Unit 2 Flashcards
A firm of stockbrokers is conducting MiFID business.
For what minimum period of time after an individual leaves the firm, should the training and competence records of the adviser be retained?
5years
The time period that training and competence records must be kept for after an employee stops the activity or leaves the company is as follows:
At least three years for individuals carrying out non-MiFID business;
At least five years for individuals carrying out MiFID business
Indefinitely for individuals carrying out pensions transfer business.
The rules contained in the FCA Market Conduct Sourcebook apply primarily to: who?
Investment firms
This source book concerns investment markets and is therefore primarily of interest to investment firms. It covers issues such as insider dealing.
Miranda performs a senior management function in the firm she works for. Which of the following principles does not specifically apply to her role?
She must:
A) at all times, act to avoid situations that could lead to risks to the business.
B) disclose appropriately any information of which the FCA or PRA would reasonably expect notice.
C) reasonable steps to ensure that the business of the firm for which she is responsible complies with relevant regulatory requirements and standards.
D) take reasonable steps to ensure that the business of the firm for which she is responsible is controlled effectively.
A
The following prociples or code of conduct do apply to senior management functions: D, C , B and take reasonable steps to ensure that any delegation of responsibilities is to an appropriate person
What is the third money laundering directive?
Basically it outlines key definitions in relation to money laundering
Key bits to remember:
It outlines 3 key definitions which are: Property, Criminal Activity and Criminal Property
Also states that if money laundering takes place in the EU and the property being laundered was generated in a Non EU country, it will still be subject to the EU money laundering rules.
ie if the property was generated in Brazil and then laundered in an EU country, it will be subject under EU money laundering laws
What is the 4th money laundering directive?
Was introduced by the European Commission after recommendation by the Financial Action Task Force
Now:
In short; Risk based approach, MLRO, PEP, new offence, tax crimes, beneficial ownership.
Requirement to adopt a risk‑based approach when implementing
AML measures
Introduced the role of MLRO’s
It Widened the definition of ‘politically exposed persons’
It Introduced a new criminal offence ( if found guilty of recklessly making a statement which is false or misleading around ML the person may face a fine or a max prison sentence of 2years
It also included ‘tax crimes’ for the first time in an EU legislation
It increased transparency around the beneficial ownership of legal entities
What is beneficial ownership?
What EU money laundering directive led to changes around beneficial ownership. What was the change
Beneficial owners are those who control or own 25% of a legal entity ( legal entities are things like companies, trusts etc)
The 4th Money Laundering Directive required there be more transparency around beneficial ownership of legal entities.
As a result of this directive, each member state must maintain a register of the beneficial owners of legal entities.
The 5th money laundering directive then defined the rules further around beneficial ownership
Rules around transparency of beneficial ownership were introduced following the introduction of the 4th money laundering directive.
As a result of the directive, regulations were introduced in the UK to achieve the goal of the directive. However, further legislation then had to be introduced in the Uk. Why was this?
Regulations in the UK had to be improved as the beneficial ownership rule initially only applied to companies (not to other legal entities such as trusts ) which in turn meant the 4th directive’s requirements were not being fully met (the 4th directive states the beneficial ownership rule applies to ALL legal entities)
What is the fifth money laundering directive?
Introduced rules around virtual currency traders, art traders for transactions €10,000 or more and estate agents acting as intermediaries for properties let at €10,000 a month
It introduced the following changes regarding electronic money:
If total value of monthly payments exceed €150 CDD is required . Used to be €250
Remote Payments that exceed €50 require CDD. This used to be €100
It led to changes around CDD and beneficial ownership registers such as:
The ID/V of custs must be based on docs, data or info from a reliable or independent source ( this includes electronic identification that has been approved by national authorities )
Any member of public has right to access beneficial ownership information ( used to only be accessible by those who demonstrate ‘legit’ interest, now anyone can)
Improved enhanced due diligence measures that applied to entities in member states who have business relationships with high risk third countries
The 6th money laundering directive was introduced in 2021, long after brexit. If u are a UK business and operate in the EU do u need to comply with this regulation considering we are out of the EU following Brexit?
Any UK regulated business in the financial sector operating in the EU
must comply with these new regulations
Who are the financial action task force and what is their role?
