Chapter Ten: The FCA's Use of Principles and Outcomes-Based Regulation Flashcards
What are the 11 FCA PRIN’s (Principles for Business)?
- Integrity
- Skill, care and diligence
- Management and control
- Financial Prudece
- Market Conduct
- Customers Interests
- Communications with clients
- Conflicts of Interest
- Customers; relationships and trust
- Clients assets
- Relationship with regulators
If a firm fails to be able to demonstrate Threshold condition 5, what might that mean for the firm overall?
It would potentially mean the firm was non-compliant with the overall principles and therefore may not be fit and proper
Describe Outcome Based Regulation (OBR) and what it is also known as?
Known as ‘intensive’ regulation
The regulator making judgements on what might happen in the future, rather than relying on observable facts.
What is an integrated risk system?
The analysis of risk at a individual firm level, with supervisors being supported by sector analysis and technical advice from specialists in prudential and conduct risk, rather than just risk specialists in isolation
What are the key corporate cultural drivers?
Leadership Strategy Decision making and challenge Controls Recruitment, training and competence Reward
Who does the Statements for Principle Approved Persons apply to?
A person for whom approval has been sought to carry out a controlled function
What it the purpose of the Code of Practice for Approved Persons?
It helps determine whether or not an approved persons conduct complies with a principle.
What factors might be taken into account by the FCA when determining whether the particular conduct of an approved person complies with the statements of principle? (1-4)
Whether the conduct relates to activities subject to other provisions within the handbook.
Whether the conduct is consistent with the requirements and the standards of the regulatory system relevant to the firm.
What factors might be taken into account by the FCA when determining whether the particular conduct of an approved person performing a higher management function complies with the statements of principle? (5-7)?
Whether reasonable care was exercised considering the information available to them.
Whether the person reached a reasonable conclusion that they acted on.
The nature, scale and complexity of the firms business.
The role and responsibility of the person.
The knowledge the approved person had or should have of the regulatory concerns arising in the business they control.
What are the elements of the Fit and Proper Test?
Honesty, integrity and reputation.
Competence and capability.
Financial soundness.
In terms of their role, for senior managers, what must the firm maintain?
A clear and appropriate record of apportionment of responsibilities.
What action must a firm take if they believe an approved person is no longer fit and proper?
Notify the FCA immediately.
What are the individual Code of Conduct rules applicable to all staff (COCON)?
- Act with integrity.
- Act with due skill, care and diligence.
- Open and cooperative with the FCA, PRA and other regulators.
- Pay due regard to the interests of customers and treat them fairly.
- Observe proper standards of market conduct.
What are the additional Senior Manager Conduct Rules?
SC1 - take all steps to ensure the business you are responsible is controlled effectively
SC2 - your business complies with relevant requirements and standards of the regulatory system
SC3 - delegation is to an appropriate person and you oversee the discharge of the delegated responsibilities effectively
SC4 - Disclose any information appropriately that the FCA and PRA would reasonably expect to notice
If your firm failed to apply PRIN alone, could the FCA take enforcement action?
Yes.
