Chapter 4 Flashcards
- Which of the following is responsible for watching for emerging risks to the financial system
and providing strategic direction for the regulatory regime?
A. HM Treasury
B. The Bank of England
C. The Financial Policy Committee
D. The Financial Conduct Authority
C - Financial Services Act 2012 introduced three new regulators (which took over from the FSA). The Financial Policy Committee, an official committee of the Bank of England, is specifically responsible for identifying risks to the financial system and providing direction for the regulatory framework. The other two regulators introduced are the Prudential Regulation Authority and the Financial Conduct authority.
- What was the main objective of the Financial Services and Markets Act 2000?
A. To bring together the regulation of all sectors of the UK financial services industry under one regulatory system.
B. To provide a distinction for different sectors of the financial services sector e.g. friendly societies and insurance companies
C. To provide more stability for Self-Regulating Organisations
D. To provide guidance on the differences between regulated and non-regulated activities
A - The Financial Services and Markets Act 2000 (FSMA) was brought about to bring together the regulation of all sectors of the UK financial industry into one regulatory system, as previously different areas of the industry were covered under different Acts.
- Would an IFA firm always be subject to the first Markets in Financial Instruments Directive (MiFID)?
A. Not if they only advise and arrange investments and do not hold client money
B. No, as MiFID is only concerned with investment banks and stockbrokers
C. Yes, if the firm provides investment advice to its clients
D. Yes, as MiFID has wide scope to cover all financial services firms
A - MiFiD is the EU Directive for governing firms conduct of business and internal organisation designed to help integrate Europe’s financial markets. An IFA firm would not be subject to MiFiD if they only advise on and arrange investments for UK-based customers and do not hold clients’ money.
- Which international organisation provides recommendations to the EU on money
laundering?
A. The Joint Money Laundering Steering Group
B. The Financial Action Task Force
C. The Fourth Money Laundering Directive
D. The EU Money Laundering Organisation
B - The international organisation that oversees global money laundering is the FATF. They provide recommendations to the EU, who in turn translate them into EU law;
hence, the answer is b). The Fourth Money Laundering Directive is the EU directive to implement the recommendations of the FATF. The Joint Money
Laundering Steering Group is UK-based and made up of UK trade associations to help battle money laundering
- Cameron wishes to appeal against a decision of the Pensions Regulator. To which body should her appeal be made?
A. The Financial Conduct Authority (FCA)
B. The Money and Pensions Service (MaPS)
C. The Upper Tribunal (Tax and Chancery Chamber)
D. The Pensions Tribunal
D - Appeals against decisions of the Pensions Regulator should be made to the Pensions Tribunal.
- Why would it be sensible for P J Carruthers Ltd., a small advisory firm, to repeatedly compile some of the same MI over time?
A. To improve efficiency of data gathering
B. To allow the workforce to understand the data
C. So that companies in the same sector can make comparisons
D. To assess trends and monitor progress
D - Management Information (MI) can help a company by assessing trends and monitoring progress, which will help the business to improve its practices. It is advisable to share the MI with employees, but this is not the core reason for repeatedly compiling the data.
