FCA Consumer Duty: How Financial Services Firms Are Impacted
As the deadline for the FCA Consumer Duty Principle looms forward, we tackle how it impacts financial services firms, and what businesses need to be aware of.Learn More
February 21, 2022
There’s no industry quite like financial services when it comes to acronyms, abbreviations and terrible terminology. To help you navigate this bowl of alphabet soup our Head of FinReg, Gareth Malna, has been stroking his wizardly beard to come up with the only dictionary you’ll ever need to understand what all those people in pin-striped suits are talking about.
To kick off our regulatory alphabet we’re tackling the top terms that many struggle to grapple with, beginning with, you guessed it, the letter A:
AIF – Alternative Investment Fund, a collective investment undertaking which raises capital from investors with a view to investing it in accordance with a defined investment policy for the benefit of the investors and which is not a UK UCITS. Think hedge funds and other funds typically aimed at sophisticated investors and mega rich people.
AIFM – Alternative Investment Fund Manager – the manager of an AIF.
AIFMD – Alternative Investment Fund Managers Directive – the law governing AIFs. Written in a really broad brush way to meaning lawyers have a lot of work figuring out whether a client’s proposition is going to be an AIF or not.
AR – Appointed Representative, a person who is exempt from needing to be authorised to carry on regulated activities where they have contracted with an authorised person (the principal) which permits the AR to carry on the type of activity for which the principal is authorised as long as they comply with the regulatory requirements.
AUM – Assets Under Management, the total value of assets you’ve convinced your clients to let you hold on their behalf.
BoE – the Bank of England, the central bank of the UK which manages monetary policy.
BIPRU – (pronounced ‘Buy Pru’) – the Prudential sourcebook in the FCA’s handbook which includes the rules for banks, building societies and investment firms that would be categorised as BIPRU firms. Sound circular? You bet it does!
Bps – (pronounced ‘bips’) - Basis Points – the fee rate charged against assets under management, expressed as 1/100th of 1%. (So 5bps = 0.05%).
CASS – Client Assets Sourcebook (of the FCA’s Handbook) – the rules covering how firms have to hold and protect client money and assets. These are the rules that strike fear in the hearts of firms.
CCP – Central Counter Party – a legal entity that sits between the parties to a contract where they are trading financial instruments (usually derivatives contracts). The idea is that the CCP creates trust and takes away the risk that the other party goes bust because the derivative has worked so well in your favour.
CFD – Contract For Differences – a kind of derivative where you use complex strategies to assess the difference between the opening and closing price of an asset.
COLL – the rules in the FCA’s handbook for collective investment schemes.
DR – Disaster Recovery – what a firm does when the sh*t hits the fan.
DTR – Disclosure Guidance and Transparency Rules sourcebook – Wait, where’s the G?! The rules in the FCA’s handbook covering the information that issuers of transferrable securities need to disclose.
EMI – Electronic Money Issuer – someone who issues electronic money.
EMIR – European Markets Infrastructure Regulation – the regulation covering derivatives that aren’t sold on exchanges (and other things that investment bankers can’t really explain).
ETF – Exchange Traded Fund – a fund where at least one unit class is traded on an exchange.
FCA – Financial Conduct Authority – if you’ve got this far and don’t already know that then you’ve really strayed from your comfort zone.
FFS – Are we not even halfway through yet? How many are there?!
FIT – the part of the FCA handbook containing rules about how the staff of firms have to be ‘fit and proper’. Not fit like running a marathon, just suitably qualified.
FSCS – Financial Services Compensation Scheme – a compensation scheme accessible by customers if their financial services provider has gone bust and lost their money.
IAR – Introducer Appointed Representative, see AR above, but instead of being able to carry on regulated activities, the IAR can only effect introductions to the authorised principal and distribute non-real time financial promotions
ICARA – (pronounced ‘aye Cara’) – the processes and documentation needed to show adequacy under IFPR.
IFPR– Investment Firms Prudential Regulation - the new regulation brought in to make sure investment firms caught under MiFID have enough capital behind them to stop them going bust in the event of a light breeze. For help implementing this see our awesome partner, Change Gap.
IMA – Investment Management Agreement – the agreement put in place between an investment manager and its client for the provision of investment management services.
K-Factors – the 8 risk types that firms subject to IFPR have to assess to work out their capital adequacy.
KID – a simple document drawn up under PRIIPs to be shared with purchasers of applicable products.
KIID – the two page document required to be given to investors in a UCITS containing information on the essential elements of the scheme.
LTAF – Long-term Asset Fund – a new type of authorised fund which operates in accordance with the rules in COLL.
LTIF – Long-term Investment Fund – it’s different from an LTAF, promise!
MAD – Market Abuse Directive – the law that puts people wearing white collars in jail.
MAR – Market Abuse Regulation – the other law that puts people wearing white collars in jail.
MiFID – Markets in Financial Instruments Directive – 1.6 million pages of regulation and guidance covering the investment services sector. Once described by Head of Finreg Gareth in The Times as “going from the sublime to the ridiculous”
MLRO – Money Laundering Reporting Officer – the person you’ve got to tell if you suspect money laundering.
NURS – Non-UCITS Retail Scheme – a fund that’s authorised by the FCA but which isn’t a UCITS and is, therefore, and AIF. Clear as mud? Good.
OEIC – (pronounced ‘oyk’) – Open-ended Investment Company – a fund where the property belongs beneficially to a corporate body which tries to invest that property so as to spread investment risk and to give the returns to the members of the corporate body (i.e. the investors) and where the investors should expect to be able to buy and sell their units in the fund from the manager without problem.
PERG – Perimeter Guidance manual in the FCA’s handbook – the holy grail of answers.
PRA – Prudential Regulation Authority – the other regulator who cares mostly about banks, building societies, insurers and massive investment firms.
PRIIPS – Packaged Retail and Insurance-based Investment Products Regulation - *shudder* (that’s an industry joke right there).
PSP – Payment Service Provider – an entity that can provide payment services like giving out debit cards, or issuing e-money or letting people take cash out of a machine in the wall.
RDR – Retail Distribution Review – the rules that stopped firms from bundling all their costs together so that clients didn’t know how much they were paying for things.
SDR – Sustainability Disclosure Requirements – the UK’s disclosure framework to ensure that information about a product’s ‘green’ credentials is accurately communicated and reported upon.
SFTR – Securities Financing Transactions Regulation – the rules that entities engaging in securities financing transactions (e.g. repos, securities lending, margin lending) have to comply with. It’s mostly about disclosure of information.
SMCR – Senior Managers and Certification Regime – the rules that made people personally accountable for the failings of their firms. Striking terror into the hearts of managers and directors up and down the country since.
UK UCITS – (pronounced “you-sits”) - UK Undertaking for Collective Investment In Transferrable Securities, a fund aimed at the public which invests in liquid financial assets and which complies with the UK’s UCITS regulations.
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