FCA & PRA continued

Question 1

Who is the FCA’s board appointed by?

Answer 1

The Treasury as they have overall responsibility for the UK financial services industry
FCA is a government body but does have statutory powers

Question 2

What does the FCA have responsibility over?

Answer 2

• The conduct of wholesale and retail financial markets, in particular in relation to providing products and services to consumers
• Also deals with a smaller pool of businesses for prudential regulation

Question 3

What are the specific responsibilities of the FCA

Answer 3

• Ensuring the markets function well
• Supervising the conduct of financial services firms
• Prudential supervision of firms not supervised by the PRA

Question 4

What are the operational objectives of the FCA?

Answer 4

• secure appropriate degree of protection for consumers
• Protect and enhance integrity of the UK financial system
• Promote effective competition in the interests of consumers

Question 5

What are the 5 controlled functions required to be approved by the regulator?

Answer 5

Governing functions - those who run the business, director
Required functions - roles required by regulations, money laundering officer
Systems and control functions, head of finance or internal audit
Significant management functions, senior managers
Customer functions, those giving advice to customers

Question 6

What is an approved person

Answer 6

It is a person who carries out a controlled function and must be approved by the FCA or PRA

• Honesty, integrity and reputation
• Competence and capability
• Financial soundness

Question 7

What is the Senior Managers regime?

Answer 7

• The Financial Services (Banking Reform) Act 2013 which came from the Parliamentary Commission on Banking Standards in June 2013
• 3 components to regime = Senior Managers Regime, Certification regime & rules of conduct

Question 8

What does the regulator assess when looking at senior managers?

Answer 8

• Balance of probability of them breaching regulation
• Individual was a senior manager at the time
• The individual was responsible for management of any firms activities that caused the breach
• The individual did not take steps that could reasonably expected from a person in that position to avoid the breach occurring

Question 9

What is ‘reverse burden of proof’?

Answer 9

This was changed but it was the idea that senior managers were guilty until proven innocent. No longer the case.

Question 10

What is the maximum penalty for offence by senior manager?

Answer 10

It is 7 years prison and/or unlimited fine
It is judged under the standard that could be reasonably expected of a person in that position - similar to corporate manslaughter

Question 11

What is the Certification Regime?

Answer 11

Bank employees who do not carry out a senior management function but carry out a ‘signifcant harm function’ (potential to harm customer or firm)
Employee to carry out their roles initially and then on an annual basis and certifying that requirement.

Question 12

What is the Rules of Conduct

Answer 12

Set out a basic standard of behaviour that regulators expect to be met
Applies to:
- Senior managers
- Certification regime
- All other employees unless they are ancillary staff