FCA Objectives and High Level Standards

Question 1

What are the FCA’s 4 Statutory objectives and what broader categories do these sit under?

Answer 1

Strategic Objective:
- Ensuring relevant markets function well
Operational Objective
- Secure an appropriate degree of protection for consumers
- Promote effective competition in the interests of consumers
- Protect/ enhance the integrity of the UK financial system

Question 2

List the 7 blocks of the FCA Handbook

Answer 2

Handbooks Prove Brilliantly Readable Round Special Lighting

H - High level standards (/principles) 
P - Prudential Requirements 
B - Business Standards 
R - Regulatory Process 
R - Redress (compensation)
S - Specialist Sourcebooks 
L - Listing, prospectus and disclosure rules - UKLA

Question 3

In the FCA handbook which block do the CoBs (conduct of business rules) sit in?

Answer 3

Block 3 - Business Standards

Question 4

in the FCA Handbook which block does part 4a permission sit in?

Answer 4

Block 4 - Regulatory process

Question 5

List the block 1 - High level standards/ principles for business

Answer 5

MCCCCC FIRMS

M - Market Conduct
C - Customers’ interests
C - Communications with clients
C - Conflicts of interest 
C - Customers: relationships of trust 
C - Clients’ assets 
F - Financial Prudence 
I - Integrity 
R - Relations with Regulators 
M - Management and control (SYSC - Senior management systems and control) 
S - Skill, care and diligence

Question 6

What are customers & what are clients

Answer 6

Clients - clients includes retail clients/ professional clients/ eligible counter-parties

customers - includes retail clients / professional clients)

Question 7

What are the FCA High level standards / Principles for business and what aren’t they?

Answer 7

They aren’t rules they are guidelines and principles but should be followed.

Question 8

What further enhances the FCA Principles for business/ High level standards?

Answer 8

Rules

Question 9

What happens when a principle is breached

Answer 9

• Does not in itself give rise to discipline; but

* Will be taken into account for the purposes of discipline and intervention

Question 10

What rules enhance the FCA Principle for business of Customers’ interest

Answer 10

Financial promotion rules

Question 11

What rules enhance the FCA Principle for business of Communications with clients

Answer 11

Financial promotion rules

Question 12

What rules enhance the FCA Principle for business of conflicts of interest

Answer 12

Conflict of interest rules

Question 13

What rules enhance the FCA Principle for business of Clients’ assets

Answer 13

Clients Assets rules

Question 14

What is the purposes of Senior Management Arrangements, Systems and Controls (SYSC)

Answer 14

o Encourage directors and senior managers to take appropriate, practical responsibility for their firm’s arrangements
o Amplify Principle 3 (Management and Control)
o Create a common platform of organisational systems and controls (for firms subject to either or both MiFID and CRD – capital requirements directive)

Question 15

What must UK firms to when applying for permission to carry on regulated activity?

Answer 15

Firms in the UK apply to the FCA for a FSMA Part 4A permission

Question 16

When applying for a FSMA Part 4A permission what threshold conditions must be met?

Answer 16

Really Sing ABBA Especially Loudly

R - Registered office (must have UK registered office) m
S - Suitability: fitness and propriety of the applicant
A - Appointment of claims representative (insurance companies only)
B - Business model of the firm - must be a viable business model
B - Business to be conducted in a prudent manner
A - Appropriate resources ( e.g. money/ staff)
L - Legal status (what type of entity are they)
E - Effective supervision: structure of the group and close links must not inhibit supervision

Question 17

What holding could inhibit supervision?

Answer 17

generally a holding greater than 20%

Question 18

When did the new Senior Managers and Certification regime come into play and what was the key change about who it covered?

Answer 18

March 2016

Changed from for dual-regulated firms with changes including all firms are now covered

Question 19

Under the new Senior managers regime who is accountability on?

Answer 19

New ‘senior managers regime’ focusing accountability on a narrower number of senior individuals

Question 20

Under the new Senior managers regime who certified fitness and propriety of individuals?

Answer 20

Certification by firms

Question 21

Under the new Senior managers regime what replaced the statements of principle and approved person code?

Answer 21

Conduct rules

Question 22

What three main types of responsibility are there under the senior managers regime? & who approves and certifies each?

Answer 22

1) Senior management Functions (SMFs)
2) Prescribed responsibilities (PRs)
3) Key functions: important functions other than SMFs and PRs

1) Senior management Functions (SMFs) - Pre-approved by regulators, assessed as fit and proper by the firm and subject to the conduct rules
2) Prescribed responsibilities (PRs) - Certified as fit and proper by the firm
3) Key functions: important functions other than SMFs and PRs

Question 23

Generally when summing up the new senior managers and certification scheme what can be said

Answer 23

down to the regulators and firms together – more emphasis has been placed on the responsibilities of these senior management individuals

Question 24

Under the new senior managers and certification regime what replaced the old significant influence function (under the approved persons regime)

Answer 24

Effectively replacing significant influence functions

Question 25

What did the senior managers and certification regime replace?

Answer 25

Approved persons regime

Question 26

Who falls under the prescribed responsibilities function?

Answer 26

• Functions that would formally have been significant influence functions that do not fall within the scope of the new SMFs; and
• Individuals in customer facing roles subject to qualification requirements; and
• Anyone who supervises or manages the above

Question 27

What are those who fall under the prescribed responsibilities function subject to? And who must ensure adherence to this?

Answer 27

Conduct rules – not the regulators role anymore onus is on the firm completely

Question 28

Who falls under the Key Functions roles?

Answer 28

Other staff (except ancillary staff, e.g. security, catering cleaning)

Question 29

What are those who fall under the Key functions subject to? And who must ensure adherence to this?

Answer 29

Conduct rules – not the regulators role anymore onus is on the firm completely

Question 30

What brought in the Professionalism Requirement for retail advisors and what does this require?

Answer 30

• Since the retail distribution review (RDR), retail advisers have had to:
o Subscribe to a code of ethics
o Hold an appropriate qualification
o Carry out at least 35 hours of CPD (continued professional development)
o Hold a statement of professional standing (SPS) from an accredited body