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CeMAP 1 - UKFR > Topic 24 > Flashcards

Topic 24 Flashcards

Other regulation affecting the advice process (103 cards)

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1
Q

What legislation replaced the Data Protection Act 1998 in the UK?

A

The Data Protection Act 2018, which incorporates the General Data Protection Regulation (GDPR), retained in UK law as UK GDPR after Brexit.

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2
Q

What does ‘personal data’ mean under UK GDPR?

A

Personal data is information that can directly or indirectly identify an individual, such as name, ID number, location data, or online identifiers.

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3
Q

What are the six data protection principles under UK GDPR?

A

Processed lawfully, fairly, and transparently

Collected for specified, legitimate purposes

Adequate, relevant, and limited to necessity

Accurate and kept up to date

Retained no longer than necessary

Processed securely

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4
Q

What are ‘special categories’ of personal data?

A

Sensitive data needing extra protection, including race, religion, political beliefs, trade union membership, health, sexual orientation, biometric and genetic data.

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5
Q

Who is a data subject?

A

A natural person whose personal data is processed.

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6
Q

What is a data controller?

A

A legal person (usually an organisation) who determines why and how personal data is processed and ensures compliance with data protection rules.

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7
Q

What is a data processor?

A

A person or organisation that processes personal data on behalf of the data controller.

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8
Q

What are the lawful bases for processing personal data under UK GDPR?

A

Consent

Contract

Legal obligation

Vital interests

Public task

Legitimate interests

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9
Q

What rights does a data subject have under UK GDPR?

A

The right to access, correct, erase, object to processing, and transfer their data.

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10
Q

What must organisations do to demonstrate compliance with UK GDPR?

A

Establish governance roles, record processing operations, document policies, and perform data protection impact assessments for high-risk activities.

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11
Q

What is a restricted transfer under UK GDPR?

A

A transfer of personal data to a non-UK controller or processor, allowed only if the recipient is covered by UK adequacy regulations or safeguards are in place.

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12
Q

Who is responsible for enforcing the UK GDPR?

A

The Information Commissioner.

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13
Q

What must firms do in the event of a significant personal data breach?

A

Report it to the Information Commissioner.

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14
Q

What powers does the Information Commissioner have to enforce UK GDPR?

A

Require information from organisations

Conduct compulsory audits

Issue undertakings

Issue monetary penalty notices

Serve enforcement and assessment notices

Serve ‘stop now’ orders

Prosecute

Conduct consensual assessments (audits)

Issue temporary or permanent bans on data processing

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15
Q

What is are the criminal offences under UK GDPR?

A

Failing to comply with an information or enforcement notice

Failing to properly notify the ICO

Processing data without authorisation

Re-identifying individuals from pseudonymised or anonymised data

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16
Q

What is the maximum penalty under UK GDPR for serious breaches?

A

The higher of £17.5 million or 4% of an organisation’s total annual worldwide turnover from the previous financial year.

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17
Q

What does the Pensions Regulator (TPR) oversee?

A

Work-based (occupational) pension schemes and some personal pension schemes with direct pay arrangements.

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18
Q

What are the key aims of the Pensions Regulator?

A

Ensure automatic enrolment

Protect scheme members’ benefits and savings

Promote good scheme administration

Reduce risks leading to Pension Protection Fund claims

Maximise employer compliance under the Pensions Act 2008

Minimise impact on sustainable employer growth

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19
Q

How does the Pensions Regulator approach its work?

A

With a risk-based approach, focusing on prevention rather than reaction, considering both likelihood and impact of risks.

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20
Q

What are the three broad categories of TPR powers?

A

Investigating schemes

Putting things right

Acting against avoidance

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21
Q

Give two examples of actions TPR might take when “putting things right.”

A

Recover unpaid contributions

Disqualify unfit trustees

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22
Q

What powers does TPR have to act against avoidance?

A

Prevent employers from avoiding obligations

Issue contribution notices

Issue financial support directions

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23
Q

What must pension trustees have under the Pensions Act 2004?

A

Sufficient knowledge and understanding of pension and trust law, scheme funding, investments, and scheme documentation.

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24
Q

What is the purpose of the Pension Protection Fund (PPF)?

A

To protect members of private sector defined-benefit schemes when an employer becomes insolvent and cannot fully fund pensions.

