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R01 > R01 > Flashcards

R01 Flashcards

1
Q

4 key components of uk financial services structure:

A

1) financial infrastructure (payment, clearing & trading systems)
2) financial markets (on-exchange & over the counter)
3) financial firms (banks, pension funds, insurance firms)
4) financial sector authorities (BoE, FCA, HM Treasury & PRA)

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2
Q

Who is the regulator of the UKs retail payment systems industry?

A

Payment Systems Regulator (PSR)

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3
Q

Who is the regulator of investment exchange systems?

A

FCA

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4
Q

Who is the regulator of clearing houses (used for settlement of securities and derivatives markets)?

A

Bank of England (BoE)

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5
Q

Who is the regulator for on-exchange markets (investment trading systems)?

A

FCA

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6
Q

What are the Key legal instruments governing regulation & conduct of business of the financial services industry?

A

1) financial services and markets act 2000 (FSMA)
2) financial services act 2012
3) BoE and Financial services act 2016

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7
Q

Define the PRAs role

A

Part of BoE, responsible for authorisation and prudential regulation of certain larger firms (such as banks and insurers)

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8
Q

What is the Prudential Regulation Committee (PRC)

A

A committee of the BoE, operating alongside the Financial policy committee and the monetary policy committee

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9
Q

What is the Financial Policy Committee (FPC)?

A

A committee set up within BoE to monitor the uk economy

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10
Q

What is the role of the FCA?

A

This regulator has conduct & market responsibilities. It also authorises smaller firms such as intermediaries and mortgage brokers.

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11
Q

What permission is required for entry to the financial services register?

A

Part 4a permission

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12
Q

What are the FCA Principles for Business?

A

The FCA has 12 Principles for Business, which are statements of the fundamental obligations of all authorised firms.

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13
Q

How is the capital adequacy of an authorised firm assessed?

A

Capital adequacy assesses if a company has enough capital. This is tested via a risk identification and management process. It is not just about monitoring capital and assets, although this will be part of the process.

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14
Q

3 certainties required for a trust to be valid:

A

1) subject matter (assets held within it)
2) objects of the trust (beneficiaries)
3) clearly showing a trust is intended

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15
Q

Which bodies are exempt from FCA authorisation?

A

BoE, local authorities (and various other gov bodies).

Designated professional bodies including the institute of actuaries.

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16
Q

How long must client agreements be kept for?

A
  • 5 years for most forms of business
  • the duration of the relationship with the client if longer than 5 years
  • indefinitely for pension transfers, pension opt outs and FSAVCs
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17
Q

What is a materiality assessment?

A

Corporate and social responsibility is about firms engaging with their stakeholders on important issues. A materiality assessment is about looking at the important issues within a firm, identifying its stakeholders and considering how these issues will affect its stakeholders. This involves standing back from a firm to see how others might see it.

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18
Q

In general, which type of firm is likely to pay larger dividends, long-established or growing?

A

Long-established companies tend to pay larger dividends.

Growing companies tend to pay smaller dividends and may offer the chance for better capital growth to compensate.

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19
Q

What does the perimeter guidance manual (PERG) cover?

A

Guidance on when authorisation is required or exempt status is available.

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20
Q

What is part 4a permission?

A

Applying for part 4a permission refers to applying for authorisation to carry out the regulated activities applied for.

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21
Q

Under the FCAs three-pillar supervision model the majority of firms are classified as what?

A

Flexible portfolio firms.

Under its supervisory regulation the FCA categorises firms as either flexible portfolio firms or fixed portfolio firms.

Fixed portfolio firms tend to be larger firms with a significant impact on the financial system.

This system replaced the category 1-4 system of categorisation.

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22
Q

The FCA handbook refers to SYSC. What does this mean?

A

Senior Management Arrangements, Systems and Controls.

It means that the senior management of authorised businesses must have adequate systems and controls in place.

The responsibilities of senior managers must be formally written down.

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23
Q

What is a Bancassurer?

A

A life office owned by a bank to distribute products via their branches.

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24
Q

What is the fine for market abuse? Provide an example of market abuse.

A

The fine is unlimited.

Tipping a share you own to clients to try to drive the price up due to increased demand is an example.

25
Q

How often should client money reconciliations be carried out?

A

Daily.

FCA client money rules also state interest earned on the money belongs to the client, unless otherwise agreed, and money given to an intermediary firm by a client must be paid into a designated client account, held by an approved bank, by CoB the next working day.

26
Q

Which financial authority is responsible for formulating and putting into effect the UK government’s financial and economic policy?

A

HM Treasury.

Overall aim of HM Treasury is to raise the rate of sustainable growth and increase prosperity by creating opportunities in employment and the economy for people within the UK, therefore they are responsible for putting the government’s policy in place to achieve this aim.

27
Q

Conduct of Business (COBS) rules apply to which type of firms?

A

COBS is the FCA handbook which details the day-day conduct rules that apply to regulated life, pension and investment businesses, including bank and building societies investment business.

