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

What are the FCA's three operational objectives under FSMA?

Consumer protection (securing an appropriate degree of protection for consumers), integrity (protecting and enhancing the integrity of the UK financial system), and competition (promoting effective competition in the interests of consumers).

What is the FCA's single strategic objective?

To ensure that the relevant financial markets function well.

What is a 'dual-regulated' firm?

A firm (such as a bank, building society, insurer or large investment firm) that is regulated by the PRA for prudential matters and by the FCA for conduct matters.

Describe the FCA's risk-based approach to supervision.

The FCA focuses its supervisory resources where risks to its objectives are greatest, categorising firms by the potential harm they could cause and using forward-looking, judgement-based supervision rather than checking every firm equally.

List three key enforcement powers the FCA can use against firms or individuals.

Imposing unlimited financial penalties (fines), issuing public censures, withdrawing authorisation/approval, prohibiting individuals, securing redress/restitution for consumers, and bringing criminal prosecutions.

What is the Senior Managers and Certification Regime (SM&CR), and what did it replace?

A regime making senior individuals personally accountable for areas of a firm's business, requiring firms to certify that certain staff are fit and proper; it largely replaced the older Approved Persons Regime for most firms.

What are the three elements of the FCA 'fit and proper' test for approved/certified persons?

Honesty, integrity and reputation; competence and capability; and financial soundness.

What is a 'Statement of Responsibilities' under the SM&CR?

A document that each senior manager must have, setting out clearly the aspects of the firm's affairs for which they are personally responsible and accountable.

How many FCA Principles for Businesses are there, and what is Principle 1?

There are 12 Principles for Businesses. Principle 1 is 'Integrity' — a firm must conduct its business with integrity.

State FCA Principle 6 and Principle 7.

Principle 6: 'Customers' interests' — a firm must pay due regard to the interests of its customers and treat them fairly (TCF). Principle 7: 'Communications with clients' — a firm must pay due regard to clients' information needs and communicate in a way that is clear, fair and not misleading.

What is the new Principle 12 introduced with the Consumer Duty?

Principle 12: 'A firm must act to deliver good outcomes for retail customers.' It is the Consumer Duty principle and sets a higher standard than Principles 6 and 7 for retail business.

What is the Consumer Duty's overarching ('cross-cutting') requirement?

Firms must act to deliver good outcomes for retail customers, and specifically must: act in good faith, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives.

Name the four 'outcomes' that firms must deliver under the Consumer Duty.

Products and services (fit for purpose), price and value (fair value), consumer understanding (clear communications), and consumer support (helpful, responsive service).

How does the FCA define a 'vulnerable customer'?

Someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

What are the four key 'drivers' of vulnerability identified by the FCA?

Health (e.g. illness, disability), life events (e.g. bereavement, job loss), resilience (low ability to withstand financial/emotional shocks), and capability (low knowledge/confidence in managing finances).

What is a 'conflict of interest' and how must firms manage it?

A situation where a firm's (or staff member's) interests, or those of one client, may conflict with the duty owed to another client. Firms must identify, prevent or manage conflicts, and disclose them to clients where management is insufficient.

What is an 'inducement' and why are inducements restricted?

A benefit (e.g. a payment, gift or commission) offered to encourage business in a way that could conflict with a firm's duty to act in the client's best interests; they are restricted/banned in many areas to prevent biased advice (e.g. the RDR commission ban on investment advice).

Define money laundering.

The process of disguising the origins of money obtained from criminal activity so that it appears to come from a legitimate source.

Name the three classic stages of money laundering.

Placement (introducing criminal cash into the financial system), layering (moving it through transactions to obscure its origin), and integration (returning the 'cleaned' money to the criminal as apparently legitimate funds).

Which Act is the principal UK anti-money-laundering legislation, and name two key offences under it.

The Proceeds of Crime Act 2002 (POCA). Key offences include concealing/transferring criminal property, failure to disclose/report suspicion, and 'tipping off' a suspect that a report has been made.

What is a SAR and to whom is it submitted?

A Suspicious Activity Report — a disclosure that a firm's staff make (usually via the Money Laundering Reporting Officer) to the National Crime Agency (NCA) when they know or suspect money laundering.

What is the role of the Money Laundering Reporting Officer (MLRO)/Nominated Officer?

To receive internal suspicion reports from staff, decide whether they should be reported externally, and submit Suspicious Activity Reports to the National Crime Agency.

What does 'Customer Due Diligence' (CDD) involve, and when is Enhanced Due Diligence required?

