FSRE Unit 1 Vocabulary

Flashcards covering key vocabulary terms and definitions from the FSRE DipFA Unit 1, Topics 1-10.

Cash

Low-risk, highly liquid, and ideal for short-term needs, including current and savings accounts.

Fixed-interest securities (bonds/gilts)

Debt instruments with set interest payments and maturity dates, sensitive to interest rate changes.

Equities

Shares in companies offering variable returns via dividends and capital growth, with higher risk but long-term growth potential.

Property

Investments in physical real estate or indirect holdings, generally illiquid but useful for diversification.

Money markets

Facilitate short-term borrowing/lending (under 12 months) using instruments like Treasury Bills and Certificates of Deposit.

Capital markets

Medium to long-term investment through bonds and shares, divided into primary (new issues) and secondary (trading of existing securities) markets.

Retail banks

Offer current accounts, savings, personal loans, credit cards, and mortgages, and support businesses with accounts, loans, and payment systems.

Building societies

Mutual organizations owned by members, focusing primarily on mortgage lending and savings products.

Investment banks

Support companies and governments with services such as raising capital, facilitating mergers and acquisitions, and proprietary trading, without typically dealing directly with consumers.

Insurance companies

Offer protection products, with life insurers providing long-term products and general insurers covering areas like motor, home, and travel.

Credit unions

Community-based, not-for-profit financial co-operatives offering basic savings and loans, owned and controlled by their members with a focus on ethical lending.

Challenger banks

Often operate without branches, offering app-based banking with innovative features.

Fintechs

Use technology to improve delivery and accessibility of services like investing or budgeting.

Systemically important firms

Institutions so large or interconnected that their failure could cause major disruption to the financial system, facing stricter oversight by regulators.

Deposit accounts

Available from banks, building societies, and credit unions, including instant access, notice, and fixed-term accounts.

Cash ISAs

Offer tax-free interest up to the annual limit.

Credit Products

Include overdrafts, personal loans, credit cards, and secured lending like mortgages, governed by the Consumer Credit Act and FCA rules.

Term assurance

Life insurance with fixed time coverage.

Whole-of-life

Life insurance that pays out whenever the insured dies.

Critical illness cover

Pays a lump sum on diagnosis of specified serious illnesses.

Income protection

Provides income if unable to work due to illness or injury.

Collective investments

OEICs, unit trusts, investment trusts.

Bonds and gilts

Fixed-income securities from corporates or government.

Tax wrappers

Include Stocks and Shares ISAs, which offer tax-free capital growth and income.

Annuities

Convert pension pots into guaranteed retirement income.

Mortgage Market Review (MMR)

Introduced tougher affordability checks for mortgages.

Wrap Platforms

Online platforms that consolidate investments, pensions, and ISAs in one place, useful for financial advisers managing multiple products for clients.

Independent advice

Advisers must consider a wide range of products across the whole market and offer unbiased, unrestricted recommendations.

Restricted advice

Advisers only consider a limited product range or single provider and must clearly disclose their restricted status to clients.

Advised sales

A regulated advisor makes a personal recommendation based on the client’s circumstances, subject to full FCA rules under COBS.

Non-advised sales

Also called “execution-only” or “information-only” sales. The firm provides general product info but no personal recommendation. The customer decides what to buy.

Guidance

Includes generic, factual information about products without considering an individual’s personal circumstances.

Advice

Requires authorisation and includes a personal recommendation tailored to the client, a regulated activity under the Regulated Activities Order (RAO).

MoneyHelper

Offers general guidance on pensions, budgeting, and savings.

Pension Wise

Free service for people over 50 with defined contribution pensions.

Hybrid models

Combine technology with adviser support (e.g., advice over video call).

Legal person

A natural person or legal entity that has rights and obligations.

Offer

A clear proposal made by one party in contract law.

Acceptance

Unqualified agreement to the offer in contract law.

Consideration

Value exchanged by both parties in contract law.

Capacity

Parties must be legally competent (e.g., not minors or mentally incapacitated) to enter a contract.

Power of Attorney

Legal document allowing one person to act on behalf of another.

Trusts

A legal arrangement where assets are held by one party (trustees) for the benefit of others (beneficiaries).

Will

A document that sets out how a person’s estate is to be distributed after death, must be in writing, signed, and witnessed.

Intestacy rules

Rules apply when no will exists, often not aligning with the deceased’s likely wishes.

FSMA 2000

The core legislation for financial services regulation in the UK.

Financial Services Act 2012

Updated FSMA 2000, creating a “twin peaks” model with separate regulators for prudential and conduct matters.

Prudential Regulation Authority (PRA)

Part of the Bank of England, regulates banks, insurers, and major investment firms focusing on solvency and risk to the financial system.

Financial Conduct Authority (FCA)

Independent regulator supervising firms for conduct with three statutory objectives: protect consumers, market integrity, and promote competition.

SM&CR;

Senior Managers and Certification Regime, replaced the Approved Persons Regime, ensuring key individuals are fit and proper.

PRIN

Principles for Businesses, high-level standards in the FCA Handbook.

COBS

Conduct of Business Sourcebook, advice and investment rules in the FCA Handbook.

MCOB

Mortgages, rules in the FCA Handbook.

ICOBS

Insurance conduct of business, rules in the FCA Handbook.

