Batch 4

What does UCITS stand for?

Undertakings for Collective Investment in Transferable Securities

Are all non-executive directors automatically approved persons under SM&CR?

No - approval is only required for NEDs holding specific SMFs, such as Chair or chair of the Risk, Audit, Remuneration, or Nominations Committee

What does SYSC require of persons who direct a firm's business?

They must be of good repute and sufficiently experienced for sound, prudent management. The FCA sets no fixed qualifications, but firms must segregate duties

Who sets the specific competence standards for staff under the Training and Competence rules?

The authorised firm itself - it defines job roles, sets competence standards, and conducts proper assessment, not the FCA directly

What do the FCA Handbook markings R and G mean?

R means a binding Rule, breach can trigger discipline. G means Guidance, not binding and carries no evidential effect

Under SM&CR, where are firm-wide senior manager responsibilities documented?

In the firm's responsibility map, distinct from each individual senior manager's own statement of responsibilities

What is the CRD's underlying purpose?

Firms must hold financial resources in excess of their minimum requirement, not merely equal to it

What are the three tiers of regulatory capital, and what does each include?

Tier 1: permanent share capital, reserves, externally verified interim profits. Tier 2: long-term subordinated debt and revaluation reserves. Tier 3: short-term subordinated debt and interim trading book profit or loss

Which firms are subject to MIFIDPRU rather than the IPRU-INV sourcebook?

Securities and futures firms directly subject to MiFID follow MIFIDPRU, effective 1 Jan 2022, unlike other investment firms outside CRD scope, which follow IPRU-INV

Does the competence requirement cover all staff or just client-facing roles?

All employees of an authorised firm must be competent

Which roles require T&C exam qualifications, and which are excluded?

Advising, managing, and dealing roles, plus day-to-day oversight of certain functions. Excluded are those who merely arrange deals without carrying out the deal themselves

Who has the power to prosecute a crime under the Criminal Justice Act, e.g. insider dealing?

The Financial Conduct Authority

What two factors modify the general application of the COBS rules?

The nature of a firm's activities and its location, set out in COBS 1 Annex 1, Parts 1 and 2 respectively

Which activities fall under the general conduct of business rules, and which are excluded?

Included: designated investment business, life policies, deposit taking. Excluded: corporate lending, general insurance, occupational pensions

What must pre-service client disclosure specifically include, alongside firm and cost information?

Execution venues are specifically required under the information requirements rule

What must "Information About the Firm" (COBS 6.1) specifically disclose, and to whom?

This named rule is retail-only: firm name/address, regulator's name, communication methods, and compensation scheme details

What must firms do to meet the FCA's website disclosure conditions?

Notify the client by email of the website address, ensure continuous accessibility and up-to-date information - written notification alone does not satisfy the rule

How does the client agreement requirement differ between MiFID and non-MiFID business?

For MiFID business, a client agreement covers designated investment business with both retail and professional clients. For non-MiFID business, it's required for retail clients only

Does the client agreement rule apply to an insurance firm issuing life policies as principal?

No - it does not apply to insurance firms issuing life policies as principal, even if the firm requests not to receive one

What format must a client agreement take, and does a webpage qualify?

Paper or another durable medium under COBS 8A. A webpage does not automatically qualify unless it meets storage and retrieval conditions

When is disclosure an acceptable way to manage a conflict of interest?

Only as a last resort, avoidance or internal separation of duties should be tried first

When can a firm legitimately charge different amounts for the same trade on different venues?

Only if the difference reflects genuine differences in the firm's execution costs on those venues, not to favour one venue

Beyond investment business, what else falls under conduct of business rules?

Issuing insurance contracts and deposit-taking, alongside designated investment business

Does the conduct of business rules always apply to a MiFID firm operating from a UK establishment?

Yes - under general application, COBS rules apply automatically to any MiFID firm operating from an establishment in the UK

What is an 'out of scope' MiFID firm, and what's an example?

