Chapter 5 question
If the cancellation period for a pure protection policy commenced on 13 January, when will it expire?
12 February. 30 days for pure protection 14 days for general insurance chapter reference 5.2H2A
Kevin has applied for a loan which is regulated under the Consumer Credit Act 1974. If the advance copy of the form of agreement is sent to him on 5 January, what is the earliest date that the actual agreement can be posted to him for signing?
12 January. (7 days) seven days sent a copy of the agreement before the actual agreement for signature is posted to them and seven days more before the lender can approach them to be free from all selling pressure chapter reference 5.2L1
If a bank has total assets of £41bn and total liabilities of £35bn, what is its free asset ratio (FAR)?
14.63%. chapter reference 5.1E3A
If the cancellation period for a home insurance policy commenced on 3 July, when will it expire?
17 July. (two weeks) cancellation period for general insurance is 14 days it is 30 days for pure protection contracts and PPI renewal terms required 21 days before end of contract or if the insurer is declining to renew contract chapter reference 5.2H2A
Susan has applied for a loan which is regulated under the Consumer Credit Act 1974. If the advance copy of the form of agreement was sent to her on 7 September, what is the earliest date that the lender can contact Susan to discuss the loan?
21 September. (two weeks) seven days sent a copy of the agreement before the actual agreement for signature is posted to them and seven days more before the lender can approach them to be free from all selling pressure chapter reference 5.2L1
If a bank has total assets of £23bn and total liabilities of £18bn, what is its free asset ratio?
21.74%. chapter reference 5.1E3A
For a firm with 'managing investments' permission and a Prudential Category of BIPRU 50k firm, the Capital Resource Requirement is €50,000 Base and a variable capital resources requirement of:
25% of Fixed Overheads. BIPRU= Prudential sourcebook for Banks, Building societies and Investment firms IFPRU=Prudential sourcebook for the investment firms IFPRU125K- firm with permission to hold clients assets, €125k and CRR of 25% fixed overheads Exempt CAD firm- firms passporting into the EEA Correct, chapter reference 5.2G1
Rock Capital last assessed the adequacy of its financial resources to ensure that they meet the minimum capital requirements on 30 June 2019. If there are no adverse findings, by what date are they next required to carry out similar tests?
30 June 2020. should a significant change in expectations for the future occur more tests should be done chapter reference 5.1E3
If the cancellation period for a payment protection insurance policy commenced on 10 August, when will it expire?
9 September. (30 days) 14 days for general insurance 30 days for pure protection insurance chapter reference 5.2H2A
Under the terms of the Mortgage Credit Directive, what have lenders been required to provide to borrowers since March 2016?
A binding mortgage offer and a minimum 7 day reflection period. - need to give an adequate explanation of a products essential features and - are subject to new disclosure requirements (ESIS- European Standardised information sheet) chapter reference 5.2H3E
HomeSave offer sale and rent back agreements to borrowers who wish to sell their home but continue to live in it. For every applicant, HomeSave must make sure that they are:
Able to afford the deal and it is right for them; non-advised sales are not allowed. (loook at the full SRB regime chap5/52) chapter reference 5.2H3C
Which of the following scenarios would be regarded as mortgage advice?
Ann, who suggests that an existing mortgage borrower takes out a 5-year fixed-rate mortgage to replace his standard variable rate mortgage. Advice involves giving an opinion on merits of a particular product and or its suitability to a particular customer Advice does not include: -making a general recommendation to switch from say a fixed mortgage to a variable mortgage or -general advice on the advantages and disadvantages of borrowing in order to buy a property, compared with renting (see notes on information as this is the other side of the question) chapter reference 5.2H3A
Brian and Derek worked together as financial advisers for a large firm of IFAs before leaving six months ago to start their own firm, BAD Ltd. They have yet to apply for FCA authorisation so the situation for Brian and Derek is that they:
Are in breach of the general prohibition, for which they both risk imprisonment. Breach of General prohibition - people or individuals carrying out regulated activities with no permission such as giving out advice about mortgages,insurance and investments chapter reference 5.1C2
Sound As A Pound, a firm of IFAs, includes the following statement on every letter and email it sends to its clients: 'Sound As A Pound is authorised and regulated by the FCA'. Why is this statement non-compliant?
