CISI Chartered Wealth Manager Programme Applied Wealth Management

CISI Chartered Wealth Manager Programme Applied Wealth Management – Day 1 Cris Glascow Accredited Training Partner

Objectives By the end of the workshop you will have: q Revised learning outcomes 1 to 2 q Practised exam type questions q Identified areas you need to read about more thoroughly q Devised an action plan. Accredited Training Partner

Agenda q q The AWM Exam Module 1 Module 2 Review. Accredited Training Partner

General Points About The Exam There are 3 sections to the exam: q Section A - short written answers (4 from 6) - 20 marks q Section B - 2 case studies with questions worth in total, 20 marks - 40 marks q Section C - 1 case study with questions worth in total - 40 marks q Pass mark at least 50% q Pass rate - 65% (December 2017 - 58%, June 2017 - 51%) Accredited Training Partner

5 point plan to do well in this exam: 1. 2. 3. 4. 5. Know the material Understand the concepts Be able to apply it to scenarios and case studies Plan your study time Practise answering questions. Ref: Exam tips http: //glascow. co. uk/how-can-you-pass-the-cisisapplied-wealth-management-exam/ http: //glascow. co. uk/benefits-of-structured-study-topass-an-exam/ Accredited Training Partner

Module 1 – Regulatory Environment Accredited Training Partner

Short Answer Questions Regulatory environment – short answer questions 1. Discuss the risks and benefits of a “principles based” regulatory regime (5 marks) 2. Critically evaluate the role of Europe in regulating financial services in the UK. (5 marks) 3. Identify the principal money laundering offences under UK law. (5 marks) Accredited Training Partner

The regulatory infrastructure Current Regime Financial Policy Committee (FPC) Bank of England HM Treasury Student exercise: – other regulatory bodies Prudential Regulation Authority (PRA) Financial Conduct Authority (FCA) Framework for addressing macro prudential issues Macro prudential supervision of the financial services sector Consumer protection Conduct of business Accredited Training Partner

The Role of the Financial Conduct Authority Student exercise: Identify the main responsibilities of the FCA/PRA Accredited Training Partner

Statutory and Operational Objectives of The FCA Statutory objective q Ensuring that the relevant markets function well Operational objectives q Consumer protection - securing an appropriate degree of protection for consumers q Integrity – protecting and enhancing the integrity of the UK financial system q Competition – promoting effective competition in the interests of consumers in the markets for regulated financial services or services provided by a Recognised Investment Exchange RIE in carrying on regulated activities in respect of which it is exempt from the general prohibition Accredited Training Partner

Financial Conduct Authority Consumer Protection: q FCA will pro-actively study the financial market place and will challenge the conduct of firms q More focus on consumers q Will use their product intervention powers e. g. UCIS. Accredited Training Partner

Financial Conduct Authority Competition: q FCA will improve competition q Remove barriers to entry q Firms should not be able to generate supernormal profits q Business models need to be constructed where fair treatment is central to their operation. Accredited Training Partner

Objectives of the PRA General objective q promoting the safety and soundness of PRA authorised persons The PRA’s general objective is to be advanced primarily by: q seeking to ensure that the business of PRA authorised persons is carried on in a way which avoids any adverse effect on the stability of the UK financial system; and q seeking to minimise the adverse effect that the failure of a PRA authorised person could be expected to have on the stability of the UK financial system The PRA also has an insurance objective that only relates to the effecting or carrying out of contracts of insurance as principal to the extent it is a PRAregulated activity: q contributing to the securing of an appropriate degree of protection for those who are or may become policyholders. Accredited Training Partner

FCA Supervision Model 3 Pillars: q Firm Systematic Framework q Event driven work q Issues and products q Fixed portfolio firms q Flexible portfolio firms. https: //www. fca. org. uk/publication/corporate/supervision-guideflexible. pdf Accredited Training Partner

EU Regulation – Financial Services Action Plan Objective – Single market in financial services Financial Services Action Plan 43 measures to achieve Aims: q A single wholesale market q An open and secure retail market q State of the art prudential rules and supervision Accredited Training Partner

Cross-Border Legislation Accredited Training Partner

Significant EU Directives q Markets in Financial Instruments (Mi. FID II) q Packaged Retail and Insurancebased Investment Products (PRIIPs) q Capital Requirements Directive (CRD) q UCITS V q Market Abuse Directive – Review q AIFMD q …and many more!! Accredited Training Partner