They are an inter-governmental organisation created in 1989 to co-ordinate the international fight against money laundering. In 2001, it was given an additional role to combat terrorist financing.
Its role is 3 main things:
1) Sets standards for countries anti money laundering programmes to follow. It does this through a list of 40 recommendations of minimum standards a country should meet
2) evaluates if countries have met these standards ( it has a list of none cooperative countries that do not have sufficient anti money laundering measures)
3) identify trends in Money Laundering Methods
It Does NOT deal with law enforcement as this is dealt with by national authorities such as the UK’s national crime agency
When should customer due diligence be carried out for occasional transactions’ and for life assurance policies ( in relation to the premium amounts )
Where an ‘occasional’ transaction exceeds $15,000
For businesses trading in goods/services the threshold is $10,000 (because goods/services can be laundered easier)
For life assurance policies, CDD must be carried out when the value of annual premiums exceeds $1000, or $2500 for a single premium
When assessing an authorised firm’s compliance with its money‑laundering requirements, the FCA will take into account the extent to which the firm has followed what?
What can the FCA do if a firm is no compliant with Money Laundering requirements?
The Joint Money Laundering Steering Group’s guidance notes for the financial sector (these describe how a firm should ID a cust and how to confirm source of funds)
Publications of the Financial Action Task Force
FCA’s own guidance on financial exclusion
The FCA can discipline firms and individuals.
What max sentences can someone face if they are convicted under the proceeds of crimes act 2002 of concealing, arranging or enquiring?
What is the max sentence if someone is convicted of ‘failing to disclose’
What is the max sentence if someone is convicted of ‘tipping off’
What is the max sentence for a partner or director who fails to comply with money laundering regulations?
What sentences can someone face if they are convicted under the proceeds of crimes act 2002 of concealing, arranging or enquiring? 14years imprisonment or an unlimited fine, or both
What sentences if someone is convicted of ‘failing to disclose’ ? Up to 5 years or an unlimited fine, or both
What sentences if someone is convicted of ‘tipping off ‘? Up to 5 years or an unlimited fine, or both
What is the sentence for a partner or director who fails to comply with money laundering regulations? They can be fined, receive up to 2 years in prison, or both, or face civil proceedings . Same as if someone makes a reckless statement around ML which was a new offence introduced in the 4th MLD
What must an authorised firms Money Laundering Reporting Officer do each year?
They must created a report at least once a year which outlines the following:
Assess the firms compliance with the joint money laundering steering groups guidance notes
Show how the FATF finding have been used during the year
Provide info about reports of suspected money laundering incidents submitted by staff
The firms senior manager must then consider the report and implement changes if needed
What is the national crime agency?
What is the national economic crime centre?
The National Crime Agency (NCA) works to combat serious and organised crime.
It is a UK body, but works in
partnership with law enforcement agencies internationally;
The National Economic Crime Centre is part of the national crime agency. It is the part responsible for tackling money laundering
How long must a firm retain a cust info for after their relationship has ended
How long must supporting evidence of transactions ( invoices for instance ) be kept for after a cust/firms relationship has ended?
Why must this info be retained?
5 years for both
Must be retained to show evidence of the firms customer due diligence which can be used in money laundering investigations
Dont get this confused with the question about how long mifid firms and non mifid firms must keep training and competence records for
What is the max penalty if someone is convicted of ‘bribery’ under the bribery act 2010?
Unlimited fine or 10years in prison, or both
What is the Bribery Act 2010
True or false: as part of a firms AML training requirements for staff, a firm must make staff aware of their MLRO identity and their responsibilities
True
What is the joint money laundering steering group?
The Joint Money Laundering Steering Group is made up of the leading UK trade associations in the financial services industry.
Its aim is to promote good anti money laundering measures and to give help to firms/individuals in understanding the UK money‑laundering regulations.
It does this mainly by publishing guidance notes
What are the 4 codes if conduct for a senior management function?
Ensure their area of responsibility is compliancy with regulations
Ensure their area of responsibility is controlled effectively
Ensure that any delegation of tasks are to appropriate persons
Disclose information to the FCA or PRA upon request
Who do the Capital Requirements Directives (CRDs) apply to?
banks, building societies and investment companies
Total loss‑absorbing capacity (TLAC) requirements apply to what?
