1 Flashcards
1
Q
Financial services 4 essential functions
A
Protect customer savings
Allow savings to be lent to others
Provide protection against risk
Disperse risk
2
Q
GILT
A
Pay a fixed level of interest over a term then the investment is returned
3
Q
Discretionary management
A
Act within a remit for client so do not ask for permission per transaction
4
Q
Advisory management
A
Need to ask permission per transaction
5
Q
Fiscal policy
A
Government’s control of taxation and their borrowing and spending
6
Q
Monetary policy
A
Control interest rates and supply of money
7
Q
Quantitative easing
A
creating new money and then using it to ‘buy back’ loans from institutions, such as banks and companies
8
Q
Customers hierarchy of needs
A
BMBPSRET - budgeting no. 1
9
Q
What did MAPS replace?
A
Pension wise, pension advisory service and money advice service
10
Q
Debt repayment plan
A
Informal agreement with creditor
11
Q
Debt management plan
A
Agent carries out agreement with credit for repayment of debt
12
Q
IVA
A
75% of creditors must agree, carried out by an insolvency practitioner, pay back % of overall debt
13
Q
Brankruptcy
A
Min. Of £5k, carried out by a trustee and lasts 12months
14
Q
Home reversion scheme
A
Sell a % of the house which is repaid upon death or sale of property. Pay rent whilst live i property for proportion not owned.
15
Q
Peppercorn rent
A
Rent paid for home reversion scheme
16
Q
Fixed repayment lifetime mortgage
A
An agreed premium is added to debt each month for sale of property and no interest is paid.
17
Q
Diminishing Musharaka
A
The firm facilitating the arrangement buys the property and each repayment transfers a share of the property to the purchaser
18
Q
Convertable term assurance
A
Gives the opportunity to turn into a life policy without further medical questioning
19
Q
Renewable term assurance
A
Can renew policy for additional term without further medical questioning
20
Q
Whole of life assurance
A
Life assurance with no end date
21
Q
HTB ISA
A
Max. Of £12k put I on own, can put in £200pm, max of £1,200 for first instalment, 16+
22
Q
LISA
A
£4k max. Per year, latest opt in 40 and last payment at 50 then withdraw from 60, stocks and shares aswell as cash, 18+
23
Q
Personal savings allowance
A
£12,750 plus £5k for savings income
24
Q
Derivative
A
This is the option to buy shares at a price in the future, set now.
25
Tax evasion
Illegally dodging tax
26
Self employment NIC
2 & 4
27
Limited liability partnership
Separate legal identity but same tax as sole trader so class 2 & 4 NIC
28
Limited liability company
Must be set up with memorandum of association and pay corporation tax
29
Public limited company
25% min. must be on stock exchange
30
Difference between insolvency and bankruptcy
Business goes insolvent and a person goes bankrupt
31
Bankruptcy order of repayment preference to corporate insolvency
1. Fees 2. Preference debts 3. Unsecured debts
1. Secured debts 2. Fees 3. Preference debts eg wages 4. Unsecured debts 5. Interest
32
What is needed for a contract to be valid
Offer, acceptance and intention
33
How to buy freehold
Must have 21 years remaining on lease and have lived in the property for 2 years and must have 50% agree to it if block of flats
34
General power of attorney
Enduring power of attorney
Lasting power of attorney
General - ends at mental incapacity
Enduring - continues beyond mental incapacity but no provision for health care
Lasting - provisions for health care also
35
What is the only thing to effect a lasting power of attorney
Bankruptcy stops health and welfare decisions
36
Where is a lasting power of attorney registered
Office of public guardian
37
Requirements for a valid will
2 people as witness and in writting
38
Actions that revoke a will
Marriage/civil partnership, writing a new will, deliberately destroying a will
39
What happened with estate if died intestate
With wife then spouse gets all chattels plus £270,000 then 50% over this
Children - grandchild - parent - sibling - grand parent - aunt/uncle
40
Grant used for with and without will
Will - probate
Intestate - grant of administration
41
Types of trust
Express
Implied
Resulting
Bare/absolute
Successive
Power of appointment
Interest in possession
Discretionary
Statuatory
Express - expresses wishes
Implied - implied as a result of an action
Resulting - takes effect when another will fails
Bare/absolute - fixed or unchangeable beneficiary
Successive - passed to family successors
Power of appointment - get to assign trust to appoint within class of beneficiaries
Interest in possession - person has immediate right to income
Discretionary - trustees have openness and power to choose within a group of beneficiaries
Statuatory - created by law eg intestate
42
FCA 3 operational objectives
PIC
Protection, integrity, competition
43
Occupational pensions registary and what other register is kept by the TPR
This register is to help individuals who are trying to trace old company schemes and other register is for those that are banned from acting as a trustee
44
Max punishments by The Pension Regulator
£5k for individuals and £50k for businesses and daily charges of £400-£10k for on-going issues
45
Information commission officer
Enforce compliance for GDPR
46
EU decisions, directives and regulations
Decisions - enforceable immediately and measures that effect an individual or state eg something that effects an individuals rights
Directives - binding but state decides how to reach within date
Regulations - do not require ratifications and immediately effect state eg change to currency
47
How are you subject to MiFID II
If you hold client moneys
48
What did MiFID do?
