

up to 14 years in prison, unlimited fine

234
Q

What is penalty for front-running, ie. dealing on research produced specifically for clients?

A

unlimited fine

235
Q

Who can be prosecuted for financial crime?

A

anyone

236
Q

What makes a fact find inadequate?

A

Not appreciating change in circumstances

237
Q

Who needs a suitability report?

A

Retail clients, after a test

238
Q

What tax is liable on an investment bond?

A

Income tax

239
Q

What happens if someone dies with a will - testate?

A

Executors get grant of probate

240
Q

What happens if some dies intestate - ie no will?

A

Act according to the national intestacy rules

241
Q

After you die, what is threshold of debt to qualify for a bankruptcy order?

A

£5000

242
Q

Administering will - do you need to be authorised?

A

Firm needs need to be authorised for the advice, but not for the custody

243
Q

Who creates a trust?

A

The settlor creates the trust and puts property in at the start.

244
Q

How are the values of exchange traded futures calculated for accounting purposes?

A

According to the market value of the future

245
Q

Do investment powers of trustees apply to authorised unit trusts, occupational pensions schemes or life insurance companies?

A

No - Trustee Act 2000

246
Q

What does an ‘at best’ order include?

A

buy or sell, volume of shares - executes immediately, no limit price

247
Q

What is characteristic of a a fund able to passport under the Undertakings for Collective Investments in Transferable Securities Directive?

A

Open-ended

248
Q

What is only bond where SDRT is payable?

A

Convertible

249
Q

What is VAT on children’s clothes?

A

0%

250
Q

What is VAT on energy?

A

5%

251
Q

Spouse transfer - gap for CGT?

A

0 days, not 30 as with normal buys and sell

252
Q

What are goals of FSAP - financial services action plan?

A
  • To create a single EU wholesale market
  • To achieve open and secure retail markets
  • To create state-of-the-art prudential rules and structures of supervision
253
Q

How is a flexible portfolio firm supervised?

A

Thematic work - smaller firms

254
Q

What happens with a contract if the client has been misled?

A

Two options:
Enforce the contract: rely on the agreement and sue for damages if any loss is suffered
Avoid the contract: the investor has the right to their money back

255
Q

How does MIFID II cover physically delivered commodities?

A

Traded on Exchange, MTF and OTF contracts only

256
Q

How often must senior management disclose details of an authorised firms remuneration policy?

A

Annually

257
Q

When are guaranteed bonuses ok?

A

Exceptional circumstances only
New hires only
One year only

258
Q

What shows which director has taken on which responsibility?

A

Statement of responsibility.

Enhances firms must have responsibilty map

259
Q

RDR - do accredited bodies provide gap fill training?

A

No, but they do ensure ethics and sample checks of CPD

260
Q

Is image advertising exempt from financial promo rules?

A

yes

261
Q

What are shared responsibilties of manufacturer and distributor under product governance rules?

A

Effective control over product governance processes

Compliance function oversees the governance arrangements

Relevant staff understand the products

262
Q

Who is a KIID for?

A

KIIDs must be clear, fair and not misleading, and should only include information that a RETAIL INVESTOR needs in order to make informed investment decisions

263
Q

What does the CRS - common reporting standard - set out?

A

The financial account information to be exchanged
• The financial institutions required to report under the Standard
• The different types of accounts and taxpayers covered
• Common due diligence procedures to be followed by financial institutions

NOT national tax authorities

264
Q

What is the required notice for an FCA enforcement visit?

A

None

265
Q

Can FCA/PRA remove documents?

A

No - only copies

266
Q

Is it market abuse if info is disclosed through RIS?

A

No

267
Q

Are OEIC shares included in estates re IHT?

A

Yes

268
Q

How often must a listed company have a general meeting?

A

Annually

269
Q

What kind of client is a UK listed company?

A

Professional client

Must be at least two of:

  • Balance sheet min €12.5m
  • Net turnover min €25m
  • Average number of employees 250 min
270
Q

Are there automatic enforcement actions by FCA?

A

No

271
Q

What are factors re fitness?

A

Suitable qualifications
Past employment record with other firms in the financial services industry
Any criminal record
Their position in the firm

272
Q

Does the FCA authorise the Bank of England?

