Chapter 3- The Regulation of Financial Markets and Institutions- Section 3

Question 1

Explain the role and the statutory objectives of FCA

Oversees the business conduct in the UK

Answer 1

Consumer protection

Enhance integrity of capital markets

Promote effective competition

Question 2

List 3 of the 11 Business Principles of the FCA

Answer 2

Integrity of business

Treat customers fairly and equitably

Be financially prudent with its resources.

Question 3

List consequences of breaching the Business Principles in the FCA

Answer 3

Any breach of a principle does not mean automatically start legal action.

Onus on FCA to show business has breached and from investigation of best principles, next steps are ascertained.

Question 4

Explain purpose of SYSC

Answer 4

Encourage senior management to take responsibility under FSMA 2000

Give responsibility to specific directors and senior managers.

Question 5

Explain scope of SYSC

Answer 5

Well defined responsibilities, with at least 2 people managing the firm and business continuity defined.

Competent with regard to skills

Has system of controls for money laundering and risk management.

If services are outsourced, responsibilities are withheld.

Question 6

How long do records have to be kept under MiFID?

Answer 6

5 years

Question 7

How do firms mitigate conflicts of interest?

Answer 7

Identify and operate organisational arrangement.

Disclosure of the conflict of interest as the last resort.

Question 8

Which legislation protects employees for whistleblowing?

Answer 8

PIDA 1998 (Public Interest Disclosure Act) 1998

Question 9

Which regulator do you go to if you want to escalate whistleblowing?

Answer 9

FCA

Question 10

Does the FCA encourage contacting the FCA first regarding whistleblowing or solving internally?

Answer 10

Solving internally first; then escalate to FCA

Question 11

2013 Proposals on whistleblowing apply to who

Answer 11

Depositary institutions (e.g. Banks etc) which have greater than £250m AuM, PRA reg firms and insurers.

Question 12

Can you blow the whistle to FCA, the PRA or both?

Answer 12

Both

Question 13

What is a whistleblowing champion?

Answer 13

Senior individual within the firm who oversees the effectiveness of whistleblowing and person who prepares an annual report on the operation of the policy.

Question 14

How are effective remuneration policies implemented?

Bonus deferral

Answer 14

40% bonus must be deferred over a period of 3 years

60% for senior management, who’s bonus is > £500k

Question 15

How are effective remuneration policies implemented?

Composition

Answer 15

> = 50% of bonuses must be made in shares, subject to an appropriate retention period.

Firms must not offer guaranteed bonuses except for new hires

Question 16

Complete:

A person wishing to carry out one or more regulated activities must be authorised or __________

Answer 16

Exempt

Question 17

How does a person get regulated?

Answer 17

To apply for Part 4A permission on the specific regulated activity that they wish to practice.

Question 18

How many times is Part 4A permission granted?

Answer 18

Once; they will need to apply to the FCA to vary their permission.

Question 19

Who are exempt from authorisation from needing permission?

Answer 19

Appointed representative of authorised persons.

RIEs (Recognised Investment Exchanges)

RCHs (Recognised Clearing Houses)

Member of a profession- solicitor, accountant etc where there part is marginal

Member of Lloyds.

Question 20

Explain regulations under SMCR

Answer 20

Covers all solo FCA regulated firms from December 2019

Individuals are held accountable under 3 tiers: High to low

SMR - Senior Managers - subject to regulatory approval

Certification Regime- staff that could pose a risk to clients if they do not carry out their responsibilities well

Conduct- Rules for all staff

Question 21

Senior Responsibility Maps - who are they for and why are they needed?

Answer 21

Shows how senior management fits with governance framework

Sets how various responsibilities are allocated.

Senior managers are responsible for the area of the breach that can be held individually accountable.

Question 22

Certification regime - who are they for and why are they needed?

Answer 22

Must check that staff are certified to carry out certification functions once a year.

Onus on firm, NOT the FCA

Question 23

Conduct rules - who are they for and why are they needed?

Answer 23

Conduct rules apply to all firms and all staff, regulated and unregulated financial services activities.

Integrity, CDD, Co-Operative with Regulators, Pay regards to consumer interests, observe proper standards of market conduct.

Question 24

Explain regulations for training and competence:

Answer 24

Ensure staff is competent, is supervised by a supervisor who is cleared to practice.

Question 25

Explain training requirements of investment managers

Answer 25

Have an appropriate qualification

Carry out 35 hours of CPD per year, 21 hours are structured e.g. seminars

Hold statement of professional standing by the accredited body.