Globally systemically important banks
Basel III liquidity rules require a bank’s available high‑quality liquid assets to exceed the net cash outflows expected over the next: HOW MANY DAYS
30
Under Basel II, the capital required to cover operational risk is gross annual income multiplied by:
0.15
What is the Basel III’s net stable funding ratio?
Ensure banks Long‑term financial resources exceed long‑term commitments (1year)
Think, stable = long time
When looking at capital adequacy, a firm’s solvency ratio is what?
The solvency ratio is the minimum amount of capital a business must hold to satisfy capital adequacy rules.
Solvency ratio = Capital as a percentage of the businesses’ risk-adjusted assets
‘Risk adjusted’ because it takes in account the different types of assets a business may hold (ie, loans (risky), Gilts (not risky) ) so a business with riskier assets may have a higher solvency ratio meaning they have to hold more capital in reserve
The Basel Committee acts under the auspices of who?
Bank for International Settlements.
The EU Directive, Solvency II, aim is what?
reduce the risk of an insurance company being unable to meet its claims
What is prudential management?
Ensure firms have adequate risk management systems in place
Who are the Basel Committee?
Multinational body acting under
the auspices of the Bank for International Settlements
Its role is to strengthen the
regulation, supervision and activities of banks to enhance financial stability
It initially created the Basel Accord (this set out capital requirements for banks ) , and the Basel II and Basel III followed
What is capital adequacy?
Ensures a business holds sufficient reserves of capital to ensure it
is sustainable
For deposit takers in particular, where they have enough capital in reserve such that depositors do not bear any risk if the business is to run into financial difficulties
Define liquidity
The ease and speed at which an asset can be converted to cash withoit significant loss of capital value
House = Low liquidity
Cash accounts = High liquidity
What is a ‘run on the bank’?
Where a large numbers of depositors look to withdraw their savings . If the bank has low liquidity (ie a high proprtion of the banks assets is in illiquid assets such as long term mortgages ), this could mean the depositors savings are at risk which almost happened with northern rock until the government stepped in
Define operational risk
Operational risk is the risk of loss as a result of failed or inadequate internal processes, people and systems (eg staff fraud, or a computer failure), or as a result of external events, such as a natural disaster
When were capital requirements for operational risk first introduced? What does this mean?
It was first introduced in Basel II
Operational risk is the risk of loss because of failed internal processes, people and systems (eg staff fraud, or a computer failure), or as a result of external events, such as a natural disaster.
So, this just means, because of Basel II banks are required to hold capital in reserve to counteract issues as a result of the operational risk factors as stated above ( obvs capital adequacy requirements were already around for other types of risk before Basel II. Basel II adds to the rule specifically for operational risk factors
Basel II introduced specific capital requirements for operational risk factors ( as well as market risk and credit risk )
How do businesses calculate its capital requirement for its operational risk factors?
How is the process different for very large businesses?
If a business has insurance protecting it from loss as a result of operational risk factors, does this lower its capital requirement for said operational risk factors?
The capital required for operational risk is calculated as: The business’s gross annual income (averaged over the past three years) multiplied by 0.15
For large businesses, they use something different called the standardised approach
Insurance held against the events happening cannot be used to lower capital requirements ( imagine the implication if the insurance didnt pay out )
What did the Basel Accord introduce?
It introduced minimum capital
requirements for banks ( capital adequacy)
What did Basel II introduce?
Introduced the ‘solvency ratio’
(Ie, it required banks to hold a capital amount appropriate to the risk of its assets)
It introduced capital requirements respectively for the following 3 types of bank risk: operational risk, market risk and credit risk
It gave bank regulators more effective supervisory tools
It made banks disclose more info so capital adequacy can be better assessed
When was Basel III introduced and what areas of banking does it cover?
Introduced after financial crash
Basel III covers two main areas:
regulatory capital;
asset and liability management
What is Regulatory capital?
There are two types of regulatory capital. What are they?
Regulatory capital is the amount of capital that a bank is required to hold in
order to meet regulatory requirements.
