1
Q
What is a friendly society?
A
Mutual self-help groups with no shareholders
2
Q
What are the advantages of a friendly society?
A
- All profits repayable to the members
- Granted complete exemption from taxation
- Can offer tax-efficient saving plans
3
Q
Define a fixed-interest product
A
Offered by some banks, have fixed terms and fix-interest at rates higher than variable products
Subject to more restrictive T&Cs
4
Q
Difference between a short term and long term fixed-interest product
A
Short term - interest rates tend to be more related to BofE base rate and so may be a lower interest rate, lower level of risk
Long term - interest rates tend to reflect market projection and therefore may be higher but higher risk due to possible loss of capital
5
Q
Difference between higher and lower interest long term fixed interests
A
Higher - can expect to see offers for fixed rates offering higher rates than normal
Lower - can expect to see offers for fixed rate mortgages at lower rates than normal
6
Q
Describe the difference in potential objectives between short term and long term fixed-interest securities
A
Short term
* risks of being worse off/decreasing capital is minimal as changes in interest rates as minimal
* typically used by investors wanting guaranteed return and access to their funds
Long term
* higher risk of decreased returns
* tend to be better at keeping pace with inflation than variable rates
* value of these investments move in in the opposite direction to expected future rates of interest/inflation
7
Q
What is a corporate based collective investment
A
- Set up in the form of a company
- Investment managers may be directors or employed to manage funds
- Units available to investors in form of shares
Examples: OEICs, investment trusts, offshore funds
8
Q
Define an open-ended collective investment
A
- Value of each unit(share) is the value of the overall fund divided by the number of units
- No limit on number of units / new units can be created for investors
- Price of each unit determined by value of the underlying asset
9
Q
Define a closed-ended investment
A
- Set number of units, cannot be reduced/increased except under specific exceptions
- Unit/share price not determined by underlying value but by supply and demand
- Where shares/units cost more than the value of the underlying fund they are trading ‘at premium’ / where they cost less they are trading ‘at discount’
10
Q
What is an OEIC
A
- Open Ended Investment Company
- Must dispose of assets in event of more sellers than buyers in the fund
- Formed as limited liability companies
- Must be run by board of directors with authorised corporate director (ACD) responsible for fund management
- Interest of investors protected by depositary
11
Q
What is an investment trust
A
- Structured as public limited companies
- Invest in other companies using collective capital to make profit for shareholders
- Has the power to borrow additional capital(below)
- Highly geared can produce excellent returns in rising stock markets as all profits above loan interest value are available to shareholders
- Can also produce poor returns in falling stock market because full interest due even when profits are low
*trust with high level of borrowing relative to share capital is highly geared
12
Q
How are investment trust shares bought/sold
A
- Bought and sold on stock market
- Offer(purchase) and bid(sale) prices depend on market demand
- When market demand is lesser than asset value, shares are trading at discount to net asset value
- When market demand is greater than asset value, shares are trading at premium to net asset value
13
Q
What is a trust-based collective investment
A
- A unit trust
- Set up by a trust deed
- Trustees are registered asset holders on behalf of investors
- Traditionally use dual pricing system
14
Q
What are unit types and how are they priced
A
- Income units - underlying income is distributed on set regular basis
- Accumulation units - underlying income is retained and invested
- Buying price - price at which units are offered for sale
- Selling price - price at which fund managers buy the units back (sale price from investor’s perspective, and usually 4/5% below buying price)
Difference between buying & selling price known as the bid-offer spread
15
Q
Define an endowment
A
- A regular premium life insurance policy
- Taken out for fixed term
- Combines investments with life cover
- To be paid tax-free, must be ‘qualifying policy’ ie sum insured must be 75% of the premiums paid over term (reduced for those over 55)
16
Q
What is a mortgage endowment
A
- Policies provide life cover to repay the mortgage if investor dies during term AND:
- At the end of the term, assuming adequate investment returns, would aim to repay the mortgage.
- Mortgage endowments have lost a great deal
- of their popularity, but investors may have existing policies that are still in force.
17
Q
What is a savings endowment
A
- Endowments can also be held for other specific savings goals or general investment, without being linked to a mortgage.
- Sometimes offered by life companies is called a maximum investment plan (MIP). These plans are now limited to total premiums of £3,600 per annum.
18
Q
What are the two types of friendly society saving plans
A
- Investors can save up to £25 a month or £270 a year (if they pay yearly premiums) into a fund that grows free of tax on income and capital gains.
- Friendly society children’s savings plans – money is invested on behalf of a child in a children’s version of the savings plan. The same tax exemptions and savings limits apply.
