Chapter 1: Regulatory Environment Flashcards
who has overall responsibility of the financial services sector / financial system?
HM Treasury
What impact does HM Treasury have on the FCA?
appoints board and chairman
requires report on effectiveness at least annually
can subject FCA to independent reviews
Who funds the FCA
authorised firms
Identify, monitor and take action to remove or reduce systemic risks
- With a view to protecting and enhancing the resilience of the UK financial system
This is the role of who?
Financial Policy Committee of the BoE
how often does the FPC meet and how often does it produce reports?
meets four times a year, biannual report
who regulates ISAs?
HMRC (think cos of tax relation)
what are the three types of PRA firms?
deposit takers
insurance
significant investment firms
what is the PRA’s general objective?
General objective – to promote the safety and soundness of PRA-authorised firms
- Avoid instability
- Minimise adverse effect the failure of a PRA-authorised firm would have upon the stability of the UK financial system
what is the difference between statutory objectives, strategic objectives and operational objectives for FCA
statutory = all of them
strategic = only one (the main overall motive of the FCA)
operational = there are three
strategic objective of the FCA
ensuring the relevant markets function well
operational objectives of the FCA
- Consumer protection
- Securing an appropriate degree of protection for consumers
- Integrity
- Protecting and enhancing the integrity of the UK financial system
- Competition
- Promoting effective competition in the interests of consumers
What do Consumer Rights Act 2015 and the Unfair
Terms in Consumer Contracts Regulation 1999 allow the FCA to do?
Challenge, amend and remove unfair terms in consumer contracts in the
financial services
the FCAs risk based approach has how many types of work and what are they?
3
Proactive – pre-emptive (includes business model analysis and drivers of conduct)
* Reactive – emerging or actual harm
* Thematic – potential or actual harm
what are the four FCA tools for supervision?
Identify: identify where harm or potential harm is present
- Diagnose: what is the cause, the extent and potential development of the harm
- Remedy: through a range of FCA actions that can be taken
- Evaluate: FCA assesses how effective these action were
what types of firms are subject to proactive firm supervision
fixed portfolio firms
what three areas does the FCAs strategy for conduct risk supervision focus on?
- Reducing and preventing serious harm
- Setting and testing higher standards
- Promoting competition and positive change
4 general powers of the FCA
grant, vary or withdraw part 4A permission or approval of individuals/recognition of other bodies
rule making
prosecute financial crime
Supervision, enforcement, sanctions and disciplinary action
is guidance binding?
no
how is principles regulation best defined?
Use of high level objectives that are binding on the firm
where consumer duty applies, which principles for business get replaced by it?
principle 6 (customers interests) and 7 (communication with clients)
what are the 12 principles for business?
- Integrity
- Skill, care and diligence
- Management and control
- Financial prudence
- Market conduct
- Customers’ interests
- Communications with clients
- Conflicts of interest
- Customers: relationship of trust
10.Clients’ assets
11.Relations with regulators
12.Consumer Duty
in summary, what activities are exempt from the consumer duty principle?
Anything described as non-retail or specifically directed to professional
clients or eligible counterparties
Commercial products and services
Group products, such as group life assurance products
Trickier is the definition of a non-retail investment, where a minimum
denomination or investment is £50,000
what is the aim of consumer duty?
To ensure retail customers receive good outcomes when they purchase products or services
what is in the score of consumer duty?
Any product or service that is or can be distributed to retail clients
for firms out of scope of the consumer duty, what applies to them? and how many are there?
fair treatment of customer outcomes apply (FTOC Outcomes)
6 outcomes
what is the purpose of the Senior management arrangements, systems and controls (SYSC)?
Encourage directors to take responsibility for the firm’s arrangements on
regulatory matters
Amplify Principle for Businesses 3 to organise and control its affairs responsibly and effectively
Vest responsibility for effective and responsible organisation in specific director and senior managers
Create a common platform of organisational systems and controls
purpose of pension protection fund?
Protects the benefits of defined benefit pension schemes
To compensate members of insolvent final salary pension schemes
principles for business only apply to FCA authorised firms, true or false?
false, also PRA
what are the certification functions?
CASS oversight, proprietary trader, significant management, functions requiring qualifications, managers of certification functions, material risk takers and client dealing.
Which statement is the correct aim of the FCA’s Consumer Duty?
To ensure that retail customers receive good outcomes when they purchase products or services
To whom do the PRA’s rule-making powers extend?
Only PRA-authorised persons
According to the provisions under Senior Management Arrangements, Systems and Controls in the Regulator’s Handbook, the responsibilities of directors must be:
Clearly and appropriately apportioned