28
Q

The Financial Services Act 2012 gave the FCA powers of early intervention, which includes banning products. Who does it apply to?

A

Retail customers.

Other examples include withdrawal of promotional materials considered misleading, publicising enforcement actions and gathering market intelligence.

29
Q

What is the Free Asset Ratio and how is it calculated?

A

The surplus assets held by a life office over the value of its liabilities, expressed as a % of total assets.

FAR = (total assets - liabilities) / total assets x 100

30
Q

What is the purpose behind a firms ethics code?

A

Sets out the firms ethical commitment in high level terms, and also includes more specific regulations for specific responsibilities.

31
Q

What forms of costs and remuneration must a firm disclose before selling a packaged product via its agent?

A

Remuneration the agent and firm receive must be disclosed. There is no requirement to disclose supervisory or regulatory costs.

32
Q

What is a Demand & Needs Statement?

A

A statement detailing the clients needs with the reasons for recommendations.

33
Q

What are the Principles for Business (PRIN)?

A

High level standards that apply even if there are no rules or procedures for a particular situation.

34
Q

How long does an IVA appear on credit reference agency reports?

A

Minimum of 6 years after commencement.

It will be removed from the individual insolvency register 3 months after it ends.

The individual will be notified when it ends.

35
Q

What are the 4 outcomes of consumer duty?

A

1) products & services
2) price & value
3) customer understanding
4) customer support

36
Q

What is a sale and rent back scheme?

A

Client sells their home (usually for less than market value) and obtains an agreement to remain as a tenant for a set period (no less than 5 years).

37
Q

What is the regulatory approach designed to deliver outcomes based regulation called?

A

Intensive Supervision

38
Q

What are the overarching cross-cutting rules of consumer duty?

A

1) firms must act in good faith towards retail customers
2) firms must avoid causing foreseeable harm to retail customers
3) firms must enable and support retail customers to pursue their financial objectives

39
Q

How are EU treaties created?

A

Direct negotiation between member states. They must be approved by national parliaments/referendums.

They concern the fundamental principles of the EU and are its primary form of legislation.

40
Q

What is an EU directive? How does it differ from an EU regulation.

A

An EU directive requires member states to achieve a particular objective but does not dictate how they achieve it or the national laws they enforce to achieve it.

With an EU regulation both the result and the method are binding under EU law.

41
Q

What is a derivative?

A

The right or obligation to buy or sell another type of asset at a specified price at a specific date in the future

42
Q

What is a real-time promotion?

A

A promotion made via a personal visit, telephone conversation or other interactive dialogue. It would not be expected to have a shelf life.

A non real time promotion doesn’t involve interactive dialogue eg written promotion.

43
Q

What is a gilt?

A

Bonds that offer a fixed level of interest every 6 months.

At the end of the term they return the nominal or face value investment.

They are issued via the UK Debt Management Office.

44
Q

What is the FCAs competition objective?

A

Firms must compete by offering better services, better value and different types of products that customers want and need.

45
Q

On what basis did the Capital Requirements Directive (CRD) divide capital into three tiers?

A

The 3 tiers are based on loss absorbency and permanence of capital.

46
Q

What 3 pieces of UK legislation is the financial services regulatory system founded on?

A

The Financial Services and Markets Act (FSMA) 2000

The Financial Services Act 2012

The Bank of England and Financial Services Act 2016

47
Q

What are the FCAs operational objectives?

A

1) to protect customers
2) to protect financial markets
3) to promote competition

48
Q

What is the Investment Firms Prudential Regime? (IFPR)

A

IFPR applies to larger regulated firms. It requires a firm to carry out a detailed risk assessment and stress test scenarios to ensure they hold enough resources to cover risks.

It replaced the EU Capital Requirements Directive after Brexit.

49
Q

Within the FCA Handbook the term threshold conditions refers to what?

A

Minimum conditions a firm must satisfy to retain permission to conduct investment business.

50
Q

Which global body sets international standards on anti-money laundering?

A

Financial Action Task Force (FATF)

51
Q

What is the Financial Policy Committee responsible for?

A

Watching for systematic risk to the financial system as a whole.

It was established under the Financial Services Act 2012.

52
Q

One of the essentials functions of UK financial services is to provide a vehicle through which savings are protected and channelled into:

A

Capital management

(Chapter 1a)

53
Q

How is income from a purchased life annuity taxed?

A

Part is treated as capital and is tax free. The interest element is taxed at your marginal rate.

54
Q

What is the maximum fine the pensions regulator can apply to an occupational pension scheme?

A

£50,000

55
Q

Which body has the power to ensure banks increase their capital during periods of growth and profitability, so that they are sufficiently protected during periods of declining business and market instability?

A

The financial policy committee

56
Q

Which regulator is responsible for monitoring the activities of the London stock exchange?

A

FCA

57
Q

The FCA has a risk-based approach to supervising firms. This is based on the 3 pillars, which are;

A

1) proactive firm supervision
2) event driven reactive supervision
3) issues and products supervision

58
Q

What is the minimum cooling off period for loans?

A

7 days

R01 (1 decks)

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