LO7: Regulatory and Legal Environment Flashcards
1
Q
who makes up the uks regulatory framework for financial services?
A
- financial conduct authority
- prudential regulation authority
- financial policy committee
2
Q
FCA summary
A
- responsible for the conduct of business and market for all firms
- aims to take early action to protect consumers
- market wide analysis
- reviews product life cycle, can ban
3
Q
PRA summary
A
Prudential regulation authority
- sits in the bank of england
- responsible for the stability of important financial institutions, single firm failure without system failure
4
Q
FPC summary
A
Financial Policy Committee
- in bank of england
- horizon scanning for risks to the whole financial system (industry)
5
Q
PRA primary objective
A
Prudential regulation authority
- promote the safety and soundness of pra regulated persons
6
Q
PRA secondary objectives
A
- ensure persons act in away that doesnt jeprodise the financial system
- minimize impact of single failure on whole system
- encourage competition
- appropriate protection for policy holders
- appropriate protection distribution of with profit policies
7
Q
PRA threshold for entry
A
- uk head office
- conduct ‘prudent’ business
- appropriate staff
- can be effectively supervised
8
Q
PRA risk assessment framework considers
A
- potential impact on customers
- risk context the firm operates in (external and business)
- mitigating factors (risk and management controls, management and governance)
- financial mitigation (liquidity, capital)
- structural mitigation (resolvability)
9
Q
PRA basic level of monitoring
A
- compliance with standards for capital
- liquidity, asset valuation, provisioning and reserving
- annual review of the risks the company poses to the pras objective
10
Q
Proactive intervention framework
A
used to access the performance of authorised persons against the PRA supervisory framework
- has 5 stages
11
Q
FCA operational objectives
A
consumer protection
integrity
competition, in the interest of consumers
12
Q
define efficient and economic use of resources, who cares about it?
A
- proportionality
- consumer responsibilities
- transparency
fca and pra care
13
Q
fixed portfolio firms
A
- small proportion of firms that require large supervision
- have a named individual supervisor
related to fca
14
Q
flexible portfolio firms
A
- use fca customer contact centre
- passed to the appropriate supervisor area where necessary
15
Q
role authorization and approvals
- what they like
A
fca and pra have a say on the promotion of person who can impact a firms regulated activity
like candidates that will lead to good
- corporate culture
- product design
- conduct risk management
16
Q
fca 3 pillar approach to risk
A
- firm systematic framework (customer at the heart of the business?)
- event driven work (flexible supervisory activity)
- issues and products
17
Q
what can fca do if they dont like somethong?
A
ban product
withdraw misleading financial ads
fine and prosecution of people/companies
18
Q
who fca reports to ?
A
- reports annually to parliment
- can be vetoed by pra
19
Q
PRIN
- what
- who
A
Principles for business:
- integrity
- skill, care, diligence
- management and control
- financial prudence
- market conduct
- customer interests
- communication with clients
- conflicts of interest
- customer relationships of trust
- client assets
- consumer duty
20
Q
product life cycle
A
- product design and governance
- identifying the target market
- marketing and promoting the product
- sales and advice process
- after sales information
- complaint handling
21
Q
consumer clients vs commercial client
A
consumer = natural person buying, not for trade or profession
commercial = other
22
Q
consumer duty as described by fca
A
~ consumer principle
~ crosscutting rules = how firms should act to deliver good outcomes
~ four outcomes
- governance of products and services
- price and value
- consumer understanding
- consumer support
23
Q
SYSC stands for?
SMCR stands for?
A
senior management arrangements, systems and controls
senior managers and certification regime
24
Q
MLRO stands for?
A
money laundering reporting officer
- establishment and maintenance of effective antimoney laundering systems and controls
25
money laundering definition
the process of concealing the origin of proceeds of crime
26
public interest disclosure act 1998 concerns?
(PIDA)
whistle blowing
protects people from detriment from act or omission by employer
27
whistleblowing definition
public allegation of a firms concealed misconduct, usually from within
making a qualified disclosure
28
qualifying disclosures cover ?
