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Study Mistakes Flashcards

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1
Q

What is the minimum timing for capital adequacy requirement for banks?

A

Annually, but potentially more if significant changes occur

Capital adequacy ensures banks maintain sufficient capital to cover risks.

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2
Q

What can the FPC compel banks to do?

A
  • Increase capital
  • Adjust variable risk weight
  • Set leverage limits

The FPC focuses on the stability of the financial system.

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3
Q

The FCA has concurrent powers for which acts?

A
  • Competitions Act
  • Consumers Rights Act

These powers are exercised alongside the Competition Markets Authority.

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4
Q

What is the fine imposed by the Pension Regulator for individuals and companies?

A
  • £5k for individuals
  • £50k for companies

These fines are for non-compliance with pension regulations.

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5
Q

What is the age range and conditions for auto-enrolment in pensions?

A

22 to pension age, above £10k

Auto-enrolment mandates employers to enroll eligible employees in pension schemes.

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6
Q

What is the role of the Bank of England regarding financial stability?

A

Scanning for risks in the UK financial system

The BOE monitors and mitigates potential financial crises.

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7
Q

What does the Capital Requirements Directive ensure?

A

Banks have enough money

This directive sets out the capital requirements for banks to ensure financial stability.

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8
Q

In bankruptcy, what is the minimum debt amount that requires showing inability to pay?

A

£5k or more

This threshold is necessary for initiating bankruptcy proceedings.

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9
Q

What is the order of payment in bankruptcy?

A
  • Bankruptcy costs
  • Employees
  • Government
  • Floating charge creditors
  • Unsecured creditors
  • Spouse last

This order determines how assets are distributed in bankruptcy.

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10
Q

What percentage of creditors must agree for an Involuntary Arrangement?

A

75%

This agreement allows for a structured repayment plan to creditors.

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11
Q

How often must an insolvency practitioner report?

A

Twice yearly

They oversee the arrangement and ensure compliance with regulations.

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12
Q

What are the three types of ownership?

A
  • Leasehold
  • Freehold
  • Commonhold

These terms define different property ownership structures.

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13
Q

True or false: Equity release is only for the elderly.

A

FALSE

Equity release can be accessed by anyone, not just older individuals.

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14
Q

What can and cannot a basic fact find used for?

A

Referral purposes

It cannot be used to inform wider family.

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15
Q

Who is responsible for the stock market?

A

FCA

The FCA regulates financial markets to ensure transparency and fairness.

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16
Q

What must basic advice include?

A
  • Reason for stakeholder choice
  • Suitability of product
  • Initial disclosure
  • Explanation of charges

Basic advice does not require a fact find.

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17
Q

Who holds Ultimate senior management responsibility?

A

Chief Executive

The Chief Executive is accountable for the firm’s overall management.

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18
Q

What is the cancellation period for anything pension-related?

A

30 days

This applies to life policies and LISA as well.

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19
Q

What is the cooling-off period for consumer credit?

A

14 days, except for mortgages

This allows consumers to reconsider their credit agreements.

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20
Q

What is the leverage ratio used for?

A

As a backstop for risk-weighted requirements

It ensures banks maintain a minimum level of capital relative to their total assets.

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21
Q

What does best execution require?

A

Appropriateness

Firms must ensure that the execution of orders is in the best interest of clients.

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22
Q

What is QE?

A

A funding method, not a money-raising method

Quantitative easing is used to stimulate the economy.

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23
Q

Can a sole trader employ others?

A

Yes

Sole traders can hire employees while maintaining their business structure.

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24
Q

What is the monetary policy primarily concerned with?

A

Interest rates

The Bank of England manages monetary policy to influence economic activity.