A firm not subject to MiFID business rules, for example insurance undertakings, sometimes described as carrying on 'out of scope' business

What communication standard applies to all client contact?

Fair, clear, and not misleading, across every channel

What must advisers charge under RDR rules, and how must fees be presented?

A fee-based model, upfront or ongoing, based on a percentage of funds if an ongoing service is given. Fees must be itemised and based on service, not the product

If someone is acting as another person's agent, who is the firm's client?

The agent, not the principal the agent represents

Can a firm pay or accept fees from third parties regarding designated investment business?

No - only rebates paid directly back to the client are acceptable. Fees or non-monetary benefits to or from any other party are prohibited

What non-monetary benefits are acceptable under the research payment rules, and what's a prohibited inducement?

Seminars on specific investments and disclosed non-monetary benefits or training attendance are acceptable. General office equipment is specifically prohibited as an inducement

Which research is exempt from the Inducement Rules, and what does this mean for fund managers?

Research on companies with market capitalisation up to £200m is exempt. UK fund managers don't have to pay separately for this research

What is a valid defence against a charge of making a misleading statement to induce a transaction?

Reasonable grounds - genuinely believing the conduct or statement was reasonable is a valid statutory defence

Are commodity derivatives inside or outside MiFID scope?

Commodity derivatives are covered by MiFID, physical commodities markets are not

What is an MTF, and what does it do?

A Multilateral Trading Facility, introduced under MiFID, a system where a firm matches client orders, providing services similar to an exchange

What products are covered by UK MAR, and what's a key exclusion?

Financial instruments, commodity derivatives, and emissions allowance auctioned products are covered. Life assurance products like endowments are excluded, even if traded on a secondary market

What UK short selling intervention powers exist, and what's a key limit on them?

Powers extend to notification/disclosure regime expansion, restricting short selling and similar transactions, and restricting sovereign CDS trades - but not to requiring lenders to notify fee changes

Which client type is least likely to qualify as professional?

An unauthorised firm

What defines a durable medium generally?

Any format that can be saved and viewed again later

What is the exemption for market makers under the 'dealing ahead' rule?

Market makers, obliged to trade on demand, may deal ahead of the release of a research recommendation as part of normal market making

What are the general defences to insider dealing, versus the three special defences?

General defences: would have dealt anyway regardless, information was disclosed in the proper course of business, or information was already publicly available. Special defences: market maker acting in good faith, market information, and price stabilisation

How do insider dealing and market abuse differ?

Both cover unpublished price-sensitive info, but insider dealing is criminal and market abuse is civil

When must firms disclose FOS details, and what are the key complaint time limits?

Not routinely, but on an unresolved complaint. Firms send a final response within 8 weeks, the client can refer to the FOS within 6 months of that

How often must firms report complaints data to the FCA?

Twice a year, every six months

What two traits must a complaint handler have?

Impartiality and relevant subject knowledge, without prior involvement in that area

Which legislation does market abuse under FSMA s118 overlap with?

The Criminal Justice Act 1993's insider dealing provisions

Can a company, rather than an individual, commit the offence of insider dealing?

No - under the Criminal Justice Act 1993, only an individual can commit insider dealing

What defines 'inside information'?

It relates to a specific security or issuer, is specific or precise, hasn't been made public, and is price-sensitive

Who must hold overall responsibility for AML systems and controls at an authorised firm?

A director or senior manager, who may also be the MLRO

Who administers and enforces the Data Protection Act 1998 and the Freedom of Information Act 2000?

The Information Commissioner's Office, ICO, is responsible for both pieces of legislation

What powers did new legislation give the ICO beyond fines, and what right does it promote?

The power to serve an enforcement notice where data protection principles are being breached. It promotes, rather than prohibits, the right to erasure

What fines can the ICO impose under EU GDPR for non-compliance with an enforcement notice versus other breaches?

Up to €20m or 4% of global turnover for failing to comply with an enforcement notice. Other breaches carry up to €10m or 2%, whichever is greater in each case

What penalties apply for breaches of the Data Protection Act 2018 vs UK GDPR?

