RO1 Flashcards
Who are the UK financial authorities?
HM treasury
Bank of England
Financial policy committee (FPC)
Prudential Regulation Authority (PRA)
Financial conduct authority (FCA)
Friendly society
No shareholder will take profits repayable to members.
Investors had complete exemption from taxation.
Tax efficient savings.
Trust
Arranging property to be for the benefit of other persons without giving them full control of it.
Settlor
Gives away assets.
Beneficiary
Benefits.
Trustee
Controls asset in interest of beneficiaries
Trustees possess…
Legal ownership.
Once created trustee become legal owners.
Financial action task force (FATF)
To set international standards against money laundering and terrorist financing.
Will
Leave to whom ever they wish
Law of succession.
Beneficiaries succeed to property on someone’s death
Intestacy
Do not make will.
Spouse/Partner/No kids- Spouse sole benefit
Spouse/civil partner/kids- spouse/ chattels.
£250 k statutory legacy= 1/2 of the rest.
No partner- kids
No relative- crown (government)
Executors
Distribute assets aka personal representatives
Valid will
Writing (print + writing)
Signature
Attestation (witnessed by 2 or more)
Revocation of will
Full = marriage
Part = divorce
Cat standards
(Government approved products)
Charges access terms
The level of uk base interest rate
Main tool used to influence economic activity by the Bank of England
Who to speak to RE: Debt
Citizens advice bureau
National debt line
Pay plan
Step change debt charity
Capital and interest payment mortgage
Repayments to lender include a sum go repay capital plus a sum for interest
Payments can rise or fall in line with interest rates
Loan is gradually repaid and interest payable reduced
Interest only mortgage
Lower monthly cost but higher overall borrowing
Only interest is paid and outstanding capital remains the same.
Idea is to pay at the end of the term
(Pension, investments, sale, ISA)
Compulsory purchase annuity- CPA
Bought from the proceeds of a pension.
Takes as earned income on whole of income paid @ 20%, 40% and 45%
Purchased life Annuity- PLA
Purchased from other capital, or tax fee cash.
Separated into an income and capital statement.
FCA- Operational objectives
Set up by FSMA act 2000.
Protecting consumers
Protecting financial markets
Promoting competition
FCAs overarching strategic objective…
Ensure that the relevant markets function well
Prudential Regulation Authority- PRA
Banks, building societies, credit, insurers, investing.
‘Promoting safety and soundness of the firms it regulates’
PRA approach to regulation and supervision
Judgement based
Forward looking
Focused
Maintain a stable financial system
FCA level of supervision
Risk Category C1-
Large banking and insurance groups with very large # of retail clients.
C4- Smaller firms including most intermediaries.
FCA three pillar supervision model
Proactive firm/group supervision.
Event-driven, reactive supervision.
Thematic approach- issues + products supervision.
FCA Compliance monitoring
Procedure= reports, time limits, information from authorised firms -> take action.
Business, personnel and customer matters.
Sale + Rent back
No cold calls or promotions.
Sell home at discount and agree to stay
Fixed for 5 years
Must be an adviser sale
Check client checked ongoing entitlement to benefits
Cooling off period 14 days
Independent valuation
Provide additional information
Not to be called fast sale/ mortgage rescue + quick cash.
Buy to let mortgages
Long term investment
Commercial buy to lets not negotiated by FCA
Loan Types
Unstructured- (commercial) possible to increase
Loan repayments, reducing capital and interest. Can be repaid anytime.
Structured- (smaller purchase) eg car.
Fixed rate of interest payable over term of the loan
Higher risk + cost = penalty for early redemption. Increased interest, unsecured loan.
Data controllers charge
£10- max - subject access
Up to £50 for Health and education records
Complaints
Eligible complains- consumer, charity, trust, enterprise.
Must investigate competently, diligently and impartially.
Assess fairly, consistently and promptly the subject matter
If it’s another company refer within 5 days of days of complaints and inform complainant. Include other forms of contact details.
Send prompt written/acknowledged then keep informed of progress. Final response in 8 weeks
Can refer to FOS within 6 months.
If it is upheld offer remedied action/ compensation
OM Budsman can claim:
£150,000, complaint cost, interest
Cannot award respondent costs against complainant but can charge complainant it’s own costs if conduct improper or unreasonable
Pensions ombudsman (TPO)
Problems with pension plans and small occupational schemes
Free (funded by DWP)
Has legal procedures
The pension advisory service (TPAS)
Evidence on pens, specialist and volunteer.
Free advice.
The pension protection fund (PPF)
Compensation for those with DB pens.
Fraud fond.
Funded by annual levies
Principles and practices of financial management (PPFM)
With profits
Must send a consumer friendly PPFM to all existing clients with annual statements and existing where a change and new policy holders.
Best execution
Stocks and shares.
Does NOT apply to life or pension contracts or collective investments.
A stock broker will obtain highest price for a selling client and lowest price for buying.
P.I.P.S.I
Protection
Income protection
Pension
Savings and investments
Investments
Outcomes
Based ONT regulation
Intensive supervision
Making judgement on what might happen in future
Principles based regulation- PBR
Neither possible or desirable to write a rule to cover every specific situation.
Over-riding approach
‘A firm must conduct its business with due skill, care and diligence.’
Portfolio Management
UK stock market
Big amounts
Discretionary service
Taking relevant decisions to meet objectivise of investor.
Differences between advisory and discretionary.
Advisory- Suggestions re invest only
Discretionary- Actions only