19
Q
What is the maximum contribution an individual can make into a Cash ISA?
A
£20,000
20
Q
What is the Help to Buy ISA designed for?
A
First-time buyers
It offers a 25% Government bonus when investors use their savings to buy their first home.
21
Q
What is the maximum monthly saving allowed in a Help to Buy ISA?
A
£200
For every £200 saved, there is a £50 bonus payment up to a maximum of £3,000 on £12,000 of savings.
22
Q
What is the deadline for claiming the Government bonus from a Help to Buy ISA?
A
On or before 1 December 2030
The scheme has closed to new applicants, but existing savers can continue adding money until 30 November 2029.
23
Q
What is the minimum amount to receive the Government bonus in a Help to Buy ISA?
A
£1,600
The minimum Government bonus is £400.
24
Q
What is the maximum home purchase price eligible for the Help to Buy ISA bonus in London?
A
£450,000 (in London)
The maximum home purchase price outside London is £250,000.
25
What happens if savers withdraw funds from their **Help to Buy ISA** for other purposes?
They lose the bonus associated with those funds
26
What is the annual contribution limit for a **Lifetime ISA (LISA)**?
£4,000
## Footnote
Savers receive a 25% Government bonus, i.e., a £1,000 bonus for every £4,000 contributed before the saver’s 50th birthday.
27
What can the savings and bonus from a **Lifetime ISA** be used towards?
A deposit on a first home worth up to £450,000
## Footnote
This applies anywhere in the UK.
28
What is the penalty for withdrawing money from a **Lifetime ISA** before the age of 60?
25% penalty
## Footnote
This applies unless the withdrawal is for buying a first home or in the event of terminal illness.
29
Can savers with a **Help to Buy ISA** transfer their savings into a **Lifetime ISA**?
Yes
## Footnote
They can also continue to save in both but can only use the bonus from one to buy a home.
30
What types of ISAs can an individual have within the **£20,000 limit**?
* Cash ISA
* Stocks and shares ISA
* Innovative Finance ISA
* Lifetime ISA (if eligible)
## Footnote
This is applicable for the tax year 2025/26.
31
What is a **Government shared ownership scheme**?
Schemes operated by housing associations allowing purchasers to buy a share of the property
32
In a shared ownership scheme, what percentage of the property can purchasers buy?
* 10%
* 75%
## Footnote
The remaining share is owned by the housing association.
33
What do purchasers pay to the housing association in a shared ownership scheme?
Rent on the share owned by the housing association
## Footnote
This is in addition to the share they have purchased.
34
What is **staircasing** in the context of shared ownership?
The process of increasing ownership by buying additional shares in the property
## Footnote
Purchasers can increase their share up to 100% ownership.
35
True or false: A shared ownership property can be sold and the new purchaser takes on the existing owned/rented split.
TRUE
## Footnote
The new purchaser has the option to increase their ownership in the future.
36
Who is responsible for dealing with the deceased’s estate if named in a will?
Executors
37
What are the individuals called who administer an estate when someone dies intestate?
Administrators
## Footnote
Administrators are usually the next of kin appointed to manage the estate of someone who has died without a will.
38
What is the collective term for executors and administrators?
Legal personal representatives (LPRs)
## Footnote
LPRs are tasked with administering the estate, collecting debts, paying taxes, and distributing assets.
39
What can LPRs use to administer the estate?
A solicitor
## Footnote
The fees for the solicitor can be paid from the estate.
40
What are LPRs personally liable for?
Payment of all debts and taxes from the estate
## Footnote
It is essential to ensure sufficient funds are available before distributing the estate's assets.
41
What should LPRs identify as soon as possible after the death?
The estate’s assets and liabilities
42
When is probate not needed?
If the deceased only had joint savings and investments or jointly owned property
## Footnote
Such assets automatically pass to the surviving owner.
43
What must be obtained to administer an estate when probate is needed?
A Grant of Representation
## Footnote
This includes either a Grant of Probate or Letters of Administration.
44
What must executors do to obtain a Grant of Probate?
Prove the will in the Probate Registry
45
What must executors of large estates complete before receiving the Grant of Probate?
An HMRC account showing the assets of the deceased
## Footnote
This includes any gifts made in the last seven years.
46
What must be paid before the Grant of Probate can be issued?
Any tax due
## Footnote
This tax is applicable if the estate plus non-exempt gifts exceed the available IHT nil rate and residence nil rate bands.
47
What must administrators apply for when there is no will?
A Grant of Letters of Administration
## Footnote
The procedure for this is similar to that of executors.
48
How is the estate distributed when there is no will?