CDD involves identifying and verifying a customer's identity and understanding the nature of the business relationship. Enhanced Due Diligence (EDD) is required for higher-risk situations, e.g. Politically Exposed Persons (PEPs) or high-risk jurisdictions.

How does terrorist financing differ from money laundering?

Money laundering disguises the criminal origin of funds, whereas terrorist financing may use funds from legitimate or illegitimate sources but channels them to fund terrorism — so the focus is on the destination/use of funds, not just their source.

What are financial sanctions and who maintains the UK sanctions list?

Restrictions (e.g. asset freezes, prohibitions on dealing) imposed against designated individuals, entities or regimes. The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, maintains and enforces the UK list.

What are the two general bribery offences under the Bribery Act 2010?

Bribing another person (offering/giving an advantage) and being bribed (requesting/accepting an advantage) to induce improper performance of a function.

What is the corporate offence under Section 7 of the Bribery Act 2010, and its defence?

A commercial organisation is guilty of failure to prevent bribery if a person associated with it bribes another to obtain business for it. The only defence is that the organisation had 'adequate procedures' in place to prevent bribery.

Define fraud and name the three ways it can be committed under the Fraud Act 2006.

Fraud is dishonestly making a false representation, or abusing a position, or failing to disclose information, with intent to make a gain or cause a loss. The three offences are: fraud by false representation, fraud by failing to disclose, and fraud by abuse of position.

What is 'phishing' as a type of financial scam?

A scam where fraudsters send fake communications (e.g. emails, texts or calls) pretending to be from a trusted organisation to trick victims into revealing personal/financial details or login credentials.

Under FCA rules, what standard must all financial promotions meet?

They must be clear, fair and not misleading, be identifiable as a promotion, present risks alongside benefits in a balanced way, and (under FSMA s.21) generally be approved/issued by an authorised person.

What is the maximum payout per eligible person, per firm, for protected deposits under the FSCS?

£85,000 per eligible person, per authorised firm (banking licence).

State the FSCS compensation limits for investments and for long-term insurance/protection.

Investments (and home finance/mortgage advice) are protected up to £85,000 per person per firm; long-term insurance and compulsory insurance (e.g. life cover, annuities) are protected at 100% of the claim with no upper limit.

What is the purpose of the Financial Services Compensation Scheme (FSCS)?

To act as the UK's compensation 'fund of last resort', paying compensation to eligible customers when an authorised financial firm is unable (insolvent) or unlikely to be able to meet claims against it.

What is the role of the Financial Ombudsman Service (FOS)?

To provide a free, independent service for settling individual disputes between consumers (and small businesses) and financial firms, after the firm's internal complaints process has been exhausted.

What is the FOS's binding award limit, and the time limits for referring a complaint?

FOS can make binding awards up to £430,000 (for acts/omissions on or after 1 April 2019). A complaint must normally be referred within six years of the event, or three years from when the consumer became aware, and within six months of the firm's final response.

Under the Consumer Credit Act, what is the maximum total period a regulated credit agreement gives a consumer to act, and what is the standard cooling-off?

Many regulated credit agreements give the borrower a right to withdraw within 14 days of signing (the statutory cooling-off/withdrawal period under the CCA, as amended by the Consumer Credit Directive).

Explain Section 75 protection under the Consumer Credit Act 1974.

For purchases made on credit (e.g. a credit card) costing more than £100 and not more than £30,000, the credit provider is jointly and severally liable with the supplier for breach of contract or misrepresentation, so the consumer can claim against the lender.

What does the FCA require firms to do under the Distance Marketing rules?

Where products are sold at a distance (no face-to-face contact, e.g. online/phone), firms must give the consumer specified pre-contract information in good time and grant a cancellation/cooling-off right before the contract is concluded.

State the standard cancellation (cooling-off) periods for distance-marketed life/pension products versus most other products.

30 days for life insurance and pension contracts, and 14 days for most other products such as general insurance and savings/investment products.

Which legislation governs the processing of personal data in the UK, and name two of its key principles.

The UK General Data Protection Regulation (UK GDPR) together with the Data Protection Act 2018. Key principles include: lawfulness/fairness/transparency, purpose limitation, data minimisation, accuracy, storage limitation, and integrity/confidentiality (security).

Who regulates data protection in the UK and what are individuals' key rights over their data?

The Information Commissioner's Office (ICO). Individuals have rights including access to their data (subject access request), rectification, erasure ('right to be forgotten'), restriction of processing, data portability, and to object to processing.