Compliance with laws and regulations
Domain 4 - Compliance with laws and regulations - tests whether you know which rules attach to which activity, and what to do when a client request collides with them.
Map the activity to the rulebook
Advising on securities, selling insurance, arranging mortgages and managing money on a discretionary basis are licensed activities with different registration, capital and conduct requirements. Before advising, ask: what am I licensed to do, for this client, in this jurisdiction? Cross-border advice can trigger a licensing requirement in the client's country of residence even if you never travel there.
Core compliance obligations
- Know your client / AML: verify identity, beneficial ownership, source of funds and wealth; screen politically exposed persons; monitor on an ongoing basis; file suspicious transaction reports without tipping off the client. Retention commonly runs five to seven years after the relationship ends, per local regime.
- Marketing: fair, balanced, not misleading; performance claims with period, basis and required warnings; no implied guarantees; testimonials only as permitted.
- Personal conduct: declare outside business interests, restrict personal account dealing, log gifts and entertainment, never use or pass on inside information.
- Data protection: lawful basis for processing, consent where required, limits on cross-border transfer, breach notification.
- Complaints: log, acknowledge, investigate and escalate within set periods; do not settle quietly to conceal a pattern.
Worked example
A client asks the planner to split a series of cash deposits below reporting thresholds so a property purchase 'doesn't show up'. He says the money is taxed and he simply wants privacy.
Reasoning: the aim is to defeat reporting controls - structuring - which is an offence in most regimes regardless of whether the money is legitimate. Lawful privacy planning exists (permitted accounts, timing, jurisdictions), but must not require false statements or threshold avoidance. The planner declines the structuring, offers lawful alternatives, and considers whether a suspicious transaction report is required, without telling the client if one is filed.
Traps
- Assuming compliance is only the compliance department's job.
- Accepting the client's assurance about source of funds without verification.
- Treating a home-country licence as portable abroad.
- Keeping records only until the fee is paid.