Chapter 1 - The Regulatory Environment

Question 1

Who are the two regulators that together make up the twin peaks of the UK Financial services regulation and how do their responsibilities differ?

Answer 1

The PRA, which focuses on prodential issues and the FCS, which focuses on conduct and market-related issues.

Question 2

What does PRA stand for?

Answer 2

Prudential Regulation Authority

Question 3

What is the FCA’s role?

Answer 3

Ensure UK Financial markets function well via:
- Consumer protection
- Maintaining the integrity of the financial System
- Promoting competition

Question 4

What is the difference between an authorised person and an approved person?

Answer 4

‘Authorised Person’ = firms that have been authorised by the PRA and/or FCA to carry out 1 or more regulated activities.

‘Approved person’ = individual that has been approved by the PRA and/or FCA to perform a role, or carry out an activity, the nature of which requires regulatory approval.

Question 5

What does Part 4A of FSMA refer to?

Answer 5

Part 4A permission to conduct regulated activities.

Question 6

What are PRA regulated/dual regulated firms?

Answer 6

• Deposit takers,
• Insurers,
• Significant investment firms

Question 7

How are FCA and PRA funded?

Answer 7

Entirely from fees paid by the firms they regulate

Question 8

In which of the following ways do the powers of the FCA and PRA differ?

a) Only the PRA can grant authorisation to persons applying for Part 4 permission

b) Only the FCA can supervise authorised persons on an ongoing basis to ensure compliance with authorisation requirements

c) Only the PRA can vary a firm’s permission and cancel authorisation

d) Only the FCA can make rules that are legally binding on firms authorised by itself and those authorised by the PRA.

Answer 8

d) Only the FCA can make rules that are legally binding on firms authorised by itself and those authorised by the PRA.

Question 9

Who are the FCA and PRA accountable to?

Answer 9

FCA: UK Government - HM Treasury

PRA: Part of the BoE so not accountable to the Government

Question 10

What is the focus of the Financial Policy Committee?

Answer 10

Identify, monitor and take action to reduce and remove systemic risk (fundamental faw in a system causing catastrophic failure) in the UK Financial System

Question 11

How often does the FPC meet and report?

Answer 11

Meetings 4 times a year
Issues a biannual Financial Stability Report

Question 12

What are the 4 Statutory Objectives of the FCA & PRA?

Question 13

What is conduct risk?

Question 14

Give three examples of the regulators powers in addition to rule making

Question 15

What is the likely outcome for a firm that breaches a principle?

Question 16

List the 12 Principles for Business

Question 17

What is the aim and outcome of the FCA’s consumer Duty?

Question 18

What is a Management Responsibilities Map?

Question 19

What type of Individual within an authorised firm would be subject to the Certification Regime?

Question 20

What is the purpose behind the FCA requirements for senior management?

Question 21

How do the requirements of SYSC apply to non-common platform firms?

Question 22

List five areas covered by SYSC

Question 23

What is the relationship between the FCA and the FOS?

Question 24

What is the purpose of the FSCS?

Question 25

What is the role of each of the following: The CMA, the ICO, The Pensions Regulator?

Question 26

What is the purpose of the Upper Tribunal and to whom does it report?

Question 27

What provision is indicated by the letters:
G; D; P; E; R; C?

Question 28

What is the difference between a rule and an evidential provision in the FCA Handbook or the PRA Rulebook?

Question 29

What is the status of FCA or PRA confirmed industry guidance?

Question 30

What are members of the CISI expected to do should they be required to act in a manner contrary to the Principles

Question 31

What are the consequences of non-compliance with The Pensions Regulator’s rules on occupational pension schemes?

Question 32

What are the 2 core purposes of the Bank of England? What are the committee’s linked to the purposes?

Answer 32

Monetary Stability - Stable prices and confidence in currency = Monetary Policy Committee

Financial Stability - Detecting and reducing threats to the stability of the financial system = Financial Policy Committee

Question 33

The main focus of the FCA’s supervisory approach on which its resources are focused is to:

a) ensure the risks faced by financial firms are minimised
b) reduce financial crime
c) achieve its statutory objectives
d) test and implement sound systems and controls within firms

Answer 33

c) achieve its statutory objectives

Question 34

How do FCA’s statutory objectives provide a degree of accountability?

How often is a report produced, to whom and what does it contain?

Answer 34

FCA gives an annual report to HMT containing an assessment of how well it’s met the statutory objectives.

FCA has to show how the rules it makes relate to the objectives

If FCA fails to consider the objectives or incorrectly interprets the objectives, then it can be challenged in court.

FCA and PRA are held accountable if breaches of the objectives occur on the part of a serious failure by the regulator.

Question 35

What does the Risk-Based Approach of the FCA mean?

Answer 35

The FCA assesses individual firms for the risk each one presents to its statutory objectives. Then, helps determine the degree and level of supervisory attention the firm needs.