Short Answer Questions Regulatory System – short answer questions 1. Identify the legislative requirements in terms of authorisation to carry out investment business in the UK. State the penalties for non- compliance with these requirements. (5 marks) 2. Your employer has adopted a sustained initiative to incorporate an “ethical” approach to the way its business is run. State what this means and the risks associated with such an approach. (5 marks) 3. Critically consider who would not be eligible to claim compensation under the Financial Services Compensation Scheme (5 marks). Accredited Training Partner

FCA Supervisory Principles q Forward looking q Strategy and business models q Culture and governance q Individual and firm accountability q Proportionate and risk based q Two-way communication q Coordinated q Systematic harm. Accredited Training Partner

FCA Principles for Businesses 1. Integrity 2. Skill, care and diligence 3. Management and control 4. Financial prudence 5. Market conduct 6. Customer’s interests 7. Communications with clients 8. Conflicts of interest 9. Customers: relationships of trust 10. Client assets 11. Relations with regulators. Accredited Training Partner

FCA Authorisation In order to grant permission to an authorised firm, the FCA needs to ensure that the applicant satisfies 5 threshold conditions: q Legal status - what type of legal persons are accepted? q Location of offices - head / registered office in the UK q Effective supervision - no “close links” that might make it difficult for FCA to regulate them q Adequate resources - firms will only be authorised if they have adequate resources both financial and non-financial q Suitability - firm must be “fit and proper” to be granted Part IV A permission Once Part IV A permission is granted, the firm becomes an authorised person. Accredited Training Partner

High level standards - Senior Management Systems And Controls (SYSC) All firms must meet minimum conditions (common platform requirements): q Organisation q Compliance q Risk assessment q Management information q Employees and Agents q Audit q Strategy and policies q Records Accredited Training Partner

High level standards - Approved Persons – Fit and Proper Test (FIT) Fitness and propriety: q. Honesty, integrity and reputation q. Competence and capability q. Financial soundness. 23 © Glascow Consulting Ltd 2016

The Senior Managers & Certification Regime Key points: q. Senior Managers Regime q. Certification Regime q. Conduct Rules and the Code of Conduct. https: //www. fca. org. uk/firms/seniormanagers-certification-regime 24 © Glascow Consulting Ltd 2016

Business Standards and Ethics Statements of Principle for Approved Persons (APER) All approved persons must: 1. Act with integrity 2. Act with due skill, care and diligence 3. Observe proper standards of market conduct 4. Deal with the FCA and other regulators in open way. Accredited Training Partner

Statements of Principle for Approved Persons (APER) Significant influence function holders must: 5. Take reasonable steps to ensure proper organisation of business 6. Exercise due skill care and diligence in managing the business 7. Take reasonable steps to ensure the business complies with regulatory requirements. Accredited Training Partner

High level standards - Statements of Principle for Approved Persons (APER) FSA (previous regulator) Quotes (PS 10/18): “We point out that adherence to APER is a vital part of retaining approved person status” “We are disappointed to note…. that knowledge of APER among approved persons population is so low” “We expect approved persons to understand their obligations under APER and the consequences if they fail to adhere to them” Accredited Training Partner

Financial Crime q Market Abuse q Insider dealing. Question: To what extent can you differentiate between the two points above? Explain your answer. Accredited Training Partner

Money Laundering “The attempt to conceal or disguise the ownership or source of the proceeds of criminal activity and to integrate them into the legitimate financial system in such a way as they cannot be distinguished from assets acquired by legitimate means. Typically this involves the conversion of cash based proceeds into account based forms of money. ” Source: Glossary of terms used in payment and settlement systems, Bank for International Settlements, July 2001 Accredited Training Partner

Three Stages of Money Laundering q Placement q Layering q Integration Accredited Training Partner

Money Laundering Legislation The Proceeds of Crime Act 2002 (POCA) q Money Laundering Offences q Failure to Disclose Risk Based Approach FCA Rules – Senior Management Systems & Controls (SYSC) EU Regulations – Money Laundering Regulations 2007 (MLR) EU Regulations - New EU Anti-Money Laundering Directive 2015 (AML) Interpretation & Guidance – Joint Money Laundering Steering Group (JMLSG). Accredited Training Partner

The Offences – POCA 2002 (as amended by SOCPA 2005) Knowingly Assisting: q Concealing – concealing, disguising, converting, transferring q Arrangements – which facilitates the acquisition, retention, use or control q Acquisition, use or possession Penalty: q 14 years and / or unlimited fine Defences: q Authorised disclosure q Adequate consideration q Criminal conduct occurred overseas – not unlawful. Accredited Training Partner

