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M80 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What are the name of the 3 bodies made after financial crisis by Financial Services Act 2012

A
  1. FCA
  2. PRA
  3. FPC
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2
Q

FCA

A

Conduct of business for all financial firms including intermediaries

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3
Q

FCA’s Objectives

A
  • Ensure relevant markets function well
  • Consumer protection
  • Integrity
  • Competition
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4
Q

What other bodies does the FCA oversee

A
  • Financial Ombudsman Service (FOS)
  • Money Advice Service (MAS)
  • Financial Service Compensation Scheme (FSCS)
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5
Q

How pillars in FCA’s approach

A
  1. Firm systematic Framework
  2. Conducting event driven work for emerging issues
  3. Reviewing issues as they happen (products and promotions can be banned by FCA)

RISK BASED APPROACH

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6
Q

PRA objective

A

Within BOE

Promote safety and soundness of PRA-regulated persons

Firms must meet threshold conditions

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7
Q

What PRA’s threshold conditions for firms to carry out regulated activity

A
  1. Head office in UK
  2. Conduct business in prudent manner
  3. Adequate resources
  4. Fit and proper
  5. Appropriately staffed
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8
Q

PRA

A

Supervisory framework to see gross risk exposure , what is in place to mitigate

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9
Q

PRA: Judgement based approach

A
  • Forward looking
  • Not only insurance firms
  • Approach differs for each industry
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10
Q

Insurance Regulators

A

Dual regulated: PRA + FCA

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11
Q

PRA in Insurance

A

Focuses on outcomes and adequate measures

  • mgmt and governance
  • culture and competence (Board takes responsibility)
  • Risk mgmt and controls
  • Financial resources
  • Resolvability
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12
Q

FPC

A

Emerging and systemic risk

  • provide strategic direction to the regulatory set up
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13
Q

How do PRA + FCA impact UW functions (5)

A
  1. Principles of business (PRIN)
  2. Training and competence (TC)
    3.Fair treatment of customers
  3. Monitoring and auditing
  4. Complaint and dispute resolution
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14
Q

FCA Handbook (PRIN) 11 principles

A
  1. Integrity
  2. Skill, care and diligence
  3. mgmt and control
    4.financial prudence
  4. market conduct
  5. customers interest
  6. Comms with client
  7. conflict of interest
  8. customers - relationship of trust
  9. client’s assets
  10. relationship with regs
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15
Q

PRA threshold categories

A

Cat 1 - 5
1 = significant capacity to cause disruption to large number of policyholders

2 = significant

3 = minor

4 = very little

5 = almost no

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16
Q

PRA solvency requirements

A

In line with Solvency II which came out Jan 2016

17
Q

Solvency II objectives (4)

A
  1. Greater risk awareness
  2. Deeper integration of EU insurance market
  3. Policy protection
  4. Competitiveness
18
Q

FCA supervision model

A

Firm Systemic Framework: structured conduct assessments

Event drive work: Faster and more decisively w/ problems

19
Q

PRIN 2: Includes training and competence sourcebook

A
  • employees are competent
    -remain competent for the work they do
    -appropriately supervised
  • competence regularly reviewed
  • competence appropriate to nature of work
20
Q

What principle in training and competence

A

PRIN 2 - Due skill, care and due diligence

21
Q

What principle is fair treatment of customers

A

PRIN 6 - pay due regard to the interest of its customers and treat them fairly

22
Q

What are the 6 outcomes

A
  1. Fair treatment of customers is central to the corp culture
  2. Products / services designed to meet needs of identified consumer groups
  3. Clear info - before, during and after sale
  4. Suitable advice given
  5. Products do what they are said to be done
  6. No un-reasonable post sale barriers inforced to change, switch provider etc
23
Q

Dispute resolution: Complaints (DISP)

A

Section in FCA handbook = expression of dissatisfaction should be treated as complaint

Must be recorded, analysed and used for where improvements can be made

24
Q

Consumer duty - FCA

A

For all new / existing products and services by end of July 2023 -> Firm must deliver good outcomes for retail consumers

25
Q

Monitoring and auditing business

A

PRIN 2 & 3

26
Q

UW monitoring

A
  • detailed budgets aligned with org corp objectives
  • Authority limits
  • Claims freq and severity
  • Premium comparison
  • Sales and renewal volumes
27
Q

FSCS

A
  • Established under s.212 of FSMA 2000

100% protection for:
- compulsory insurance
- PI
- Long term (pensions, life insurance)
- Certain claims for injury, sickness or infirmity of ph

90% protection of claim with no upper limit for other types of policy

0% protection for directors, managers of defaulting firm

28
Q

FOS

A
  • Free indpt impartial service deals with individual consumers / small businesses and FI’s
  • Membership is compulsory for all firms including intermediaries
29
Q

Eligible FOS

A
  • Consumer
  • Micro-enterprise (<10 employees, turnover <EUR 2m)
  • Chairty w/ annual incomes <£6.5m
  • Trustee of trust woth net asset value <5m
  • Consumer buy-to-let
  • Small business annual TO <£6.5, <50 employees, balance sheet total of <£5m
  • Guarantor
30
Q

When can they refer complaint to FOS from

A

6 months of the date on firm’s letter advising claimant of its final decision regarding complaint

6 years after the event complained about

3 years after complainant knew or should’ve known they had cause for complaint

31
Q

Maximum FOS awards

A

£375k about acts after 1st Apr 19

£170k about acts before 1st Apr 19

32
Q

Directions award FOS

A

Telling firm what actions that need to done to put things right

33
Q

How is FOS funded

A
  • Levy paid by all firms
  • Case fee payable by firm to which complaint relates to
34
Q
A

M80 (5 decks)

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