UK Financial Regulation - CISI Level 3 Practice Flashcards

Vocabulary flashcards generated from the UK Financial Regulation study manual (Edition 33), covering key terms, regulatory structures, client categorisations, market integrity, and dispute resolution schemes.

General Prohibition

The statutory prohibition set out in Section 19 of the Financial Services and Markets Act 2000 (FSMA), making it a criminal offence to carry out a regulated activity by way of business in the UK unless a person is authorised or exempt.

Twin Peaks Approach

The UK regulatory structure split between two main regulatory bodies: the Prudential Regulation Authority (PRA) for prudential regulation of systemic institutions, and the Financial Conduct Authority (FCA) for conduct of business, market regulation, and prudential supervision of solo-regulated firms.

Consumer Duty (Principle 12)

The FCA principle requiring in-scope financial services firms to act to deliver good outcomes for retail customers across four core outcomes: Products and Services, Price and Value, Consumer Understanding, and Consumer Support.

Senior Managers & Certification Regime (SM&CR)

An individual accountability framework for FSMA-authorised firms designed to improve standards of conduct at all levels, consisting of the Senior Managers Regime, Certification Regime, and Conduct Rules.

Statement of Responsibilities

A document submitted to regulators under the Senior Managers Regime that clearly sets out the specific aspects of a firm's business and affairs that a Senior Management Function (SMF) holder is responsible for managing.

Fit and Proper Test (FIT)

The criteria used by regulators and firms to assess whether an individual is suitable to perform a controlled or senior management function, evaluated against honesty, integrity and reputation; competence and capability; and financial soundness.

Appointed Representative (AR)

An individual or firm that is exempt from direct authorization under Section 39 of FSMA because they have entered into a contract with an authorised principal firm that accepts legal responsibility for their regulated activities.

Designated Professional Bodies (DPBs)

Professional bodies (such as the Law Society or ICAEW) whose members are permitted under Part 20 of FSMA to carry on limited, incidental financial services activities without direct authorisation from the FCA.

Threshold Conditions (TC)

The statutory minimum standards that a firm must satisfy and continue to meet on an ongoing basis to obtain and retain Part 4A permission to carry on regulated activities.

Elective Professional Client

A retail client who has requested and been approved for reclassification as a professional client after passing a qualitative test assessing expertise and knowledge, and (for MiFID business) a quantitative test meeting statutory trading, portfolio size, or employment criteria.

Eligible Counterparty (ECP)

A category of client (such as credit institutions, investment firms, or central banks) that receives the lowest level of regulatory protection under COBS rules when conducting eligible counterparty business.

Durable Medium

An instrument (such as paper or email) that enables a client to store information addressed personally to them in a way accessible for future reference for an adequate period of time, without allowing the stored information to be altered.

Key Investor Information Document (KIID)

A standardised pre-sale disclosure document required for UCITS schemes that presents essential facts regarding investment objectives, costs, risks, rewards, and past performance to enable retail investors to make informed decisions.

Packaged Retail and Insurance-based Investment Products (PRIIPs) KID

A stand-alone, standardized key information document limited to a maximum of three A4 pages designed to explain the key features, risks, costs, and potential gains or losses of non-UCITS packaged investment products.

Cold Calling

An unsolicited real-time financial promotion communicated to a recipient without prior appointment or arrangement.

Churning

The practice of over-dealing or trading excessively in a client's discretionary account primarily to generate additional commission or fee income for the firm.

Suitability Report

A mandatory report provided to a retail client explaining why a specific personal recommendation or transaction is suitable for them, based on their demands, financial situation, and investment objectives.

Information Barriers (Chinese Walls)

Organisational and administrative barriers that restrict the flow of confidential or inside information between different departments of a firm to prevent and manage conflicts of interest.

Research Payment Account (RPA)

A dedicated account controlled by an investment firm, funded by an explicit, agreed research charge to clients, used solely to purchase third-party investment research.

Best Execution

The requirement under COBS for firms executing client orders to take all sufficient steps to obtain the best possible result for their clients, taking into account price, cost, speed, likelihood of execution and settlement, size, and nature.

Suspicious Transaction and Order Report (STOR)

A notification submitted without delay to the FCA by an investment firm or trading venue when there is reasonable suspicion that an order or transaction constitutes insider dealing or market manipulation.

Inside Information

Non-public information of a precise nature relating directly or indirectly to financial instruments or issuers which, if made public, would be likely to have a significant effect on the price of those instruments.

Persons Discharging Managerial Responsibilities (PDMR)

Directors or senior executives within an issuer who have regular access to inside information and the authority to make managerial decisions affecting the future developments and business prospects of the issuer.

Market Sounding

An interaction prior to the announcement of a transaction where an adviser or investment bank gauges potential investor interest in a security on behalf of an issuer, subject to recipient consent and strict confidentiality rules.

Placement

The initial stage of the money laundering process, during which dirty cash or illicit funds are introduced into the financial system or commercial economy.

Money Laundering Reporting Officer (MLRO)

An approved person appointed within an authorised firm with responsibility for overseeing anti-money laundering compliance, receiving internal disclosures, and submitting Suspicious Activity Reports (SARs) to the National Crime Agency (NCA).

Bribery Act 2010

UK legislation creating four key criminal offences: giving a bribe, receiving a bribe, bribing a foreign public official, and the strict liability corporate offence of failing to prevent bribery by associated persons.

Financial Ombudsman Service (FOS)

An independent statutory dispute-resolution body established under FSMA to resolve complaints between eligible individual consumers or small businesses and financial service firms quickly and informally.

Financial Services Compensation Scheme (FSCS)

The UK's statutory compensation scheme of last resort that pays financial claims to eligible customers in the event that an authorised financial firm is insolvent or defaults on its liabilities.

Whistleblowing Champion

A senior individual (typically a non-executive director) tasked under FCA/PRA rules with overseeing the integrity, independence, and effectiveness of a firm's internal whistleblowing policies and whistleblower protections.