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25
What else is the PPF responsible for?
The Fraud Compensation Fund, which provides compensation to schemes affected by dishonesty.
26
How does the PPF fund its compensation payments?
Levy on defined-benefit schemes Taking on assets of transferred schemes Recovering assets from insolvent employers Investment growth
27
Does the PPF always provide 100% of pension benefits?
No, it provides varying levels of compensation, with full benefits paid only in limited circumstances.
28
What directive led to the creation of the Electronic Money Regulations 2011 in the UK?
The second Electronic Money Directive (2EMD).
29
When did the Electronic Money Regulations 2011 come into effect in the UK?
30 April 2011.
30
What do the Electronic Money Regulations 2011 cover?
Authorisation, registration, and prudential standards for electronic money institutions (EMIs).
31
What regulation retained the Electronic Money Regulations post-Brexit?
The Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018.
32
What did the 2023 regulations change regarding the FCA’s powers?
Removed limitations on the FCA’s ability to make rules for authorised and small EMIs and other similar institutions.
33
What does MiFID regulate?
Firms providing services relating to tradeable financial instruments like shares, bonds, and derivatives.
34
When did MiFID become effective in the UK?
November 2007.
35
What are the three main objectives of MiFID?
Improve conduct of business Strengthen organisational requirements Enhance market transparency
36
What are core and non-core activities under MiFID?
Core: Investment services and activities Non-core: Ancillary services
37
What is the MiFID 'passport'?
Allows firms authorised in one EEA state to operate throughout the EEA based on that single authorisation.
38
Which UK body incorporated MiFID into its rules?
The Financial Conduct Authority (FCA).
39
What event triggered MiFID II reforms?
The 2008 financial crisis.
40
Name three areas covered by MiFID II reforms.
Transparency (e.g., for non-equity investments) Enhanced investor protection Organisational requirements, including product governance
41
What does MiFID II require regarding cost disclosures?
Aggregated disclosure of all adviser and product charges.
42
How does MiFID II address high-frequency trading?
Imposes measures to ensure it does not negatively impact markets.
43
What is MiFID II's requirement concerning suitability?
Suitability must be assessed not only when buying or selling but also when holding an investment.
44
What is the main goal of the UCITS Directive?
To provide a common framework of investor protection and product control across the EU.
45
What does UCITS allow through mutual recognition?
It allows the free circulation of fund units across the EU based on a single authorisation.
46
What requirements must UCITS funds meet?
Adequate spread of risk and high liquidity for investor redemption.
47
What did UCITS V aim to improve when implemented in March 2016?
Investor protection standards and customer confidence.
48
What happened to UK UCITS funds after Brexit?
They lost their passporting rights and are treated as AIFs in the EU.
49
What types of funds does AIFMD cover?
Funds not eligible under UCITS, such as hedge funds, private equity, and real estate funds.
50
Who is AIFMD primarily aimed at?
Professional investors.
51
What does AIFMD provide for fund managers?
A passporting framework for managing and marketing funds across the EU.
52
Can AIFs be marketed cross-border to retail investors using the passport?
No, local member state rules apply instead.
53
When did AIFMD come into force?
22 July 2011.
54
What happened to UK-domiciled AIFs post-Brexit?
They lost their EU marketing passport and must follow member state rules to market in the EU.
55
What are the two main objectives of a single EU insurance market?
Access to a wide range of insurance products with strong legal and financial protection Allow insurers authorised in one EU country to operate across the EU
56
Why are life and non-life insurance treated separately in EU legislation?
Due to their different characteristics and life assurance's links to long-term savings.
57
What EU legislation provides the framework for life assurance regulation?
The Consolidated Life Directive (2002).
58
What types of insurance are included in the definition of life assurance?
Life insurance, annuities, and income protection insurance.
59
Who is responsible for the ongoing financial supervision of a life assurance firm?
The regulator in the firm's home state.
60
What must life assurance policyholders be given?
Clear, accurate product information and a key features document.
61
What cooling-off protection is offered to life assurance applicants in the UK?
A statutory cancellation period (cooling-off period), as required by FCA rules.
62
Was the Consolidated Life Directive retained in UK law post-Brexit?
Yes.
63
What did the Second Non-Life Council Directive (1988) allow?
It allowed insurers to supply insurance in other EU states without establishing a branch or subsidiary.
64
What was the purpose of the Third Non-Life Council Directive (1992)?
It allowed insurers to establish branches in other EU countries under the supervision of their home state regulator.
65
How is authorisation granted under the Third Non-Life Directive?
By class of insurance, with the possibility of being authorised for multiple classes.
