17) THE FCA'S AIMS AND ACTIVITIES

Question 1

Why is regln of finl serv sector necy?

Answer 1

Finl serv sector deals with money - imp to both indiv and to national economy - so necy to regulate.
Aims of regln incl
1. to ensure busi are authd to do so and conduct fairly to consumers
2. to ensure busi have necessary finl arrangements inplace, o.wise risk to consumers
3. W.in finl orgns, snr level are held accountable
4. Indiv carrying out regtd acti. - capable & competent
5. Indiv in indus keep up w skills and knowl
6. Supervn to ensure regtry req are adhered, prevents problems

Question 2

Define conduct regulation

Answer 2

Regulation which ensures that products and services by finl services meet the requirements of the consumers and that they act appropriately and fairly with customers.

Question 3

Define Prudential regulation

Answer 3

Regulation to ensure that busi are estd and run on sound financial basis. This limits the risk of businesses failing and in case of failure to limit impact on consumers.

Question 4

Briefly say how BofE, FPC, PRA and FCA together provide regulatory oversight to financial sector

Answer 4

BofE: Looks at monetary and finl stability. Central role in final regn
FPC: Is a committee of BofE…identify and address risks to whole/large parts of economy…no direct regulatory responsibility…takes action if threat to economy
PRA: Sole respon for day-to-day prudential (financial) supervision of banks and other finanl insti. AUTHORISES SYSTEMICALLY IMP PROVIDERS OF FINANL SERVS. EG BANKS, INSU. COS. AND BLDG. SOCS.
FCA: Respon for conduct of all retail and wholesale financial firms. Also financial supervision of firms wh are not under PRA…is a quasi-govt dept with statutory powers

Question 5

Objectives of FCA

Answer 5

• To protect consumers - by securing a degree of protection
• To protect financial markets - by protecting and enhancing finanl integrity of UK finanl sys
• To promote effective competition - promote competition in the interests of consumers

Question 6

How does FCA promote competition

Answer 6

Regulatory std such that no undue barriers…new providers can enter
Consumers empowered to drive competition - easily switch pdts
No single firm/gp of firms dominates mkt
Focus on consumers’ genuine needs, if recommendations are made to make sure that they are suitable

Question 7

How are rules different from guidance in FCA Handbook

Answer 7

Rules: Rules in Handbook are BINDING obligations to be followed by firms. Contravening rules may bring enforcement action and sometimes action for damages
Guidance: Explains rules and indicate ways of complying…not binding…firms have discretion on how to achieve rules

Question 8

What are the 11 Principles for Businesses?

Answer 8

1 - Integrity - A firm must conduct busi with integrity
2 - Skill, care and deligence - must conduct busi with
3 - Management and control - reasonable steps to control affairs reponsibly, adeq. risk mgt systems
4 - Financial prudence - busi maintain adeq finl resourc
5 - Market conduct - Proper std of mkt conduct
6 - Customers’ interests - due regard to, treat fairly
7 - Communications with clients - clear, fair and not misleading
8 - Conflicts of interest - manage conflicts fairly..betn itself and cust, and betn one cust and ano
9 - Customers:relationships of trusts - give suitable advice, make discretionary decisions for customers who rely on its judgement
10 - Clients’ assets - provide adeq protection
11 - Relations with regulators - disclose to FCA or PRA, be open and co-operative

Question 9

Six outcomes to ensure ‘Fair Treatment of Customers’

TCF

Answer 9

1) Consumers will be confident of fair treatment by firms
2) Pdts by firms must meet needs of properly identified customer groups
3) Clear info provided to consumers at all stages before, during and after a sale
4) Take customers’ circumstances into account and advice suitable to them is given
5) Pdts perform as led to expect and assoc serv are of acceptable std
6) No unreasonable barriers to switch product or provider, make a claim, or complaining

Question 10

Name four powers that FCA can exercise in regulation of business conduct

Answer 10

*Product intervention powers
*Competition powers - to open up competition
*Power of disclosure - of warning notices issued and
disciplinary action taken
*Power to take formal action - against misleading
financial institutions