UK Financial Regulation and Planning - Questions(Pages 1-4)

Flashcards covering the core Q&As from Pages 1-4 (UK financial market operations, regulation, policy, and common planning scenarios).

How does the UK financial market operate in respect of both Investments and loans?

Financial intermediaries help transform short-term savings into long-term loans.

Within the UK economy, an example of disintermediation would be?

Purchase of UK gilts from the Debt Management Office.

With respect to UK short-dated gilts, index-linked gilts and National Savings & Investments products, a financial adviser should be aware that they

are all used by the Government to raise funds.

When the Bank of England announces it will undertake quantitative easing, a financial adviser should consider that typically

The Bank of England will purchase an amount of gilts that are in circulation.

The tripartite regulators of UK financial firms, when considering issues relating to financial stability, will report to

The European Systemic Risk Board.

The rate of inflation has been steadily increasing in the UK over the last year. In an effort to control this position, the Bank of England has increased the Bank Rate by 0.5% and the Government have just announced a 2% increase to the basic rate of Income Tax. These actions are example of change in

Monetary and fiscal policy respectively.

Terry has various debts, including a mortgage, a credit card, a secured personal loan and a hire purchase finance agreement on his car. When considering how he might reduce his outgoings, he should be aware that

Debt consolidation may involve increasing the term of his repayments.

A client is considering mortgage payments for both capital and interests and interest-only mortgages. He should be aware that if interest rates stay constant throughout the mortgage term, compared to a capital and interest mortgage, an interest-only mortgage will result in

A lower monthly cost, but a higher overall borrowing cost.

Michael, aged 27, has recently purchased a property with a mortgage on a capital and interest basis. He is single and has no dependants and is employed by the local authority. Michael’s main priority is most likely to be arranging an

amount of income protection insurance sufficient to continue meeting the mortgage payments.

Claire, aged 38, is concerned about funding the future further education costs for her children, aged 9 and 10. When considering an appropriate timescale for any investment and reflecting her medium attitude to risk, she is most likely to consider using

A range of tax-efficient savings plans investing in a range of investment types.

John, aged 64, is married to Margaret, aged 62, and they are both approaching retirement. They have always worked for the same company and have both accrued pension benefits through the company’s group money purchase scheme. If they both purchase annuities at retirement and both wish to receive the maximum possible income level, they should both select

A level annuity on a single-life basis with no guarantee.

Geoffrey and Andrew are brothers and have both retired. All of Geoffrey’s retirement income, but only part of Andrew’s, is treated as earned income. This is because

only Andrew took out a purchased life annuity with the funds raised from his pension commencement lump sum entitlement.

When considering estate and Inheritance Tax planning for a retired couple, who have no outstanding debts or liabilities and a substantial estate, their first priority should be

writing a valid will.

Bob and Gillian, both aged 28, have recently arranged an interest-only mortgage on their first home which they intend to repay with the proceeds of a trust fund that Bob will receive when he attains the age of 35. To ensure that this loan is adequately protected in the event of death before the trust fund is distributed, the most suitable arrangement is likely to be

a level term assurance policy on a joint-life basis for the outstanding mortgage amount.

Kim and Richard have two children, aged five and seven. They have no outstanding mortgage and Richard is the sole wage earner. To ensure Kim is able to continue looking after the children in the event of Richard’s death, they should consider a family income benefit policy based on

Richard’s life and Kim’s income requirement.

Jerry, a 37 year old higher-rate taxpayer, is looking to provide lump sum in the future, for the benefit of his 15 year old son, Paul, when he finishes further education at age 22. Jerry wishes to invest £10,000 per annum. It is likely that the most tax-efficient method of achieving this would be

Utilising his own ISA allowances and gifting the proceeds to Paul at the age of 22.

The maximum entitlement to the State Pension is currently determined by

A complete National Insurance contributions record for a specific period of the working life of the individual.

A self-employed jeweller wanting to purchase a shop using his pension scheme should consider a

self-invested personal pension (SIPP).

How is an authorised firm affected by the Financial Conduct Authority’s Consumer Duty rules in relation to good customer outcomes?

They must be evidenced in all areas of the firm.

A financial adviser has been approached by his client, Billy, who has recently been appointed as a deputy by the Court of Protection on behalf of his mother, Betty, who has lost mental capacity. Betty is a joint trustee of a discretionary trust with her brother Jimmy. Who will have the power to act on any advice given in relation to the trust assets?

