How The FCA Ensures Ethical Outcomes For Consumers Flashcards
What is ethics?
Moral principles that govern a person’s behaviour or the conducting of an activity.
How does the FCA makesure individuals and businesses act ethically?
Principles - high level, not comprehensive, expected to be stuck to.
Outcomes - sets out what good outcomes would be for consumers.
Monitors results using data provided and through its own monitoring lists and activities.
What are the principles for the FCA in regards to ethics? 11
Integrity
Skill and diligence
Management and control
Financial prudence
Market conduct
Consumers interest
Communications with customers
Conflicts of interest
Customer trust
Client assets
Relationship with regulators
If there is a conflict between the FCA rules and FCA principles, which will take precedence?
The principles
What is threshold condition 5?
Proof the firm is suitable under fit and proper rules.
Does being compliant with the principles mean a firm has met threshold condition? 5
No.
What are the 4 principles that apply to all people performing a controlled function? ISMO
Integrity
Skill, care, and diligence
Market conduct
Open and co-operative
What are the 3 principles that apply to accountable higher management functions
Organisation and control
Skill, care, and diligence in management
Compliance
What is meant by integrity for an individual?
Was the individual truthful?
Did they do the right thing for the customer
What is meant by skill, care, and diligence as an individual?
Did the individual carry out the right level of care.
Did they have the necessary skills
Did they act with diligence in the performance of their duties
What is meant by market conduct of an individual?
Whether right practices have been demonstrated by the extent the person followed codes of conduct and other rules within their own market. These rules differ depending on the buisness type they undertake.
What is meant by open and co-operative of the individual?
In dealings with the regulator have they followed the firms internal compliance procedure.
Ie whistle blowing
What is meant by organisation and control by the individual?
Where someone is responsible for their firms organisation, they have taken necessary steps to ensure the structure of the form is appropriate and sufficient of these functions.
Ie is there the right level of delegation
What is meant by skill, care, and diligence in management?
In managing others, the individual applied the same standard of skill, care, and diligence in relation to their own conduct.
What is meant by compliance for the individual?
Making sure systems are appropriate, proportionate and adequate for purpose.
What does a fit a proper test look at?
Honesty, integrity, and reputation - criminal records, past complaints, etc.
Competency and capability - do they have the necessary qualifications
After doing a skill gap analysis, what plans are in place to bring them up to scratch.
Financial soundness - someone in trouble is more likely to come under pressure to cause a bad customer outcome for personal gain.
Do they have any outstanding CCJ or past significant financial problems.
What should senior managers develop?
A clear, appropriate, and recorded appointment of responsibilities against which the individual can be monitored and failure of which can be punished.
What are the punishments for people who neglect their responsibilities under approved person’s or SM&CR?
Fining
Loss of job
Inability to work in the financial industry
How soon does the FCA expect someone to be disaplined and reported if found to do wrong?
As soon as possible
What other key area that is not mentioned is important for personal wthical control?
Conflicts of interest.
Firms should look at this in a broad sense, and managers should ensure there is a formal policy for it.
What is the most effective way to control conflict of interest?
Idemtify what consitute a conflict and train people to use their own initiative and think outside the box for their role.
What does the Certificsyion Regime (CR) require?
Relevant firms to assess the fitness and propriety of certain employees who could pose a significant risk of harm to the firm or any of its customers.
What should you remember for the certification regime?
Anyone whose role has a significant bareing to the success or failure of the firm should have individual, regular, reassement of their ‘fit and proper’ credentials with fitness for role now be determined by the firm rather than the regualtor.
What must firms do under the certification regime?
Allocate prescribed responsibilities across their Senior Managers setting out their duties. This forms part of the overall firm management and governance map.