66
What was the purpose of the Insurance Mediation Directive (IMD)?
To allow insurance intermediaries to operate across the EU and regulate sales standards.
67
How is "insurance mediation" defined under the IMD?
As introducing, proposing, concluding, or assisting in the administration of insurance contracts.
68
Are tied agents included in the IMD's definition of insurance mediation?
No, tied agents and company employees are excluded.
69
What must intermediaries be registered with?
A competent authority in their home state (e.g. FCA in the UK).
70
What are the professional requirements for insurance intermediaries?
General, commercial, and professional competence, plus good repute.
71
What are the 'good repute' criteria under IMD?
No serious financial crime convictions or bankruptcy declarations.
72
What insurance must intermediaries hold under IMD?
Professional indemnity insurance to a minimum threshold or a percentage of annual income.
73
How must intermediaries handle client funds?
Through segregated accounts and with a minimum level of financial capacity.
74
What details must intermediaries give about themselves?
Name, address, registration, ownership links, complaint procedures, and whether they’re tied or independent.
75
What must independent intermediaries base their advice on?
Analysis of a sufficiently large number of contracts to recommend suitable products.
76
What must intermediaries provide to justify product recommendations?
An assessment of needs and reasons for recommendations, documented via a factfind and suitability letter.
77
How should all information be communicated to the customer?
Clearly, accurately, and in a way that is comprehensible.
78
What replaced the Insurance Mediation Directive in 2018?
The Insurance Distribution Directive (IDD).
79
What was the main aim of the IDD?
To harmonise standards, improve consumer protection, and ensure consistency across the EU.
80
When is the FCA implementing IDD rules in the UK?
From April 2024.
81
What annual training must intermediaries now complete under IDD?
At least 15 hours of continuing professional development (CPD).
82
How must intermediaries act under the IDD?
Honestly, fairly, and professionally in the best interests of customers.
83
What new standardised document is required for products?
The Insurance Product Information Document (IPID).
84
What sales practices are now regulated under the IDD?
Direct sales, comparison websites, bundled products, and life insurance with investment elements.
85
How does the IDD support cross-border distribution?
Through a single electronic register of cross-border intermediaries and simplified procedures.
86
What is the purpose of oversight groups in financial services?
To ensure that investments and operations are handled safely, honestly, and in compliance with laws and regulations, protecting all stakeholders.
87
Who can carry out oversight functions in financial institutions?
Auditors, trustees, compliance officers, and similar roles.
88
What is the main responsibility of external auditors?
To provide assurance that published financial statements are free from material misstatement and follow legislation and accounting standards.
89
Who do external auditors typically belong to?
Professional bodies like the ICAEW or ACCA, which publish ethical codes.
90
What is the primary role of internal auditors?
To assess risk management, check internal controls, evaluate operations, and suggest improvements—but not to implement controls.
91
Who may perform internal audit functions?
In-house staff or outsourced professionals; often members of the Chartered Institute of Internal Auditors.
92
What is the role of a trustee?
To ensure that assets held in trust are managed according to the trust deed for the benefit of the beneficiaries.
93
What is an example of a trust in financial services?
Unit trusts and occupational pension schemes.
94
What legislation outlines trustees’ responsibilities?
Trustee Act 1925 (general duties) and Trustee Investment Act 2000 (investment responsibilities).
95
Why are pension scheme trustees important?
They ensure pension assets are separate from the employer’s business assets for member security.
96
What is the role of a compliance officer?
To ensure the firm complies with all relevant legislation and regulatory requirements.
97
Under which regulatory regime do compliance officers operate?
The Senior Managers and Certification Regime (SM&CR)
98
What are key responsibilities of a compliance officer?
Producing compliance manuals, maintaining records (e.g., complaints), liaising with the FCA, and ensuring staff meet FCA requirements.
99
What additional role must firms appoint?
A Money Laundering Reporting Officer (MLRO).
100
Which professional body might compliance officers belong to?
The Association of Professional Compliance Consultants.
101
Why are codes of conduct important in financial services?
They set ethical and professional standards for individuals and firms to follow.
102
What must an adviser declare to receive a Statement of Professional Standing (SPS)?
That they meet professional standards and adhere to their body’s code of ethics.
103
Name two other examples of codes of conduct in financial services.
The Advertising Standards Authority and The Standards of Lending Practice.

CeMAP 1 - UKFR (25 decks)

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