A

No

273
Q

How must a prospectus be made available for official list of LSE?

A

Have a prospectus approved by the UK Listing Authority
Publish its prospectus
Advertise the prospectus in at least one national newspaper

274
Q

How often must complaints be reported to FCA?

A

Twice yearly

Must report complaints closed in 4 weeks, 8 weeks, plus more than 8 weeks and outstanding

275
Q

What are defences for communicating a financial promotion if not authorised or approved by authorised person?

A

Reasonably believed that the communication was prepared by an authorised person
Reasonably believed that the communication was approved by an authorised person
Exercised due diligence

276
Q

What must pre-trade information be in?

A

Durable information

277
Q

What is difference between money laundering and terror funding?

A

Terror funding can come from legit sources

278
Q

What is the principal-to-principal guarantee?

A

The guarantee operates between the clearing member and the clearing house. The clearing house guarantees trades between itself and the clearing member only.

279
Q

What do you do if client wants lower level of protection?

A

First assess the client and then, if necessary, warn them of the additional risks

280
Q

What is priority in recommending a life insurance policy?

A

Affordiability for the investor

281
Q

Does tax bracket effect attitude to risk?

A

No - income/capital are the factors

282
Q

Can you unilaterally break a trading restriction if you think it is unjust?

A

No

283
Q

Does UK corporate governance include provisions on environmental impact?

A

No

284
Q

What happens if you terminate a life policy early?

A

Terminating a life policy early will lead to a surrender value below the prices the policy is linked to.

285
Q

How long must responsibility records be kept?

A

Six year

286
Q

Do training and competency requirements apply to arranging?

A

No

The rules apply for advising, dealing, managing and overseeing on a daily basis.

287
Q

What is a benefit of the LSE CCP service?

A

Settlement netting

Multiple fills on an order book will settle as one transaction with the central counterparty (CCP).

288
Q

Do FCA listing rules apply to AIM companies?

A

No

289
Q

What is the ethical priority?

A

Putting customer first

290
Q

How do you pass assets to spouse but make sure a third party gets them on the spouse’s death?

A

Interest in possession trust

291
Q

Does FOS cover accepting deposits in foreign currency savings and current accounts?

A

No - specified investments do not cover foreign currency

292
Q

How is FX settled?

A

PvP

293
Q

Can companies commit offences under Criminal Justice Act 1993?

A

No

294
Q

Does Criminal Justice Act 1993 cover commodity derivatives?

A

No

295
Q

What is a limit order?

A

A limit order is to buy or sell a volume at a price or better.

296
Q

What NIC do self-employed people pay?

A

2 and 4

297
Q

What NIC do employees pay?

A

1A and 1B

298
Q

What NIC do employers pay?

A

1

299
Q

What are top up NICs?

A

3

300
Q

What is the the SDLT on first homes up to 125k?

A

0%

301
Q

What is the the SDLT on first homes between 12k and 250k?

A

2%

302
Q

What is the SDLT on first homes between 250k and 925k?

A

5%

303
Q

What is the SDLT on first homes between 925k and 1.5m?

A

10%

304
Q

What is the SDLT on first homes above 1.5m?

A

12%

305
Q

How much extra SDLT is there on second homes?

A

3%

306
Q

What is the bed and spouse practice?

A

Use CGT allowance on sales

307
Q

What characterises a VCT?

A

The maximum investment is £200,000 with a 30% income tax relief (£60,000). The scheme invests in smaller, newer companies that are more likely to be higher risk.

308
Q

Who allocates a debtor’s assets following bankruptcy?

A

The Receiver

309
Q

How must pension fund trustees invest?

A

According to statement of investment principles - NOT Trustee Act 2000

310
Q

A beneficiary is subject to life in interest. On their death the second beneficiary is known as the:-

A

Remainderman

311
Q

How is it described if If the beneficiaries have the legal right to all the income of the property, but not to the property itself?

A

Interest in possession

312
Q

What do life insurance companies mainly invest in?

A

Equities

313
Q

Can you invest for people with little experience?

