Chapter 10 Flashcards
- What are the FCA Principles for Businesses?
A. Guidelines issued by the FCA to all authorised firms
B. Statements of the fundamental obligations of all authorised firms
C. The basis behind many of the FCA rules
D. Management control systems for authorised firms
B - The FCA has 11 Principles for Businesses (PRIN), which are statements of the fundamental
obligations of all authorised firms. These Principles are the high-level standards that all firms must abide by; they are not guidelines. Management and Control is only one of the Principles.
- What prompted the development of outcomes–based regulation?
A. Many compliance and legal departments requested this as they were not comfortable with the principles–based regulation
B. To address some of the common areas where breaches of regulation were
occurring
C. The financial crisis and to allow the FCA to make judgments about the future
D. Following the results of themed risk assessments
C - The financial crisis and allowing the FCA to make judgments about the future prompted the
outcomes-based regulation (OBR), known as intensive supervision. The other answers are all false as: The FCA believe that the industry will become comfortable in dealing with principle-led regulation as it evolves. Themed risk assessments will be the tools to help firms and the FCA with OBR. Addressing common areas of breaches in regulation did not prompt the introduction of OBR.
- What would be a positive indicator that a firm’s strategy was working?
A. The firm has a clear vision that supports the fair treatment of customers
B. Internal posters for staff highlighting key messages
C. Evidence of target rewards in place for individuals achieving desired outcomes
D. Evidence of frequent staff meetings where strategy has been discussed
A - The FCA sets out the key cultural drivers for businesses; one of these key drivers is ‘strategy’, which sets the direction and priority of a firm. A clear indicator that the firm’s strategy is working well would be that the firm has a clear vision that supports the fair treatment of customers.
- Which of the following is an example of good leadership practice?
A. Letting middle managers decide for themselves what FTC means for the firm
B. Senior managers establishing FTC requirements and giving middle managers free rein to
implement them
C. Allowing the firm to have a multi-faceted approach to delivering a FTC vision
D. Senior management providing regular feedback on a firm’s progress towards their goals
D - One of the FCA key cultural drivers is ‘leadership’, which sets the tone of the business and drives staff behaviours. An example of good leadership practice would be senior
management’s providing regular feedback on a firm’s progress towards its goals. The other
answers are incorrect as senior management should give middle managers support and clear direction to ensure they understand and implement the firm’s messages regarding the fair treatment of customers (FTC); they should not be given free rein. Senior management should also apply controls and monitor the implementation of its FTC ethics.
- Deliberately NOT paying due regard to the interests of a customer is failing to comply with
which individual conduct rule?
A. Organisation and control
B. Integrity
C. Market conduct
D. Open and co-operative
B - Under COCON, if an individual were not paying due regard to the interests of a customer, this would not comply rule 1 ‘Integrity’.
- Who should own the overall conflict policy within a firm?
A. Every individual within the firm is responsible for owning the conflict policy
B. The overall conflict policy should be owned by a member of the board or senior
management
C. Ownership of conflict will be on a case by case basis therefore no-one would have overall ownership of the conflict policy
D. Ownership of the overall conflict policy varies according to the type of conflict being reported
B - The overall conflict policy should be owned by a member of the board of senior management. Staff need to be aware of how to recognise and report any conflicts but should
not own the policy.