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25
What is the income threshold for **pension credit** eligibility?
Under £11k ## Footnote This credit provides additional financial support to eligible pensioners.
26
What does the **Commonhold Reform Act 2002** allow?
Leaseholders to buy or extend lease if lived in property for 2 years and lease is 21 years or more ## Footnote This act provides rights to leaseholders regarding their property.
27
What is the purpose of **administration**?
To save a company before bankruptcy ## Footnote Administration aims to rescue financially troubled businesses.
28
Who are the members of the **PRC**?
* Governor of BOE * Deputy Governor of PRC * Deputy Governor of Financial Stability * CEO of FCA * 6 external members * 1 member appointed by BOE ## Footnote The PRC oversees financial stability in the UK.
29
What are the **four FCA panels**?
* Practitioner Panel * Small Business Panel * Financial Services Panel * Markets Practitioner Panel ## Footnote These panels provide input on regulatory issues.
30
How often does the **FPC** report to the government?
Bi-annually ## Footnote The FPC provides updates on financial stability and risks.
31
How often does the **FCA** report to the government?
Annually ## Footnote This report includes the FCA's activities and regulatory outcomes.
32
What can be insured against in terms of FCA investigation?
Costs, not penalties ## Footnote Firms can insure against operational costs but not against regulatory penalties.
33
Who leads and decides the threshold for **dual regulated firms**?
PRA ## Footnote The PRA oversees the prudential regulation of banks and insurers.
34
What is the maximum duration for appointed representatives to hold assets?
28 days, but no cash under any circumstances ## Footnote This rule ensures proper management of client assets.
35
When are **suitability reports** needed?
* Before investments * Before pension transfers or conversions * After 14 days for pension payments ## Footnote These reports ensure that financial products are appropriate for clients.
36
What is the role of **internal audits**?
To be independent ## Footnote Internal audits assess compliance and operational effectiveness.
37
What does the **Pension Ombudsman** handle?
Occupational Pension and Personal Protection Fund ## Footnote The Pension Ombudsman resolves disputes related to pensions.
38
What does the **Financial Ombudsman** address?
Personal pensions and stakeholder issues ## Footnote The Financial Ombudsman helps consumers resolve complaints against financial firms.
39
What type of complaints go to the **upper tribunal**?
Decisions, authorisations, enforcement against firms ## Footnote The upper tribunal reviews regulatory decisions made by financial authorities.
40
What does the **Consumer Credit 2006** allow?
HNW individuals to opt out of protection ## Footnote This legislation provides certain exemptions for high-net-worth individuals.
41
What does **Solvency 2 directive** apply to?
Insurances without investments ## Footnote This directive regulates the insurance sector to ensure financial stability.
42
What is the focus of **leadership** in financial firms?
From the top ## Footnote Leadership sets the tone and direction for the organization.
43
What does **COBS** cover?
Investments only, not deposits ## Footnote COBS outlines conduct rules for investment firms.
44
When are **suitability reports** due?
* Investments: before * Pension: 14 days * Pension opt or transfer: before * Life Contract: before conclusion ## Footnote Timely reporting ensures compliance with regulations.
45
What is required for **termination of an AR**?
Reporting to FCA within 10 days ## Footnote Timely reporting is crucial for regulatory compliance.
46
What is **equity release** about?
Releasing money from property ownership for various reasons ## Footnote This financial product allows homeowners to access cash tied up in their property.
47
What is the cancellation period for **payment protection**?
30 days ## Footnote This allows consumers to reconsider their purchase of payment protection insurance.
48
What does the **Pension Ombudsman** oversee?
Pension Protection Fund and administration of occupational pension schemes ## Footnote The Ombudsman resolves disputes and complaints regarding pensions.
49
What are the **FCA Principles of Business**?
Guidelines for firms when no specific rules apply ## Footnote These principles ensure ethical conduct across financial services.
50
What are the **eight regulatory principles** for the FCA?
* Efficiency * Proportionality * Sustainable Growth * Consumer Responsibility * Senior Management Responsibility * Recognition of Differences * Transparency * Competition ## Footnote These principles guide the FCA's regulatory approach.
51
What does **MCOBS** state about residential mortgages?
40% of the house must be used as a dwelling ## Footnote This requirement ensures that residential mortgages are appropriately secured.
52
What is the timeframe for referring complaints to the **Financial Ombudsman**?