Two types:
Tier 1 capital, which includes share capital and disclosed reserves (ie profits retained in the business rather than being paid as dividends);
Tier 2 capital, which is known as supplementary capital
What does Basel II require from banks in terms of leverage ratio and solvency ratio?
Basel III requires banks to reach a minimum solvency ratio of 10.5%
Basel III requires a minimum leverage ratio of 3%
Basel III requires banks to have a minimum solvency ratio of 10.5% and a leverage ratio of 3%
How is leverage ratio calculated?
How is Solvency Ratio calculated?
Leverage ratio is: A bank’s Tier 1 capital divided by its average total consolidated assets.
NOTE: Tier 1 capital = Share capital (capital raised from shares and disclosed reserves (profits retained in the business rather than being paid as dividends)
Solvency ratio is: capital as a percentage of the risk-adjusted value of assets
What is liquidity coverage ratio?
What is net stable funding ratio?
Both were introduced in Basel III ( Following the financial crash )
The LCR requires that high-quality liquid assets available to the bank exceed the net cash outflows expected over the next 30 days
The NSFR requires that long-term financial resources exceed long-term commitments; long-term being more than one year
Net Stable funding ratio = long term
Liquidly coverage ratio = short term
Both were introduced because of what happened to Northern Rock
To remember: liquidity = quick = short term
‘Stable’ = long
What directives implemented Basel I, II and III in the EU
The EU capital requirement directive(s)
CRD IV implemented Basel III to the EU
Tell me about capital requirement directive 5
Was it implemented in the UK?
Introduced new rules about the remuneration of staff (staff salary)
The stricter rules around remuneration apply to staff classed as ‘material risk takers’ ( stricter rules include introducing deferral periods for performance-related pay )
Under the terms of the UK’s
Withdrawal Agreement with the EU the UK was required to ‘onshore’ the CRD V rules
Tell me about the 4th capital requirement directive.
Implemented Basel 3 in the EU so same rules as Basel 3
Applies to banks, building societies and investment firms
What is total loss-absorbing capacity?
Way to remember: ‘total loss = total destruction. If one of these banks fail it could mean total destruction
introduced by the The Financial Stability Board (FSB)
Applies to 30 global systematically important banks (G-SIBs)
A bank is classed as a G-SIB if the BaselCommittee on Banking Supervision (BCBS) believes so
The minimum TLAC is 18% ( ie G-SIBS must have at least 18% in capital reserve, in addition to other capital adequacy requirements ).
NOTE: Certain capital can apply to both requirements
What is the Financial Stability Board (FSB)?
They are an international
an organisation consisting of national regulators and central banks.
They introduced a minimum ‘total loss-absorbing capacity’ (TLAC) which is an extra minimum capital requirement that applies to global systematically important banks ( it is 18%)
Think = stability = for capital requirement rules
What is solvency II?
Has the UK implemented solvency II?
Implemented by the European
Insurance and Occupational Pensions Authority (EIOPA) in the EU
Basically, it created a capital requirement for insurance providers called The solvency capital requirement
The solvency capital requirement
(SCR) is calculated as a basic SCR, plus an allowance for operational risk, less
an amount for adjustments ( this will vary across insurance companies )
Insurers are then required to complete and submit an Own Risk & Solvency Assessment (ORSA) as part of solvency II disclosure /transparency rules. Kind of similar to Basel II’s 3 pillars
UK has retained solvency II
Who are the PRA and FCA responsible for respectively when it comes to prudential management?
The PRA is responsible for the prudential regulation of all deposit-takers, insurers and significant investment firms.
The FCA is responsible for the prudential regulation of firms for which it is the sole regulator (generally smaller businesses)
What are certified functions?
What are senior management functions?
Senior management functions are the roles the FCA feel pose the greatest risk. (CEO, MLRO, Compliance functions, executive directors) They must be vetted and approved by the FCA
Certified functions are more junior roles than senior functions but the FCA still deem they pose great risk. (regional managers, head of branch banking etc) They DO NOT have to be approved by the FCA, they instead are approved by the firm if the firm deems them ‘fit and proper’.
What are core, enhanced and limited scope firms?