Because Financial Conduct Authority should not be abbreviated to FCA. Requirement taht all authorised firms disclose their statutory status in every letter/ email sent to a retail client - should also include on business cards and compliment slips (good practice) - Firm MUST identify its regulator - Appointed representative ( name of AR authorised by Firm and regulated By Financial Conduct Authority) chapter reference 5.2F3A
Wicker Ltd is allocated to both FCA fee-block A018 and FCA fee block A019. This means that their tariff-base is determined:
By the levels of income the firm receives in respect of both home finance and insurance mediation activities. Correct, chapter reference 5.2F3B
How does a firm that is subject to the Capital Requirements Directive (CRD) establish what level of financial resources they should hold?
By undertaking detailed risk assessments and stress-testing scenarios appropriate to the business they do. chapter reference 5.2G1
Under ICOBS, a cancellation notice will be sent to which of Nigel's clients?
Chariot Partnership where the three partners arranged partnership protection insurance for the benefit of each other. THIS QUESTION SHOULD BE IGNORED
Which official within a firm should have overall responsibility for the 'controlled functions' within that firm?
Chief Executive. (SYSC 2) - Senior Managment arrangements - each firm should appoint individuals responsible for the controlled functions within the firm. - Overall responsibility is pinned on the firm's chief executive or equivalent chapter reference 5.2F1C
The FCA Financial Services Practitioner Panel meets on a monthly basis to discuss:
Current and future issues of relevance to FCA regulated firms. FSPP- Financial Services Practioner Panel ( there aim is to provide early and effective practioner input into the FCA's Policy Dev) - FCA Does not have to take any action recommended by these panels but must consider the views -FCA also maintains the Consumer, small business and Markets panel - FCA answerable to the Treasury for the way it carries its duties -Chancellor of the Exchequer bears ultimate responsibility for the regulatory system chapter reference 5.1C1A
Black and While Ltd are a firm of mortgage introducers. They do not require FCA authorisation because they:
Do not provide advice to clients. Introducer status means the firm or individual merely passes on Leads to an authorised who pays the introducer for that lead. Mortgage firms that fall into the regulated category: a) Lenders b) administrators c) arrangers d) advisers chapter reference 5.2H3A
If the FCA were to substantially increase the number of rules in its handbook, this might be seen as being contrary to which FCA regulatory principle?
Efficiency and economy. There are 8 Regulatory Principles: 1. efficiency and economy 2. Proportionality 3. sustainable growth 4. responsibility of consumers 5. senior management responsibility 6.recognising the differences in the businesses carried out by different regulated persons 7. Openness and disclosure 8. Transparency chapter reference 5.1B
Under the FCA's prudential rules for solo-regulated firms, how frequently does the FCA conduct periodic capital and liquidity tests for the highest risk firms?
Every 24 months. Referred to as a P1 Firm- a firm whose failure would cause lasting and widespread financial and reputational damage to their customers, client assets and marketplace chapter reference 5.1D1B
Which regulator is responsible for monitoring the activities of the London Stock Exchange?
Financial Conduct Authority. forms part of one of the main roles of the FCA Monitoring the activities of various recognised bodies a) Recongised Investment exchanges i.e LSE b) reccogonised overseas stock exchanges e.g. NASDAQ c) Recognised clearing houses, such as CREST d) Recognised professional bodies chapter reference 5.1C1
Euan took out a credit arrangement in 2018 but believes that the loan agreement has been changed without his consent and against the terms set out in the agreement. Following receiving an unsatisfactory response from the credit firm, Euan should take his concerns to the:
Financial Ombudsman Service. chapter reference 5.2L2
Which body has the responsibility for macro-prudential regulation and for identifying systemic risks within the financial services sector?
