C6 Flashcards
What is the FCA
The financial conduct authority
Responsible for the conduct for all financial firms, including intermediaries
What is the FPC
The financial policy committee
What are the 3 operational objectives of the FCA
Consumer protection
Integrity
Competition
Secondary- stimulate competition and growth in the medium to long term
What do the FCA do
Overseas the financial ombudsman service (FOS) and the financial services compensation scheme (FSCS)
What is the FCAs focus
Product governance
End to end sales process
Prevention of financial crime
What is the FCAs approach to supervision
Fixed portfolio firms
Flexible portfolio firms
What does the PRA strive to do
Promote the safety and soundness of PRA regulated persons
Sits in the Bank of England
What are the PRA threshold conditions
Firms head office is in the uk
Conduct business in a prudent manner
Adequate resources
Fit and proper
Appropriately staffed
Capable of being effectively supervised
How does the PRA achieve its goals
Closely monitor a firms prospect of failure and has a supervisory framework to asses the gross risk firm is exposed to and what is in place to mitigate that risk.
What are the PRA secondary objectives
Acting in so far as reasonably possible in a way which faciilitates:
- effective competition in in markets for services provided by PRA authorised firms
- the uk economy’s international competitiveness
- it’s growth over the medium to long term, subject to alignment with international standards
What does the FPC do
Looks for emerging and systemic risks
Provides strategic direction to the regulatory set up
What is PRIN
Principles for business
An FCA handbook
What is in PRIN
12 business principles e.g integrity, proper standards of market conduct
PRIN 6
Customers interests
Consistent and fair treatment of customers throughout product life cycle
Fair treatment pre contract post sale and during life of policy and sometimes after
Consumer
Natural person acting outside their trade or profession
Commercial customer
Acting for purposes that are business related
PRIN 3
Senior management
Every regulated person must take reasonable care to share out the significant responsibilities within the firm between its directors and senior managers and appoint an MLRO
Whistle blowing
Encouraged by regulators if its in the public interest to do so and made in good faith protected by public interest disclosure act 1998
Lloyds ESG agenda
Strategy and governance
Climate
Culture
communities
Options to operate in the EU
Establishment basis - Establish a physical presence
Service Basis - work from home state
US regulation
Up to individual states
Admitted basis - approved in particular states
Surplus lines basis - outside of local appetite more flexible
What is the PRA
The prudential regulation authority
Lloyds permission
Negotiates and obtains permission to operate in international markets so their syndicates can operate and write business in those regions
Is a second tier market in the US and only acts if the local market cannot accommodate the risk in all 50 states
What is surplus lines status
When a local market cannot accommodate the risk so the second tier market takes on the risk
What is the council of Lloyds
Has the rule making power
Looks at management and superintendency of all affairs
Right to exercise any of the peers of the society of Lloyds
Power to direct the insurance business at Lloyd’s
Primary and secondary rules of Lloyds
Bye laws and regulations
Requirements
What do the Lloyds governance not tolerate
-Dishonesty
-The forging of fake documents
-Failure to look after money held on trust
-Failure to organise/control the business
-Any act or omission capable of damaging the Lloyds brand or bringing the name to dispute
What is solvency
Assets must exceed liabilities
Solvency margin
The amount assets exceed liabilities
What must insurers provide the regulator with each financial year
Revenue account
Profit and loss account
Balance sheet
What is runoff
Where a Lloyds syndicate cannot write or accept any new risk
What is the FOS
Financial ombudsman service
Independent body which all authorised insurers must be a member of
Complaints have 6 month to be escalated to the FOS
What is the FSCS
A one stop compensation shop to cover claims against insurers where they are unable to pay them because they can gone out of business or become insolvent
Levy on authorised firms
Covers 100% compulsory and 90% general insurance
What is the Lloyds central fund
Reserve that acts as the last port id call in the event that members are unable to pay claims for risks they have written
Who is the FCA consumer duty aimed at
Any small organisation involved in the manufacture or supply of products or services to any retail clients (consumers or small to medium enterprises SMEs)
What is consumer duty
Intends to improve how firms serve their customers and has implications for
Product development
Marketing
Compliance
Sales
Customer support
Aims to set higher and clearer standards across financial services market and protect customers form risk such as exploitation
Elements of consumer duty
PRIN 12 a firm must act to deliver good outcomes for retail customers
What are cross cutting rules
Set out more detail of the FCAs expectations in how firms should act to deliver good outcomes
What are some FCA expectations of grins
Putting consumers at the heart
Providing products and services that meet customer needs
Seeking not to exploit customers
Monitor and review customer outcomes
Outcomes relating to firm conduct
Governance of products and services
Price and value
Consumer understanding
Consumer support
There has to be evidence this is being done
What impacts are regulators looking for
Ending inappropriate charges or fees
Easily cancellation or change of products
Helpful and accessible customer support and information
Fit for purpose products
Focusing on real needs for customers including those who are vulnerable
What are mashing agents expected to do by the FCA and PRA
Annual solvency test
Plan the capital needed
Maintain sufficient controls