According to the law of intestacy (spouse/children split if there is a spouse, otherwise in descending order - children, parents, siblings, half-siblings then grandparents)
## Footnote
This distribution occurs after administrators have paid any due tax and obtained Letters of Administration.
49
What is the **first step** before assessing demands and needs in investment?
Evaluating attitude to risk
50
What are the **four key aspects** advisers should clarify regarding a client's understanding of investment risk?
* Understanding of investment risk
* Ability and willingness to take risk
* Understanding, knowledge, and experience of investment types
* Financial capacity for loss
51
True or false: Advisers should only ask clients their attitude to risk on a scale of 1 to 10.
FALSE
## Footnote
The subject must be explored in more detail beyond a simple scale.
52
What must advisers understand about the client's experience with investments?
Client's current knowledge, understanding, and experience
53
What is the **advantage** of using risk profiling tools?
Clear audit trail of questions and responses
## Footnote
However, the output still needs to be reviewed by the adviser.
54
Define **capacity for loss** in the context of investment.
Customer's ability to absorb falls in the value of their investment
## Footnote
If loss affects standard of living, it should be considered in risk assessment.
55
What are the **three bodies** responsible for financial regulation in the UK following the Financial Services Act 2012?
* Prudential Regulation Authority (PRA) (sits within Bank of England)
* Financial Conduct Authority (FCA) (separate independant regulator)
* Financial Policy Committee (FPC) (not a regulator, sits within Bank of England)
| PrafCafPC
## Footnote
These bodies have distinct roles in ensuring the stability and conduct of financial institutions.
56
What is the role of the **Prudential Regulation Authority (PRA)**?
Monitoring the stability and soundness of important financial institutions
Memory Trick:
PRA = Prudential Regulation Authority
They check firms have enough capital, solvency, risk controls
Think: PRA → Protects Against collapse
## Footnote
The PRA is part of the Bank of England and ensures firms can fail without collapsing the financial system.
57
What does the **Financial Conduct Authority (FCA)** focus on?
Policing and enforcing conduct rules regarding customer interactions
Memory Trick:
FCA = Financial Conduct Authority
They regulate behaviour, advice, conduct, customers, communications
Think: FCA → Fair Customer Actions
## Footnote
The FCA also conducts prudential regulation of smaller firms and aims to prevent customer detriment.
58
True or false: The **Financial Policy Committee (FPC)** is a regulator.
FALSE
## Footnote
The FPC is a committee within the Bank of England that monitors risks to the financial system.
59
What was the main change introduced by the **Financial Services Act 2016**?
Strengthened the Bank of England's governance and operational effectiveness
## Footnote
This act placed the Bank at the center of UK financial stability.
60
What is the main aim of the **Prudential Regulation Committee (PRC)**?
Maintain and enhance financial stability in the UK
Memory Trick:
PRC = Prudential Regulation Committee
They make prudential policy for PRA to enforce
Think: PRC → Rules for Prudential Control
## Footnote
The PRC is the governing body of the PRA and makes its most important decisions.
61
What is the relationship between large firms and the **PRA** and **FCA**?
Large firms are dual authorised and regulated by both the PRA and FCA
## Footnote
Smaller firms are only regulated by the FCA.
62
Fill in the blank: A strong, stable, and competitive financial system supports economic growth, facilitates investment, and underpins the UK's position as an important global _______.
financial centre
## Footnote
This highlights the importance of financial stability for the UK's economy.
63
What does the **Monetary Policy Committee (MPC)** focus on?
MPC = Monetary Policy Committee
They set the Bank Rate (interest rates)
Think: MPC → Money Price Control
64
What are the **three operational objectives** of the FCA?
Memory Trick:
**F**ight bad conduct (aka protect consumers from bad conduct)
**C**ontinue integrity (aka protect the integrity of the UK financial system)
**A**ssist competition (aka promote effective competition)
## Footnote
These objectives guide the FCA's rule-making, investigatory, and enforcement powers.
65
The FCA aims to **protect consumers from bad conduct** by securing what?
An appropriate degree of protection for consumers
## Footnote
This includes enhancing confidence in retail markets and intervening early to prevent consumer detriment.
66
What does the **Consumer Duty** set in terms of consumer protection in financial services?
A high standard of consumer protection
## Footnote
Consumers should expect support, understandable communications, and products that meet their needs.
67
True or false: The FCA has explicit responsibility for **financial stability**.
FALSE
## Footnote
Financial stability is the responsibility of the Bank of England, the FPC, and the PRA.
68
What is the FCA's role in preserving the **integrity of the UK financial system**?
