Chapter 4

Question 1

What did the FSA 1986 do?

Answer 1

Financial Services Act 1986

Brought in 3 ways that an individual, firm or market could be authorised and regulated:

Securities and Investment Bond (SIB)
Self-Regulating Organisation (SRO)
Recognised Professional Body (RPB)

Question 2

What did FSMA 2000 involve?

Answer 2

Broadened regulated activities

FSA
FOS
FSCS

Question 3

What is grandfathering?

Answer 3

Individuals, firms and marke tea regulated under SIB and SRO were automatically authorised under new rules

RPB members had to re-apply

Question 4

What did the FSA 2012 do?

Answer 4

FCA
FPC
PRA

Question 5

Who is ultimately responsible for the UK financial services industry?

Answer 5

Chancellor of the Exchequer and HM Treasury

Question 6

What is the role of the HM Treasury?

Answer 6

Formulates and puts into effect financial and economic policies (fiscal and monetary)

Question 7

What is the role of the BoE?

Answer 7

Promotes and maintains a stable and efficient UK monetary and financial framework

Question 8

What is the role of the MPC and what is the process?

Answer 8

The monetary policy committee controls interest rates to meet inflation targets set by Treasury

9 members meet 8 times a year and led by governor of BoE

Question 9

What is the role of the FPC?

Answer 9

The Financial Policy Committee aims to reduce and remove market risk and support government economic policy

Macro prudential responsibilities

Produces a bi-annual Financial Stability Report

Question 10

What is the role of the PRA and who regulates it?

Answer 10

Responsible for safety and soundness of the UK’s top 1500 systemically important firms and markets

Facilitates effective competition

The Prudential Regulation Committee is the governing body of the PRA

Question 11

What is the role of the FCA and name the operational objectives?

Answer 11

The Financial Conduct Authority is the sole UK conduct regulator and also responsible for prudence of all other firms not cover by PRA

Operational objectives are PIC
Protection - customers
Integrity - financial system
Competition - effective

Question 12

What are the 8 regulatory principles of the FCA?

Answer 12

1 - Use FCA resources efficiently and economically
2 - Impose burdens proportionate to outcomes
3 - Sustainable medium to long term growth in UK economy
4 - Consumer responsibilities
5 - Senior management responsibilities
6 - Recognising differences in business
7 - Openness and disclosure
8 - Transparency

Question 13

Who is the FCA responsible for?

Answer 13

The FOS, FSCS, MaPS and Consumer Credit

Question 14

What is the role of the CMA?

Answer 14

The Competition and Markets Authority works to promote competition for benefit of consumers to ensure markets work well for consumers, business and the economy

It also investigates how FCA rules affect market competition and can ask for rules to be changed

Can also consider effects of mergers and enforce legislation

Question 15

What is the role of the TPR?

Answer 15

The Pensions Regulator protects members of work based pensions schemes, reduce risk of DB and enforce employer compliance with workplace pensions

Question 16

What is the register held by the TPR and what powers does it have?

Answer 16

The register of schemes is called the Occupational Pensions Registry and helps individuals to trace old scheme but also holds a list of individuals who are prohibited from acting as a scheme trustee

The TPR has the power to remove, suspend and appoint new trustees, issue fines, wind-up schemes and set capped charges

Question 17

What is the role of the ICO?

Answer 17

The Information Commissioner’s Office is an independent public body who oversee and enforce compliance of Data Protection Acts of 1998 and 2018 plus GDPR

Question 18

What type of EU legislation are there?

Answer 18

Binding legal instruments - decisions, directives and regulations

Non-binding legal instruments - recommendations and opinions

Question 19

What are the types of EU binding legal instruments?

Answer 19

1 - Decisions
Measures that affect individuals or member state
Immediately enforceable

2 - Directives
Discretion of state on how to apply
Need to be transposed into national law so require ratification

3 - Regulations
Take immediate effects
Do not require ratification

Question 20

What did MiFID and MiFID II do?

Answer 20

MiFID came into effect in 2007 and was about conduct of business and internal structures in different investment firms

MiFID II came into effect in 2018 and gave a heavy emphasis on improving investor protection

Introduced costs disclosure, description of services, recording conversations, justifying advice and suitability

Question 21

What is CRD (Basel I & Basel II)?

Answer 21

The Capital Requirement Directive is both Basel I & Basel II

Basel I was introduced to improved strength of international banking

Basel II introduced 3 pillars of risk management:
1 - Minimum capital requirements
2 - Is there a need for additional capital above minimum?
3 - Requirement to publish risk management and capital statistics

Question 22

What is the FTC and who is responsible?

Answer 22

Fair Treatment or Customers - customers must be at the heart of what they do

Senior managers take overall responsibility for how a firm is managed