Jimmy only.

An independent financial adviser within a large authorised firm is recommending a new personal pension arrangement to her client. She is acting as

Agent to the client only.

Katrina entered into a personal loan arrangement with a finance company 3 months before her 18th birthday. What is the legal position in respect of this arrangement?

Katrina can avoid all liability under the contract.

Tony, Peter and Steve jointly own an investment property as tenants in common. Tony owns 20%, Steve owns 30%, and Peter owns 50% of this property. The property is subject to a mortgage. If Tony dies, what will happen to his share of the property?

It will be passed on Tony’s estate.

Michaela owns a property outright and in perpetuity, but does not own the freehold. This is most likely to be because the ownership is

On a commonhold basis.

In a case of bankruptcy, who has a statutory duty to investigate, where necessary, the bankrupt’s affairs and send a report to the creditors?

The official Receiver.

Jessica wrote a will some time ago leaving most of her assets to her husband and a small bequest to her mother. What is the impact, if any, of her recent divorce on the will?

the will remains valid and her assets distributed as if her ex-husband had predeceased her.

Ethel has purchased shares for £5,000 and placed them under a trust for her grandson. She has arranged the trust so that he will automatically receive the shares at the age of 18, but there will not be any access before that time. The trust she is most likely to have used is a

Bare trust.

In creating a trust for her client, a solicitor recommends the inclusion of a charging clause in the trust wording. What is this most likely to relate to?

To allow professional trustees to be remunerated for their services.

How does the Financial Services Act 2012 directly affect the Financial Conduct Authority (FCA) and the prudential Regulation Authority (PRA) in respect of financial stability?

It required the FCA and the PRA to have an appropriate strategy, and work with the Bank of England and HM Treasury to achieve a satisfactory outcome.

A professional firm of pension trustees have been deemed to be in breach of the law whilst administering and managing an occupational pension scheme. What maximum fine may be levied by the Pensions Regulator against the firm?

£50,000.

An authorised firm is using the services of an external compliance consultancy to advise the firm on all compliance matters. In respect of this agreement, the authorised firm should be aware that

responsibility for compliance issues ultimately rests with the senior management of the firm.

In what circumstances would the Financial Services Compensation Scheme provide a compensation payment to a customer?

When compensation is due and the firm that the customer dealt with is unable to meet its liabilities and is no longer trading.

What is the main function of the Financial Action Task Force with regard to the EU Money Laundering Directives?

To set standards required to deal with money laundering and terrorist financing.

The maximum fine, if any, which the Financial Conduct Authority (FCA) can impose on an authorised firm for a breach of the FCA rules is

unlimited.

The objective of MoneyHelper in assisting with the implantation of the National Strategy for Financial Capability is to do so by primarily providing information to

any individual seeking information on financial products and debt advice.

The Financial Conduct Authority’s strategic objective is to

ensure that the relevant markets function well.

What is the main purpose of the stress-testing which the Financial Conduct Authority requires of certain authorised firms?

To assess firm’s ability to meet capital and liquidity levels during challenging economic circumstances.

In relation to breaches of the current Money Laundering and Terrorist Financing (Amendment) Regulations 2019, the Financial Conduct Authority (FCA) has the power to act against

any firms or individuals regardless of whether they are on the FCA register.

What is the maximum term of imprisonment which may be imposed, if any, on an individual who is found guilty of insider trading?

Seven years.

Following a breach of their rules, the Financial Conduct Authority has issued a public statement about a firm’s behaviour. The offence is most likely to have been

a significant failure in financial reporting.

A financial adviser is suspected of financial mis-conduct in relation to her regulated activities. How may the Financial Conduct Authority deal with the matter?

It may deal with the matter using civil or criminal proceedings.

In the Prudential Standards section of the combined handbook of the Financial Conduct Authority Handbook and Prudential Regulation Authority, which types(s) of firm are covered by the MIPRU requirements?

Administrators, home finance providers, intermediaries, and general insurance intermediaries only.

The rules in section 12 of the Prudential Sourcebook for Banks, building Societies and Investment Firms (BIPRU), are primarily aimed at dealing with the issues of

liquidity and management of liquidity issues.

Gavin, a financial adviser, has sold a payment protection insurance contract to his client, in respect of this sale, he should be aware that the sale is

regulated by the provisions of the Insurance: Conduct of Business sourcebook (ICOBS).