* Integrity of stock markets
* Combating market abuse
* Addressing financial crime
## Footnote
The FCA's CEO is a member of the FPC, linking its activities to financial stability.
69
The FCA promotes **effective competition** by ensuring consumers can make what?
Informed choices regarding products or services
## Footnote
This requires a sound economic understanding of market operations.
70
What must firms do to compete effectively in the market according to the FCA?
* Offer better services
* Provide better value
* Offer types of products that customers want and need
## Footnote
This competition is essential for consumer choice.
71
Under which act can the FCA enforce against breaches of **domestic and EU competition law**?
Competition Act 1998
## Footnote
This includes actions against anti-competitive agreements and abuses of dominant positions.
72
What does the **Consumer Rights Act 2015** allow the FCA to do?
Make a market investigation reference to the Competition and Markets Authority (CMA)
## Footnote
This act works in conjunction with the FCA's competition powers.
73
What does it mean that the FCA has **concurrent competition powers**?
It can enforce competition law alongside the CMA
## Footnote
This applies to financial services and other sectors of the economy.
74
What are the two categories of firms under the FCA supervision model?
* Fixed portfolio
* Flexible portfolio
## Footnote
The FCA's approach varies depending on the risks identified in each sector.
75
What type of supervision do **fixed portfolio firms** receive?
* Firm or group-specific supervision (Pillar I)
* Proactive supervision using a continuous assessment approach
* They are allocated a named individual supervisor.
## Footnote
These firms require the highest level of supervisory attention.
76
What type of supervision do **flexible portfolio firms** receive?
Event-driven reactive supervision (Pillar II)
Proactively supervised through a combination of market-based thematic work, and
Programmes of communication, engagement and education activity aligned with the key risks identified
## Footnote
The majority of firms fall into this category.
77
What is the first point of contact for **flexible portfolio firms** with the FCA?
FCA Customer Contact Centre
## Footnote
Contact Centre staff should have the expertise to deal with most issues and queries.
78
True or false: The **FCA** communicates its programme of work and views on risks to firms regularly.
TRUE
## Footnote
This communication is part of the FCA's supervision model.
79
What factors determine whether a firm is classified as a **fixed portfolio firm**?
* Size
* Market presence
* Customer footprint
## Footnote
These factors indicate the need for higher supervisory attention.
80
What does the FCA's supervision model include for all firms?
Analysis and assessment
## Footnote
This is part of the regular communication with firms.
81
What may happen to the supervision of some firms over time?
Changes to how they are supervised
## Footnote
This is based on the risks identified by the FCA.
82
What must a firm apply for when wishing to carry out a **regulated financial services activity**?
Authorisation from the FCA
## Footnote
Unless they are exempt from authorisation.
83
Under which act is it an offence to carry out a regulated activity without authorisation?
Financial Services and Markets Act 2000
## Footnote
A breach may be a criminal offence.
84
List some things a business should do before applying for **FCA authorisation**.
* Match the financial service to an FCA ‘regulated activity’
* Check they meet the threshold conditions for authorisation
* Check systems and controls meet FCA threshold conditions
* Ensure employees have necessary qualifications
* Define who holds a ‘senior management function’
* Prepare a business plan
## Footnote
This includes an explanation of the business, objectives, target market, and marketing strategy.
85
What are **regulated activities** in banking?
* Accepting deposits
* Issuing electronic money
## Footnote
This includes pre-pay credit cards.
86
What does an **insurer** do in regulated activities?
* Effecting or carrying out contracts of insurance as principal
* Assisting in the administration and performance of a contract of insurance
87
List the activities of an **investment intermediary**.
* Advising on investments
* Providing basic advice on stakeholder products
* Arranging deals in investments
* Managing investments
* Dealing in investments
* Safeguarding and administering investments
88
What does **home finance** include in regulated activities?
* Advising on home finance activities
* Arranging home finance activities
* Entering into and/or administering a home finance activity
* Agreeing to do most of the above activities
## Footnote
This includes regulated mortgage contracts and home reversion schemes.
89
What is the role of a **scheme operator**?
Establishing, operating, or winding-up collective investment schemes and/or stakeholder pension schemes
90
What are some **credit-related** regulated activities?
* Entering into a regulated credit agreement as lender
* Credit broking
* Debt counselling
* Debt administration
91
List some examples of **regulated investments**.
* Deposits
* Electronic money
* Rights under a contract of insurance
* Shares
* Government and public securities
* Certificates representing certain securities
* Units in a collective investment scheme
* Rights under a personal/stakeholder pension scheme
* Options, futures, and contracts for differences
* Life insurance policies
* Non-investment insurance contracts
* Rights under regulated mortgage contracts
* Rights under a home reversion plan
* Rights under a home purchase plan
* Regulated sale and rent back agreements
* Rights under a credit/consumer hire agreement
92
What is the FCA responsible for regarding **Money Laundering Regulations 2017**?
