Chapter 9 Qs Flashcards
76 - 81 * What does Principles Based Regulation mean?
A. Instead of rules to cover every situation, general terms are issued to outline the types of behaviours expected
B. The principal of each authorised firm carries the ultimate responsibility for FCA
authorisation
C. The FCA issues regulations to those responsible for controlled functions and it is
their responsibility to cascade down the firm
D. Only the main areas of compliance are supported by regulation
A. Instead of rules to cover every situation, general terms are issued to outline the types of behaviours expected
Principles Based Regulation uses principles to drive types of behaviours rather than having rules for every situation. The FCA’s Principles for Businesses apply to all regulated firms and apply throughout their business. Statements b), c) and d) are false.
- Which of the following is NOT regarded as a key cultural driver?
A. Controls
B. Recruitment and T&C
C. Decision making and challenge
D. Ethnic diversity
D. Ethnic diversity
The FCA sets out the key cultural drivers for businesses that will have a positive impact on management, staff and ultimately consumers. These include controls, recruitment and training and compliance, and decision-making and challenge. The other FCA key drivers are strategy, leadership and reward but not ethnic diversity.
How does ‘leadership’ differ from ‘strategy’ as a key driver for a company?
A. Leadership can only be derived from senior management, strategy can be filtered
down and delivered by virtually any member of staff
B. Leadership is the purpose of the business and strategy relates to how this is
achieved
C. Leadership sets the tone of the business, drives staff behaviours and quality of decisions, strategy sets priorities and management focus
D. Leadership is an inherent skill, whereas strategy can be learned
C. Leadership sets the tone of the business, drives staff behaviours and quality of decisions, strategy sets priorities and management focus
Leadership sets the tone of the business and drives staff behaviours, whilst strategy drives the direction of the business, sets its priorities and management focus.
How many additional principles apply to an individual holding a significant influence function (above those that apply to an approved person)?
A. An additional four principles
B. Same number of principles apply to both
C. An additional three principles
D. One extra additional principle
C. An additional three principles
There are seven FCA Principles for Approved Persons. Four apply to all approved persons (‘integrity’, ‘skill, care and diligence’, ‘market conduct’ and ‘open and cooperative’), but an additional three Principles apply to an individual authorised to carry out significant influence (accountable higher management) functions. These are ‘organisation and control’, ‘skill, care and diligence in managing’ and ‘compliance’. Note the approved persons regime will be superseded by the SM&CR on 9 December 2019.
What disciplinary action could be taken in the event of an approved person neglecting their responsibilities?
A. Financial penalties and loss of job
B. Criminal proceedings
C. Potentially lose their home
D. Bankruptcy
A. Financial penalties and loss of job
If an approved person neglected their responsibilities, they could face financial penalties or lose their job. Note the approved persons regime will be superseded by the SM&CR on 9 December 2019.
Which of the following is NOT one of the FCA’s Principles for Businesses?
A. Integrity
B. Honesty
C. Customers’ interests
D. Clients’ assets
B. Honesty
Honesty is not an FCA Principle for Business. There are 11 FCA Principals for Businesses. ‘Integrity’, ‘skill, care and diligence’, ‘management and control’, ‘financial prudence’, ’market conduct’, customers interests’, ‘communications with clients’, ‘conflicts of interest’, ‘customers: relationships of trusts’, ‘clients’ assets’ and ‘relationship with regulators’.