6 months after final response ## Footnote Consumers must act within this period to seek resolution.
53
What is the **attendance allowance** for?
For disabled individuals in retirement age ## Footnote This allowance provides financial support for those with disabilities.
54
What capital requirement does **MIFIDPRu** require for private independent firms?
£20k and 25% of fixed overheads ## Footnote This capital requirement ensures firms can operate effectively.
55
What is the best way to protect children from **IHT**?
Whole of life, last survivor in trust ## Footnote This strategy helps mitigate inheritance tax liabilities.
56
What gifts can **Lasting Power of Attorneys** make?
Reasonable sized gifts to relatives on birthdays ## Footnote This allows for some flexibility in financial planning.
57
What do **CASS rules** require?
Close off discrepancies by the end of the day or next business day ## Footnote This ensures accurate management of client funds.
58
What was the purpose of the **FSMA 2000**?
To bring all financial services under one roof ## Footnote This act established a unified regulatory framework.
59
What are the three authorities established by the **FSA 2012-2013**?
* PRA * FCA * FPC ## Footnote These authorities oversee different aspects of financial regulation.
60
What did the **Banking Act 2016** do?
Strengthened the governance of the Bank of England ## Footnote This act aimed to enhance financial stability in the UK.
61
What does **ICOBS** cover?
Insurance products and some protection products, not investments ## Footnote This sourcebook outlines conduct rules for insurance firms.
62
What does the **Data Protection Act 2018** allow the ICO to do?
Prosecute ## Footnote The ICO can enforce compliance with data protection regulations.
63
Under **CASS**, what is required if you have more than £1m of client money?
A senior manager responsible ## Footnote This ensures accountability for large sums of client funds.
64
What are **index-linked gilts** linked to?
RPI (Retail Price Index) ## Footnote These government bonds provide inflation protection.
65
What type of matters are **injunctions, restitutions, and insolvency**?
Civil matters ## Footnote These actions are typically resolved in a court of law.
66
What is the role of the **Financial Regulators Complaints Commissioner**?
To review complaints about UK financial services regulators ## Footnote This role ensures accountability and transparency in regulatory actions.
67
What must be provided when making a **product recommendation**?
Information about the product ## Footnote This ensures consumers are well-informed before making decisions.
68
How often is the **pension age** reviewed?
Every 6 years ## Footnote This review assesses the sustainability of the pension system.
69
What can **building societies** do?
Sell OEICs, ISAs, and unit trusts since 1992 ## Footnote This expansion allows building societies to offer a wider range of financial products.
70
What do direct offers and insurance life pension policies not require?
Client Agreement ## Footnote This exemption simplifies the process for certain financial products.
71
What must a **KIID** include?
Aims of investment and cancellation rights ## Footnote This document provides essential information for investors.
72
Who is responsible for the **fair treatment of customers**?
Firms, not FCA ## Footnote Firms must ensure they treat customers fairly in all dealings.
73
What is the **government-issued document** sufficient for money laundering purposes?
Passports and firearms certificates ## Footnote These documents are accepted for identity verification.
74
What are **gift inter vivos policies** for?
IHT in case you die within 7 years ## Footnote These policies help manage inheritance tax liabilities.
75
How long must **client agreements** be held?
* Indefinitely for pension opt-outs and AVCs * 5 years for business * Until client arrangement ends if longer than 5 years ## Footnote This ensures compliance with record-keeping regulations.
76
What is needed to ascertain **attitude to risk**?
* Understanding * Knowledge * Experience ## Footnote These factors help assess a client's risk tolerance.
77
What personal data is considered under **GDPR**?
* NI * Family circumstances * Address * DOB * Medical records ## Footnote Employers' addresses are not included as personal data.
78
What happens if a firm was previously authorized before the **FSMA**?
Automatically received authorization by the FSA ## Footnote This transition ensured continuity in regulatory oversight.
79
What can **Lasting POA** do regarding gifts?
Make gifts if granted by the Court of Protection ## Footnote This allows for some flexibility in financial management.
80
What is required under **CASS** for money reconciliation?
At least every 25 days ## Footnote Regular reconciliation ensures accurate management of client funds.
81
What drives **strategy** in financial firms?
Direction and leadership ## Footnote Leadership sets the tone for strategic objectives.
82
Who pays the **IHT** on an estate?