Registration of firms
## Footnote
This includes licensing consumer credit activities.
93
What are the **FCA Principles for Businesses**?
Twelve general statements of fundamental obligations for all authorised firms
## Footnote
These principles apply even without specific rules or procedures.
94
True or false: The **FCA Principles** take precedence over FCA Rules in case of conflict.
TRUE
## Footnote
The Principles will take precedence in any conflict with FCA Rules.
95
What is the first **Principle for Businesses**?
Integrity
| A firm must conduct its business with integrity.
96
What does the **second Principle** require from firms?
A firm must conduct its business with due skill, care and diligence.
97
What is the focus of the **third Principle**?
Management and control
## Footnote
A firm must take reasonable care to organise and control its affairs responsibly and effectively.
98
What does the **fourth Principle** emphasize?
Financial prudence
A firm must maintain adequate financial resources.
99
What is the **fifth Principle** regarding market behavior?
A firm must observe proper standards of market conduct.
100
What does the **sixth Principle** state about customers?
A firm must pay due regard to the interests of its customers and treat them fairly.
101
What is required by the **seventh Principle** in communications?
A firm must communicate information clearly, fairly, and not misleadingly.
102
What does the **eighth Principle** address?
A firm must manage conflicts of interest fairly.
103
What is the focus of the **ninth Principle**?
Customers: relationships of trust
## Footnote
A firm must ensure the suitability of its advice for customers relying on its judgment.
104
What does the **tenth Principle** require regarding clients' assets?
A firm must arrange adequate protection for clients' assets.
105
What is the **eleventh Principle** about relations with regulators?
A firm must deal with regulators in an open and cooperative way.
106
What is the **twelfth Principle** known as?
Consumer Duty
## Footnote
It requires firms to deliver good outcomes for retail customers.
107
What must a compliance officer do if a firm is aware of a breach of the **Principles**?
Inform the FCA and implement remedial action
## Footnote
This is necessary to prevent similar breaches in the future.
108
An employee must not carry out an activity unless they have been assessed as **competent** in that activity or are under _______.
supervision
## Footnote
This ensures that employees are qualified to perform their tasks safely and effectively.
109
How many hours of **continuous professional development (CPD)** must be completed by employees?
35 hours, with at least 21 structured
## Footnote
This is to maintain competence in their roles.
110
What is the difference between **structured** and **unstructured CPD**?
* Structured CPD: Designed to achieve a defined learning outcome
* Unstructured CPD: Activities like research and reading relevant material
## Footnote
Structured CPD includes seminars and courses, while unstructured CPD is more flexible.
111
Advising on **pension transfers** requires an additional _______ hours of appropriate CPD each year.
15 hours
## Footnote
Of these, nine hours must be structured.
112
What is required for CPD to be considered appropriate?
* Relevant to the individual's role
* Maintain knowledge with reference to current qualification standards
* Address identified gaps in technical knowledge
## Footnote
These criteria ensure that CPD contributes to professional development.
113
What is the threshold requirement for advising on **investment products**?
**Level 4 professional exam standards**
## Footnote
This includes the CII's Diploma in Regulated Financial Planning, consisting of the R01 to R06 exams.
114
What qualification is required for **mortgage advisers**?
**Level 3 qualification**
## Footnote
There are no specific time limits for attaining this qualification.
115
For which activities are further specific approved examinations required?
* Discretionary management
* Occupational pension transfers
* Long-term care insurance
* Equity release
## Footnote
These activities require passing specific examinations before conducting them.
116
How long do those entering the industry as **investment advisers** have to complete the Level 4 exams?
**48 months**
## Footnote
This time frame applies to those acting as investment advisers.
117
Can firms limit the number of attempts for passing an appropriate examination?
Yes, firms can choose to limit the **number of attempts** or the amount of time allowed
118
What must a firm provide to a retail client on first contact regarding **packaged products**?
* Name and address of the firm
* Contact details for effective communication
* Methods of communication
* Firm's regulatory status
* Status as appointed representative or tied agent
* Status as 'independent', 'focused independent', or 'restricted'
* Details of services provided
* Details of how the firm is paid
* Details of loans and ownership
* How to complain
* Coverage by the Financial Services Compensation Scheme (FSCS)
* Summary of conflicts of interest policy
119
What must be obtained from the client before a firm starts to act if a **fee** is to be charged?
