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Financial Markets And institutions > FCA Supervision > Flashcards

FCA Supervision Flashcards

1
Q

What are the Powers of the PRA and FCA

A
  • granting authorisation and permission to firms (under Part 4A of FSMA 2000) to undertake regulated activities
  • Approval individuals to perform controlled functions
  • Issuing (under Part 9A FSMA 2000) - General rules
  • Supervision of authorised firms to ensure they continue to meet regulators authorisation requirement and that they comply with regulatory rules and other obligations
  • Powers to take enforcement action in criminal courts, in respect of offences
  • Powers to discipline authorised firms and approved persons
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2
Q

What are the general rules the FCA and PRA can issues?

A

FCA can issue general rules for authorised firms which are necessary or expedient to advance the FCA’s operational objectives such as COBS rules and rules on firms holding clients’ money
-PRa can issue general rules for PRA-authorised firms which appear to be necessary or expedient to advance the PRA’s objective

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3
Q

What are the offences which the PRA and FCA can tkae enforcement action over?

A
  • Carrying on a regulated activity whilst not being authorised or exempt or claiming such
  • Contravening the financial promotions restrictions in communicating an invitation to engage in investment activity
  • Misleading the FCA
  • Giving false info to,or failing to co-operate with an investigator appointed by FCA
  • Breaching money laundering Regulations
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4
Q

What powers doe the FCA have?

A
  • Take actions against any person for market abuse of insider dealing (under part V of the criminal justice act
  • Recognise investment exchanges
  • As the UK listing Authority, approve companies for stock exchange listing in the UK
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5
Q

To whom does a person or firm wishing to appeal against a regulator appeal to?

A

Tax and Chancery Chamber off the Upper Tribunal (Upper Tribunal)
This body is independent from the FCA, with its rules being determined by the Lord Chancellor

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6
Q

Who does the FCA oversee?

A

FOS and the Money Advice Service

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7
Q

Who do the PRA and FCA jointly oversee?

A

FSCS

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8
Q

What Investigatory powers does the regulator (FCA) have? What gives them these powers?

A

ss165-176 FSMA 2000

  • Information and document - can request an authorised firm or any person connected with one, appointed representatives or certain other persons e.g. RIE’s to provide info, reports and documents
  • Investigators - appoint investigator to look at potential regulatory breaches. This coveres authorised firms, approved persons, appointed representative and, in some case such as market abuse, all persons
  • Entry to premises- regulator may seek access to an authorised firms’s premises on demand. When refused, the regulator may use a warrant obtained from a court of from a Justice of the Peace
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9
Q

What does s45 FSMA 2000 enable?

A

regulator has the general power to vary or cancels a firm’s Part 4A permission to undertake a regulated activity or withdraw authorisation entirely. More commonly, the regulator will vary permission by placing restrictions on the firm. This action is usually taken to protect consumers.

This applies to certain individuals who work within an authorised firm and require approval.

Approval to perform a controlled function may be withdrawn if the individual is no longer fit and proper.

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10
Q

How can a regulator withdraw approval?

A

Refer the matter to the RDC, which give the individual a warning notice followed by a decision notice

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11
Q

What does S56 FSMA 2000 enable?

A

regulator to prohibit individuals from carrying out specified functions in relation to regulated activities within the investment industry. A prohibition order may be issued in respect of anyone, approved or not.

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12
Q

What Disciplinary measures are available to the regulator?

A

Private warnings
Public Statements of misconduct
Censures and Unlimited fines

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13
Q

What are the types of restitution power available to the regulators?

A
  • Those which require a court order - regulator can apply to the court if a person has breached FSMA 2000 to provide compensation to those who have suffered loss
  • Those the regulator can impose themselves - authorised firm breaches FSMA 2000 rules, compensation may be required without a court order

-If there is evidence of industry wide breaches e.g. pensions scandal, the regulator may ask the Treasury to make an order authorising an industry wide review or enquiry.

The regulator may also apply to a court for an injunction to restrain or prohibit persons from breaking a rule of FSMA 20000

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14
Q

What are the types of supervisory tools available to the regulator and how many are there?

A

4
-Diagnostic - identify, assess and measure risk
-Monitoring - track the development of risks
-Preventative- reduce or limit identified risks and prevent risks from crustallising
Remedial - to address risks that have crystallised

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15
Q

What are the tools a regulators may use in the supervisory process?

A
  • Desk-based reviews
  • Liaison with other agencies or regulators
  • Meetings with the management and representatives of the firm
  • On-site inspections
  • Reviews and analysis of periodic returns and notifications
  • Reviews of past business
  • Transaction monitoring
  • Use of auditors
  • Use of skilled persons reports
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16
Q

How does the FCA go about its risk assessment process?

A
  • Will initially consider detriment
  • In qualifying this it will be broken down into probability and impact
  • Impact will be broken down into incidence (numbers affected) and severity
17
Q

What are the 3 operational objectives of the FCA?

A
  • ensuring consumer protection
  • market integrity
  • competition in the interests of consumers
18
Q

How does the FCA categorise firms?

A

C1 - universal or investment banks with large trading operation and substantial client assets and banking and insurance groups with large numbers of retail customers
C2 - Large wholesale firms - firms from different sectors having a substantial number of retail customers
C3 - firms across different sectors with a significant wholesale presence and/or retail customers
C4 - Smaller firms, including almost all intermediaries

the top two receive intensive and shorter two year regulatory cycles

the bottom two on a 4 year basis

19
Q

What are the three key pillars of the FCA’s supervision model?

A

FSF
Event Driven
Issues and Products

20
Q

What is the role of FSF as one of the 3 key pillars?

A
  • analsys firms business models and strategies so that the FCA can form a view of the sustainability of the business from a conduct perspective an where future risks may lie
  • Assessment of how the fair treatment of customers and ensuring market integrity is embedded in the way in which the firm runs its business, from the ‘tone from the top’, through how culture is embedded across to firm, to how the firm manages and controls its risks
21
Q

What is the chief purpose of the BSMA?

A

forming a view on whether a business model exposes a firm to an unacceptable level of conduct risk

22
Q

What is the focus of the second pillar?

A

Dealing with issues that are emerging or have happened and are unforeseen in their nature.

It covers mergers and acquisitions, to whistle blowing allegations, to spikes in reported complaints at a firm

23
Q

What is the focus of the third pillar?

A

driven by analysis made of each sector by the regulator’s sector teams. This teams will produce Sector Risk Assessments of conduct risks across all sectors. This will determine whether there are cross-firm and or product issues driving poor outcomes for consumers or endangering market intergrity, the degree of potential detriment and whether the regulator should be undertaking thematic work to assess or mitigate these risks

24
Q

Firms in addition to the C1-C4 categorisation are also given prudential categories, what are they?

A

CP1 -firms whose failure would have a significant impact on their market, but where the FCA is not yet confident that orderly wind-down can be achieved. These are supervised on a going-concern basis with the aim of minimising the probability of failure.
CP2 - firms who failure would have a significant impact on their market but an orderly wind-down can be achieved . These are supervised on a proactive ‘gone-concern’basis
CP3 - Failure is unlikely to have a significant impact. These are supervised on a reactive gone-concern basis

For the vast majority of firms the focus will be on managing failure when it happens rather than trying to reduce its probability.

Financial Markets And institutions (14 decks)

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