London Institute of Banking & Finance (LIBF) Qualifications CeMAP Module 1: UK Financial Regulation (UKFR) Syllabus

CeMAP Module 1: UK Financial Regulation (UKFR) syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for CeMAP Module 1: UK Financial Regulation (UKFR) in London Institute of Banking & Finance (LIBF) Qualifications, not a summary of it.

1. 1

   Introduction to the UK Financial Services Industry

   4 topics

   • Purpose and structure of financial services
     • Role of financial intermediation
     • Deposit takers, insurers and investment providers
     • Wholesale versus retail markets
   • The economic environment
     • Inflation, interest rates and the Bank of England base rate
     • Monetary and fiscal policy effects on lending
     • The economic cycle and housing demand
   • Time value of money and saving versus borrowing
     • Simple and compound interest
     • APR, AER and effective rates
   • Main personal financial needs
     • Protection, savings, borrowing and retirement
     • Life-stage financial planning
2. 2

   The Regulatory Framework

   4 topics

   • The Financial Services and Markets Act 2000 (FSMA)
     • Regulated activities and the perimeter
     • Authorisation and permissions
   • The twin-peaks regulators
     • Financial Conduct Authority (FCA) objectives
     • Prudential Regulation Authority (PRA) role
     • Bank of England and the Financial Policy Committee
   • FCA supervision and enforcement
     • Threshold conditions
     • Senior Managers and Certification Regime (SM&CR)
     • Sanctions, fines and the FCA Handbook
   • Approved persons and fit and proper test
3. 3

   Principles, Conduct and Consumer Duty

   4 topics

   • FCA Principles for Businesses
     • Treating Customers Fairly (TCF)
     • Clear, fair and not misleading communications
   • The Consumer Duty
     • Cross-cutting rules and four outcomes
     • Products and services, price and value
     • Consumer understanding and support
   • Vulnerable customers
     • Identifying vulnerability
     • Adapting advice and service
   • Conflicts of interest and inducements
4. 4

   Financial Crime and Data Protection

   5 topics

   • Money laundering and the Proceeds of Crime Act
     • Placement, layering and integration
     • Customer due diligence and KYC
     • Suspicious activity reporting and the MLRO
   • Terrorist financing and sanctions
   • Bribery, corruption and the Bribery Act 2010
   • Fraud, scams and financial promotions rules
   • Data protection
     • UK GDPR and the Data Protection Act 2018
     • Lawful processing and data subject rights
5. 5

   Consumer Protection, Complaints and Redress

   4 topics

   • Financial Services Compensation Scheme (FSCS)
     • Coverage limits and eligible claims
   • Financial Ombudsman Service (FOS)
     • Eligible complainants and award limits
     • The complaints handling process and DISP rules
   • Consumer Credit Act and Section 75 protection
   • Distance marketing and cancellation rights

CeMAP Module 1: UK Financial Regulation (UKFR) flashcards for London Institute of Banking & Finance (LIBF) Qualifications

19 of 61 cards from the CeMAP Module 1: UK Financial Regulation (UKFR) deck — real questions with worked answers.

1. What are the three main functions of the UK financial services industry?

   To channel funds from savers/lenders to borrowers (intermediation), to enable payments and transactions, and to help individuals and businesses manage and pool risk (e.g. insurance).

2. Define 'financial intermediation' in the context of financial services.

   The process by which financial institutions (e.g. banks) gather funds from those with a surplus (savers) and channel them to those needing funds (borrowers), pooling risk and matching different needs for amount and time.

3. Distinguish between a retail customer and a wholesale customer in financial services.

   Retail customers are individual private consumers buying products for personal use; wholesale customers are large organisations, institutions and businesses dealing in large volumes, typically with each other.

4. What is the difference between the primary market and the secondary market for securities?

   The primary market is where new securities (shares/bonds) are first issued and sold to raise capital; the secondary market is where existing securities are subsequently traded between investors (e.g. the stock exchange).

5. List the four phases of the economic cycle.

   Boom (peak/expansion), recession (downturn/contraction), depression (slump/trough), and recovery (upturn).

6. What is the technical definition of a recession in the UK?

   Two or more consecutive quarters of negative economic growth (a fall in real Gross Domestic Product).

7. Define inflation and name the UK's main measure and target.

   Inflation is a sustained general rise in the price level (fall in money's purchasing power). The main measure is the Consumer Prices Index (CPI), with a government target of 2%.

8. What is the role of the Bank of England's Monetary Policy Committee (MPC)?

   To set the Bank Rate (base interest rate) to meet the government's inflation target of 2% CPI, thereby influencing the cost of borrowing and the level of demand in the economy.

9. Explain the difference between fiscal policy and monetary policy.

   Fiscal policy uses government taxation and public spending (set by the Treasury/Chancellor) to influence the economy; monetary policy uses interest rates and the money supply (set by the Bank of England) to control inflation.

10. State the future value formula for a single sum under compound interest.

    $FV = PV \times (1 + i)^{n}$, where $PV$ is the present value, $i$ is the interest rate per period, and $n$ is the number of periods.

11. Why does money have a 'time value'?

    Because a sum of money available now is worth more than the same sum in the future, since it can be invested to earn interest (and because of inflation and risk); future sums must be discounted to find their present value.

12. What is the difference between the nominal interest rate and the real interest rate?

    The nominal rate is the stated/headline rate of return; the real rate is the nominal rate adjusted for inflation, approximately $\text{real rate} \approx \text{nominal rate} - \text{inflation rate}$.

13. Compare saving and borrowing as personal finance activities.

    Saving is deferring consumption by setting money aside to earn interest (you are a lender receiving interest); borrowing is bringing forward consumption using someone else's money now and repaying with interest (you are a debtor paying interest).

14. What is the difference between APR and AER?

    APR (Annual Percentage Rate) shows the total yearly cost of borrowing including interest and charges, used for credit; AER (Annual Equivalent Rate) shows the yearly return on savings assuming interest is compounded, used for deposits.

15. List the main categories of personal financial needs a client may have.

    Protection (insurance against death, illness, loss), saving and investment, borrowing/credit, retirement/pension planning, and budgeting/managing income and expenditure.

16. What does a 'pyramid of financial needs' suggest about priorities?

    That basic needs should be met first: budgeting and an emergency fund, then protection (e.g. life cover, income protection), then saving/borrowing for goals, and finally investment and retirement planning at the top.

17. What is the primary legislation that established the modern UK financial regulatory framework?

    The Financial Services and Markets Act 2000 (FSMA), as significantly amended by the Financial Services Act 2012 which created the twin-peaks model.

18. Under FSMA 2000, what is the 'general prohibition'?

    That no person may carry on a regulated activity in the UK (or purport to do so) unless they are an authorised person or an exempt person; breaching it is a criminal offence.

19. Name the two 'peaks' of the UK twin-peaks regulatory model and their broad remits.

    The Prudential Regulation Authority (PRA), part of the Bank of England, responsible for the prudential safety and soundness of major firms; and the Financial Conduct Authority (FCA), responsible for conduct of business and market regulation.

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