The Offences – POCA 2002 (as amended by SOCPA 2005) Failure to disclose: q Know q Suspect q Reasonable grounds for knowing or suspecting Penalty: q 5 years and/or an unlimited fine Defences: q Reasonable excuse q Privilege q Lack of appropriate training. Accredited Training Partner

The Offences – POCA 2002 (as amended by SOCPA 2005) Tipping off: q Making a disclosure which is likely to prejudice an investigation Penalty: q 5 years and/or an unlimited fine Defences: q Mainly aimed at legal advisers. Accredited Training Partner

Processes – Customer Due Diligence q Identification q Verification q Identification – beneficial owner q Know your customer (KYC) q Ongoing monitoring q Types: q. Standard q. Simplified q. Enhanced. Accredited Training Partner

Enhanced Customer Due Diligence Who? Client not physically present q. Politically Exposed Persons (PEP’s) q Immediate family / close associates q. Correspondent banking Additional measures: q. Source of wealth q. Additional procedures to identify q. Approval from senior management. Accredited Training Partner

FCA Anti-money Laundering Rules Systems and controls: q Identify, assess, monitor and manage money laundering risk – detailed procedures q Documented policy statement Comprehensive & q Regular assessment Proportionate q Appropriate training q MLRO – role q Nominated Officer – role q Compliance / Senior management responsibility. Accredited Training Partner

KYC & Suspicious Activity Reports q Initial and ongoing monitoring q Report if suspicious Staff Nominated Officer / MLRO NCA Accredited Training Partner

The Financing of Terrorism q “War against terror” q Terrorism Act 2000 provides definition q Rules similar to anti-money laundering q Offence is committed if transactions “facilitate the retention or control of terrorist property” q Duty to report – failure 5 years in prison and/or unlimited fine. 39 Accredited Training Partner

COBS Rules - Exercise 1. You will be assigned 2 topics from the list below in each group: q Conduct of business obligations q Client categorisation q Disclosure requirements q Client agreements q Suitability and appropriateness q Dealing and managing q Client reporting q Client assets. 2. In your groups, identify the key relevant points as they apply to financial services provided to private clients. Use CISI manual Chapter 1 for reference 3. Present these key points back to the group. Accredited Training Partner

GDPR Personal data: q GDPR regulatory requirements q Lawful bases for holding data q Breaches and penalties. Accredited Training Partner

Complaint Handling q Any oral or written expression of dissatisfaction, whether justified or not q Complaints should be dealt with promptly and fairly. Accredited Training Partner

Complaint Handling Procedures Consumer awareness rules q Publish summary details of internal complaint handling process q Refer to these details in writing at point of sale, q Provide copy of these details to clients on request and when acknowledging a complaint q Details to include: q How the firm handles and seeks to resolve complaints q Right of referral to FOS if not resolved. Accredited Training Partner

Application of Complaint Handling Procedures Complaint resolution rules q Investigate competently, diligently, impartially q Offer redress where appropriate q Explain decision to complainant q Try to resolve complaints at earliest possible opportunity Root cause analysis q. Affects other products / services? q. Correct where reasonable to do so. Accredited Training Partner

Application of Complaint Handling Procedures Complaints – time limits q Receipt of complaint - log q Prompt written acknowledgement q Keep complainant informed of progress thereafter 8 weeks: Right to refer to FOS / FOS explanatory leaflet q Send final response, or, q Explain why not able to provide final response. Accredited Training Partner

Records Keep records of all complaints: q 3 years from date of receipt (non Mi. FID) q 5 years (Mi. FID business) q. Name of complainant q. Substance q. Correspondence. Accredited Training Partner

Integrity and Ethics Key points q Regulatory standards q Professional ethics and culture q Codes of ethics and codes of conduct q Professional integrity. Accredited Training Partner

Module 2 – Financial Planning Accredited Training Partner

Financial Planning Process Key points q q q Establish client relationship Collect client information Analyse client’s financial circumstances Develop solutions Implement Review client’s situation. Handout 1 – Case studies 1 and 2 Accredited Training Partner

Day 1 Review q Review slides and exercises against syllabus q Check areas of understanding - questions for next session q Assess past exam reports for questions on syllabus areas covered. Accredited Training Partner