Chapter 5.1 Responsibilities and Approach to Regulation Flashcards
What is the main objective of FSMA 2000
To bring together regulation of the sector under one regulatory system,
One regulator then FSA
One Ombudsman (FOS)
One Compensation Scheme (FSCS)
FSMA 2000 requires the FCA to have regards to the 8 principles of good regulation these are:
Efficiency & Economy Responsibility of Consumers Responsibility of Management Proportionality Openness and Disclosure Transparency Sustainable Growth Recognizing the difference in the businesses carried out by different regulators
Financial Services Act 2012- what was the new approach to financial regulation?
Abolish FSA 2013 and bring in FPC, PRA, FCA
Financial Policy Commitee FPC, econimic/finacial satbility/looking for emerging risk.
PRA, regulator of major financial firm
FCA, regulator of retails/wholesale markets
FCA’s Three Operational Objectives:
Protect Consumers
Protect Financial Markets
Promote Competition
FCA is accountable to?
The Treasury
FCA has these powers over firms and individuals carrying out regulated activities
1) Enforcement i.e impose penalties, investigations
2) Supervision i.e make rules, regulate changes
3) authorization i.e grant, vary cancel authorization
Three Pillars Approach (FCA Supervision Model)
Pillar 1 - Proactive supervision for biggest firms.
Pillar 2 - Event driven, reactive supervision of actual or emerging risks
Pillar 3 - Thematic work - issues and products
Firms solely regulated by FCA - What are the three prudential categories?
P1 - Firms whose failure would cause significant harm to consurmer/markets.
P2 - Firms whose failure would cause harm, but easily dealt with.
P3 - Firms who failure would not cause significant harm
All authorized firms are split into two “conduct” categories these are:
Fixed Portfolio Firms (P1 supervision)
Flexible Portfolio Firms (P2 most firms)
What are the responsibilities of a Regulated Firms?
1) Authorized firms responsible for conduct of all staff/agents/AR
2) Advice given by representative
3) systems in place to manage risk
4) Individuals Carrying out controlled functions must be approved by FCA
FCA Enforcement Officers check compliance systems typically these are;
1) Business Operations,
2) Personnel Matters
3) Customer Matters
What is the maximum penalties for Market Abuse Civil offences?
7 years Imprisonment and/or an unlimited fine
The types of Market Abuse Civil Offences
Insider Dealing, Improper Disclosure, Manipulating Transactions or Devices, Distortion of Info.
Free asset ratio:
The surplus asset a company has over the liabilities.
Or the amount by which a company’s assets outweigh its liabilities. (%)
Important measure to life offices
What is an approved person?
An individual approved to carry out a controlled function
Name the significant influence functions.
- Governing Function
- Required Function
- Systems & Controls Function
- Significant management Function
- Customer Function
MCOB is the conduct business book for
Home Finance
Rules of control structures, must be adhered to in these areas.
Communications and Financial Promotions - Fair, Clear , not misleading
Record keeping and Reporting
Training Competence
Intermediaries.
What is the upper tribunal?
A appeal process for those aggrieved by FCA decisions/independent judicial body.
The adequacy of a firms capital resources need to be assessed by?
The the firm & the appropriate regulator.
FCA Enforcement officers can
1) Visit Premises without notice
2) Demand access to docs and take copies
3) Obtain warrants to enter premises.
FCA Discipline actions include
1) Make public announcements
2) Levy Fines
3) Withdrawn authorisation
4) Ordering compensation payments.
Bank of England and Financial Services Act 2016
BOE at heart of everything.
Stenghens BOEs governance
Now includes PRA as part of bank.
Created PRC
FPC -
Run by the Bank of England - Responsible for Macro Prudential supervision.
PRC
PRA’s governing body (same level as MPC & FPC)
Monetary policy committee
Financial policy comitee
The Bank of England has two core purposes
Monetary Stability - (via interest rate decisions)
Financial Stability - (Lender of Last resort)
Payment Services Regulator PSR
Purpose to make payment systems work well for those that use them.
For UK firms to remain/become authorised what Threshold Conditions (COND) must be met?
Legal Status - A body
Location of Offices - HQ & Registered office must be held in UK
Effective Supervision -
Appropriate resources.
Suitability
Business Model