This refers to the senior management and certification regime ( ie the Senior Management Functions and Certified Functions rules )
Core firms have to comply with a set of requirements to satisfy the SM&CR
Enhanced firms have additional requirements as they pose greatest risk
Limited Scope- exempt from some of the requirements and have less senior management functions
What is the financial service register?
The Financial Services Register is a public record of firms or individuals that have been or are regulated by the PRA and/or FCA
What are fixed portfolio firms?
What are flexible portfolio firms?
This determines how strictly the firm is supervised
Fixed portfolio= firms that require the highest level of supervisory attention because of their size ( they have a named supervisor, supervised continuously)
Flexible Portfolio = smaller firms. Less strict supervision. Their first point of conduct is the FCA’s customer contact centre
What is structured CPD
What is unstructured CPD
CPD is ‘continuous personal development’ and refers to ongoing training that employees must carry out to remain as competent.
Structured CPD= attending courses, lectures, e-learning activities which are longer than 30mins
Unstructured CPD = participating in coaching or mentoring sessions, reading industry material
Respectively speaking, how much CPD must a retail investor and an advisor selling protection policies undergo annually ?
Retail investor = 35hours annually, 21 hours being structured CPD
Advisor Selling Protection Policies = minimum 15hours CPD annually, according to the insurance distribution directive
What must advisors obtain each year from an FCA accredited body?
Statement of Professional Standing
To receive an SPS, an adviser must meet the professional standards of the professional body and declare that they adhere to its code of ethics. They must also confirm that they hold the required qualifications
What is part 4A permission?
It is the part of the Financial Services and Markets Act 2000 that gives a firm permission to carry out their respective regulated activities
Called part 4A because that is the ‘part 4A in the act like this topic is part 20.1
What is an appointed representative?
An appointed representative (AR) is a firm or person who runs regulated activities and acts as an agent for a firm, which is known as the AR’s ‘principal’.
NOTE: The principal firm is the regulated entity, not the AR, and the principal takes full responsibility for ensuring that the AR complies with FCA rules
The specialist sourcebooks section within the FCA Handbook is for who?
Professional firms
( those not deemed as being eligible counterparties since they require more services such as an eligible counterparty executing a transaction for them or a need for advice )
What are the following:
Eligble counterparties
Professional clients
Retail clients
The Conduct Of Business Source book sets out three types of clients:
EC = Includes governments, central banks and financial institutions such as banks, collective investment funds , insurance companies or investment firms. They have the Highest level of knowledge.
EC business includes stuff like executing transactions for PC or RC ( ie banks )
PC = Anybody that would otherwise be an EC except for the fact they require a higher level of service such as requiring advice or someone to execute transactions for them. Clients can be deemed as professional clients on a de-facto basis( by passing a test ) or they can opt to be treated as a professional client (in this case they are referred to as ‘elective professional clients’
RC = customers who do not fall into the above categories. Require highest level of protection . Basic understanding
An authorised firm has not given a final response to a complaint after eight weeks.
What is the firm obliged to do at this point?
1) Inform the client that they can refer the complaint to the Financial Ombudsman Service.
2) Refer the complaint to the Financial Ombudsman Service.
1
In terms of complaints, how long must the records of the complaint be kept for?
Firms have to keep records of all complaints. Records have to be retained for at least three years from the date a complaint is received.
Where the complaint relates to collective portfolio management services for a UCITS scheme, the minimum period for which records must be retained is five years.
Where the complaint relates to MiFID business, records should generally be kept for a minimum of five years and a maximum of seven years (although there are exceptions)
What is a super complaint?
The Financial Services and Markets Act 2000 (FSMA) gives designated consumer bodies the right to make a ‘super-complaint’ to the FCA where they consider that there are features of a financial services market in the UK that are or may be significantly damaging the interests of consumers.
The FCA is required to respond to a super-complaint within 90 days, setting out how it proposes to deal with the complaint and any possible actions.
When is a contract or notice deemed as being unfair to a consumer?