(for whistle blowing)
- criminal offence
- failure to comply with legal obligations
- miscarriage of justice
- putting health and safety in danger
- damage to environment
- deliberate concealments of the above
29
FCA environmental, social, governance key themes
- promote global standards for sustainable reporting
- improved transparency of performance on diversity and inclusion matters
- integrating esg into market decision making
30
Lloyds environmental, social, governance agenda
- strategy and governance
- climate
- culture
- communities
31
Requirements for admittance abroads
- set up office
- employ staff
- incur capital expenditure
32
home state financial regulation
allows a company authorised in its home state to operate in any EU country
33
working on 'establishment' basis
company estabishes presence in another eu state
34
working on 'services' basis
company provides services from their home state
35
admitted basis
- US specific on a state by state basis
- allows foreign companies to write business like a local insurer
- requires the submission of wordings and rates (premium) to be agreed
36
surplus lines basis
- how lloyds operates in the us
- excepts business not covered (cus of size or complexity) by the local/admitted markets
37
lloyds syndicate operations abroad
- lloyds bargains centrally
- lloyds reports to local regu;ators centrally
38
overseas reporting requirments about the risk
- risk category
- risk location
- location of broker
- tax payable
39
who regulates the society of lloyds (lloyds)
fca and pra
40
who regulates the managing agents
fca and pra
41
who regulates brokers
fca
42
who regulates members agents
fca
43
lloyds job
- ensure all participants are aware of their obligations
- create and maintain controls over the risks to which the whole market is exposed to when there is impact on the funds held locally
- measure and assess the capital needs of each member and name
44
managing agents required undertakings as dictated by lloyds
- file and annual solvency test returns
- assess capital needs
- put in place and maintain controls over risks (eg. market and credit risks)
45
council of lloyds powers
- rule making
- power to exercise the powers of the society of lloyds
- management of all affairs in lloyds
- direct insurance business at lloyds
- making/changing bylaws
- setting long term strategic development of the market
- deciding contributions to the central fund
- deciding the amount of members
- reviewing budgets and plans
46
members of the council of lloyds
3 working
3 external
9 nominated
47
executive team of the corporation of lloyds
does the day to day running, along with various committees
48
byelaws and regulaitons
primary rules in lloyds
49
requirements
secondary rules in lloyds
50
explanatory notes
additional guidance in lloyds
51
punishments for lloyds rule breaches
fines-bans
52
ways coperates can join the lloyds market
new corperate member or name...
- join an existing syndicate
- make anew syndicate
- make new syndicate and its own managing agent
53
proposal to join lloyds must contain
the opportunity
the strategy
the structure of the proposed business
target insurance classes and territories
underwriting and management resources
details of their proposed managing agent
sources of capital
value to lloyds
54
solvency margin
amount assets exceed liabilites
55
capital adequacy
solvency margin with risk considered
56
annual submission to regulators concerning solvency
- revenue account
- profit and loss account
- balance sheet (assets and liabilities)
57
fca 3 pillar system for risk analysis
- proactive firm supervision
- event driven work
- issues and products
58
wound-up
formal cessation of the company
59
run-off
prevention of lloyds syndicates from taking further business
60
FOS summary
Financial ombudsman service
- deals with disputes between individual consumers or small businesses and financial organizations
- membership is compulsory for all authorised firms and intermediaries
- free, independent, impartial
61
FOS eligible complaintant
- consumer
- microenterprise < 2M euros
- charity < £6.5M
- trustee < £5 M
- consumer buy-to-let consumer
- guarantor
- small business <£6.5 M and < 50 ppl or < £5M
62
time before referring to fos
8 weeks for insurer to respond
6 months to accept/reject firm decision
63
FOS monetary awards
act/omission before 1 april 2019: (£___K)
195
190
170
160
for referral after:
april 2024
april 2023
april 2022
april 2019
act/omission after 1 april 2019: (£___K)
430
415
375
350
for referral after:
april 2024
april 2023
april 2022
april 2020
april 2019
64
FSCS summary
- under
- covers who?
- covers what?
(Financial services compensation scheme)
- under fca
- covers authorsied insurers and intermediaries
- covers claims against that cannot be paid (insolvent or gone out of business)
- covers same entities as fos
65
central fund
lloyds fund for contingency cases
66
FSCS protection levels
100%
- compulsory insurance
- professional indemnity insurance
- long term insurance (pensions and life)
90%
- claims with no upper limit
0%
- goods in transit
- marine
- aviation
- credit
67
broker networks
umbrella organisations thatis authorised and each broker in it is an appointed representative
68
appointed representative
individual or company thats appointed an authorised person
principal takes responsibility for the ar activity on their behalf
69
TOBA definition
term of business agreements
70
principals obligation in relation to an AR according to FCA
have a written agreement (toba)
asses the ar's suitability
notify fca of appointment
ensure the principal can over see the AR
ensure AR acts within their authority
provide complaints data anually
be clear on when/how to terminate the AR relationship
71
Legislative reform (lloyds) order 2008
allows non lloyds brokers access to the lloyds market
72
wholesale broker
has contact with the insurer
73
retail broker
has direct contact with the client
74
FCA action against broker rule breaches
withdraw authorisation
discipline
impose penalties
apply for court injunctions
prosecuting the firm
75
insurance contract
an agreement enforceable by law between an insured and an insurer
76
elements of a valid contract
offer
acceptance
considerations (gain or forbearance by either party)
other:
intention
possibility to perform
capability to enter into legal relations
consensus ad idem (both parties know what they are agreeing to)
legality
certainty
77
void ab initio
void from the start
applies to contracts lacking the elements of a valid contract
78
good faith
parties do not try to mislead each other
79
contract certainty
concept that both parties must know to what they are agreeing, evidence might can be MRC (market reform contract)
80
features of insurable interest
legal right to insure rising from a financial relationship between the insured an the subject matter which is recognised by law
81
subject matter
concerns insurable interest
- subject matter of insurance (what is being insured)
- subject matter of contract (relationship between the insured and the subject matter of insurance)
82
insurers insurable interest
they have it hence reinsurance
83
insurable interest timing
life insurance = must exist at inception but not at time of loss
marine insurance = must exist at the time of the loss but need not at inception
general insurance = must exist at inception and loss
