2.1 The FCA's General Duties

Question 1

FCA’s Strategic Objective

Answer 1

Ensuring that financial markets work well

Question 2

Operational Objective 1 - The Consumer Protection Objective

Answer 2

Securing an appropriate degree of protection for consumers. In considering this, the FCA should regard different degrees of risk involved in different types of investment, differing expertise of consumers, consumers need for advice and information and the principle that consumers are responsible for their decisions.

Question 3

Operational Objective 2 - The Integrity Objective

Answer 3

Protecting and enhancing the integrity of the UK financial system. includes:

1) soundness, stability and resilience
2) Not being used for a purpose connected with financial crime
3) Not being affected by behaviour amounting to market abuse
4) The orderly operation of financial markets
5) The reliability and Transparency of the price formation process in those markets
6) The suitability of the listing rules

Question 4

Operational Objective 3 - The Competition Objective

Answer 4

Promoting effective competiiton in the interest of consumers in the markets for regulations financial services or services prohibited by an RIE in carrying on regulated activities in respect for which It is exempt from the general prohibition.

1) The needs of different consumers who obtain those services, including the need for information that lets them make informed choices
2) The ease which consumers can obtain those services and change the person from whom they obtain them from
3) The ease with which new entrants can enter the markets
4) How far the competition is encouraging innovation

Question 5

In addition to rule-making-powers, FSMA empowers either the FCA or PRA to:

Answer 5

1) Grant authorisation to persons applying for Part4A permission, vary a firm’s permission and cancel the authorisation
2) Supervise authorised persons to ensure they continue to meeting authorisation requirement and comply with the handbook rules and other regulatory obligations
3) Employ a range of disciplinary measures and sanctions to punish/limit the activities of firms that fail to comply
4) Enforce the regulatory framework - the general approach is one of credible deterrence, using enforcement strategy as a tool to change behaviour in the industry

Question 6

FCA’s objectives also provide for a degree of accountability

Answer 6

1) Annual Report: FCA report to the treasury. Assesses how well the FCA has met its statutory objectives. Report is scrutinised by various parliamentary committees
2) Rules: FCA must demonstrate how its rules relate to the statutory objectives
3) Judicial Review: if the FCA fails to consider the objectives, or incorrectly interprets them, it can be challenged in the courts
4) Regulatory failure: FCA and PRA held accountable is breaches of the objectives occurred or were made worse because of a failure in part of the regulator

Question 7

Supervision Efforts

Answer 7

FCA - focuses on the conduct of FCA-authorised and PRA-authorised firms, plus prudential regulation for authorised firms not authorised by the PRA

PRA - supervises the prudential aspects of firms that it authorises