A

yes - if you are clear about experience and basis of fund

314
Q

How long must pension transfer record be kept?

A

Indefinitely

Also opt-outs and free standing additional voluntary contributions (FSAVC’s)

315
Q

Are funeral plans subject to COBS?

A

No, not designated business

316
Q

Are corporate bonds or Eurobonds subject to tax at source?

A

No, but coupons are

317
Q

What is settlement for equity corporate bonds and Eurobonds?

A

T+2

318
Q

What is name for a proxy instructed to vote according to specific set of instructions?

A

Special (two-way) proxy

319
Q

What does the Universal Trading Platform do on the NYSE?

A

It is an order processing system that delivers orders to the trading post

320
Q

Are shares in an investment trust a retail investment product or a packaged product?

A

Retail investment product

Other investments that are considered retail investment products and not packaged products include unregulated collective investment schemes and structured products

But investment trust savings schemes ARE packaged products

321
Q

Part 4A permission - what is sole responsibility of FCA?

A

Appropriate non-financial resources

322
Q

When are Eurobond sales confirmed and settled?

A

Confirmed T+1; settled T+2

323
Q

How is the PPF funded?

A

The PPF is funded by levies on eligible defined benefit pension schemes

324
Q

What are notification periods for disclosures from PDMRs?

A

Most notify listed company within four days, and the company must notify the market through PIP not more than one business day after

325
Q

What needs to be published for a market to be pre-trade transparent?

A

Real-time data about quotes and orders.

326
Q

What is market abuse an offence under?

A

EU regulation

327
Q

Are futures used for risk management regulated?

A

No

328
Q

Where are the high level competence requirements laid out?

A

The Senior Management Arrangements, Systems and Controls sets out the requirements for ALL firms.

329
Q

Do training and competence sourcebook rules apply to all firms?

A

No, only retail firms

330
Q

When retired, what is usually the priority for investments?

A

Generating income

331
Q

When can a UK firm communicate an unsolicited real time financial promotion to a client in another EEA country?

A

When it complies with the UK COBS

332
Q

What is the most important feature of an interest in possession trust?

A

The beneficiary of the income differs from the beneficiary of the assets

333
Q

Can bribery be a corporate offence?

A

Yes

334
Q

Do derivatives always require risk warnings?

A

Yes

335
Q

What can you do if client cannot provide enough info for you to judge appropriateness?

A

If the client still wishes to do business with the firm, the firm must warn the client that it is unable to judge appropriateness

336
Q

What is CGT on NON-MAIN HOME?

A

18% basic, 28% higher/additional

337
Q

What sets apart SETSqx?

A

SETSQX is for less liquid securities - hybrid system

It provides both quote and order driven matching and has four auctions per day.

338
Q

What is threshold for requiring a prospectus?

A

Fewer than 150 persons PER EEA STATE

339
Q

What does an AIM listing need?

A

NOMAD - nominated advisor

340
Q

Maximum lifetime transfer without IHT consequences a year?

A

£3000, £5000 for wedding

341
Q

What is max charge for accessing credit reference agency?

A

£2

342
Q

How is a fixed portfolio firm supervised?

A

On-going by dedicated FCA supervisor

343
Q

Where is guidance on process for authorisation for regulated activities?

A

FCA Perimeter Guidance Manual (PERG).

344
Q

Does the FCA recognise the NYSE?

A

No!

345
Q

Does the FCA recognised the LME?

A

Yes

346
Q

What is Aquis Exchange?

A

New name for NEX Exchange

347
Q

How is variable remuneration handled?

A

Adjusted according to risk

348
Q

What is the Senior Manager’s Regime?

A

A statutory duty of responsibility

349
Q

Do ancillary staff need to follow code of conduct?

A

No

350
Q

How does FCA see social media?

A

Financial communication, covered wherever it appears

ie not just firm’s account

351
Q

Is car insurance a packaged retail investment and insurance product (PRIIP)?

A

No - no general insurance is

352
Q

When is research not an inducement?

A

When it is directly paid for

353
Q

Can research budget be linked to volume/value of transactions?

A

NO

354
Q

How many years interest in shares requires disclosure?

A

Three years

355
Q

What does CREST provide?