Financial Policy Committee. chapter reference 5.1A2
A life assurance company's surplus assets over its liabilities, expressed as a percentage of its total assets gives its:
Free Asset Ratio. chapter reference 5.1E3A
Counters Financial Solutions is seeking FCA authorisation. In order to meet the threshold conditions, it would be correct to say that its:
Head office and registered office must be in the UK, and it must be capable of being supervised by FCA. Threshold conditions are minimum conditions that a firm must satisfy at all times if it is to retain its part 4a permission Cond 2.2 Location of offices Cond 2.3 Effective supervision Cond 2.4 Appropriate resources Cond2.5 suitability Cond 2.7 Business model chapter reference 5.2F1A
Florence is retired and living on a low income. Her biggest asset is her home. She is looking to release capital and she is not concerned about selling her home, although she does want to remain there for as long as possible. The most suitable regulated product would be a:
Home reversion plan. - equity release scheme. Person sells home or part to someone below market value. They get to live in that home until they die or move out - the sale of part or whole of home gives them an income but the home now belongs to the buyer when the seller dies or moves out -high risk product chapter reference 5.2H3B
Paula works in the Enforcement Division of the FCA, investigating reported breaches of FCA rules and recommending enforcement action. In order to avoid liability for acts done in the discharge of her role, she must ensure she acts in a manner consistent with the:
Human Rights Act 1998. chapter reference 5.1C1A
Weekes & Co is exempt from the FCA's 'Capital Requirements Directive'. This is most likely to be because it is a[n]:
IFA business. many intermediary businesses are currently exempt from the Capial Requirements Directive chapter reference 5.2G1
To what extent, if at all, can a firm insure against financial action being taken against it by the FCA?
In respect of its own costs in defending FCA enforcement action, and any costs it may be required to pay to the FCA. - It cannot enter into or claim under an insurance contract that is intended to indemnify against all or part of a financial penalty imposed by the FCA - so insure against defending itself in court not against the original penalty (crime) chapter reference 5.2F3A
Ronald, the Sales Director of Flyhigh Airframes plc, is aware that the company is about to announce a massive order. He arranged for his wife to purchase shares in Flyhigh, in the expectation of a big leap in share price when the order is made public, and with the aim of making a sizeable personal profit. This is an example of:
Insider dealing. -when an insider deals or tries to deal on the basis of insider information Other civil offences: 1) Improper disclosure 2) misuse of information 3) manipulating transactions 4) manipulating devices 5) dissemination- giving out false info about an investment or issuer of investment and knowing it misleading or false 6) distortion and misleading behaviour chapter reference 5.1C3
Gayle works for a FCA authorised firm which is subject to FCA pro-active supervision. It is UNLIKELY that Gayle works for a[n]:
Insurance broker. insurance broker is someone who looks for best insurance deals for client not an insurance company -most likely a small firm and therefor falls into the flexible portfolio where the supervised by event driven and thematic approaches chapter reference 5.1D1A
Jake works for a firm that operates in the mortgage market. If Jake's firm is NOT required to be authorised by the FCA, Jake works for a[n]:
Introducer. Do not provide advice to clients. Introducer status means the firm or individual merely passes on Leads to an authorised who pays the introducer for that lead.
MaxiFund is a firm of IFAs that holds money on behalf of its clients, and carries out a reconciliation every Friday at noon. How does it measure up to the FCA's expectations under client money rules?
It falls short of the FCA's expectations because reconciliation is expected to be carried out daily. - must normally be paid into the client bank account by close of business the next day - the importance here is that client bank account must be designated to be such and with an approved bank. - this is so that money sits in a trust and is not available to creditors of the firm ( if insolvent) NB! Client money rules chapter reference 5.2H4B
In what way does the Banking Act 2009 increase the responsibilities of the Bank of England in respect of the long term stability of the UK financial system?
