Chapter 6 - Legal and regulatory environment Flashcards
What are the three regulatory bodies in the UK?
FCA, PRA and FPC
What is the FCA?
Financial Conduct Authority
Regulator responsible for conduct of business and market issues
Consumer protection
What is the PRA?
Prudential Regulation Authority
Sits within the Bank of England
Stability and resolvability of important financial institutions e.g., banks, building society etc
Firms can fail without bringing down the whole system
What is the FPC?
Financial Policy Committee
Within the Bank of England
Scanning for emerging risks to the system
Strategic planning for direction
What is the PRA’s primary objective?
Promote safety and soundness of PRA regulated persons
What is the PRA’s secondary objective?
Control behaviours that can impact the stability of the UK financial system
Do all firms have to carry out regulated activities?
No, threshold conditions must be met before it is permitted to carry out regulated activities
What PRA risk assessment framework determines a firms level of supervision?
Proximity of failure
Proactive Intervention Framework (PIF)
5 stages
What are the FCA objectives?
Relevant markets function well
Consumer protection
Integrity of finance system
Competition
What regulatory body covers product governance, end-to-end sales processes and prevention of financial crime?
FCA
Does the FCA work with the PRA to approve roles that have impact?
Yes
What does the FCA think about new products?
Innovate new products but not against the customers needs
Treating customers fairly
What are FCA fixed portfolio firms?
Small population firms
Highest level of supervision
Allocated supervisor
What are FCA flexible portfolio firms?
FCA customer contact centre at first point of contact
No allocated supervisor
What is the FCAs three pillar approach to risk?
- Firm systematic framework - are interest of customers at the heart of the way the business is run?
- Event driven work - supervisory activity to issues that are emerging or recently happened
- Issues and products - Flexible approach, review of issues as they take place
What does the FCA do if it finds problems?
Bans products
Withdraws misleading financial promotions
Firing/prosecuting individuals and organisations
Who does the FCA report to?
Government and Parliament
How often does the FCA report to Government and Parliament?
Annually
What takes prejudice between the PRA and FCA when co-ordinating activites?
PRA
What is customer duty for the FCA?
Aimed at manufacturers, supply of products, retail customers (SMEs)
Pricing of products - new vs renewal price
What is SYSC?
Senior Management Arrangements, Systems and Controls
What is a MLRO?
Money Laundering Officer
Responsible for anti-ML
Who appoints a MLRO?
SYSC at a firm
What term is used when making a qualified disclosure within a firm?
Whistleblowing
What act does whistleblowing fall under?
Public Interest Disclosure Act 1998 (PIDA)
What does PIDA cover?
Penalties for making false/malicious allegations
Protected once blown the whistle
What is ESG?
Environmental, social and governance
Lloyd’s have 4 main areas:
Strategy and governance
Climate
Culture
Communities
What regulations does the EU have?
Home state financial regulation
Establishment basis - open office in another EU state
Service basis - work from home state
What regulations does the USA have?
Individual state manages
Admitted bases - foreign companies can work with local companies
Surplus lines broker - removes the need for filing premium and wordings. Needs to be presented to the local market first
Reinsurance is ok with no limitations
Lloyd’s in the USA was an admitted insurer for what states?
Kentucky
Illinois
US Virgin Islands
What is the corporation of Lloyd’s?
Everyday management
What are the rules in Lloyd’s?
Primary rules - byelaws and regulations
Secondary rules - Requirements
What are the supporting docs for the rules of Lloyd’s?
Explanatory notes and code of practice
What happens if you break the rules in Lloyd’s?
Enforcement jurisdiction for companies and staff
How are new insurers entered into the market?
Authorised by the PRA after completing forms
If want to be Lloyd’s then submit to Lloyd’s relationship management team - evidence of solvency and capital adequacy
What is the FOS?
Financial Ombudsman Service
individuals and small buisnesses
Resolutions from eligiable complaints
8 weeks to respond before referring the matter to the FOS
6 months from the date of decision to report to the FOS
What makes you exempt from the FOS?
> £6.5m turnover
50 employees
What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2022 by firms that occurred after 1st April 2019?
£375,000
What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2019 and referred between 1st April 2020 and 31st March 2022?
£355,000
What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2019 and referred between 1st April 2019 and 31st March 2020?
£350,000
What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2022 about acts or omissions by firms before 1st April 2019 but referred after that date?
£170,000
What is the FSCS?
Financial Services Compensation Scheme
Covers claims against firms that cannot pay (insolvent)
Does the FSCS fall under the FCA?
Yes
Does a Lloyd’s claim ever go unpaid?
No - have a central fund