A

Delivery versus payment - ie settlement

356
Q

When do equities and corporate bonds settle?

A

T+2

357
Q

Who performs the role of counterparty to the buyer of an exchange-traded futures contract?

A

Clearing house

358
Q

What do you need to confirm you want opt up to elective professional client once you have met the conditions?

A

Two way written warning, demo of understanding

359
Q

What is threshold for disclosing director interest in shares?

A

3%

360
Q

When must interest be paid on client money accounts?

A

Always - unless written arrangement

361
Q

Who do you appeal to re Part 4A permission?

A

Tax and Chancery Chamber of the Upper Tribunal

362
Q

What is exempt from financial promotions order?

A

Solicited real time communications for non-derivative products with associations of high net worth individuals Unsolicited non-real time communications to an authorised firm
Non-real time promotions to high net worth individuals

Not exempt: Non-real time communications with a company categorised as a retail client

363
Q

is it OK to allow aggregation to work to client disadvantage?

A

NO

364
Q

What balance sheet total must a company have in order to be categorised as a professional client for MiFID business?

A

€20 million

365
Q

Do inducement payments count for COBS when client is paying the firm?

A

No

366
Q

Can you seek to make future appointments unless the client requests it over the phone?

A

Yes - but must give opportunity to cancel

367
Q

Who is responsible to unit holders of a trust re investment objectives?

A

Trustee

368
Q

Whose trades does a clearing house guarantee?

A

All member firms - but not their customers

369
Q

What is best for young taxpayer who wants no risk?

A

S&I Capital bonds

370
Q

Once a clearing house has performed novation, what is the relationship between the parties involved?

A

The buyer and the seller each become contractually bound to the clearing house

Novation is where the clearing house acts as central counterparty to the trade, dealing as principal to both sides.

371
Q

Do you need to disclose compensation from outside sources

A

All compensation from outside sources should be disclosed whether monetary or non-monetary.

372
Q

What is a benefit of ITC market?

A

Confidentiality

373
Q

If you cannot resolve a complaint in the allotted time, do you need to give client a summary of the investigations the firm has made into the complaint?

A

No

374
Q

Where do corporate bonds mostly trade?

A

OTC

375
Q

What happens re tax if you are a UK resident but are not domiciled here?

A

You are liable for UK tax on your UK income and gains.

Overseas income and gains will be taxed on a remittance basis if you elect for this treatment.

376
Q

How do conflict of interest policies work?

A

The rules protect ALL types of client.

Where a firm is part of a group, the policy should take account any potential conflicts arising from that group

A description of the policy should be provided to retail clients and potential retail clients.

The policy itself does not require firms to maintain effective and administrative arrangements but shows how they will identify and manage conflicts.

377
Q

How much can be withdrawn from an investment bond on a cumulative annual basis?

A

5% with no tax - CUMULATIVE

378
Q

What does a preference towards cash suggest?

A

Risk-averse client

379
Q

Can you receive a trust before 18?

A

No

The named beneficiary has an ‘absolute entitlement’ to the assets that are placed in trust, but they will be held in the name of the trustee until the child reaches the age of 18.

380
Q

What is difference between qualifying and non-qualifying insurance policies?

A

Gains on qualifying policies do not incur any extra taxes.

Gains on non-qualifying policies incur extra income tax, not capital gains tax.

381
Q

Do you pay CGT on unit trusts?

A

yes - 10% basic, 20% higher/additional

£12,300 allowance

382
Q

What is it about Eurobonds and money laundering?

A

Money laundering is much easier through the use of bearer instruments

383
Q

Do you need to tell FCA if MLRO reports to NCA?

A

No

384
Q

Is being a a market maker acting in the normal course of business a defence against insider dealing?

A

Yes

385
Q

Can you be anonymous with an IDB?

A

Yes - An interdealer broker allows a market maker to anonymously take on or off-load a position in a security.

386
Q

How is the liquidity of AIM stock?

A

The liquidity of AIM stock is generally lower as the companies tend to be smaller and younger.

387
Q

What is most vulnerable to inflation?

