R01 Flashcards
Why consider reviewable critical illness cover?
Cheaper premiums than under a guaranteed contract.
Reviewed based on advancements in medical science not the insured’s health circumstances.
Global regulatory body
Financial action task force
Debt management plan
Consolidation of debt in to one affordable payment which involves negotiation with existing creditors.
Adviser must be licensed under consumer credit act
Lifetime morgage
Property still owned by client
Home reversion
Sale of property for lump sum
Client retains right to stay in property
Income protection policy
Benefits paid after a deferred period
4 week minimum or 12, 26 or, 52 weeks
Period chosen by client when taking out policy
Payment protection insurance
Contributions paid monthly
Only available in connection with a loan to cover monthly repayments is made redundant or unable to work due to accident or sickness
CPA
Annuity purchased from a pension fund
Whole premium is taxed
PLA
Can be purchased from other capital including a tax free lump sum from a pension
Only income element is taxable
Interest
Banks and building societies pay interest gross on deposit accounts
Basic rate tax payer has £1000 savings allowance,
PIBS
issued by building societies
No redemption dates
Interest payments to investors can be missed in exceptional circumstances
Unit trusts
Open ended
Investment trusts
Listed companies with a set number of shares
Closed ended
Investments need to be made via an investment trust savings scheme
Public limited company
Must disclose the shareholdings of the company
Must have at least 2 directors and 2 shareholders
Must provide fully audited accounts
Must use plc at the end of thier name
Banks and building societies
Created as a place for investors to keep thier money safe and easily accessible
Building societies
Owned by members
Any profit is returned to members in the form of better interest on savings or lower interest on loans
EU initiatives
Driven and influenced around 70% of FCA policy making
Residence nil rate band
£125,000
Income protection and personal accident and sickness policies
Pay a regular benefit in the event of being unable to work due to accident or illness
Neither pay out on death
Accident and sickness may pay out a lump sum on diagnosis of certain permanent disabilities
Full new state pension
Must have 35 qualifying years
Platform advantages
Allows investor to aggregate his holdings from different companies on the same platform
Derivative
A right or obligation to buy or sell another type of asset at a specified date and time in the future
Enduring power of attorney
Cannot relate to health or welfare decisions
Must be over 18
Cannot make substantial gifts
Lasting power of attorney
Has power to make decisions about donor’s welfare and financial maters
Bankruptcy
Lasts 12 months
Pensions regulator took over from
OPRA
Punishment for market abuse
Maximum 7 years in prison
Unlimited fine
Flexible portfolio firms
Smaller firms
Supervised through event driven reactive supervision and thematic issue (product) supervision
Fixed portfolio firms
Larger firms
Require more proactive supervision
ICOBS insurance categories
General insurance
Pure protection - term assurance, critical illness, income protection
Payment protection
MCOB
Rules for conduct for mortgage business in the UK
Standard terms and meanings for communications
FCA notification of investigation
Not required for insider trading, market abuse and misleading statements
Exempt status
A firm can qualify for exempt status if it is contracted to an authorised person who takes responsibility for all regulated activities
Persistency of products
Data on policy cancellations
Reporting to FCA
Amount held in client bank accounts
Persistency stats
Number of complaints
Annual accounts
Value of client assets in discretionary portfolios
Types of business being conducted
Number of staff
Proceeds of crime act 2002
Uk’s principal statute on anti money laundering
Created several criminal offences
- disguising criminal property
- removing criminal property from UK
- failing to disclose suspected money laundering
Client data
NI records
Family circumstances
Bank details
Address
Date of birth
Medical records
Pure protection policies
No surrender value
Benefits payable on death or incapacity
Term assurance
Income protection
Exempt from providing client agreements
Direct offer promotions
Life offices selling life and pension policies
Client agreement
Must include
- risk warnings
- restrictions
- confirmation of FCA regulation
Acceptable limitations
Reliance on information provided by client
Reliance on others (third parties)
Insufficient evidence to make a recommendation
Monetary Policy
Concerned with the management of interest rates and supply of money
Increasing interest rates will reduce an individuals ability to spend as borrowing becomes more expensive
Fiscal policy
Levels of tax and spending
Increased government spending stimulates the economy
Reducing taxes stimulates the economy
3 stages of money laundering
Placement - cash is deposited, eg purchasing insurance policy
Layering - refund policy to get clean cheque from a legal source
Integration - integrate the money in to the legal economy
Insurable interest
Financial interest between the life assured and the policy holder
Life assurance acceptance
Valid once the first premium had been paid
NS&I
Not regulated by the FCA
Pensions regulator fines
£50k on a company
£5k on an individual
Failure to monitor compliance
Could lead to unwelcome publicity
Capital adequacy assessment
Should be carried out annually
FCA minimum threshold (location)
If the corporate body is constituted under UK law, its head office and registered office must be in the UK
FCA approval
A firm cannot claim their affairs have FCA approval unless the FCA requires it
FCA application fee
Not refundable
Capital requirement directive
Divides capital for the purpose of risk assessments into three tiers based on loss absorbency and permanence of capital
COBS
Conduct of business sourcebook
UK mortgage market review
Did not include imposing limits on multiple incomes and banning affordability tests
Client money
The FCA expects an intermediary firm holding client money to reconcile client money every day
Interest earned belongs to the client
