CeMAP Module 1 cheat sheet

FSMA 2000 created a single statutory regulator for UK financial services; the Financial Services Act 2012 replaced the FSA from 1 April 2013 with the FCA and the PRA, the PRA being a Bank of England subsidiary.

FSMA s.19 general prohibition: no person may carry on a regulated activity in the UK by way of business unless authorised or exempt; breach is a criminal offence.

FCA statutory objectives: consumer protection, integrity of the UK financial system, and promoting effective competition in consumers' interests. The PRA has a general objective (safety and soundness) and a specific insurance policyholder objective.

FSCS limits: £85,000 per eligible person per authorised firm for deposits and for investment claims (including bad advice); £100,000 for long-term insurance; 90% of general insurance claims (100% for compulsory cover); temporary high balances up to £1m for six months.

Bank of England structure: the MPC sets Bank Rate, the FPC identifies systemic risk, and the PRA prudentially supervises banks, building societies and insurers.

MoneyHelper, delivered by the Money and Pensions Service, provides free impartial information and guidance; it does not give regulated personal advice or sell products.

Regulator decisions such as financial penalties, prohibitions and permission cancellations may be referred to the Upper Tribunal (Tax and Chancery Chamber), normally within 28 days of the decision notice.

The FCA must have regard to its regulatory principles, including proportionality, consumer responsibility, and the principle that any burden imposed should be proportionate to the benefits.

A regulated activity requires a specified activity relating to a specified investment, carried on by way of business, as set out in the Regulated Activities Order 2001 (RAO).

Threshold Conditions (COND): legal status, location of offices, business prudence, suitability, and effective supervision; a firm must satisfy them at authorisation and on an ongoing basis.

PRIN contains 11 Principles: integrity; skill, care and diligence; management and control; financial prudence; market conduct; customers' interests; communications; conflicts of interest; customers' relationships of trust; clients' assets; relations with regulators.

Handbook status letters: R = rule (binding), G = guidance (not binding), E = evidential provision, D = direction; GEN holds general provisions and GLOSS holds defined terms.

A firm needs Part 4A permission for each regulated activity it carries on; the FCA may add limitations or requirements, and appointed representatives (s.39 FSMA) operate under the principal's permission.

Exemptions include professionals such as solicitors and accountants carrying on regulated activities incidentally to their profession under Part 20 FSMA; they are not authorised persons.

Supervisory and enforcement tools: s.166 skilled person reports, own-initiative requirements (s.55L), variation or cancellation of permission, financial penalties (s.206), public censure and prohibition orders (s.56).

Dual-regulated firms hold one Part 4A permission but are supervised by the PRA for prudential matters and the FCA for conduct; the regulators have statutory duties to cooperate and coordinate.

DISP definition: a complaint is any oral or written expression of dissatisfaction, whether justified or not, alleging financial loss, material distress or material inconvenience.

Firms must handle complaints promptly, fairly and consistently, and may issue a Summary Resolution Communication where the complaint is resolved by the close of the third business day after receipt.

Eight-week rule: a final response must be issued within eight weeks of receipt; if none is issued the complainant may refer the matter to FOS, and the final response must state the six-month referral right.

FOS time limits: referral within six months of the final response; otherwise the act must have occurred within six years, or within three years of when the complainant knew or ought reasonably to have known.

FOS is free to consumers and funded by a general levy plus case fees (£750 per case, first three free); the maximum award is £430,000 from 1 April 2024, plus interest and costs.

FOS decisions bind the firm once accepted by the complainant, but never bind the complainant, who may still pursue the matter in court; FOS is not a regulator and cannot fine a firm.

Eligible complainants: consumers, micro-enterprises, small businesses (turnover below £6.5m and either fewer than 50 employees or a balance sheet below £5m), charities with income below £6.5m, and trusts with net assets below £5m.

FOS versus FSCS: FOS resolves individual disputes against firms still trading and can award redress; the FSCS pays compensation where an authorised firm is in default and cannot meet claims.

Firms must report complaints data to the FCA twice a year and publish complaints information where required under DISP.

POCA 2002 principal offences: s.327 concealing, disguising, converting or transferring criminal property; s.328 entering into or becoming concerned in arrangements; s.329 acquiring, using or possessing criminal property.

Regulated-sector failure to disclose (s.330 POCA): employees must report knowledge or suspicion to the nominated officer or MLRO as soon as practicable; an internal SAR is followed by an external SAR to the NCA.

Appropriate consent: after the external SAR, the NCA has seven working days to respond and may then impose a 31-day moratorium during which the transaction must not proceed.

Tipping off (s.333A POCA) - telling a person that a SAR has been made or an investigation is under way, where that is likely to prejudice the investigation - is a separate criminal offence.

Money Laundering Regulations 2017: risk-based approach; CDD when establishing a relationship, on occasional transactions of €15,000 or more, on suspicion, or where there are doubts about identification data; EDD for PEPs and high-risk third countries.

Record-keeping: CDD and transaction records must be kept for five years after the business relationship ends or the transaction is completed; policies, MLRO arrangements and training must be documented.

UK GDPR and DPA 2018 principles: lawfulness, fairness and transparency; purpose limitation; data minimisation; accuracy; storage limitation; integrity and confidentiality; accountability.

Data subject rights and breaches: subject access requests must be answered within one month (extendable by two); qualifying breaches are reported to the ICO within 72 hours; the maximum fine is £17.5m or 4% of worldwide turnover.

Sanctions: OFSI administers UK financial sanctions, breaches carry strict liability, and firms must screen customers and beneficial owners and report suspected breaches.

Consumer Duty (PRIN 2A) four outcomes: products and services; price and value; consumer understanding; consumer support.

Consumer Duty cross-cutting rules: act in good faith towards retail customers; avoid causing foreseeable harm; enable and support customers to pursue their financial objectives.

The Duty applies to new and existing open products from 31 July 2023 and to closed products from 31 July 2024, and now sits above the earlier Treating Customers Fairly six outcomes.

SM&CR Individual Conduct Rules (all relevant staff): act with integrity; act with due skill, care and diligence; be open and cooperative with regulators; pay due regard to customers' interests and treat them fairly; observe proper standards of market conduct.

Senior Manager Conduct Rules: take reasonable steps to ensure the business is controlled effectively; ensure compliance with relevant requirements; delegate appropriately and oversee the work; disclose and manage conflicts of interest.

Fit and proper (FIT): honesty, integrity and reputation; competence and capability; financial soundness - assessed on appointment and on an ongoing basis.

Financial promotions must be fair, clear and not misleading; s.21 FSMA requires approval by an authorised person unless an exemption applies, and evidence of compliance must be retained.

Retail investment advisers must complete at least 35 hours of continuing professional development each year, including structured and independent elements, and hold a current statement of professional standing.

Ethical frameworks: deontological ethics judges actions by duty and rules, consequentialist ethics by outcomes, virtue ethics by the character of the decision maker; vulnerable customer drivers are health, life events, resilience and capability.