A

Conventional gilts

More vulnerable than a bank account - bank account interest is calculated on the BOE rate which can be changed in response to inflation and the rate benefits from compounding

388
Q

What is insolvency?

A

A financial state where a company can no longer pay on time

State of being - bankrupty is a matter of law

You can be insolvency while not being bankrupt

389
Q

How often does fund manager supply a short report and long report to unit holders?

A

Half yearly and annually

390
Q

Does a payment system with a central counterparty get regulated?

A

No

Payment systems that are embedded in securities trading systems, clearing houses or central counterparties are excluded from PSR regulation

391
Q

Is SEAQ a quote-based system?

A

Yes

392
Q

What kind of order/quote systems are SETS and UTP?

A

Order-based

393
Q

What does round trip transaction costs mean?

A

Buying and selling - NB SDRT is only on BUYING

Add to costs when buying, deduct from profits when selling

Don’t forget takeover panel levy is over £10,000

394
Q

What is key benefit of dark pools?

A

Sell side traders, as frequent traders, have an informational advantage

395
Q

Who can call an AGM?

A

Only the board

396
Q

Which LSE system is used for less liquid stocks?

A

SETSqx

397
Q

Is a unit in a collective investment scheme a packaged product?

A

Yes

398
Q

Who does MLRO report to?

A

NCA

399
Q

How much will code staff generally have bonus deferred?

A

40% over three years

400
Q

How do Eurobonds usually trade?

A

OTC

401
Q

Under the Takeover Code an offer must remain open for how many days after posting?

A

21 days

402
Q

When doing IHT on a house, do you include both spouse allowances up to £500k each?

A

yes

403
Q

What is a systematic internaliser?

A

An investment firm deals on its own account by executing customer orders outside a regulated market or a multilateral trading facility.

404
Q

Under the remuneration code, for how long will a proportion of the bonus of code staff typically be deferred?

A

Four years

405
Q

Is an execution-only future likely to require appropriateness to be assessed?

A

Yes

406
Q

Who doesn’t pay NIC?

A

People above state pension age

407
Q

Is gilt interest liable to income tax?

A

yes

408
Q

When are tax bands determined?

A

AFTER deducting £12,500 allowance

409
Q

Why do bonds not get CGT?

A

The capital is unchanged?

410
Q

Do NS&I savings certificates pay income tax?

A

No

411
Q

Do Eurobonds pay income tax?

A

Yes

412
Q

Do convertible bonds pay income tax?

A

Yes

413
Q

Do NS&I direct saver accounts pay income tax?

A

Yes

414
Q

Can maintenance costs be offset against CGT?

A

No

415
Q

Can acquiring, disposal and improving costs be offset against CGT?

A

Yes

416
Q

What are trust rates?

A

first £1000 is at standard rate, above that 45% for property/interest, 38.1% for dividends

417
Q

What are the savings allowances for interest?

A

basic £1000, higher £500, additional zero

418
Q

When are self-assessment payments due?

A

31 January in tax year, July the next year

419
Q

Can REITs be held in an ISA?

A

Yes

420
Q

Can a REIT elect from property income to be exempt from income tax?

A

Yes

421
Q

Is a REIT a listed company?

A

Yes

422
Q

Are disposals of REIT shares subject to income tax?

A

Yes

423
Q

Are gains in a currency trading account liable for CGT?

A

Yes

424
Q

Can CGT exempt allowance be transferred to a partner

A

No

425
Q

What happens with a gift with reservation?

A

Person gifts property and continues to benefit for free, or the person who gets it has conditions attached

426
Q

Do cars get CGT?

A

No

427
Q

Does fine wine get CGT?

A

Yes

428
Q

How many years of audited accounts to UKLA for a premium listing?

A

Three

429
Q

How long after the end of the half year must interim results be published?

A

Two months

430
Q

Do disclosure requirements apply to money laundering?

A

No

431
Q

Do shareholders need to be kept abreast of price sensitive info?

A

Yes - in reports

432
Q

Material interest - 2% - by when should the COMPANY be notified?

A

T+2

433
Q

What is a quorum for shareholder meetings?

A

2 persons

434
Q

UKLA reports to who?

A

FCA - not LSE

435
Q

Is there a minimum value for AIM?

