Chapter 6 - Legal and regulatory environment

Question 1

What are the three regulatory bodies in the UK?

Answer 1

FCA, PRA and FPC

Question 2

What is the FCA?

Answer 2

Financial Conduct Authority

Regulator responsible for conduct of business and market issues

Consumer protection

Question 3

What is the PRA?

Answer 3

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

Question 4

What is the FPC?

Answer 4

Financial Policy Committee

Within the Bank of England

Scanning for emerging risks to the system

Strategic planning for direction

Question 5

What is the PRA’s primary objective?

Answer 5

Promote safety and soundness of PRA regulated persons

Question 6

What is the PRA’s secondary objective?

Answer 6

Control behaviours that can impact the stability of the UK financial system

Question 7

Do all firms have to carry out regulated activities?

Answer 7

No, threshold conditions must be met before it is permitted to carry out regulated activities

Question 8

What PRA risk assessment framework determines a firms level of supervision?

Answer 8

Proximity of failure
Proactive Intervention Framework (PIF)
5 stages

Question 9

What are the FCA objectives?

Answer 9

Relevant markets function well
Consumer protection
Integrity of finance system
Competition

Question 10

What regulatory body covers product governance, end-to-end sales processes and prevention of financial crime?

Answer 10

FCA

Question 11

Does the FCA work with the PRA to approve roles that have impact?

Answer 11

Yes

Question 12

What does the FCA think about new products?

Answer 12

Innovate new products but not against the customers needs

Treating customers fairly

Question 13

What are FCA fixed portfolio firms?

Answer 13

Small population firms
Highest level of supervision
Allocated supervisor

Question 14

What are FCA flexible portfolio firms?

Answer 14

FCA customer contact centre at first point of contact
No allocated supervisor

Question 15

What is the FCAs three pillar approach to risk?

Answer 15

1. Firm systematic framework - are interest of customers at the heart of the way the business is run?
2. Event driven work - supervisory activity to issues that are emerging or recently happened
3. Issues and products - Flexible approach, review of issues as they take place

Question 16

What does the FCA do if it finds problems?

Answer 16

Bans products
Withdraws misleading financial promotions
Firing/prosecuting individuals and organisations

Question 17

Who does the FCA report to?

Answer 17

Government and Parliament

Question 18

How often does the FCA report to Government and Parliament?

Answer 18

Annually

Question 19

What takes prejudice between the PRA and FCA when co-ordinating activites?

Answer 19

PRA

Question 20

What is customer duty for the FCA?

Answer 20

Aimed at manufacturers, supply of products, retail customers (SMEs)
Pricing of products - new vs renewal price

Question 21

What is SYSC?

Answer 21

Senior Management Arrangements, Systems and Controls

Question 22

What is a MLRO?

Answer 22

Money Laundering Officer

Responsible for anti-ML

Question 23

Who appoints a MLRO?

Answer 23

SYSC at a firm

Question 24

What term is used when making a qualified disclosure within a firm?

Answer 24

Whistleblowing

Question 25

What act does whistleblowing fall under?

Answer 25

Public Interest Disclosure Act 1998 (PIDA)

Question 26

What does PIDA cover?

Answer 26

Penalties for making false/malicious allegations Protected once blown the whistle

Question 27

What is ESG?

Answer 27

Environmental, social and governance Lloyd's have 4 main areas: Strategy and governance Climate Culture Communities

Question 28

What regulations does the EU have?

Answer 28

Home state financial regulation Establishment basis - open office in another EU state Service basis - work from home state

Question 29

What regulations does the USA have?

Answer 29

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

Question 30

Lloyd's in the USA was an admitted insurer for what states?

Answer 30

Kentucky Illinois US Virgin Islands

Question 31

What is the corporation of Lloyd's?

Answer 31

Everyday management

Question 32

What are the rules in Lloyd's?

Answer 32

Primary rules - byelaws and regulations Secondary rules - Requirements

Question 33

What are the supporting docs for the rules of Lloyd's?

Answer 33

Explanatory notes and code of practice

Question 34

What happens if you break the rules in Lloyd's?

Answer 34

Enforcement jurisdiction for companies and staff

Question 35

How are new insurers entered into the market?

Answer 35

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

Question 36

What is the FOS?

Answer 36

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

Question 37

What makes you exempt from the FOS?

Answer 37

>£6.5m turnover >50 employees

Question 38

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?

Answer 38

£375,000

Question 39

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?

Answer 39

£355,000

Question 40

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?

Answer 40

£350,000

Question 41

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?

Answer 41

£170,000

Question 42

What is the FSCS?

Answer 42

Financial Services Compensation Scheme Covers claims against firms that cannot pay (insolvent)

Question 43

Does the FSCS fall under the FCA?

Answer 43

Yes

Question 44

Does a Lloyd's claim ever go unpaid?

Answer 44

No - have a central fund