If it lacks fairness (For example, a term in the contract that allows the business to decide the prices after a consumer has been bound by the contract )
If it lacks transparency ( the term should be transparent and expressed in clear, easily understood language. In a situation where there is doubt about a certain term if it unclear about what it means, an interpretation that is most favourable to the consumer must be adopted)
If it lacks goodfaith (A term that causes a significant imbalance between the rights and obligations of the various parties to the contract to the detriment of the consumer will be deemed to be in breach of good faith. )
What is the consumer rights act 2015?
Main things to remember about CRA:
It covers unfair contract terms
It covers what to do when digital goods are faulty ( first to do this )
Covers what should happen if a service is provided in a way not agreed or with reasonable care or skill
Before 2015, what is the name of the legislation that covered unfair contract terms and what was this revoked by?
Unfair Terms in Consumer Contracts
Regulations 1999 and was revoked and reformed by the consumer rights act 2015
What is the name of the section in the FCA handbook that outlines the different things the FCA can do when a contract term is deemed unfair?
The FCA’s Unfair Contract Terms and Consumer Notices Regulatory Guide (UNFCOG)
It outlines the different things it can do (for example, getting the firm to amend the unfair term for future contracts )
Schedule 2 to the CRA and the UTCCRs each contain an indicative and non‑exhaustive list of types of terms that
may be regarded as unfair. If a contract does not include any of these listed terms does this mean it cannot be deemed as unfair?
No, it does not totally remove the risk of unfairness.
Firms need to assess whether a term is fair under the CRA/UTCCRs as a whole and in the context of the particular
product or service.
What is the Unfair Terms in Consumer Contracts Regulations 1999?
The regulation that governed unfair contract terms before the consumer rights act 2015 cam along
What is the FCA’s Unfair Contract Terms and Consumer Notices Regulatory Guide?
It is part of the FCA’s handbook, and outlines the different things the FCA can do in response to an unfair contract term (for example, getting the firm to amend the unfair term for future contracts)
Membership of the Financial Ombudsman Service is compulsory.
True or false
Any organisation authorised under the FSMA 2000, membership of the Financial Ombudsman Service is compulsory
The service is funded through a general levy on members, plus case fees.
What is a time-barred complaint?
Tell me the time frames for the FOS and the POS
A complaint made outside the time
limits for referral to the FOS; a firm
may reject such a complaint, via a
final response, without considering
its merits
Complaints to the FOS must be made within six months of receiving a final
response letter, six years of the event that gives rise to the complaint, or within
three years of the time when the complainant should have become aware that they had cause for complaint, whichever is the later.
NOTE: Complaints and disputes involving PPs, OPs or the PPF must be communicated to the Pension Ombudsman service in writing within three years of the event being complained about.
What does and does not the Pensions Ombudsman Service deal with in relation to complaints?
Deals with complaint involving:
Personal pension schemes
Occupational pension schemes
The Pension Protection Fund (PPF)
Does NOT deal with complaints involving:
The sale of pension schemes (the FOS does this)
The marketing of pension schemes (the FOS does this)
State pensions
Who are the Pension Ombudsmen Services’ ombudsmen (the ones that make the final decision) appointed by?
They are appointed by the secretary of State for Work and Pensions
Tell me about the FSCS protection for insurance
Long‑term insurance and for certain types of general insurance = 100% of the value of
the policy with no upper limit.
Long‑term and general insurance that
provide benefits on death/disability only = 100%
Long‑term policies that include savings as well (endowments) as a protection element… the protection element has 100% protection.
Annuities that are being used to provide an income = 100%.
Insurance that is compulsory (such as employers’ liability cover or motor insurance) = 100%
Any other type of insurance the compensation limit is 90% of the claim with no upper limit
The FSCS covers firms based in the Channel Islands or the Isle of
Man. True or false?
False, it DOES NOT
Tell me about the record keeping requirements for complaints?
Firms have to keep records of all complaints.
Records have to be retained for at least three years from the date a complaint is received.
Where the complaint relates to collective portfolio management services for a UCITS scheme, the minimum period for which
records must be retained is five years.
Where the complaint relates to MiFID business, records should generally be kept
for a minimum of five years and a maximum of seven years (although there are exceptions)
Who must firms report to if there are any significant personal data breaches
What can be done in response?