A

No

436
Q

What is minimum value for LSE?

A

£700,000

437
Q

On AIM, what happens if you lose your NOMAD?

A

Suspended if not a new one within 30 days

438
Q

What is free float for full listed company?

A

25%

439
Q

Who regulates AIM?

A

LSE

440
Q

When must changes in ownersip be disclosed?

A

Cross 3%, and cross a full % point above 3% in either direction

ie. 5.9 -6.1

441
Q

What kind of proxy is assigned to vote a specific pre-determined way?

A

Two-way proxy

442
Q

When do ex-dividend dates fall?

A

Thursdays

443
Q

What are requirements for high-growth stock?

A

20% growth over three years, no need for previous AIM membership, can be incorporated in any EEA state

444
Q

What is takeover panel levy level?

A

£1 after £10,000

445
Q

What do wide spreads mean?

A

Less liquidity

446
Q

How is SDRT rounded?

A

CREST - nearest penny

paper-based - nearest £5 unit

447
Q

Is SETS order or quote driven?

A

Order

No need for market maker for liquidity

LSE and most liquid AIM shares

448
Q

Who is a a KIID for?

A

Retail investors

449
Q

What is SEAQ?

A

Quote driven

Minimum volume quote - 1 EMS (exhange market size) - ie prices change if you want to trade more than volume quote

Needs market makers

450
Q

What is SESTqx?

A

Hybrid

most AIM sares

451
Q

What is a systematic internaliser?

A

Investment firms match orders with clients

Creates direct liquidity without need for external markets

452
Q

Can an operator of platform take positions on MTF?

A

No - but they are allowed on OTF

453
Q

How are Eurobonds settled?

A

Reported T+1, settled T+2

Euroclear and clearstream

454
Q

What are thresholds to per se pro clients?

A

MIFID 2 of:

20m euro balance sheet
net turnover 40m euro
own funds 2m euro

Non-MIFID - 12.5m balance sheet, 25m turnover, 250 employees

OR gov or supranational body

455
Q

What are quantitative criteria for elective professional client?

A

10 transactions a quarter for four quarters
500,000 euro portfolio
experience

456
Q

What is an eligible counterparty?

A

dealing on accounts
execution for clients
transmission of orders

ie lots of institutions inc UCITs

457
Q

Is FX excluded from FXMA 2000?

A

Yes

458
Q

Are employee share schemes excluded from FSMA 2000?

A

Yes

459
Q

Are physical property and FX excluded investments under FSMA 2000?

A

Yes

460
Q

Are premium bonds and national savings certificates excluded investments under FSMA 2000?

A

Yes

461
Q

Is custody a core activity under MIFID II?

A

No

462
Q

Is FX a core activity under MIFID II?

A

No

463
Q

What does remittance basis mean?

A

Overseas income is only taxed as it comes into the UK

£2000 or more - has to choose if remittance or arising

464
Q

What is the remittance basis charge?

A

£30,000

or £60,000 if domiciled in UK for 12 out of last 14 years

465
Q

What is the tax status of UK resident but non-dom?

A

UK income taxed on arising

Overseas income in either arising or remittance basis

466
Q

What is the tax status of overseas resident?

A

UK income on arising basis

Overseas income not taxed

467
Q

If you are taxed on remittance basis, do you lose your allowances for income and CGT?

A

Yes

468
Q

What are the thresholds for automatic overseas resident?

A

One of:

Fewer than 16 days a year in UK

Not been resident in UK for past three years and in UK for 46 days or fewer this year

Work full time overseas

469
Q

Are loss adjusters excluded investments?

A

No

but general insurance is

470
Q

What are thresholds for automatic UK resident?

A

One of:

In UK 183 days a year

Main home in the UK

Work full time in UK

471
Q

What is the allowance for trust income?

A

£1000 per settlor at standard rate (20), income above at additional rate (45, 38.1)

472
Q

What is SDLT for commercial property up to £150,000?

A

Zero

473
Q

What is SDLT for commercial property between 150k and 250k?

A

2%

474
Q

What is SDLT for commercial property above £500k?

A

5%

Investment Environment (1 decks)

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