1. Regulatory Framework - Section A

Question 1

Which bodies are the Bank of England responsible for?

Answer 1

Financial Policy Committee (FPC)

Prudential Regulation Authority (PRA)

Question 2

Which regulatory body is the Bank of England not responsible for?

Answer 2

Financial Conduct Authority (FCA)

Question 3

what are the 2 objectives of the Financial Policy Committee?

Answer 3

1. Identify, monitor and take action to remove or reduce systemic risks to the stability of the financial system.
2. Support the economic policy of the Government

Question 4

What are the 2 statutory objectives of the Prudential Regulation Authority?

Answer 4

1. Promotion of the safety and soundness of firms.
2. (Specifically for insurers) - Contributing to the securing of an appropriate degree of protection for policy holders.

Question 5

What are the 3 objectives of the Financial Conduct Authority?

Answer 5

1. Secure an appropriate degree of protection for consumers
2. Protecting and enhancing the integrity of the UK Financial system
3. Promote effective competition in the interest of consumers

Question 6

Principle for business 1?

Answer 6

Integrity - A firm must conduct its business with integrity

Question 7

Principle for business 2?

Answer 7

Skill, care and diligence - A firm must conduct its business with skill, care and dilligence.

Question 8

Principle for business 3?

Answer 8

Management and control - A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems in place.

Question 9

Principle for business 4

Answer 9

Financial Prudence - A firm must maintain adequate financial resources.

Question 10

Principle for business 5

Answer 10

Market Conduct - A firm must observe proper standards of market conduct.

Question 11

Principle for business 6

Answer 11

Customers interests- A firm must pay due regard to the interests of its customers and treat them fairly.

Question 12

Principle for business 7

Answer 12

Communication with Clients - A firm must pay due regard to the information needs of its clients, and communicate the information in a way that is clear, fair and not misleading.

Question 13

Principle for business 8

Answer 13

Conflicts of Interest - A firm must manage these fairly, both between itself and its customers and between a customer and another client

Question 14

Principle for business 9

Answer 14

Customers: Relationship of Trust - A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.

Question 15

Principle for business 10

Answer 15

Client’s assets - A firm must arrange adequate protection for clients assets when it is responsible for them.

Question 16

Principle for business 11

Answer 16

Relationship with regulators - A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

Question 17

The PRIN don’t all apply to the PRA - Which ones do?

Answer 17

1 to 4, 8 and 11 only.

Question 18

What is Consumer Duty?

Answer 18

An FCA initiative intended to counter the exploitation of customers.

Question 19

Consumer duty aims to improve consumer protection, this requires businesses to do what 3 things?

Answer 19

Act in good faith

Avoid foreseeable harm

Enable customers to pursue their financial objectives

Question 20

The FCA focuses on 4 key areas with regard to consumer duty, what are they?

Answer 20

Information given to customers to help them make informed decisions

Fair value pricing

Quality of customer service

Ensuring products are designed appropriately for their target market and work as expected

Question 21

What are 5 examples of Regulated Activities

Answer 21

1. Mortgage lending, advice, arranging and administration.
2. Effecting insurance and pension contracts.
3. Accepting deposits.
4. Advising on, arranging, managing or administering investments
5. Running collective investment schemes such as unit trusts, investment trusts and open ended investment companies.

Question 22

What is an authorised person?

Answer 22

Someone who carries out regulated activities, they can only carryout activities for which they have been authorised.

Question 23

What 5 bodies are exempt from authorisation requirements?

Answer 23

The Bank of England

The European Central Bank

Central banks of the European economic area

Local authorities

Various government bodies

Question 24

What is an appointed representative?

Answer 24

A firm who is in contract with an authorised person - only able to advise on that person’s products.

Question 25

Who is ultimately responsible for the advice given and compliance with regulations? The appointed representative or the authorised person?

Answer 25

The authorised person, except in the case of an Independent financial adviser.

Question 26

What are the 3 parts of the Senior Managers & Certification regime? (SM&CR)

Answer 26

1. Senior Managers Regime
2. Certification Regime
3. Rules of Conduct

Question 27

What is the Senior Managers Regime?

Answer 27

A regime applying to those carrying out Senior Management Functions (SMF’s), imposing disciplinary action should controls be lacking in the area of the business that the relevant person is responsible for.

Question 28

What is the Certification Regime?

Answer 28

A regime applying to those not carrying out SMF’s, but whose roles have been deemed capable of causing significant harm to the firm or its customers. (Decided by the regulators).

Question 29

Who is exempt from the Rules of Conduct set under the SM&CR

Answer 29

Senior employees in a purely administrative role