Client's agreement
## Footnote
This ensures that the client is aware and consents to any fees before services commence.
120
In a 'fee only' arrangement for pre-2013 'legacy' investment business, what must happen to any **trail commission** taken by the firm?
* Must be transferred to the client
* Can be done by reducing the fee
* Can be done by increasing the investment
* Can be done by direct payment to the client
## Footnote
This is to ensure fairness and transparency in fee structures.
121
True or false: A firm can retain any **trail/renewal commission** if it is small relative to the overall fees and agreed in writing with the client.
TRUE
## Footnote
This allows for flexibility in fee arrangements while maintaining transparency.
122
When is a firm **not required** to provide initial disclosure information?
* Information has already been given and is still valid
* Initial contact is by phone (equivalent info must be provided on the phone)
* Transaction is execution only for a non-life packaged product
123
What is the purpose of the **initial disclosure documentation** provided by the firm?
To confirm all relevant information in writing
124
What must a firm provide to a **retail client** before conducting business?
Client agreement (Terms of Business)
## Footnote
This is required to ensure transparency before any business transactions.
125
If a business is concluded using **distance communication**, when must the client agreement be provided?
Immediately afterwards
## Footnote
This applies if the business was conducted by phone or similar means.
126
For a **professional client**, when must the client agreement be provided?
Within a ‘reasonable period’ of the start of conducting business
## Footnote
This timeframe is less strict compared to retail clients.
127
Client agreements are **not required** for which two scenarios?
* Direct offer financial promotions
* Life offices selling life and pension policies as a principal
## Footnote
These exceptions are outlined in the regulations.
128
What must client agreements set out in **adequate detail**?
* Commencement
* Regulation by the FCA
* Investment objectives
* Restrictions
* Services provided
* Payment
* Status
* Giving of instructions
* Accounting
* Withdrawal rights
* Conflicts of interest
* Risk warnings
* Complaints
* Compensation
* Termination
129
What is a **suitability report** required for?
* Buying or selling in a regulated collective investment scheme
* Effects on insurance-based investment products
* Transactions involving personal or stakeholder pension contracts
* Income withdrawals from a pension
* Purchasing a short-term annuity
* Pension opt-out or conversion
* Life policy take-up following a personal recommendation
## Footnote
A firm must provide this report in a durable medium, such as a letter, when making these recommendations.
130
What must a **suitability report** specify?
* Advice given
* How it meets client preferences, objectives, and characteristics
* Explanation of suitability based on client information
* Possible disadvantages of the transaction
## Footnote
This ensures the client understands the rationale behind the recommendation.
131
In the case of investments, what should the suitability report draw attention to?
Whether the recommended product or service requires periodic review
## Footnote
This is important for ongoing client engagement and management.
132
For a **personal pension**, what should the report explain?
Why the choice of scheme is at least as suitable as any available occupational pension scheme
## Footnote
This ensures clients are informed about their options.
133
When must a firm provide the suitability report for an **investment transaction**?
Before the transaction is concluded
## Footnote
This timing is crucial for informed decision-making.
134
When must a suitability report be provided for a **personal pension scheme**?
No later than the fourteenth day after the contract is concluded
## Footnote
This aligns with rules on cancellation.
135
What are the exceptions where a **suitability report** is not required?
* Acting as an investment manager for a retail client
* Client habitually resident outside the UK
* Personal recommendation to increase a regular premium or invest additional single premiums
136
What additional documents must be provided if a personal recommendation is made regarding a **pension transfer**?
* Suitability report
* One-page summary at the front of the suitability report
137
What is the **principle of best execution** primarily applied to?
Firms dealing in stocks and shares
## Footnote
It does not apply to life or pension contracts or collective investment schemes.
138
Firms must take ‘**all sufficient**’ steps to ensure what regarding transactions?
Best terms available
## Footnote
This includes price, speed, cost, likelihood of execution and settlement, size, nature, or any other consideration relevant to the execution of the order.
139
Put succinctly, a stockbroker will usually obtain the **highest price** for a selling client and the **lowest price** for a buying client. True or False?
TRUE
140
What is the **document** required for **Packaged retail and insurance-based investment products (PRIIPs)**?
Key information document (KID)
## Footnote
This document must be provided to retail clients before completing the application form.
141
What is the **document** required for **non-PRIIP packaged products**?
Key features document (KFD)
142
What is the **document** required for **collective investment scheme investments**?
Key investor information document (KIID)
## Footnote
This document provides essential information to investors.
143
When must the key features/key information/key investor information document be provided to the client?
Before the application form is completed
## Footnote
This applies to new sales only.