Must be paid in to a designated client bank account (held by an approved bank) next working day
FOS compensation
Maximum of £350k plus the claimants costs and interest
Stakeholder products
Medium term - minimum investment £20
After making a product recommendation
Must provide client with product information to allow them to decide if it’s suitable
Principles for business
Integrity
Skill, care and dilligence
Management and control
Financial prudence
Market conduct
Customers interests
Communication with clients
Conflicts of interest
Customers: relationships of trust
Client assets
Relationship with regulators
Outcomes based regulation
Allows the FCA to make judgements on what might happen in the future
Approved person
Someone approved to carry out a controlled function
Fit and proper
Honesty, integrity and reputation
Competence and capability
Financial soundness
Four key areas of an ethical culture
Capabilities - how well equipped are staff to exhibit the ethical standards expected of them
Leadership
Practices
Narratives
Fair treatment of customers MI
Accuracy
Relevant
Consistent
Timely
Ethics measures
Indirect - employee engagement and ethics training
Direct - customer complaints and ethical feedback
Pre FSMA authorisation
Automatically authorised if previously under:
Banking act 1987
Insurance companies act 1982
SRO under financial services act 1986
Before Appointing an AR
Must ensure:
Will not prevent the firm meeting threshold conditions
Firm will have adequate control over regulated activities
AR is solvent
Customer complaints - reporting requirements
Must be submitted twice per year
Must include number of complaints
How many were closed within four weeks
How many closed within 8 weeks of receipt
Also those which are open longer
Must not distinguish between actual complaints and expressions of dissatisfaction as all of these are considered complaints by the FCA
Due dilligence
Must be carried out if:
money laundering is suspected
When establishing a business relationship
Carrying out ad-hoc transactions
GDPR
Implemented in the UK under the data protection act
Implemented across all general data processing
Gives extra powers to the information commissioner
Maximum fine £17m or 4% of turnover
Direct offer financial promotion
Must give the consumer enough information to make an informed decision as to whether the product is suitable
Must include that the firm is authorised or regulated by the FCA
Full name and address of person offering the investment
Details of any charges and expenses
A required function example
Compliance oversight officer
Maximum FOS award
£350k
Records of investment advice
Must be kept for 5 years
Maximum time to Complete qualifications after starting to give advice
4 years
Record of advertising pensions. Not including transfers, opt outs or free standing voluntary contribution schemes
Must be kept for 6 years
Suitability report
Should be received within 14 days after the contract has concluded
Recommendation summary provided for….
Stakeholder pension
IFA doesn’t need to provide advice on….
Long term care insurance
CMA objectives
Deliver effective enforcement
Extending competition frontiers
refocusing consumer protection
achieving professional excellence
developing integrated performance
FCA Handbook threshold conditions
Location of offices Effective supervision Business model Resources Suitability
FCA high level standards
Systems and controls
Common platform requirements
Cooling off period
Sale and rent back
14 days
Demands and needs statement
Details the clients needs with reasins for recommendations
Mortgage credit directive
What is the name of the product disclosure document starting 21st march 2019
European standardised information sheet
How did the consumer credit act 2016 change the definition of an individual
Included
sole traders
Small partnerships (less than 3)
Unincorporated associations
How do the fca and cma work together
Regarding standard terms in contracts
Fca deals with regulated firms
Cma deals with unregulated firms
Client agreement
Must include
Services the firm offers
Cost of those services
How they are paid for
Investment objectives
Risk warnings
Reviews
Should be kept for 5 years
E-commerce directive rules
Provide access to name, address and email address
Status
Services provided
How to order product
How to amend order
Provide immediate acknowledgement when order is placed
Key features document
Nature and aims of investment
Risk factors
Principle terms
Cancellation rights
Compensation arrangements fscs
Complaints procedure
A Principles and Practise of Financial
Management document
A with profit regular savings policy
Who had a statutory duty to investigate bankruptcy
The official receiver
Charging clause
Why?
To allow professional trustees to be remunerated for their services
MIPRU
Who is covered?
Home finance
Mortgage people etc
FA may transact businesses without the prior existence of a client agreement when….
Business is done over the phone
Free asset ratios
When would you compare?
Considering a with profits investment
Why use a nominee company?
To protect the assets of a client
Who is exempt from the FCA T&C rules
Non uk domiciled firms
FCA fit and proper bankruptcy rules
Bankruptcy would not automatically preclude an individual
Individually asessed
FCA fit and proper
Latest point to meet criteria for new employees
Before the start date
FOC penalty
£150k plus costs
Per se eligible counterparty
Example
A government of a country
Help to buy maximum contribution
£3400
Who is ultimately responsible for compliance
Senior management
FOS rules
Costs cannot be deducted from a compensation award
All FOS decisons are binding
Execution only and limited advice transactions
Client can always insist in proceeding
Know your customer rules apply to limited advice transactions
Complaint handling rules in relation to FOS apply to limited advice transactions
Cancellation rights
If cancellation rights are not issued when required, a client may cancel at anytime
For pension transfers the firm may issue a pre sale right to withdraw as an alernative
Cancellation rights on open market options apply for 30 days before an annuity is processed
Catergories of organisations who introduce business to a firm
Firms that are not fca authorised
Exempt firms
Firms that are regulated by a designated professional body