Widen scope of investment products, easier to trade across EU and capital requirements introduced, changes to advice process eg recording advice or disclosure
49
Basel II pillars
Min. capital requirement
Need for additional capital above min.
Public risk management and capital stats
50
FCA 8 regulatory principles
Efficiency and economy
Proportionality
Sustainable growth
Responsibility of consumers
Responsibility of SM
Recognition of business differences
Openness and disclosure
Transparency
51
3 FCA areas of responsibility
Authorisation, supervision, enforcement
52
How long does FCA have to process an application
6 months if complete and 12 months if incomplete application
53
Fixed and flexible portfolio firms
Fixed - larger, higher risk companies and supervised to pillar 1
Flexible - most firms who carry smaller risk to markets and supervised to pillar 2 & 3
54
3 pillars of supervision
1. Proactive
2. Event driven
3 Thematic
55
Who sets punishment for FCA and who can you appeal to if disagree
Regulations Decision Comittee and if appeal Upper tribunal
56
Free asset ratio
Surplus assets, usually for life office
57
Temporary transition power
Allow UK to switch rules from EU
58
On shoring process
Amending EU rules to UK only
59
Short selling
Trader borrows shares and speculates on price movements
60
Types of FCA fees
Application - starts at £2.5k and if wishes to vary authorisation then is 50% of application fee but if not changing fee block then flat £250 fee
Periodic - paid annually and tariff based
Special projects - special requests eg mergers
61
Fixed overheads
Costs to enable a firm to run day to day. Classed as fixed as they do not change much. Eg rent, staff, etc.
62
Smaller firms must fulfill capital resource requirement of?
25%
63
Acceptable capital within CRD
Tier 1 - permenant share capital
Tier 2 - non permenant capital
Tier 3 - company debts that have short term maturity
64
Retail distribution review ensured any payment can only be made to intermediary unless?
Intermediary waives right and passes to customer
Another firm has been involved
Is a packaged product
65
Can commission increase with volume?
No
66
Record keeping
Record of any benefits received
Sales referrals
Benefits - 5yrs
Referrals - 1yr
67
What report is done for insurance?
Demands and need statement
68
Insurance cooling off periods
General - 14 days
Protection - 30 days
69
PPI cap?
20% of amount recovered
70
Mortgage market review brought in what 3 new things
More stringent affordability tests
stress tests
FCA accountability on advisors
71
Mortgage credit directive three new things
New disclosure method
7 day reflection period
New categories of BTL mortgages
72
When are you subject to MiFID?
If you hold client monies
73
Market abuse directive brought in what 2 things
Insider dealing
Market manipulation
74
Who decides FCA punishments and who controls them. Then who can you raise that to under point of law only?
Upper tribunal and Lord Chancellor’s Department and raise to court of appeal
75
Complaints commissioner must receive a complaint by when and how long to til they reply?
3months and reply in 3 days, keep you updated every 4 weeks and resolve within 12 weeks
76
Consumer credit agreement was for how much?
Under £25k
77
Cooling off period for a credit agreement
7 days
78
Consumer credit agreement brought in what?
removed the £25,000 limit, but it also introduced two new exemptions which are loans:
over £25,000 where these are for business purposes.
where a debtor is categorised as a high net worth individual.
79
FTOC 6 positive consumer outcomes
Consumers can be confident… fair treatment of customers is central to the corporate culture.