It provides a framework for dealing with failing banks, and formalises the Bank's oversight of payment systems. chapter reference 5.1E2
Longbridge Bank Ltd has been asked to pay a special project fee to the FCA. What might be the reason for this?
It was, until recently, the Longbridge Building Society before demutualising. firms pay special project fees to the FCA usually for mergers or significant changes of authorisation under the fees section chapter reference 5.2F3B
Carol and Brian both work for FCA regulated firms. Carol's employer is classified as a fixed portfolio firm, while Brian's employer is classified as a flexible portfolio firm. What routine elements of FCA supervision will Carol's firm experience that Brian's firm will not?
It will have a named individual supervisor. (learn difference between flexible and fixed portfolio) Fixed portfolio- require highest level of supervisory attention. -These firms are allocated a named individual supervisor, -are pro-actively supervised -and use a continuous assessment approach. Flexible portfolio- majority of firms fall into this category -pro-actively supervised through combination of market-based thematic work and programmes of communication, engagement and education to address identified key risk of the firms sector -These firms get FCA customer contact centre chapter reference 5.1D1A
The Consumer Credit Act 2006 expanded the definition of an 'individual'. Which of the following applicants is now protected under the consumer credit legislation?
Malcolm, Mark and Mary who are the three partners in an accountancy practice. sole traders and partners
Manni works for a large bank, while Lucy works for a small firm of IFAs. How are these firms likely to be categorised under the FCA's risk framework?
Manni's employer is likely to be a fixed portfolio firm and Lucy's employer is likely to be a flexible portfolio firm. Fixed portfolio- require highest level of supervisory attention. -These firms are allocated a named individual supervisor, -are pro-actively supervised -and use a continuous assessment approach. Flexible portfolio- majority of firms fall into this category -pro-actively supervised through combination of market-based thematic work and programmes of communication, engagement and education to address identified key risk of the firms sector -These firms get FCA customer contact cent chapter reference 5.1D1A
Lucy provides regulated advice and is expected to provide customers with a European Standardised Information Sheet (ESIS). This means that she is providing advice on:
Mortgages. adoption of the Mortgage Directive changed the MCOB now firms need to: 1) Provide a binding mortgage and a seven-day minimum reflection period 2) Need to give an adequate explanation of a products essential features and; 3) Are subject to new disclosure requirements (ESIS) European Standardised Information Sheet. *FCA requires mortgage seller and adviser to obtain a relevant Level 3 Qualification chapter reference 5.2H3E
Boris has just started his own IFA firm and is in the process of having his business cards printed and email footer drafted. He must disclose his regulatory status:
On the email footer, and it is good practice to declare the same on his business cards. chapter reference 5.2F3A
A financial services provider is running training seminars to help intermediaries achieve Chartered status. The provider is in breach of the FCA COBS rules on incentives if it:
Only pays travelling expenses to selected delegates. -Provider of training must make facilities generally available for intermediaries -and where realistic make the benefits generally available for intermediaries Correct, chapter reference 5.2H1B
In what part of the FCA Handbook would a firm find guidance on the circumstances in which authorisation is required, or exempt person status is available?
Perimeter Guidance Manual (PERG). chapter reference 5.2K4
The FCA is required to maintain four panels to represent the interests of relevant groups within the financial services industry. The groups represented by these panels are:
Practitioners, Consumers, Small Businesses and Markets. 1) FSPP- Financial Services Practioner Panel there aim is to provide early and effective practioner input into the FCA's Policy Dev) 2) Financial Services Consumer Panel speaks on behalf of consumers by reviewing, monitoring and reporting to the FCA on effectiveness of FCA policies and practices 3) Smaller Businesses Practioner Panel objective to ensure that the regulatory environment enables smaller firms to be commercially viable and to flourish 4) The Markets Practioner Panel (MPP) represents interest of practitioners who will be effected by the FCA function relating to markets such as short selling powers and the regulation of recognised investment exchanges. chapter reference 5.1C1A
Henry has received regulated advice and as a result received an initial disclosure document and a demands and needs statement. What has he received advice on?
