Chapter 4 Flashcards
What did the FSA 1986 do?
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)
What did FSMA 2000 involve?
Broadened regulated activities
FSA
FOS
FSCS
What is grandfathering?
Individuals, firms and marke tea regulated under SIB and SRO were automatically authorised under new rules
RPB members had to re-apply
What did the FSA 2012 do?
FCA
FPC
PRA
Who is ultimately responsible for the UK financial services industry?
Chancellor of the Exchequer and HM Treasury
What is the role of the HM Treasury?
Formulates and puts into effect financial and economic policies (fiscal and monetary)
What is the role of the BoE?
Promotes and maintains a stable and efficient UK monetary and financial framework
What is the role of the MPC and what is the process?
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
What is the role of the FPC?
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
What is the role of the PRA and who regulates it?
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
What is the role of the FCA and name the operational objectives?
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
What are the 8 regulatory principles of the FCA?
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
Who is the FCA responsible for?
The FOS, FSCS, MaPS and Consumer Credit
What is the role of the CMA?
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
What is the role of the TPR?
The Pensions Regulator protects members of work based pensions schemes, reduce risk of DB and enforce employer compliance with workplace pensions
What is the register held by the TPR and what powers does it have?
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
What is the role of the ICO?
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
What type of EU legislation are there?
Binding legal instruments - decisions, directives and regulations
Non-binding legal instruments - recommendations and opinions
What are the types of EU binding legal instruments?
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
What did MiFID and MiFID II do?
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
What is CRD (Basel I & Basel II)?
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
What is the FTC and who is responsible?
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