SYSC

Senior management systems and controls, rules in the FCA Handbook.

Treating Customers Fairly (TCF)

Embedded in firm culture, training, and compliance, with 6 consumer outcomes

Consumer Duty

Firms must act to deliver good outcomes for retail customers, replacing Principles 6 and 7 for retail business.

Three stages of Money Laundering

Placement, Layering, Integration.

MLRO

Money Laundering Reporting Officer, appointed by Firms.

CDD

Customer Due Diligence, must be conducted by Firms to prevent Money Laundering.

Financial Ombudsman Service (FOS)

Independent arbiter of disputes between firms and customers.

Financial Services Compensation Scheme (FSCS)

Protects consumers if a firm fails.

Core stages of the advice process

Establish the relationship, Gather client information, Analyse the information, Develop solutions, Present recommendations, Implement and review.

Categories for suitability

Customer needs and objectives, Risk tolerance and capacity for loss, Time horizon, tax status, existing arrangements

FCA Client Categories

Eligible Counterparty, Professional Client, Retail Client

Vulnerable Customers

Those especially susceptible to harm due to personal circumstances.

Streamlined Advice Types

Focused Advice, Simplified Advice, Basic Advice Robo-Advice

What is Customer Due Diligence (CDD)?

The process of verifying the identity of a customer and assessing the potential risks associated with the business relationship.

What is a Suspicious Activity Report (SAR)?

A report made by a firm to the relevant authorities, such as the FCA, when it suspects or knows that money laundering has taken place.

What is Anti-Money Laundering (AML)?

This aims to prevent firms from being used for financial crime, including terrorist financing. It involves assessing risks and applying appropriate measures to mitigate them.

What is an effective AML training program?

A system that ensures that staff are aware of the firm’s policies and procedures for preventing financial crime and are trained to identify and report suspicious activity.

What are the FCA’s financial crime rules?

This framework sets out the minimum standards that firms must meet in relation to their systems and controls for countering the risk that they might be used for financial crime.

What is money laundering?

The process of disguising the origins of illegally obtained money so that it appears to come from a legitimate source.

What is extortion?

The use of force or intimidation to obtain financial gain, often involving threats to a person’s safety or well-being.

What is embezzlement?

The act of wrongfully taking property or funds entrusted to one’s care, often by an employee or fiduciary.

What is insider dealing/trading?

The use of confidential information about a company’s financial situation to make a profit or avoid a loss when buying or selling its shares.

What is fraud?

Dishonestly making a false representation with the intention of making a gain or causing a loss to another.

What is Market manipulation?

An attempt to manipulate the price of a security or commodity for financial gain.

What is insurance fraud?

The act of knowingly destroying, damaging, or concealing property with the intent to defraud an insurer.

What are investment scams?

Deceptive practices that induce individuals to invest in worthless or non-existent investments.

What is counterfeiting?

The creation and distribution of counterfeit currency or financial instruments.

What is cybercrime in finance?

The use of digital technologies to commit fraud, theft, or other financial crimes.

What is white-collar crime?

Financial crimes committed by individuals in professional positions, such as embezzlement or bribery.

What is greenwashing in finance?

The practice of making misleading or unsubstantiated claims about the environmental benefits of a financial product or service.

What is bribery and corruption?

Bribery is offering, giving, receiving, or soliciting any item of value to influence the actions of an official or other person in charge of a public or legal duty.

What is Regulatory breaches?

Involves actions that contravene established rules, policies, or laws, often motivated by personal gain or other unethical considerations.

What is Financial crime risk management?

The process of identifying, assessing, and prioritizing actions to mitigate the impact of financial crime.

What are common market abuse tactics?

Methods used to manipulate financial markets for illicit gains.

What is the purpose of money laundering?

The process by which criminals attempt to conceal the true origin and ownership of the proceeds of their illegal activities.

What does Customer Identification Program (CIP) involve?

The steps financial institutions must take to verify the identity of their customers, aiming to prevent identity theft, money laundering, and terrorist financing.

What are key components of Anti-Money Laundering (AML) regulations?

Laws and regulations designed to prevent financial institutions from being used for money laundering and terrorist financing.

What is the importance of filing a Suspicious Activity Report (SAR)?

A report that financial institutions must file with regulatory authorities when they suspect or detect activities related to financial crimes.

What are strategies for Effective Financial Crime Risk Management?

How financial firms assess and mitigate the risks associated with financial crimes, ensuring compliance with legal and regulatory requirements.

What are the major categories of Financial Crimes?

Unlawful activities committed in the financial sector, including fraud, embezzlement, insider trading, and market manipulation.

What are the common types of Fraud?

Techniques used to deceive or misrepresent financial information for personal or corporate gain, often resulting in significant financial losses for others.

What are the implications of Insider Trading?

The act of attempting to profit from confidential information about a company's plans or performance, not available to the general public.

Deceptive actions taken to distort

What are the common types of Fraud?

Techniques used to deceive or misrepresent financial information for personal or corporate gain, often resulting in significant financial losses for others.

What are the implications of Insider Trading?

The act of attempting to profit from confidential information about a company's plans or performance, not available to the general public.

What is Accounting Fraud?

Deceptive actions taken to distort financial statements, often to inflate assets, revenue, or profits.