CISI IISI cheat sheet

Ethics governs conduct beyond legal minimums: an act can be lawful yet still breach a firm's code of ethics and trigger disciplinary action.

The four FCA/regulatory ethics pillars used in CISI material are integrity, competence, responsibility, and respect for others; each maps to observable behaviours.

Conflicts of interest rule: identify, disclose, and manage (or decline) - never simply ignore a conflict because the client has not asked about it.

Inducements: a payment or benefit is only acceptable if it is designed to enhance the quality of service, is disclosed, and does not impair the duty to act in the client's best interests.

Insider dealing is a criminal offence under the Criminal Justice Act 1993; the test is whether the person holds inside information from an inside source and deals on a regulated market.

Market abuse (Market Abuse Regulation) covers insider dealing, unlawful disclosure of inside information, and market manipulation; it is a civil and criminal regime.

Gifts and hospitality: log and seek approval above firm thresholds; a benefit that could influence a decision is a bribe even if small and given informally.

Whistleblowing: firms must have internal channels; a worker who reports a reasonable suspicion in good faith is protected from detriment.

Personal account dealing usually requires pre-clearance and is barred around the firm's own client orders to prevent front-running.

The FCA has three operational objectives: protect consumers, protect and enhance market integrity, and promote effective competition in consumers' interests.

The PRA regulates prudential soundness of banks, insurers, and major investment firms; the FCA regulates conduct for all authorised firms.

The FSCS protects eligible claimants up to £85,000 per person per firm for most investment claims; the limit applies per firm, not per product.

The Financial Ombudsman Service handles complaints from eligible complainants about firms; the award limit is £430,000 for complaints referred from 1 April 2024.

FSMA 2000 general prohibition: no person may carry on a regulated activity in the UK unless authorised or exempt; breaching it is a criminal offence.

The Senior Managers and Certification Regime (SM&CR) imposes a duty of responsibility on senior managers and requires annual fitness and propriety certification for certified staff.

Consumer Duty (in force 31 July 2023 for open products) requires firms to act to deliver good outcomes across four areas: products and services, price and value, consumer understanding, and consumer support.

MiFID II product governance requires a target market definition and periodic review; distribution must be compatible with that target market.

Complaints must be resolved within 8 weeks or a final response issued explaining the right to go to the Ombudsman.

Equities confer ownership and typically voting rights; preference shares usually rank ahead for dividends but often carry restricted voting.

Bonds: price moves inversely to yield; a 1% rise in required yield on a bond with modified duration of 5 reduces price by about 5%.

Gilts are UK government bonds; index-linked gilts adjust coupons and principal for inflation measured by RPI.

Collective investment schemes pool investor money; an OEIC is open-ended and prices once daily, while an investment trust is a closed-ended listed company that can trade at a premium or discount to NAV.

UCITS funds must meet diversification rules (e.g. no more than 5% of NAV in one issuer's transferable securities, with a 10% limit up to 40% of NAV).

Derivatives derive value from an underlying; a futures contract is exchange-traded and margined, while a forward is OTC and carries counterparty risk.

Settlement: UK equities typically settle T+2; a failed trade creates settlement risk and possible buy-in.

Custody vs nominee: assets held by a nominee are registered in the nominee's name but beneficially owned by the client; client money must be segregated under CASS.

Order types: a market order executes at best available price; a limit order executes only at the specified price or better.

The six Treating Customers Fairly outcomes include fair product design, clear information, suitable advice, and no unreasonable post-sale barriers.

Suitability: a recommendation must match the client's knowledge, experience, financial situation, and objectives; appropriateness (execution-only) is a weaker test.

Know Your Client requires identity verification, source of funds, risk tolerance, and capacity for loss; enhanced due diligence applies to PEPs and high-risk jurisdictions.

Client categorisation: retail clients get the highest protection; elective professional clients can opt up but lose certain protections, and the firm must warn them.

Best execution requires taking all sufficient steps to obtain the best possible result considering price, cost, speed, likelihood of execution and settlement, size and nature of order.

Financial promotions must be fair, clear, and not misleading; a firm must be able to show a promotion complies with the rules before it is communicated.

Vulnerability: firms must identify and respond to characteristics of vulnerability (health, life events, resilience, capability) and record reasonable adjustments.

Record keeping: client orders and suitability assessments must be retained for at least five years (longer for certain pension transfers).

Anti-money laundering: report suspicious activity to the firm's nominated officer (MLRO); tipping off the client is a criminal offence.

