The regulatory advice framework Flashcards
(20 cards)
What 4x categories of customer types must a firm identify under FCA regulation?
Eligible counterparty - large financial institutions with the lowest level of investor protection
Professional client - as above but require a higher level of service and a higher level of protection
Retail client - ‘the person in the street’ with the highest level of protection
Vulnerable clients - especially susceptible to harm due to personal circumstances
In 2018, the FCA made changes to the definition of ‘advice’, in line with amendments to the Regulated Activities Order 2001. How?
Defining the difference between guidance and advice.
Investment advice can only be given by authorised firms with specific permission. Therefore, what constitutes as guidance in lieu of regulated advice?
Providing product and generic information to identify options. Information must be balanced and the advisor cannot express an opinion/make a recommendation
What is focused advice?
Focused advice provides personal recommendations relating to a specific need at the request of the client
What is simplified advice?
The advice focuses on a specific area of need and does not consider other information that is not relevant to that need. The provider decides the level of advice to be offered.
What is basic advice?
Restricted advice, using a series of pre‑scripted questions to assess the suitability of products
What is Robo-advice (automated advice)?
Online advice based on computer algorithms rather than the services of an adviser
What is independent advice?
Advice based on an analysis from the whole market. Must be fair/unbiased.
What is restricted advice?
Advice based on the products of one or a limited number of companies.
What happens if a client has a need outside of the authorisation of the advisor?
The client should be referred to a suitably authorised, qualified and experienced adviser, either from the adviser’s own firm or another firm
What matters are beyond the scope of the FCA and not subject to the FOS and FSCS?
Taxation, wills, legal matters such as trusts or certain unregulated investments
When is a Client agreement required?
When a firm provides services in relation to designated investment business other than purely advising on packaged investments
What types of non-PRIIP products are subject to
different disclosure rules? 6x
pension products
purchase annuities with fixed/escalating income
non‑life and general insurance
deposits
ISAs
gilts
When a firm is offering advice and personal recommendations on a retail investment products (investments, life assurance and pensions) they are subject to what? And how does it differ from general and protection‑only business?
Adviser charging rules. They cannot take a commission from insurers
What is a customer’s cancellation period for life assurance, annuities, pensions, Lifetime ISAs and pure protection insurance?
30 days
What is a customer’s cancellation period for investments, stocks and shares ISAs, and cash deposit ISAs?
14 days
What is the procedure for the cancellation of a unit trust, OEIC or investment bond, where a lump sum has been invested?
If the value of the investment has fallen; the client would receive back the lower of their original investment and the current offer price of units.
What is Proactive servicing?
Instigating action by contacting the client to discuss further needs in the form of reviews.
What is Reactive servicing?
A client request to discuss a situation e.g. after unexpected changes in their circumstances or news/media information