DPA 2018 allows civil fines up to £500,000 and unlimited criminal fines. UK GDPR allows fines up to £17m or 4% of annual turnover, whichever is greater

Which body administers and issues guidance on ISAs?

HM Revenue and Customs, under powers conferred by various Acts of Parliament

How long can an FCA product intervention ban last without prior consultation?

Up to 12 months, where the FCA judges a product poses unacceptable risks to consumers or is misleading

How does the Bank of England address threats to financial stability?

Its surveillance and market intelligence functions detect threats, dealt with through financial and other operations at home and abroad, and exceptionally by acting as lender of last resort

For MiFID business, when exactly must a firm have a client agreement in place?

For designated investment business with a retail client (covering all such business, not just MiFID), and for MiFID business specifically with a professional client — not all designated investment business with professional clients.

Under the Conduct of Business inducement rules, which statement is TRUE?

The rule does not prohibit a firm from paying an inducement to the client. It applies to business with all clients (retail and professional), disclosure must be made before the service is provided, and it does not apply to minor non-monetary benefits.

When can a retail client expect to receive cancellation-rights information for an authorised unit trust purchase?

It depends on the situation — firms must tell consumers of their cancellation rights in good time before being bound by the contract or, where that isn't possible, immediately after, always in a durable medium.

To whom must a firm carrying on MiFID business provide its compensation-scheme document?

All clients who have used or intend to use its services — not just retail, and not just retail and professional, but every client type.

When first communicating with a retail client, which item is NOT part of the required 'appropriate information' under COBS?

Who to refer complaints to if the firm can't resolve them — this isn't part of the initial appropriate-information requirement. The firm's name/address, a statement of FCA authorisation, and the contact person's name/status all are.

Can a buy-side firm bundle payment for third-party research together with execution services?

Yes — the FCA's payment optionality reform allows UK buy-side firms to bundle third-party research payment with execution costs, provided the relevant requirements on execution and research costs are met.

Which of the FCA Code of Market Conduct's market abuse types is a common false-positive?

'Misleading impressions' — it reflects the spirit of MAR's manipulation examples but is actually a separate criminal offence under s90 FSA 2012, not one of the Code's defined market abuse types (manipulating devices, dissemination, benchmark manipulation).

Which offence is expressly excluded from the 'base fraud offences' under the failure to prevent fraud regime?

Money laundering — the base offences are false accounting, fraud by false representation, and fraudulent trading, despite the overlap with economic crime enforcement generally.

What kind of liability does the failure to prevent fraud offence create for a firm?

Strict liability — the firm can be held liable even if senior management were genuinely unaware the fraud was happening.

What does the Consumer Rights Act 2015 do for financial services consumer contracts?

Consolidates consumer protection law and reforms unfair contract terms — it doesn't replace FCA conduct of business rules or apply only to specified-investment contracts.

What is the main purpose of the product disclosure rules when a firm recommends a packaged product?

To ensure the client receives sufficient, relevant information to make an informed investment decision — not a guarantee of outcome, and not identical disclosure across every product type.

Can an authorised firm or authorised collective investment scheme claim under the FSCS?

No — authorised firms and authorised CIS are themselves authorised entities and cannot claim, unlike individuals, retail clients, or small companies dealing through them.

What must a firm do if it loses a contested employment tribunal case involving a whistleblowing protected disclosure claim?

Report the case promptly to the FCA or PRA (as applicable) — this is separate from, and in addition to, any annual board-level whistleblowing report.

Name one of the core Data Protection Act 2018 principles.

Personal data must be accurate and kept up to date. Other principles include lawful/fair processing, specified and legitimate purposes, data minimisation, and not keeping data longer than necessary.

What are the FOS eligibility thresholds for a small business complainant?

Turnover below £6.5 million AND balance sheet below £5 million, OR fewer than 50 employees — meeting either route is sufficient, not both simultaneously