SIDC Module 12 flashcards

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

FCA Principle 1

Integrity: a firm must conduct its business with integrity. This is a fundamental obligation and can be breached even where no specific rule is broken.

FSMA s.19 general prohibition

No person may carry on a regulated activity in the UK unless authorised or exempt. Breach is a criminal offence under s.23, punishable by up to two years' imprisonment and an unlimited fine.

Threshold conditions

The minimum conditions a firm must satisfy to be authorised and to remain authorised, including appropriate resources, suitability, effective supervision, and legal status.

SM&CR Duty of Responsibility

Under FSMA s.66A, a Senior Manager can be liable if they fail to take reasonable steps to prevent a regulatory breach in their area of responsibility. The FCA bears the burden of proof.

Market abuse types

UK MAR identifies three civil offences: insider dealing, unlawful disclosure of inside information, and market manipulation. The FCA can impose unlimited fines and prohibit individuals.

Consumer Duty outcomes

Four outcomes: products and services, price and value, consumer understanding, and consumer support. Firms must act in good faith, avoid foreseeable harm, and enable customers' financial objectives.

FOS award limit

The maximum amount the Financial Ombudsman Service can require a firm to pay is £430,000 for complaints referred on or after 1 April 2024. Firms cannot contract out of FOS jurisdiction.

Money Laundering Regulations 2017

Require a risk-based approach, customer due diligence before the relationship, enhanced due diligence for PEPs and high-risk jurisdictions, ongoing monitoring, and five-year record-keeping after the relationship ends.

Transformational leadership

Bass's model with four components: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration. It predicts higher discretionary effort and team performance.

Transactional leadership

Based on contingent reward and management-by-exception (active or passive). Effective for routine, compliance-driven tasks but less so for innovation and change.

Situational leadership styles

Hersey and Blanchard's four styles: telling (high task, low relationship), selling (high task, high relationship), participating (low task, high relationship), and delegating (low task, low relationship), matched to follower readiness.

Emotional intelligence components

Goleman's five components: self-awareness, self-regulation, motivation, empathy, and social skill. High EI leaders manage conflict and build trust more effectively.

Psychological safety

Edmondson's shared belief that the team is safe for interpersonal risk-taking. It is a stronger predictor of team learning and performance than individual expertise.

Leadership pipeline

Charan's six passages from managing self to enterprise manager. Each transition requires new skills, time applications, and work values; failure to adapt causes derailment.

Servant leadership

Greenleaf's model prioritising follower development and community impact. Ten characteristics include listening, empathy, healing, awareness, persuasion, conceptualization, foresight, stewardship, commitment to growth, and building community.

Kotter's eight steps

Create urgency, form a coalition, create a vision, communicate it, remove obstacles, create short-term wins, build on change, and anchor in culture. Skipping steps increases failure risk.

Ethical leadership

Brown's model of the leader as a moral person and moral manager. It is positively associated with follower ethical behaviour and negatively associated with misconduct.

UK Corporate Governance Code

FRC code applying to premium-listed companies on a comply-or-explain basis. Principles cover board leadership, division of responsibilities, composition, audit and risk, and remuneration.

Board independence

For FTSE 350 companies, at least half the board excluding the chair should be independent non-executive directors. The chair should be independent on appointment.

Audit committee composition

At least three independent non-executive members (two for smaller companies), with at least one having recent and relevant financial experience. It should meet at least three times a year.

Remuneration committee

All independent non-executives, at least three members (two for smaller companies). It sets executive pay, approves incentive plans, and has discretion to override formulaic outcomes.

Nomination committee

Majority independent non-executives, chaired by the chair or an independent NED. It leads board appointments and succession planning.

s.172 duty

Directors must promote the success of the company for the benefit of members as a whole, considering long-term consequences, employees, suppliers, customers, community, environment, and reputation.

Directors' duties

Companies Act 2006 ss.171-177: act within powers, promote success, exercise independent judgment, reasonable care and skill, avoid conflicts, not accept third-party benefits, and declare interests.

Board evaluation

Annual evaluation of board, committee, and individual director performance. FTSE 350 companies should externally facilitate the evaluation at least every three years, and the chair should act on results.

Risk management responsibility

The board is responsible for the risk framework and internal control. The audit committee reviews effectiveness, and the board determines the nature and extent of principal risks.

Product governance (PROD)

Firms must define a target market, assess suitability, and review products regularly. PROD 3 applies to manufacturers and PROD 4 to distributors, with a sufficiently granular target market.

Consumer Duty price and value

Firms must assess whether products and services provide fair value, considering the relationship between price and benefits for different groups of customers.

Product intervention powers

The FCA can prohibit or restrict products under FSMA s.137D (temporary) and s.137F (permanent), and make rules under s.137A, where consumer harm is identified.

PRIIPs KID

A maximum three-page document provided before contract conclusion, containing a risk indicator (1-7), performance scenarios, costs, and a comprehension alert.

MiFID II target market

Manufacturers must identify a target market and distribution strategy; distributors must ensure products reach that market. The negative target market identifies customers for whom the product is unsuitable.

Vulnerable customers

FCA FG21/1 requires firms to understand vulnerability drivers (health, life events, resilience, capability) and ensure fair treatment through policies to identify and support vulnerable customers.