Private medical insurance. demands and needs document not sent to sales made without advice chapter reference 5.2H2A
The FCA has a risk-based approach to supervising firms. This is based on the three pillars, which are:
Proactive firm/group supervision; event-driven reactive supervision; and issues and products supervision. 1) Proactive firm/group supervision (pillar 1) - designed to assess firms Conduct Risk; "are the interest of the customer and market integrity at the Heart of the company" (TCF) - analyses business model and stratergy, product design, after-sales and POS stage -personable accountability for senior managers 2) Event-driven Reactive Supervision (pillar 2) -Supervisory activity in response to something that is emerging or recently happened. - supervisory staff are allocated to situations and firms of heightened risk to consumers. - events that cause this type of reaction: Whistleblowing, alleged misconduct and spike in reported complaints 3) Thematic Approach (issues and product's work) -FCA looks at issues and risks in each sector -issues like a trend for particular business practice or problem with a certain product -does it on an ongoing basis to address risks common to one or more firms 5.1D1A
A large bank based in the UK is authorised to provide advice on investments. This activity would be regulated by the:
Prudential Regulation Authority. - is part of the Bank of England and is responsible for the authorisation, prudential regulation and supervision of banks, building societies, credit union, insurers and major investment firms. - governed by the PRC -has three objectives: 1. promote safety and soundness of firms it regulates 2. contribute to the securing of an appropriate degree of protection for those who are or may become insurance policyholders 3. Facilitate competition chapter reference 5.1A
The frequency and intensity of the supervision applied by the Prudential Regulation Authority to the firms it supervises varies in line with the:
Scale of a firm's potential impact, taking account of its size, complexity and its interconnectivity with the rest of the financial system. -for insurers PRA takes into account its size (no. of Policy holders) and type of business undertaken chapter reference 5.1D2
Monument Insurance and Long Life Assurance are currently going through a merger. What type of additional fees will be charged by the FCA to cover the costs incurred by the regulator as a consequence of their union?
Special project fees only. -meets cost FCA undertakes to deal with a request from a fee-payer e.g. insurance company re-organisations, large mergers and demutualisations chapter reference 5.2F3B
If the FCA is planning to visit High Advice Ltd, a firm of IFAs, on Wednesday 5 June to conduct an investigation into market abuse, what is the latest that High Advice Ltd must be notified of the FCA's enforcement officers' visit?
The FCA does not need to give notice of such a visit. - The FCA does not have to give notice if: a) insider dealing b) market abuse c) misleading statements d) promoting collective investment schemes chapter reference 5.2I1A
Which body has the power to ensure banks increase their capital during periods of growth and profitability, so that they are sufficiently protected during periods of declining business and market instability?
The Financial Policy Committee. 5.1A2
DepositOn is an online bank offering a range of current and savings accounts, including ISAs. It also offers a financial planning service through its subsidiary InvestOn. Its Part 4A permission will be provided by:
The Prudential Regulation Authority. is part of the Bank of England and is responsible for the authorisation, prudential regulation and supervision of banks, building societies, credit union, insurers and major investment firms. - governed by the PRC -has three objectives: 1. promote safety and soundness of firms it regulates 2. contribute to the securing of an appropriate degree of protection for those who are or may become insurance policyholders 3. Facilitate competition chapter reference 5.1C1
Ivan has appealed against enforcement action that has been taken by the FCA. Who would he appeal to and what power does this body have?
The Upper Tribunal (Tax and Chancery Chamber) and they can overrule the FCA decision. chapter reference 5.2.I1B
Following a review by FCA enforcement officers, Fay has been fined and told to pay compensation to 40 clients because her records failed to support her recommendations. Who could she appeal to against the decision?