144
What must be provided to customers when a variation to an existing life policy or pension scheme is made?
Sufficient information about the variation
## Footnote
This helps customers understand the consequences of the change.
145
What must happen if a relevant product is sold without a written application?
The key features/key information/key investor information document must be sent immediately after the sale
146
What are some of the **special rules** mentioned for certain financial products?
* Occupational pension schemes
* Self-invested personal pensions
* Pension income withdrawals
* Cash ISAs
* Traded life policies
* Stakeholder pensions
## Footnote
These products may have different disclosure requirements.
147
What details are required by FCA rules for life policies under the **Solvency II Directive**?
* Nature of the investment
* Aims of the investment
* Risk factors
* Information on performance and charges
* Principal terms of the investment
* Cancellation or withdrawal rights
* Compensation arrangements
* Procedure for complaints
* Solvency II Directive information
## Footnote
These details ensure transparency and compliance with regulatory standards.
148
What did the **Financial Services Act 2021** amend regarding KIDs?
* Rules on how information on performance is to be provided
* Power to delay the application of KIIDs for UCITS funds until December 2026
149
What significant change did the FCA implement regarding **performance scenarios** in KIDs?
Removed the requirement to display performance scenarios
## Footnote
This was to avoid potentially misleading information.
150
What narrative information is still a requirement in KIDs after the FCA's changes?
Narrative information on past performance
## Footnote
This allows for accurate disclosure of factors impacting product returns.
151
What does the **FCA** regulate regarding mortgage contracts?
* Lender provides credit to an individual (or trustees)
* Obligation secured by a legal first mortgage on land in the UK
* At least 40% of the property is to be used as a dwelling by the borrower or a related person
## Footnote
This includes loans secured on a second or subsequent charge and consumer buy-to-let mortgages.
152
True or false: A **commercial mortgage** for the purchase of an office block is regulated by the FCA.
FALSE
## Footnote
The contract is not regulated if the borrower is a company.
153
Fill in the blank: The FCA regulates mortgage contracts where the obligation is secured by a legal first mortgage on _______ in the UK.
land
## Footnote
This regulation applies to specific conditions outlined by the FCA.
154
What type of mortgages does the FCA regulation include?
* Loans secured on a second or subsequent charge
* Consumer buy-to-let mortgages
## Footnote
These are part of the broader category of regulated mortgage contracts.
155
What directive did the **Money Laundering Regulations 2017** implement?
EU’s Fourth Money Laundering Directive
## Footnote
The regulations were supplemented by the Fifth Money Laundering Directive in January 2020.
156
Who provides guidance on the interpretation of the **Money Laundering Regulations**?
Joint Money Laundering Steering Group (JMLSG)
## Footnote
The JMLSG is chaired by the Bank of England and regularly revises guidance to reflect changes in the UK's legal framework.
157
List the types of businesses included in the **Money Laundering Regulations**.
* Credit and financial institutions
* Auditors, accountants, tax advisers
* Independent legal professionals
* Trust or company service providers
* Estate agents
* Casinos and high value dealers
* Leasing companies
* Commercial finance providers
* Safe custody services
158
What must firms appoint to act as a central point for money laundering reporting?
Money laundering reporting officer (MLRO)
## Footnote
The MLRO decides whether to report suspicions to the NCA.
159
When must **CDD checks** be carried out?
* Establishing a business relationship
* Carrying out an occasional transaction
* Suspecting money laundering or terrorist financing
* Doubts about previously obtained customer information
160
What is **simplified due diligence (SDD)**?
Measures applied when a business relationship presents a low degree of risk
## Footnote
Firms may apply SDD based on their risk assessment.
161
What is the two-stage process for **identification procedures** for individuals?
* Obtain information (name, address, date of birth)
* Verify information through reliable independent documents
## Footnote
Acceptable documentation includes government-issued documents.
162
What is **Electronic Identity Verification (eIDV)**?
A system using public and private databases to confirm an individual's identity
## Footnote
eIDV can quickly identify inconsistencies in personal information.
163
What must firms do regarding the **beneficial ownership** of corporate clients?
* Update records
* Understand ownership and control structure
* Report discrepancies to Companies House
## Footnote
This ensures compliance with regulations and transparency.
164
What is required for **ongoing monitoring** of business relationships?
Scrutinise transactions for consistency with client knowledge and risk profile
165
What must staff be trained on according to the **Money Laundering Regulations**?
* Identification and verification of customer identity
* Recognising and dealing with suspicious transactions
## Footnote
Regular retraining is necessary for existing staff.
166
What are the **enforcement powers** under the Money Laundering Regulations?
