Glossary - Glossary of terms

ARROW visit - The FSA has developed the ARROW risk-assessment framework with the following objectives:

- To help the FSA meet its statutory objectives by focusing on key risks.

- Influence resource allocation to make efficient and effective use of limited resources

- Use appropriate regulatory tools to deal with risks or issues

- Undertake proportionally more work on a thematic (or cross-sectional) basis

ARROW stands for Advanced Risk Response Operating frameWork and describes how the Financial Services Authority assesses the risk posed by individual firms. Firms are assigned to one of four supervision categories, with category 'A' representing firms that are viewed as 'high impact', i.e. in the event of their collapse, the impact to customers would be high.

These firms can expect a close and continuous relationship, while those in category 'D' can expect little or no individual contact.

Appointed representative - Someone who carries out activities that are part of the business for which their principal has accepted responsibility in writing.

Business standards - The detailed requirements relating to firm's day-to-day business.

Client - Any person with or for whom a firm conducts or intents to conduct business.

Cooling-off period - The right of consumers to cancel policy coverage within a set time limit (see Distance Marketing Directive).

Commercial customer - Someone who purchases cover on behalf of their business, trade or profession.

CPD - Continued professional development pertains to the regulators requirement for each member of an organisation to be fit for purpose. In line with the regulator's requirements for processes and competence to be transparent, this must be demonstrable, i.e. by having received documented training and assessment material relating directly to an employee's job function.

Dispute reolution: complaints - Refers to the detailed requirements for handling complaints via the Financial Ombudsman Service arrangements.

Distance Marketing Directive (DMD) - The Directive of the Council and Parliament published the Distance Marketing Directive (FSA Consultation Paper 196) on 23 September 2002 on distance marketing of consumer financial services (No. 2002/65/EC). The DMD aims to protect retail consumers who deal with a financial services firm or acquire a financial services product through the use of distance means such as post, fax, internet and telephone. Its main aims are to ensure they are given minimum standard information about the firm with which they propose to deal and the product or service being offered; and have the right to cancel a range (but not all types) of contracts once entered into.

Enforcement - Where a firm intentionally or unintentionally fails to meet certain requirements, disciplinary enforcement action may be taken.

Execute - Carry into effect or perform a transaction, whether as a principal or as an agent.

Financial Ombudsman Service (FOS) - The scheme where certain disputes may be resolved quickly and with minimum formality by an independent person.

Financial promotion - An invitation or inducement to engage in investment activity.

Financial Services Authority (FSA) - The independent non-governmental body given legal powers by the Financial Services and Markets Act 2000 to regulate the UK financial services industry.

The Fit and Proper Test for Approved Persons - The minimum standards for becoming and remaining an approved person.

ICOB - The Insurance: Conduct of Business sourcebook. The requirements applying to firms with insurance business customers.

IMD - The Insurance Mediation Directive.

Integrated Prudential Sourcebook - Prudential requirements for insurers, groups, mortgage firms and insurance intermediaries.

Introducer - An individual appointed by a firm or an appointed representative to introduce business or distribute non-real-time financial promotions.

Money laundering - The requirements for anti-money-laundering systems and controls.

Moral hazard - The risk arising from the character and management style of the insured or their employees.

Network - An independent intermediary that has five or more appointed representatives or whose appointed representatives (fewer than five) have between them 26 or more financial advisers.

Principles for business - The fundamental obligations of all firms under the regulatory system.

Professional indemnity insurance - A contract of insurance that indemnifies a firm against financial losses that may occur as a result of negligence.

Senior management arrangements, systems and controls - The responsibilities of directors and senior management.

Statements of Principle and Code of Practice for Approved Persons - The fundamental obligations of approved persons.

Supervision - The regulatory powers of the FSA to monitor and maintain set standards in the industry including enforcement action.

Threshold conditions - The minimum standards for becoming and remaining authorised.

TOBA - Terms-of-business agreement. Issued by insurers to agents, TOBAs set out a framework for the business relationship between the two and should incorporate the FSA's high-level principles. The arrangements set out in TOBAs should also make this relationship clear and transparent in defining and allocating the respective responsibilities and rights in the agreement to each party.

Utmost good faith (uberrima fides) - A contract of insurance is a contract based on the principle of utmost good faith. It requires proposers to give all relevant information to the insurer and requires insurers to deal openly and honestly with policyholders.