6 - Legal and Regulatory Environment Flashcards
What three bodies make up the UK regulatory framework for financial services?
FCA (Financial Conduct Authority)
PRA (Prudential Regulatory Authority)
FPC (Financial Policy Committee)
What is the primary objective of the PRA?
Promote safety and soundness of regulated persons, responsible for solvency and stability
What determines the PRA’s intensity of supervision?
The perceived level of risk
What are the three operational objectives of the FCA?
Consumer Protection
Integrity
Competition
What makes the FCA more proactive than previous regulators?
Intervenes earlier in a products life and seeks to address the root cause of problems
What is a ‘fixed portfolio’ firm?
A small proportion of firms which require the highest level of supervision, determined by size and market presence
What are ‘flexible portfolio’ firms?
The majority of firms which are more passively regulated
What can the FCA do if it finds problems?
- Ban products
- Withdraw misleading promotions
- Fine or prosecute individuals
Who does the FCA report to?
Government and parliament, annually
The eleven principles for business (PRIN) can be found in which documents?
FCA handbook and PRA rulebook
What is SYSC?
Senior management arrangements, systems and controls
What is PIDA?
The public interest disclosure act 1998
What does PIDA do?
Concerns whistleblowing - makes it unlawful for an employer to punish an employee for disclosing information
What is the difference between working on an establishment basis or services basis?
Establishment - open offices in EU
Services - work only from home state
What is working on an ‘admitted basis’ in regards to US insurance?
State regulators granting permission to foreign insurance companies to write business
What is the incentive for nations to regulate foreign insurers?
To keep local risks written in local markets, hence retaining premium within its own economy
If a worker notices it’s employer committing for example a criminal offence, miscarriage of justice or concealment, it carries out a what?
Criminal disclosure
When the local market cannot accept all the risk, Lloyds can step in from abroad. This is known as what?
Surplus lines status
What is the key difference between Lloyds and company markets obtaining permission to write business overseas?
Lloyds obtains the permission centrally for all syndicates, whereas companies have to get individual permission
What compliance acts are managing agents required to carry out?
- File annual solvency test return
- Assess the capital required to engage in insurance busines
- Maintain controls over risks
What is the key concept that underpins the regulator’s willingness to allow Lloyds a degree of self regulation?
Insureds must have same protection as if insured by Non-Lloyds insurer
Which key bodies oversee the Lloyds acts?
Council of Lloyd’s
Executive comittee
What two forms do laws take in Lloyds?
- Bye laws and regulations
- Requirements
What is capital adequacy?
Required for new insurers, it is the amount by which assets must exceed liabilities
What must insurers submit annually to the regulator?
- Revenue account
- Profit and loss account
- Balance sheet
What is ‘run off’?
When an insurer is prevented from taking any further business by a regulator
Who deals with financial disputes between individual consumers or small businesses and financial institutions?
Financial ombudsman service (FOS)
How long does a complainant have to report to FOS?
After exhausting internal complaints, six months
How large can a company be before the FOS can no longer assist them?
- Turnover less than £6.5m
- Less than 50 employees
- Balance sheet total less than £5m
What is the role of the FSCS?
Covering claims against firms who are unable to pay
What insurance does the FSCS. not cover?
Goods in transit, marine, aviation and credit
What is the central fund?
Lloyds reserve fund which pays claims if insurers cannot.
All authorised insurance company pay must report complaints to the FCA in what frequency?
Bi-annually
How much of a non-compulsory insurance policy claim will the FSCS pay out?
90%