* Right to enter and inspect premises
* Take copies of relevant documents
## Footnote
Partners or directors may face fines or prison for non-compliance.
167
What are examples of **suspicious activity**?
* Customer using intermediaries to hide identity
* Sudden significant improvement in finances without explanation
* Money paid by a third party with no connection to the client
## Footnote
These activities may indicate potential money laundering.
168
What must authorized firms do regarding **annual reporting**?
Conduct an annual review of anti-money laundering systems and processes
## Footnote
This involves obtaining a report from the MLRO.
169
How long must records of customer identity verification be kept?
Five years after the end of the customer relationship or transaction
## Footnote
Records can be kept in various formats, including electronic.
170
What are **financial sanctions**?
Restrictions imposed by the UN or UK for foreign policy or national security objectives
## Footnote
These can limit financial services and restrict access to financial markets.
171
What is a criminal offence under the **financial sanctions** regulations?
Making payments to targets on the sanctions list
## Footnote
This includes dealing directly or through intermediaries.
172
What is the **Pensions Regulator (TPR)**?
The UK regulator of work-based pension schemes
## Footnote
TPR seeks to build confidence in pension savings and ensure pension schemes are adequately funded.
173
What are the **key responsibilities** of TPR?
* Ensure employers enrol employees in a pension scheme
* Protect people's savings in workplace pensions
* Improve the management of workplace pension schemes
* Reduce the risk of pension schemes ending up in the Pension Protection Fund (PPF)
* Ensure employers balance the needs of their defined benefit pension scheme with business growth
## Footnote
These responsibilities help safeguard retirement savings and ensure compliance with pension regulations.
174
What does TPR maintain registers of?
* Occupational pension schemes and personal pensions
* Trustees available for appointment as independent trustees
* Prohibited trustees
175
What is the duty of trustees, managers, administrators, employers, and professional advisers regarding breaches of law?
To report breaches of law to TPR in writing as soon as reasonably practical
## Footnote
This duty ensures compliance and accountability within pension schemes.
176
What actions can TPR take against individuals in serious or persistent breach of duties?
* Prohibit a person from being a trustee
* Appoint a trustee for a scheme
* Fine individuals up to £5,000 or companies up to £50,000
* Wind up a scheme to protect members
177
What can TPR do to prevent misuse of the assets of an occupational pensions scheme?
Get a court injunction
## Footnote
TPR can also seek restitution of assets for certain breaches of the law.
178
How is TPR financed?
By levies on pension schemes
179
What can TPR do if a life office or IFA provides misinformation to trustees?
Report them to the FCA
180
Where can appeals against TPR's decisions be made?
To the General Regulatory Chamber of the First-tier Tribunal
181
What is **income tax** paid on?
* Rental income from property
* Self-employed/partnership profits
* Employed earnings and benefits-in-kind
* Pension income
* Savings (interest) income
* Dividend income from shares and unit trusts/OEICs
* Other investment income
* Trust income
* Foreign income
182
Name a few types of income that are **specifically exempt** from income tax.
* Profits from gambling and lotteries
* Premium bond winnings
* Certain redundancy payments from an employer
* Certain lump sum payments from pension schemes
* Certain State benefits
* The capital part of purchased life annuities
* Income from ISAs
## Footnote
These exemptions indicate that not all income is subject to taxation.
183
True or false: People who are **self-employed** pay income tax on their earnings as they earn them.
FALSE
## Footnote
Self-employed individuals receive their income gross and pay tax later, unlike employed individuals who pay tax through PAYE.
184
What is **self-assessment** in the context of income tax?
The process HMRC uses to collect tax from certain taxpayers, such as the self-employed and those receiving untaxed income
## Footnote
Self-assessment applies to individuals earning more than £1,000, partners in a business partnership, and those with rental or investment income.
185
When must paper tax returns be sent to **HM Revenue & Customs (HMRC)**?
By 31 October following the end of the tax year
## Footnote
For example, a return for 2025/26 would be due by 31 October 2026.
186
When are online tax returns due?
By 31 January following the end of the tax year
## Footnote
For example, a return for 2025/26 would be due by 31 January 2027.
187
What happens if a taxpayer fails to meet the self-assessment deadlines?
An automatic fine of £100
188
What are **payments on account**?
Payments made by those subject to self-assessment towards their income tax bill in instalments
## Footnote
The first payment is due by 31 January in the tax year, and the second by 31 July.
189
What must taxpayers keep to support the figures submitted on their tax return?
Detailed financial records and receipts
## Footnote
Failure to maintain these records could lead to financial penalties.
CII CF1 2025-26
flashcards
Decks in class (13)
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