Ethics governs conduct beyond legal minimums: an act can be lawful yet still breach a firm's code of ethics and trigger disciplinary action.

The four FCA/regulatory ethics pillars used in CISI material are integrity, competence, responsibility, and respect for others; each maps to observable behaviours.

Conflicts of interest rule: identify, disclose, and manage (or decline) - never simply ignore a conflict because the client has not asked about it.

Inducements: a payment or benefit is only acceptable if it is designed to enhance the quality of service, is disclosed, and does not impair the duty to act in the client's best interests.

Insider dealing is a criminal offence under the Criminal Justice Act 1993; the test is whether the person holds inside information from an inside source and deals on a regulated market.

Market abuse (Market Abuse Regulation) covers insider dealing, unlawful disclosure of inside information, and market manipulation; it is a civil and criminal regime.

Gifts and hospitality: log and seek approval above firm thresholds; a benefit that could influence a decision is a bribe even if small and given informally.

Whistleblowing: firms must have internal channels; a worker who reports a reasonable suspicion in good faith is protected from detriment.

Personal account dealing usually requires pre-clearance and is barred around the firm's own client orders to prevent front-running.

The FCA has three operational objectives: protect consumers, protect and enhance market integrity, and promote effective competition in consumers' interests.

The PRA regulates prudential soundness of banks, insurers, and major investment firms; the FCA regulates conduct for all authorised firms.

The FSCS protects eligible claimants up to £85,000 per person per firm for most investment claims; the limit applies per firm, not per product.

The Financial Ombudsman Service handles complaints from eligible complainants about firms; the award limit is £430,000 for complaints referred from 1 April 2024.

FSMA 2000 general prohibition: no person may carry on a regulated activity in the UK unless authorised or exempt; breaching it is a criminal offence.

The Senior Managers and Certification Regime (SM&CR) imposes a duty of responsibility on senior managers and requires annual fitness and propriety certification for certified staff.

Consumer Duty (in force 31 July 2023 for open products) requires firms to act to deliver good outcomes across four areas: products and services, price and value, consumer understanding, and consumer support.

MiFID II product governance requires a target market definition and periodic review; distribution must be compatible with that target market.

Complaints must be resolved within 8 weeks or a final response issued explaining the right to go to the Ombudsman.

Equities confer ownership and typically voting rights; preference shares usually rank ahead for dividends but often carry restricted voting.

Bonds: price moves inversely to yield; a 1% rise in required yield on a bond with modified duration of 5 reduces price by about 5%.

Gilts are UK government bonds; index-linked gilts adjust coupons and principal for inflation measured by RPI.

Collective investment schemes pool investor money; an OEIC is open-ended and prices once daily, while an investment trust is a closed-ended listed company that can trade at a premium or discount to NAV.

UCITS funds must meet diversification rules (e.g. no more than 5% of NAV in one issuer's transferable securities, with a 10% limit up to 40% of NAV).

Derivatives derive value from an underlying; a futures contract is exchange-traded and margined, while a forward is OTC and carries counterparty risk.

Settlement: UK equities typically settle T+2; a failed trade creates settlement risk and possible buy-in.

Custody vs nominee: assets held by a nominee are registered in the nominee's name but beneficially owned by the client; client money must be segregated under CASS.

Order types: a market order executes at best available price; a limit order executes only at the specified price or better.

The six Treating Customers Fairly outcomes include fair product design, clear information, suitable advice, and no unreasonable post-sale barriers.

Suitability: a recommendation must match the client's knowledge, experience, financial situation, and objectives; appropriateness (execution-only) is a weaker test.

Know Your Client requires identity verification, source of funds, risk tolerance, and capacity for loss; enhanced due diligence applies to PEPs and high-risk jurisdictions.

Client categorisation: retail clients get the highest protection; elective professional clients can opt up but lose certain protections, and the firm must warn them.

Best execution requires taking all sufficient steps to obtain the best possible result considering price, cost, speed, likelihood of execution and settlement, size and nature of order.

Financial promotions must be fair, clear, and not misleading; a firm must be able to show a promotion complies with the rules before it is communicated.

Vulnerability: firms must identify and respond to characteristics of vulnerability (health, life events, resilience, capability) and record reasonable adjustments.

Record keeping: client orders and suitability assessments must be retained for at least five years (longer for certain pension transfers).

Anti-money laundering: report suspicious activity to the firm's nominated officer (MLRO); tipping off the client is a criminal offence.