Chapter 6 - Legal and Regulatory Environment Flashcards
What are the three financial services regulatory bodies in the UK?
- financial conduct authority
- prudential regulation authority
- financial policy committee
What are the objectives of the PRA?
- promote the safety and soundness of PRA regulated persons
- ensure regulated persons behave to avoid adverse effects on UK financial system
- minimising adverse effect that failure of regulated person could be expected to have on the stability of UK financial system
- facilitate competition
What are the PRA threshold conditions?
- firms head office, in particular management, in UK
- business must be conducted in a prudent manner
- fit and proper and appropriately staffed
- capable of being effectively supervised
What is the PRA’s risk framework and what does the baseline level of monitoring include?
Framework:
- potential impact on policy holders
- macroeconomic and business risk context in which firm operates
- mitigating factors like risk management and governance
Monitoring:
- ensure compliance with prudential standards for capital
- liquidity, asset valuation, provisioning and reserving
- annual review of risks posed by firms / sectors to PRA’s objective
- assess a firms planned recovery actions and how it might exit the market
What are the objectives of the FCA?
- ensure the relevant markets function well
- consumer protection
- integrity of the UK financial system
- competition
What does the FCA look at in a firm and how do they ensure good outcomes?
Focus on:
- product governance
- end-to-end sales
- prevention of financial crime
Ensure by:
- corporate culture
- conduct risk management
- product design
What are the FCA’s two approaches to supervision?
- fixed portfolio, small population of firms that require highest supervision, allocated named supervisor
- flexible portfolio, all others and do not het a named supervisor
What is the FCA’s risk framework?
- firm systematic framework
- event driven work
- issues and products
What are the principles for business?
- integrity
- skill, care and diligence
- management and control
- financial prudence
- market conduct
- customers interests
- communication with clients
- conflicts of interest
- customers relationship of trust
- clients assets
- relations with regulators
What is fair treatment through a products life cylce?
- product design and governance
- identifying target market
- marketing and promoting product
- sales and advice process
- after-sales information
- complaint handling
What are senior management arrangements, systems and controls (SYSC)?
each regulated firm must take reasonable care to share out significant responsibilities within the firm between directors and senior managers so it is clear who has which responsibility
- each firm must appoint a money laundering reporting officer for example
What does the Public Interest Disclosure Act 1998 (PIDA) say?
individuals who make a qualifying disclosure have the right not to suffer any detriment by act or omission by employed because of disclosure
What counts as a qualifying disclosure?
one which in reasonable belief of the worker has been committed:
- criminal offence
- failure to comply with legal obligation
- miscarriage of justice
- putting health and safety of any one in danger
- damage to environment
- deliberate concealment of any of the above
What is the difference between writing business on an establishment basis vs a service basis in the EU?
Establishment means setting up an office in another state, service when they choose to write from their home state
How do you write business in the US if foreign based?
State regulators allow foreign insurance companies to write on an admitted basis but require submission of wordings and rates to be agreed