Personal Representative or legal person, executor or administrator ## Footnote The LPR is responsible for settling inheritance tax liabilities.
83
What are the **12 Principles of Business**?
Obligations of all FCA firms ## Footnote These principles guide firms in their operations and interactions with customers.
84
What can **Friendly Societies** now sell since 1992?
* OEICs * ISAs * Unit trusts ## Footnote This expansion allows Friendly Societies to offer a broader range of financial products.
85
What are the **sourcebooks** in the FCA handbook?
Various regulatory frameworks for financial firms ## Footnote These sourcebooks provide guidance on compliance and conduct.
86
What is the focus of **outcome-based** regulation?
Future-focused ## Footnote This approach emphasizes achieving positive results for consumers.
87
What is the core function of the **UK Financial Markets**?
Ensure the transfer of savings into protection and capital management ## Footnote This function supports economic stability and growth.
88
What is a **discretionary service**?
When someone chooses the investments on your behalf ## Footnote This service allows clients to delegate investment decisions.
89
What is the new **Health and Welfare POA**?
The new enduring POA ## Footnote This allows individuals to appoint someone to make health and welfare decisions on their behalf.
90
What must the FCA consider when enforcing regulations?
The 8 Business Principles Elephants paly soccer, carefuk referees review tough calls ## Footnote These principles guide the FCA's regulatory actions.
91
What can the **FPC** do regarding banks' capital?
Make banks increase their capital ## Footnote The FPC focuses on systemic risks and financial stability.
92
What are the **three pillars** of the Capital Requirement Directive?
* Current liabilities and operating * Supervision * Reporting ## Footnote These pillars ensure comprehensive regulation of banks' capital adequacy.
93
What is the **consumer principle**?
To provide good outcomes for all customers ## Footnote This principle emphasizes the importance of customer satisfaction.
94
What are **fixed portfolios**?
Big banks and insurance needing supervision ## Footnote These portfolios require more oversight due to their size and complexity.
95
What is the **used asset** in financial terms?
The home ## Footnote This refers to the property that can be leveraged for financial purposes.
96
What are the **12 principles** in order?
Integrity, skill, care and delligience Management Prudencial Market conduct Customer Interest Customer Comms Conflict of Interest Customer Relationship CLient assests Regulator relationship Consumer duty ## Footnote These principles guide the conduct of FCA-regulated firms.
97
What does **FCA disclosure** require?
Necessary on most communications, not text and business cards ## Footnote This ensures transparency in client interactions.
98
What is the fee for changing the **fee block** for authorization?
50% of the initial £2500 fee ## Footnote This fee structure applies when altering authorization categories.
99
Where do complaints against the **Pension Regulator** go?
General Reg Chamber of the First Tier Tribunal ## Footnote This tribunal handles disputes related to pension regulation.
100
What did the **Banking Act 2009** create?
The Special Resolution Regime ## Footnote This framework helps manage failing banks effectively.
101
What does **regular reporting** include?
* Client money held * Types of business undertaken * Persistency statistics * Complaint numbers ## Footnote Regular reporting ensures transparency and accountability.
102
What does **COBS** stand for?
Conduct of Business Sourcebook ## Footnote This sourcebook outlines conduct rules for financial firms.
103
What should be checked for **conflict of interest**?
Material interest rules ## Footnote Firms must ensure that conflicts are identified and managed.
104
What is a **debt management plan**?
Consolidation of debt into one affordable payment ## Footnote This plan involves negotiation with existing creditors.
105
What percentage of the claim is payable for **insured personal pensions**?
100% ## Footnote This ensures full coverage for insured personal pensions.
106
What is the coverage percentage for **home insurance**?
90% ## Footnote This percentage reflects the typical payout for home insurance claims.
107
What should be checked in **money laundering situations**?
* Ad Hoc * Suspicions * Establishing new relationships ## Footnote These checks are crucial for compliance with anti-money laundering regulations.
108
Who do the **FCA Conduct rules** apply to?
All staff in an authorized firm except ancillary staff ## Footnote These rules ensure ethical conduct across the organization.
109
What does the **Mortgage Credit Directive** ensure?
Mortgage offer is binding to the lender with a 7-day reflection period ## Footnote This directive protects consumers in mortgage agreements.
110
What are the **suitability labels**?
* Impact: Pre-defined outcomes * Improvers: Business that will get better * Focus: Assets meeting criteria * Mixed: Multiple goals ## Footnote These labels help categorize investment suitability.
