Chapter 1 (Regulatory Environment)

Question 1

What was the act and when that set out the legal and regulatory framework for financial services firms?

Answer 1

FSA 2012 (Financial Services Act)

Question 2

Name the 12 FCA Principles for Businesses (PRIN)

Answer 2

Integrity
Skill, care and diligence
Management and control
Financial prudence
Market conduct
Customers’ interests
Communications with clients
Conflicts of interest
Customers: relationship of trust
Clients’ assets
Relations with regulators
Consumer duty

Question 3

What is the fee block system

Answer 3

Funding of FCA by financial services firms (riskier the firm, the larger the fee block charged)

Question 4

FCA and PRA regulates who and what

Answer 4

All firms are subject to FCA conduct regulation and non-dual-regulated firms are subject to FCA prudential regulation; PRA is responsible for prudential regulation of dual-regulated firms

Question 5

Strategic objectives of FCA

Answer 5

Ensuring relevant markets function well; securing appropriate degree of protection for consumers

Question 6

Operational objectives of FCA

Answer 6

Consumer protection; integrity; competition

Question 7

3 pillar model and which apply to fixed portfolio (large) firms and flexible portfolio (small) firms

Answer 7

Proactive; reactive; thematic (all apply to fixed firms, only 2 and 3 apply to flexible firms)

Question 8

Who issues directions to FCA and PRA and what do they do

Answer 8

Financial policy committee (FPC); panel of experts and not a regulator

Question 9

Which are the two non-binding FCA handbook provisions?

Answer 9

Evidential provisions; guidance

Question 10

3 cross-cutting rules within Consumer Duty (PRIN 12)

Answer 10

Act in good faith towards retail clients; avoid causing foreseeable harm to RC; enable and support RC to pursue financial objectives

Question 11

Who must comply with PRIN?

Answer 11

ALL authorised firms

Question 12

According to SYSC (systems and controls), senior managers should…

Answer 12

Apportion responsibilities clearly and appropriately; sound governance; experienced management; receive written reports on compliance and internal audit annually

Question 13

What is the maximum fine the PCA can issue?

Answer 13

Unlimited

Question 14

Is the FCA a company and who is it answerable to?

Answer 14

It is a company and answers to the treasury

Question 15

Can the FCA delegate its statutory objectives?

Answer 15

No

Question 16

As a designated body under the Unfair Terms in Consumer Contracts Regulation 1999, the FCA has the power to:

Answer 16

Force financial services firm to amend or remove unfair contract terms.

Question 17

Who is responsible for reducing risks to the financial system as a whole?

Answer 17

FPC

Question 18

What is the purpose of the Pension Protection Fund?

Answer 18

To compensate members of insolvent final salary pension schemes

Question 19

What is the main aim of the FCA’s Consumer Duty?

Answer 19

To ensure that retail customers receive good outcomes when they purchase products or services

Question 20

What are the 4 supervisory tools of the FCA?

Answer 20

Identify, Diagnose, Remedy, Evaluate

Question 21

Who is responsible for the regulation of ISAs?

Answer 21

HM Revenue and Customs

Question 22

What are the 3 types of PRA firms?

Answer 22

Deposit takers (banks), insurance-related firms, significant (v.large) investment firms

Question 23

What does the Takeover panel do?

Answer 23

Focuses on the fair treatment of affected parties during the process of the takeover or merger ( does not play a part in assessing the impact of the takeover or merger)