9 - Principles and Outcomes Regulation Flashcards
FCA Principles for Business
What are they?
Relation to PRA equivalent
FCA principles for business are high level principles that should be followed by businesses, even if no rules or procedures apply in a given situation.
PRA equivalents are the ‘fundamental rules’ and if in conflict the FCA principles take precendence.
FCA Principles for Business
The 11 principles
- Integrity
- Skill, care & diligence
- Management & control
- Financial prudence
- Market Conduct
- Customers interests
- Communication with clients
- Conflicts of interest
- Customers: relationship of trust
- Clients assets
- Relationships with regulators
FCA Principles for Business
What to do if there is a breach?
Comliance officer should contact FCA.
FCA Principles for Business
What is outcomes-based regulation?
Outcomes-based regulation utilises Intensive Supervision and involves the regulator making judgements about what might happen in the future, rather than relying on observable facts.
Corporate Culture
6 key cultural drivers
- Leadership
- Strategy
- Decision making and challenge
- Controls
- Recruitment, training and competence
- Reward
Individuals
FCA Statements of Principle for Approved Persons
FCA Code of Practice for Approved Persons
What are they?
Relationship between them
The Statements of Principle are 7 statements that approved persons should meet when carrying out controlled functions.
1-4 are for everybody, 5-7 for those carrying out ‘accountable higher level functions’.
The code of practice is used to evaluate whether a person’s conduct complies with a Principle.
Individuals
FCA Statements of Principle for Approved Persons
List of 7
- Integrity
- Skill, care and diligence
- Market Conduct
- Open and cooperative
- Organisation and control
- Skill, care and diligence in marketing
- Compliance
Individuals
Fit and proper test
3 criteria
- Honesty, integrity and reputation
- Competence and capability
- Financial soundness
Individuals
Conflicts of interest
Who is responsible?
What they should do?
Senior management is responsible for conflicts of interest at the firm.
They should have a single member of the board of senior management in charge of conflict identification, and put in place a formal conflicts policy.
Individuals
Senior Managers and Certification Regime (SM&CR)
General requirements
Who the rules apply to
General requirement is to establish the specific responsibilities of senior managers so they can be held accountable.
SM&CR applies to:
- Banks
- Building societies
- Credit Unions
- Largest investment firms (PRA regulated ones)
- Branches of foreign banks in UK.
Individuals
Senior Managers and Certification Regime (SM&CR)
Senior managers regime requirements
- Each senior manager has a ‘statement of responsibilities’
- Firm has a ‘Firm Responsibilities map’
- All senior managers are pre-approved by regulators before carrying out their roles (existing approval can be grand-fathered in)
Individuals
Senior Managers and Certification Regime (SM&CR)
Who it applies to
Requirements
Applies to ‘material risk takers’ and other staff who pose a risk of significant harm to the firm (eg advisers).
All must be identified, assessed as fit and proper and have procedures to reassess fit and proper status annually.