111
What is the credit limit after **bankruptcy**?
£500 before disclosing bankruptcy status ## Footnote This limit ensures transparency in financial dealings post-bankruptcy.
112
What is the main purpose of the **European Central Bank**?
To look after fiscal policy and interest rates ## Footnote The ECB plays a crucial role in the economic stability of the Eurozone.
113
What should be considered via **KYC**?
* Affordability * State benefits ## Footnote These factors help assess a client's financial situation.
114
What is the status of **introducers** in regulation?
Excluded from regulation, but not exempt ## Footnote Introducers must still comply with certain regulatory requirements.
115
What is the condition for a firm to be **exempt**?
Contracted to an appointed representative ## Footnote This allows some firms to operate without full regulatory oversight.
116
What are **demands and needs**?
Seeing clients' needs and reasons for recommendations ## Footnote Understanding these factors is essential for providing suitable advice.
117
What is the only way to avoid **probate** for property?
Tenancy in common ## Footnote This arrangement allows for direct transfer of property ownership.
118
What does **income insurance** do?
Pays after a deferred period set by the customer, minimum 4 weeks ## Footnote This insurance provides financial support during periods of income loss.
119
What does **ICOBS** cover?
Customers and commercial customers ## Footnote This sourcebook outlines conduct rules for insurance products.
120
What does **ethics** refer to in finance?
Behaviors ## Footnote Ethics guide the conduct of financial professionals.
121
What is **pure protection**?
Long-term coverage, covered by ICOBS ## Footnote Examples include term assurance and income insurance.
122
What are the headings in the **FCA sourcebook**?
* SUP (Supervision) * DEPP (Decision, Procedures and Penalties) * DISP (Dispute Resolution: Complaints) * COMP (Compensation) ## Footnote These headings categorize different regulatory frameworks.
123
What are the types of **restricted advisers**?
* Single-tied * Multi-tied * Whole of market ## Footnote Only independent financial advisers provide unrestricted advice.
124
What do **traded life policies** lack?
Cancellation rights ## Footnote These policies are typically irrevocable once purchased.
125
What happens if a **building society** demutualizes?
Mortgage holders get a windfall ## Footnote This event can provide financial benefits to existing members.
126
What outlines the **day-to-day running** of a business?
Business Standards ## Footnote These standards guide operational practices within financial firms.
127
What is the **Consumer Duty** overarching principle?
Act to deliver good outcomes for retail customers ## Footnote This principle emphasizes the importance of customer-centric practices.
128
What are the **FCA high-level goals**?
* Consumer protection * Market integrity * Effective competition ## Footnote These goals guide the FCA's regulatory framework.
129
What are the **strategic outcomes** of the FCA?
* Consumer understanding * Consumer confidence * Financial stability ## Footnote These outcomes aim to enhance the overall effectiveness of the financial system.
130
What cannot be created by someone with **dementia**?
Power of attorney ## Footnote This condition affects an individual's ability to make legal decisions.
131
How many members are in the **FPC**?
13 members ## Footnote This includes key figures from the Bank of England and independent members.
132
What are the key **supervision principles**?
* Focus on outcomes * Forward-looking * Evidence-led * Proportionality * Transparency ## Footnote These principles guide regulatory supervision practices.
133
What does the **e-commerce directive** require?
* FCA status disclosure * Acknowledgment of orders without delay ## Footnote These provisions ensure transparency in online transactions.
134
What can a failure to monitor **compliance** lead to?
* Unwelcome publicity * Decline in business * Disciplinary action by the FCA ## Footnote Proper compliance monitoring is crucial for maintaining business integrity.
135
Who is on the **committee for FPC**?
Head of FPC is Governor of BOE ## Footnote This committee oversees financial stability and systemic risk management.
136
What are **sale and rent backs** considered?
Financial activities outside the role of an intermediary ## Footnote These transactions involve selling a property and renting it back.
137
What are **injunctions, restitutions, and insolvency**?
Civil actions the FCA can take ## Footnote These actions are typically resolved in a court of law.
138
What are acceptable limitations to a firm's **expertise**?
* Reliance on client information * Insufficient information ## Footnote These limitations can affect the quality of advice provided.
139
Who is the **head of FPC**?
Gov BOE ## Footnote FPC stands for Financial Policy Committee.
140
What are the **civil actions** the FCA can take?
* Injunctions * Restitutions * Insolvency ## Footnote These actions are carried out by a court of law.