The Upper Tribunal (Tax and Chancery Chamber). - is an independent judicial body established by the Tribunals, Courts and enforcement act 2007 - Tax and Chancery chamber is part of the upper Tribunal which hears references arising from certain decisions and supervisory notices issued by the FCA Decisions that can be referred to the Tribunal Include: 1) disciplining authorised firms and approved person 2) Varying a firm's permission to conduct certain or all regulated activities 3) Matters relating to market abuse 4) Withdrawing individual approval 5)Making prohibition orders banning people from employment relating to certain or all regulated activities 5.2I1B
Wedge Hedge Funds Ltd made a complaint to the Complaints Commissioner regarding the FCA's apparent lack of evidence for carrying out enforcement actions. To whom must the Complaints Commissioner report his findings?
The complainant and the FCA. - complaintes commissioner can in this report give the FCA recommendations to make ex gratia payment to the complainent (payments of goodwill) - The FCA decides if they want to make this payment -FCA complaints commissioner publishes an annual report on their work NB: NEW complains regime for the PRA, FCA and BOE - four weeks to deal with complaint arrange a timetable with the complainant if can't -FCA will process complaints centrally even if about other regulatory bodies - FCA is responsible for recruitment of Complaints commissioner but all three bodies need to agree for appointment to happen chapter reference 5.2J1
Under what circumstances would Craft Ltd be permitted to use the FCA logo on their own materials?
They are not permitted to use the FCA logo on any of their own materials. chapter reference 5.2F3A
Under the Capital Requirements Directive (CRD) GENPRU Principle 4, equity share capital is contained within which Tier?
Tier 1 chapter reference 5.2G2
Tightening controls with the aim of combating market abuse and other forms of financial crime is an example of the FCA pursuing which of its operational objectives?
To protect financial markets.: aspects that fall under this operational objective a) soundness and resilience of the trading infrastructure. b) The integrity of the financial markets (reliability of price formation process and suitability of listing rules) c) Combating Market Abuse d) addressing the extent the financial system may be used for the purposes of financial crime NB- FCA does not have strict responsibility for financial stability that falls to PRA and more the FPC -CEO of FCA is part of the FPC chapter 5.1B1B
Under what circumstances can an eligible firm use the FCA's logo on any of its documentation?
Under no circumstances. chapter reference 5.2F3A
The Public Interest Disclosure Act 1998 is of particular relevance to which part of the Senior Management Arrangements, Systems and Controls (SYSC)?
Whistle blowing (SYSC 18). -Firms should have procedures for whistle-blowing to someone in the firm or to the FCA and should make staff aware of them - as is required by the Public Interest Disclosure Act 1998 chapter reference 5.2F1C
The Upper Tribunal (Tax and Chancery Chamber) can hear appeals against FCA decisions regarding any of these matters, EXCEPT those relating to:
a Firm's capital adequacy. Decisions that can be referred to the Tribunal Include: 1) disciplining authorised firms and approved person 2) Varying a firm's permission to conduct certain or all regulated activities 3) Matters relating to market abuse 4) Withdrawing individual approval 5)Making prohibition orders banning people from employment relating to certain or all regulated activities chapter reference 5.2I1B
RTF Ltd, an authorised firm, has not been controlling the advice it provides in one part of its business - mortgages. Although other parts of the business are satisfactory, the action taken by the FCA in relation to their mortgage business is most likely to be:
a withdrawal of authority. chapter reference 5.2I1
Under the Consumer Rights Act 2015, a contract may be deemed to be unfair if the terms are not transparent or prominent. The definition of prominent means that it should be brought to the consumer's attention in such a way that:
an average consumer would be aware of it. chapter reference 5.2L3
Maxine gave her discretionary fund manager £100,000 to invest on a Thursday. Under the client asset and client money (CASS) rules, this money must normally be paid into the firm's client bank account by close of business the following:
day. Client Money Under CASS: -client money rules don't apply to: life offices, friendly societies and banks - Client money =cash or cheques payable to an intemediary -Small firms don't need to complete a client money and asset return (CMAR) -CASS medium or Large firm holding more the £1M and/or £10M in assets must: -complete CMAR via Gabriel every Month -make a director or senior manager responsible for CASS chapter reference 5.2H4B
Penny works for a firm which has a remuneration code. The main purpose of this is to:
ensure that remuneration policies are consistent with effective risk management. affected firms must establish, implement and maintain remuneration policies that consistent with and promote effective risk management know the 12 Remuneration principles chapter reference 5.2F1C
John Bentley, managing director of Bentley Financial Services Ltd, asked the FCA what supervision as a flexible portfolio firm actually means to his company in practical terms. He is told that his firm will be subject to:
event driven reactive supervision(pillar 2), and thematic issue and products supervision. (pillar 3) Flexible portfolio- majority of firms fall into this category -pro-actively supervised through combination of market-based thematic work and programmes of communication, engagement and education to address identified key risk of the firms sector -These firms get FCA customer contact cent
PPT Ltd have received a fine from the FCA as they didn't have adequate procedures in place to ensure the advice they provided was suitable. This led to an inconsistent approach and some customers were disadvantaged. The FCA fine is most likely because PPT Ltd:
had inadequate systems and controls. Falls Under SYSC 3- Senior Management arrangements, systems and controls (SYSC) -firms should have systems and controls appropriate to its business meaning appropriate for its size, nature and associated risks -should be regularly reviewed -NB the common platform requirements chapter reference 5.2F1C
Agreements involving credit of up to £25,000 are regulated by the Consumer Credit Act 1974. The 2006 Act removed this upper limit for:
high net worth debtors. And for the purposes of a business carried on by the debtor. chapter reference 5.2L2
Bradley is currently subject to a FCA investigation about his behaviour but he hasn't been notified about this. The offence being investigated is likely to be suspected:
insider dealing. or it is a case of: b) market abuse c) misleading statements d) promoting collective investment schemes chapter reference 5.2I1A
A financial services provider is making training facilities available to Hogg Howlett, an insurance intermediary. The provider is in breach of COBS 2 rules on inducements if:
it does not make the facilities generally available to intermediaries. Conduct of Business Obligations (COBS2) - chapter reference 5.2H1B
Able & Co is an authorised firm which is subject to the Capital Requirements Directive. Abel & Co should be aware that:
it will be required to undertake stress testing of its financial resources. -Most larger firms are subject to the Capital Requirements Directive (CRD) which requires them to undertake detailed risk assessments and stress-testing scenarios to establish the appropriate level of financial resources are required to be hold -NB! insurance companies and Banks are subject to very rigorous financial monitoring and prudentially regulated by the PRA chapter reference 5.2G1
Leaking false or misleading information in order to influence the price of a company's shares is an example of:
market abuse. chapter reference 5.2H5
The Remuneration Code (SYSC 19) includes 12 Remuneration Principles. Examples of these principles include:
pension policy, governance, and remuneration structures. The 12 principles are: 1. Risk Management and risk tolerance 2. supporting business strategy, objectives, values and the long-term interests of the firm 3. avoiding conflicts of interest 4. Governance 5. Control Functions 6. Remuneration and capital 7.Exceptional Government intervention 8. Proft-based measurement and risk adjustment 9.Pension Policy 10. Personal Investment strategies 11. Non-compliance with remuneration code 12. Remuneration structures chapter reference 5.2F1C
The FCA's approach to how firms handle their anti-money laundering procedures can best be described as:
risk-based. Risk-based approach in terms of which cases to pursue -considering its regulatory objective - the principles of good regulation - the referral criteria FCA course of action must be a proportionate response, exercise common standards of fairness in use of its powers and act in a manner consistent with the Human Rights Act of 1998 chapter reference 5.1C2
Wendy feels that some of the terms of her life policy are unfair. Under the Consumer Rights Act 2015, Wendy may successfully challenge the terms on the grounds of fairness if:
she can demonstrate the terms are insufficiently prominent or transparent. A term is: Transparent- if it is expressed in plain and intelligible language Prominent- if it is brought to the consumer's attention in such a way that an average consumer would be aware of it average consumer= one who is reasonably well informed, observant and circumspect chapter reference 5.2L3
The Consumer Credit Act 2006 expanded the definition of an 'individual' entitled to protection, so as to include:
sole traders, partnerships of three or fewer partners and unincorporated associations.
