Chapter 5: The Regulatory Infrastructure of the UK Financial Services Flashcards
Which of the following is a statutory objective of the FCA?
A. Reducing the incidence of money laundering
B. Protecting the integrity of the financial system
C. Regulating financial services firms
D. Contributing to the securing of an appropriate degree of protection for those who are or may become policyholders of insurance companies
B. ‘Protecting the integrity of the financial system’ is correct.
Part of the integrity objective is to reduce all financial crime, not just money laundering. The insurance company objective is a statutory objective of the PRA, not the FCA.
Which ONE of the following is a statutory objective of the FCA?
A. Ensuring the UK financial markets are competitive worldwide
B. Providing services that allow a firm to manage and control their risks
C. Implementing and monitoring financial legislation
D. Securing an appropriate degree of protection for consumers
D. ‘Securing an appropriate degree of protection for consumers’ is one of the statutory objectives of the FCA.
Which one of the following is considered exempt from authorisation under the Financial Services and Markets Act 2000?
A. A market maker
B. A firm that deals on a MTF
C. The International Monetary Fund
D. A firm that wishes to provide services to eligible counterparties only
C. As a supranational organisation the IMF is an exempt person.
Of the FCA Principles of Good Regulation, which of the following best illustrates ‘Openness and Disclosure’?
A. Recognising the differences in the businesses carried in by different regulated persons
B. The FCA should publish relevant market information about regulated persons or require them to publish it
C. It ensures that any burden or restriction that it imposes on a person, firm or activity is proportionate to the benefits it expects
D. Firms must make it clear who has what responsibility and ensure that their business can be adequately monitored and controlled
B. The FCA should publish relevant market information about regulated persons or require them to publish it.
A = Recognising the differences in businesses
B = Openness and disclosure
C = Proportionality
D = Responsibility of senior manager
The FCA wants to see firms achieve three broad outcomes that satisfy their operational objectives. Which of the following is one of those outcomes?
A. Consumers get standardised financial services and products from firms that seek to maximise products
B. Firms compete aggressively with market share at the heart of how they run their business
C. Firms should be a proactive force for enabling the right outcomes for consumers and market participants
D. Markets and financial systems are sound, stable and resilient with transparent pricing information
D. Markets and financial systems are sound, stable and resilient with transparent pricing information.
The other two outcomes are:
- Consumers get financial services and products that meet their needs from firms they can trust - not standardised products.
- Firms compete effectively with the interests of their customers and the integrity of the market at the heart of how they run their business.
‘Firms should be a proactive force for enabling the right outcomes for consumers and market participants’ sounds credible, but this is a description of the FCA.
Which of the following Principles for Businesses require firms to have appropriate risk management controls in place?
A. Management and control
B. Integrity
C. Market conduct
D. Financial prudence
A. Principle for Businesses 3: Management and Control requires firms to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
Under the Financial Services Act 2012, which of the following is NOT a statutory objective of the Financial Conduct Authority?
A. Protecting the integrity of the UK financial system
B. Promoting effective competition in the interests of consumers
C. Securing an appropriate degree of protection for consumers
D. Reducing financial crime
D. ‘Reducing financial crime’ is an INTEGRITY objective of the FCA, NOT a statutory objective.
The need to reduce financial crime was a statutory objective of the FSA. The FCA is accountable for reducing financial crime - but this is now subsumed into the integrity objective.
Which ONE of the following is CORRECT concerning a multi-lateral trading facility?
A. It is a facility where a firm engages in multiple core investment services
B. It is a system where a firm provides similar services to those offered by exchanges
C. It is a system where a firm takes proprietary positions with a client
D. It is a facility where a firm operates in more than one location
B. An MTF is a system which provides an alternative order matching system to an exchange. The client orders match with other clients so that the firm operating the MTF does not take proprietary positions.
All of the following EU requirements are designated to facilitate the cross-border trading of financial products, EXCEPT:
A. Undertakings for collective investment in transferable securities directive
B. Capital Requirements Directive
C. Alternative investment fund managers directive
D. Prospectus regulation
B. Capital Requirements Directive.
The CRD requires firms to satisfy certain financial requirements to minimise the risk of a firm’s collapse.
The others facilitate the marketing of:
- UCITS - certain open-ended funds
- AIFMID - any non-UCITS fund
- PR - shares in primary market issues
The FCA’s Principles for Businesses do NOT include which of the following statements?
A. A firm must deal with its regulators in an open and cooperative way
B. A firm must pay due regard to the interests of its customers and treat them nicely
C. A firm must operate an appropriate and effective complaints procedure
D. A firm must take reasonable care to organise and control its affairs responsibly and effectively
C. Complaints are not covered. They are dealt with in a separate block of the FCA Handbook.
The FCA is funded by contributions from which of the following?
A. The Treasury indirectly through taxes
B. The London Stock Exchange through a levy charged on transactions
C. Regulated firms authorised under the Financial Services and Markets Act 2000
D. The FCA through its own activities on the market
C. Regulated firms authorised under the FSMA 2000.
Although the FCA is answerable to the Treasury, it is in fact a limited liability company. It is also funded by the financial services industry - businesses authorised under the FSMA 2000.
The FCA is accountable to HM Treasury. To whom is HM Treasury accountable?
A. Bank of England
B. Parliament
C. HM Revenue and Customs
D. The Crown Estate
B. The HM Treasury is accountable to Parliament.
HM Treasury submits a report to Parliament that examines the FCA’s performance against statutory objectives and how they have dealt with major regulatory cases.
According to the Markets in Financial Instruments Directive, which of the following is NOT a core investment service or activity?
A. Execution on behalf of a professional body
B. Dealing on the firm’s own account
C. Placing financial instruments on a firm commitment basis
D. Giving advice on capital structure
D. Giving advice on capital structure is an ancillary service. All the others are investment services.
Which of the following statements regarding Designated Investment Exchanges is NOT true?
A. They are normally based overseas and international in character
B. The FCA is responsible for ensuring their operations offer fair practices
C. They are not under FCA control
D. They are regulated exchanges
B. DIEs are granted their status from the FCA. However, although they will be regulated in their home states, the FCA has no responsibility for their operations and practices.
Which of the following is TRUE in relation to the Upper Tribunal (Tax and Chancery Chamber)?
A. The Upper Tribunal is a division of the FCA
B. All decision notices must be referred by the Tribunal for adjudication
C. A recipient of a decision notice may refer the matter to the Tribunal within 28 days
D. The Tribunal may not take account of new evidence not available at earlier hearings
C. A recipient of a decision notice may refer the matter to the Tribunal within 28 days.
The Tax and Chancery Chamber of the Upper Tribunal is part of the Ministry of Justice. Any person receiving a statutory notice from the Regulatory Decisions Committee (RDC) has 28 days to appeal to the tribunal.