141
What are the **acceptable limitations** to a firm's expertise?
* Reliance on client information * Insufficient information * Lack of expertise leading to referral to another firm ## Footnote These limitations help define the scope of a firm's capabilities.
142
What does the **PRA** handle compared to the **FCA**?
* PRA: Deposits * FCA: Regulated activities ## Footnote Part 4a permissions differ between these two regulatory bodies.
143
What products use **ESIS** (European Standardised Information Sheets)?
* Mortgages ## Footnote Introduced by the mortgage directive in 2015.
144
What happens to a **will** after marriage?
A new will is needed as the old one is revoked ## Footnote This is important for ensuring that the individual's wishes are accurately reflected.
145
What is the role of the **Financial Action Task Force (FATF)**?
Global money laundering ## Footnote FATF works with national financial authorities.
146
How often is **universal credit** paid?
Monthly ## Footnote This is a key aspect of the welfare system.
147
What is the cancellation policy for **EIS** and **Cash ISA**?
14 days ## Footnote This is the period allowed for cancellation.
148
What are the **Exempt Professional Firms**?
* Accountancy * Conveyancing * Surveyors * Actuaries ## Footnote These firms do not need FCA authorization.
149
What must an adviser inform a client of after **first contact**?
Firm regulatory status and how to complain ## Footnote This is part of the adviser’s duty to the client.
150
What does the **Bank of England** use the gilt repo market for?
To influence short term interest rates ## Footnote This is part of monetary policy operations.
151
What are the **Threshold conditions**?
Brush up on them ## Footnote These conditions are essential for firm authorization.
152
What are **Pibs**?
Prepetual Interest Bearing Share No longer avaible: Not regulatory PIBS become PSB Prepetual Subordiante Bond ## Footnote This term may refer to specific financial instruments or products.
153
What must **authorized firms** pay?
* Applications (£2500) * Special project fees * FOS fees * FCCS fees * Money and Pension service fees ## Footnote These fees are part of the regulatory framework.
154
What must an **authorized firm** report?
* Amount in clients' bank accounts * Persistency rates * Number of complaints * Number of staff * Type of business * Annual accounts ## Footnote These reports help maintain transparency and accountability.
155
What are the **Principles of Business**?
* Integrity * Skill, care, and diligence * Management * Prudential * Market conduct * Customer interest * Customer communications * Conflict of interest * Customer relationship * Client assets * Regulator relationship * Consumer duty ## Footnote These principles guide the conduct of financial firms.
156
What must **authorized firms** notify the FCA about?
Address moves ## Footnote This is important for maintaining accurate records.
157
Are there any authorizations for **introducers**?
No authorization ## Footnote Introducers do not require FCA authorization.
158
What does **ICOBS** refer to?
Pure protection: Term insurance, income, and critical illness ## Footnote It does not include buildings and payment protection.
159
What is the maximum time for **client money reconciliation**?
25 days ## Footnote This is a regulatory requirement.
160
When is a **suitability report** required?
When recommending income withdrawals from a pension contract or suspending contributions ## Footnote This ensures that the advice is appropriate for the client's situation.
161
What did the **Banking Act 2009** establish?
A statutory objective of financial stability for the Bank of England ## Footnote This act was a response to the financial crisis.
162
What are the three pieces of UK legislation that form the current financial services regulatory system?
* The Financial Services and Markets Act (FSMA) 2000 * The Financial Services Act 2012 * The Bank of England and Financial Services Act 2016 ## Footnote These acts provide the legal framework for financial regulation.
163
What is the **FCA strategic objective**?
Financial markets work well ## Footnote This objective guides the FCA's regulatory approach.
164
What does the **Pensions Act 2014** state about the review of State pension age?
Should happen at least every six years ## Footnote This ensures that the pension system remains sustainable.
165
Who owes the **conflicts policy**?
Senior management or members of the board ## Footnote This is crucial for governance and compliance.
166
Can firms be **partially exempt** or **authorized**?
No ## Footnote Firms must be fully authorized to operate.
167
What is a **bancassurer**?
A life office owned by a bank ## Footnote This model combines banking and insurance services.
168
What are the **reporting requirements** for the FCA?
* Persistency rates * Nature of business * Client assets held * Complaints numbers ## Footnote These metrics help the FCA monitor firms' performance.
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