Trudy's firm of independent financial advisers has to pay the FCA periodic fees. The fees are based:
solely on the firm's share of the FCA's budget for the current tax year. Periodic Fees- paid annually. provide most of funding FCA require undertaking its functions -The Annual Funding Requirement (AFR) is derived each year from the FCA's budget. - total split amongst fee blocks which each have an AFR - A018 is a fee block for a firm providing advising on or arranging home finance -A019 Fee Block general insurance mediation -If firm carrying out both they have to pay fees for both blocks - Periodic fee = (tariff base date for firm applied to fee-block tariff rates - final fee rates received in May (exept application fee rates made March) -Firms should expect fee invoice June/July of each year chapter reference 5.2F3B
Under the twelve Remuneration Principles, the MOST effective form of remuneration will be based primarily on:
standard salaries. as opposed an over-reliance on performance-related pay chapter reference 5.2F1C
In its role as prudential supervisor, in addition to ensuring the adequacy of a firm's financial resources, the FCA also considers:
systems and controls, governance arrangements and risk management capabilities. chapter reference 5.1D1B
Breaches of the Consumer Rights Act 2015 by one or more financial firms is likely to result in enforcement action from:
the FCA or the Competition and Markets Authority. also applies to the Competition Act 1998 where the FCA and CMA can fine for breaches of domestic and EU competition law prohibitions on anti-competitive agreements ( cartels and abuses of dominant position) chapter reference 5.1B1C
Under ICOBS, Able Insurance is only required to provide a brief demands and needs statement to Clive because:
the sale is being made without the provision of advice. non-advised sales the intermediary must still collect sufficient information about the client to ensure they are eligible to claim benefits under the policy -brief demands and needs statement sets out what the policy covers chapter reference 5.2H2A
Rita has received advice on a general insurance product but has NOT received a cancellation notice. She has received advice on:
travel insurance lasting less than a month. or policies where performance has already been completed chapter reference 5.2H2A
Alpha Finance, an authorised firm, is seeking significant variations to its FCA permissions. The variation has been approved but it causes the firm to fall into a new fee block not allocated before the variation. What would be the application fee, if the fee for a new firm falling into this block would be £2,000?
£1,000. Variation of Permission fee is what this is called and is charged at 50% of the fee block NB that a standard or flat fee of £250.00 applies to all other Variations of permission applications that do not result in the firm being allocated to one or more fee blocks chapter reference 5.2F3B
Under Block 2 - Prudential Standards, an exempt MiFID firm will now have a base capital resource requirement of:
£20,000. (from 30 June 2017) Variable Capital Resource requirement of 5% of income (from 30 June 2016) chapter reference 5.2G1
Before 2006, Margaret secured a loan of £20,000 from her bank. What maximum additional sum could she have borrowed, and still remain within the scope of the Consumer Credit Act 1974?
£5,000. chapter reference 5.2L1
Lyonheart Finance, an authorised firm, is seeking significant variations to its permission. Agreement has been granted, but it causes the firm to fall into a new fee block not allocated before the variation. What would be the application fee, if the fee for a new firm falling into this block would be £1,500?
£750. Variation of Permission fee is what this is called and is charged at 50% of the fee block NB that a standard or flat fee of £250.00 applies to all other Variations of permission applications that do not result in the firm being allocated to one or more fee blocks chapter reference 5.2F3B