Chapter 4 - Financial Services Regulation Flashcards
What was the main purpose of the Financial Services Act (FSA) of 1986
To bring together the different areas of the industry and make it more streamlined
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What 3 ways could an individual, firm or market be authorised and regulated through the FSA 1986?
- Via the Securities & Investments Board (SIB)
- Through a Self-Regulating Organisation (SRO)
- Through a Recognised Professional Body (RPB)
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What is the FSMA 2000 and what did it now include when compared to the FSA 1986?
- Bank & Building Society Accounts
- Stocks & Shares
- GILTS
- Derivatives
- Unit Trusts and OEICs
- Mortgages & General Insurance
- SIPPs
- Home Reversion and Lifetime Mortgages
- Sale and Rent Back Schemes
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When did mortgages start to become regulated and what contained the mortgage rules?
2004 - Mortgage Conduct of Business (MCOB)
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When did General Insurance start to be regulated and what contained these rules?
2005 - Insurance Conduct of Business Sourcebook (ICOB)
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What is General Prohibition?
The idea that you must be regulated to give advice in the areas that the FSMA allows, otherwise you are guilty of a criminal offence!
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What was the main purpose of FSMA?
To bring together all regulated financial services and activities under:
One Regulator - Financial Services Authority (FSA)
One Ombudsman - Financial Ombudsman Service (FOS)
One Compensation Scheme - Financial Services Compensation Scheme (FCFS)
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What is the purpose of the FSA?
- Responsible for the FOS & FSCS
- Became the FCA in 2013
- The sole regulator
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What is the purpose of the FOS?
- Responsible for the independent review of advice complaints, when a resolution direct with the firm has been unsuccessful.
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What is the purpose of the FSCS?
Eligible customers get compensation if a provider goes bust
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What is “Grandfathering”?
Some sectors were automatically qualified if they were already authorised by the SIB or SRO. RPB members had to reapply since they were NOT grandfathered across.
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If the profession was not grandfathered across, what information can be obtained from the former professional?
They can give information incidental to their professional duties in relation to regulated advice
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Why is the Financial Services Act 2012 referred to as having “Twin Peak” regulation?
It involves Prudential Regulation & Conduct Regulation
Prudential - Maintaining the stability of a system or body
Conduct - Oversight of Market Conduct
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What 3 entities was the FSA split into?
1) FCA (Financial Conduct Authority)
- Separate, independent regulator
- Responsible for the conduct of all firms and monitoring the Financial Stability (Prudence) of smaller firms
2) FPC (Financial Policy Committee)
- Part of the Bank of England
- Concerned with the stability of the financial system and providing strategic direction for the entire UK regulatory regime
3) PRA (Prudential Regulatory Authority)
- Part of the Bank of England
- Responsible for monitoring the Financial Stability of the UK’s largest financial companies (Prudence)
- Includes companies that have the largest impact on the UK market were they to fail, so are systematically important (systemic risk, also known as market risk)
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