CeMAP Module 1 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

FSMA 2000

The Financial Services and Markets Act 2000 created a single statutory regulator for UK financial services and set out its objectives, powers and the general prohibition on unauthorised activity.

General prohibition

Under section 19 FSMA 2000, no person may carry on a regulated activity in the UK by way of business unless they are authorised or exempt; breach is a criminal offence.

FCA statutory objectives

The Financial Conduct Authority has three statutory objectives: securing an appropriate degree of protection for consumers, protecting and enhancing UK financial system integrity, and promoting effective competition in consumers' interests.

FSCS deposit limit

The Financial Services Compensation Scheme protects eligible deposits up to £85,000 per person per authorised firm; temporary high balances are protected up to £1 million for six months.

Financial Policy Committee

A Bank of England committee that monitors the financial system as a whole, identifies systemic risks and takes or recommends action to strengthen financial stability.

Upper Tribunal

The Tax and Chancery Chamber of the Upper Tribunal hears references against FCA and PRA decisions, such as penalty or prohibition notices, and may uphold, vary or overturn them.

Regulated Activities Order

The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 lists the specified activities and specified investments that together make an activity regulated under FSMA.

Threshold conditions

The minimum conditions a firm must satisfy to be authorised and to remain authorised: legal status, location of offices, business prudence, suitability, and effective supervision.

Principles for Businesses

Eleven high-level, ever-applicable rules in the FCA Handbook module PRIN that apply to all authorised firms and can be breached even where no detailed rule is broken.

Appointed representative

A person or firm that carries on regulated activities under a principal firm's Part 4A permission by virtue of section 39 FSMA; the principal is responsible for its activities.

Skilled person report

A report commissioned under section 166 FSMA from an independent expert, imposed by the regulator as a supervisory tool to review and report on a firm's systems or conduct.

Dual regulation

Banks, building societies and insurers hold a single Part 4A permission but are regulated by the PRA for prudential matters and by the FCA for conduct and market issues.

Handbook status letters

FCA Handbook provisions carry status letters: R means rule and is binding, G means guidance and is not binding, E means evidential provision, and D means direction.

Eligible complaint

Under DISP, an expression of dissatisfaction, oral or written, made to a firm about a regulated activity, alleging financial loss, material distress or material inconvenience.

Eight-week rule

A firm must resolve a complaint and issue a final response within eight weeks of receipt, or explain why it cannot and give its decision, allowing referral to the Ombudsman.

Six-month referral window

After a firm issues its final response, the customer has six months to refer the complaint to the Financial Ombudsman Service; the final response must state this right.

FOS award limit

The maximum sum the Financial Ombudsman Service can require a firm to pay as compensation is £430,000 from 1 April 2024, plus interest and reasonable costs.

FOS decision effect

An Ombudsman decision binds the firm once the complainant accepts it within the stated period, but never binds the complainant, who may still go to court.

FOS versus FSCS

The Ombudsman resolves individual disputes against firms still trading and awards redress; the FSCS pays compensation when an authorised firm is in default and cannot meet claims.

POCA principal offences

Sections 327 to 329 of the Proceeds of Crime Act 2002 make it an offence to conceal or transfer criminal property, enter arrangements facilitating it, or acquire, use or possess it.

Failure to disclose

Section 330 POCA requires employees in the regulated sector to report suspected money laundering to their nominated officer or MLRO as soon as practicable; failure is a criminal offence.

Tipping off

Section 333A POCA makes it an offence to disclose that a suspicious activity report has been made or that an investigation is under way, where this is likely to prejudice the investigation.

CDD threshold

Under the Money Laundering Regulations 2017, customer due diligence is required on occasional transactions of €15,000 or more, as well as on suspicion and when doubting identification data.

Enhanced due diligence: PEPs

Politically exposed persons, their family members and close associates require enhanced due diligence, senior management approval, establishment of source of wealth and funds, and ongoing monitoring.

Five-year record retention

Money Laundering Regulations 2017 require firms to keep customer due diligence and transaction records for five years after the business relationship ends or the occasional transaction is completed.

72-hour breach notification

Under UK GDPR, a personal data breach must be reported to the Information Commissioner's Office without undue delay and, where feasible, within 72 hours of becoming aware of it.

Consumer Duty outcomes

Principle 12 requires firms to deliver four outcomes for retail customers: products and services, price and value, consumer understanding, and consumer support.

Consumer Duty cross-cutting rules

Firms must act in good faith towards retail customers, avoid causing foreseeable harm to them, and enable and support them to pursue their financial objectives.

Individual conduct rules

Five rules apply to most employees of SM&CR firms: integrity; skill, care and diligence; cooperation with regulators; fair treatment of customers' interests; and proper standards of market conduct.

Fit and proper test

The FIT module requires firms to assess honesty, integrity and reputation; competence and capability; and financial soundness, both on appointment and on an ongoing basis.

Financial promotion approval

Under section 21 FSMA 2000, a communication inviting or inducing engagement in investment activity must be approved by an authorised person unless exempt, and be fair, clear and not misleading.

Ethical approaches

Deontological ethics judges actions by duty and rules, consequentialist or utilitarian ethics judges them by outcomes, and virtue ethics judges them by the character and intentions of the decision maker.