Firms should report significant personal data breaches to the Information Commissioner
Serve information notices (Requiring the organisation to provide the Information Commissioner’s Office with specified
information within a certain time period)
Issue undertakings (Committing an organisation to a particular course of action in order to improve its compliance)
Serve enforcement notices (Requiring organisations to take (or refrain from taking) specified steps in order to ensure they comply with the law)
Conduct consensual assessments (audits)
Serve assessment notices (conduct compulsory audits to assess whether organisations’ processing of personal data
follows good practice)
Issue monetary penalty notices
Prosecute
Issue a ban
What is the max penalty for an offence committed UK GDPR
The maximum penalty is the higher of £17.5m or 4 per cent of an organisation’s total annual worldwide turnover in the previous financial year
Who are the pensions regulator?
The Pensions Regulator (TPR) is responsible for the regulation of work-based
pension schemes (as well as some personal pension schemes)
It takes a proactive risk based approach
- Which of the following is not one of the Financial Conduct Authority’s Principles for Businesses?
1) Customers: relationships of trust.
2) Facilitation of competition.
3) Management and control.
4) Relations with regulators
The answer is 2
It is not 4 because this is about how a firm must disclose any info to the PRA or FCA upon request that would be reasonably expected
Tell me what the following sourcebooks are about:
Market Conduct sourcebook
Client Assets sourcebook
Market Conduct sourcebook - this concerns investment markets and is therefore primarily of interest to investment firms. It covers such issues as insider dealing.
Client Assets sourcebook - contains the requirements relating to holding client assets and safe custody of client assets.
Can an independent financial advisor receive commission for the following product: income protection insurance?
Is commission available for investment based business?
An insurance company can still pay commission in relation to sales of insurance such as term assurance and income protection.
Commission is NOT permitted in relation to investment business
What products are Key Information Documents (KIDs) required for?
A KID must be provided if a customer is buying a packaged retail and insurance-based investment product (PRIIP).
A PRIIP is defined as an investment where the amount repayable to the retail investor is subject to risk and fluctuation as a result of exposure to reference values or the performance of assets not directly held by the client; or an insurance-based product that is exposed to market fluctuations.
What is a PRIIP?
A PRIIP is a packaged retail and insurance-based investment product (PRIIP).
A PRIIP is an investment where the investment is subject to risk and fluctuation as a result of exposure to reference values or the performance of assets not directly held by the client; (for example: unit trusts, investment trusts, structured products)
or an insurance-based product that is exposed to market fluctuations ( with-profit endowments or unit linked endowments or investment bonds(unit linked) )
Out of the following product types tell me which are classed as a being a PRIIP and which ones are not.
-Derivatives
-Structured products
-Directly held shares, GILTS or BONDS
-Pension Products
-Investment Trusts
-Deposits with no investment risk ( savings accounts )
-General insurance and protection based insurance with no surrender value
-Insurance based investments (with profits or unit linked)
Non UCITS retail schemes (unit trusts, OEICs)
Explain why this is
If a product is classed as a PRIIP what extra requirement is there?
PRIIP = packaged retail and insurance-based investment product
A PRIIP is any investment where the amount repayable to the investor is subject to risk and fluctuations AND the underlying assets of the investment are not directly held by the investor (ie unit trusts)
Therefore this is why these products are classed as PRIIPs
Because they are classed as PRIIPs they have an extra requirement which is key information document (KID) must be provided to the investor. NOTE: a KID must be no more than 3 A4 pages and easy to understand
When must a KID get provided and when must a KIID be provided?
KID’s (Key Information Documents) must be provided to customers who buy products which are classed as PRIIPs
KIID’s (Key Investor Information Documents) must be provided to investors buying products classed as UCITS
What are KIID’s
What do they include to highlight the risk of an investment?
KIIDs are Key Investor Information Documents
They must be providers to investors buying product which are classed as a UCITS ( basically the EU equivalent to KIDs which is the doc that must be provided investors who buy products classed as PRIIPs)
The KIID contains a synthetic risk and reward indicator (SRRI) – a numerical
scale from one to seven (low risk to high risk–reward potential), based on
the volatility of a UCITS’s past performance.
After arrears have arisen, within what period should mortgage customers be provided with specific information from their lender?
15days