Products and services… meet needs of identified consumer groups.
Clear information provided before, during and after the point of sale.
Advice is suitable
Product performance and the service provided are as expected.
Consumers do not face un-reasonable post sale barriers
80
Retail distribution review brought in what 3 things?
minimum qualification levels, difference between sales and advice and changes in how we charge clients for services.
81
Sandier review brought what?
Stakeholder products
82
What report is written for stakeholder products
Recommendation summary
83
Do you need a qualification to advise on stakeholder products?
No
84
Lifestyle fund
Find that switches automatically to lower risk 5yrs before retirement
85
Elective client
Per se client
Eligible counter party
E - due to knowledge and experience
P - due to nature of role
ECP - both of above
86
If proceeding with an insistent client’s transaction must get what
Signed letter stating going against advice
87
Fiduciary duty
Highest standard of care
88
Fiduciary
The person who has a fiduciary duty
89
Kid must include what things?
ARCTIC
Aims, risks, costs, tax implications and cancellation rights
90
CFPPM booklet is provided to what type of insurance?
With-Profits fund
91
What has 30 day cooling off period
Anything with life, pension or annuity in the name
92
Record keeping for MiFID and non-MiFID and pensions
5yrs MiFID
3yrs non-MiFID
Pensions are indefinitely
93
Purpose of supplementary questionnaires on top of fact find?
To keep FF streamlined and clients engaged
94
What do you do if a client wishes to change priority from usual priority order?
Fully document on the fact find
95
Methods of ethical screening
Neutral approach
Negative screening
Positive screening
NA - choose socially responsible firms
NS - avoid certain practices
PS - actively seek out ethical firms
96
For what products are a suitability report not required?
Non-regulated activities. NS&I and stakeholder products are two examples of products that use a simplified advice process.
97
If it is FCA rules v principles which one wins?
Principles
98
FCA 11 principles
1. Integrity
2. Skill, care, due diligence
3. Management and control
4. Financial prudence
5. Market conduct
6. Customers interests
7. Communications with customers
8. Conflicts of interest
9. Customers relationship of trust
10. Clients assets
11. Relationship with regulators
99
What must a firm do first if breach FCA principles
Inform FCA then carry out remedial action
100
Principle based and outcome based regulation mean
P- Encouraging types of behaviour
O - Predicting the future issues
101
Who is responsible for compliance within a firm
SM
102
Additional FCA principle
Consumer duty principle
103
Consumer duty principle 3 elements
Sets a high standard of conduct for marketing activities
Cross-cutting rules - sets key behaviours required
4 outcomes - sets keys for firm to customer relationships
104
FCA 6 key cultural drivers
Leadership
Strategy
Decision making
Controls
Recruitment/training
Reward
105
What form is required to give permission to be an authorised person?
CF form
106
FCA categories of approved person
Governing functions - directors
Significant management function- SM but non executive
Customer dealing function
FCA governing functions - responsible for conduct
107
7 Principles for approved person
Integrity
Skill care and due diligence
Market conduct
Openness organisation and control
Skill care and diligence in managing
Compliance
108
Retail distribution review within investment firms require what certification?
Statement of professional standings
- adhere to code of ethics
- Hold necessary qualifications
- Completed CPD
- Comply with code of standards
109
Bribery act 3 new offences
Offering, promising or giving a financial or other advantage, intending to bring about improper performance (‘Giving a bung’ basically).
Bribery of a foreign public official.
Failure of a firm to prevent bribery.
110
Aldermanbury declaration
general insurance sector signing up to a common set of professional standards in relation to knowledge and conduct.
111
An ethical framework for financial services found what 3 points
Be open, honest, responsive and accountable.
Be committed to acting competently, responsibly and reliably.
Relating to colleagues and customers fairly and with respect.
112
Dilemma resolution model
‘go around the loop’ more than once until the dilemma is resolved.
113
For MI to be effective it must be…
Seen
Challenged
Analysed and monitored
Acted on
Recorded
114
PRA 4 categories for intervention framework
Low risk, moderate viability, imminent risk, firm wind up
115
Criminal punishments for:
- money laundering and general prohibition
- failure to report suspicions
- Making misleading statements or insider dealing
- POCA 2002 offences such as concealment of criminal property or assisting others to do this
2yrs
5yrs
7yrs
14yrs
