REGS BIBLE Chapter 1 Flashcards
BoE 2 core purposes
Monetary stability (prices and currency)
Financial stability (UK financial system)
Which body directly regulates ISAs and why
HMRC because of their tax-preferential treatment
Purpose of the FPC of the BoE
Financial Policy Committee’s purpose is to identify, monitor and take action/remove/reduce systemic risks
How many times does the FPC meet?
Four times a year
How many times a year does FPC issue a report and what is it called?
twice a year
Financial Stability Report
What are the PRA’s objectives?
General objective - promote safety and soundness of PRA-authorised firms (avoid instability)
Insurance objective - contributing to securing of appropriate degree of protection for those who are/may become policy holders
What are PRA firms
Deposit takers
Insurers
Significant Investment Firms
To whom does the FCA make a report and how often?
To HMT annually
What are the FCA objectives?
Strategic: To ensure relevant markets function well
3 Operational objectives:
- securing appropriate degree of protection for consumers
- protecting and enhancing integrity of UK financial system
- promoting effective competition in interests of consumers
Which bodies do the FCA/PRA oversee?
FOS - both
FSCS - FCA only
What are fixed portfolio vs flexible portfolio firms?
Fixed portfolio: Largest banks, insurers and investment firms; those which pose greatest risk to FCA objectives
Flexible portfolio firms: All other firms
What are the three types of risk-based supervision approaches?
Proactive - pre-emptive
Reactive - emerging or actual harm
Thematic - potential or actual harm
Which firms are subject to Pillar 1 (proactive) supervision?
Only fixed-portfolio firms
Flexible portfolio firms are only subject to Pillar 2 and 3
What are the FCA tools of supervision?
Identify - identify where potential harm is present
Diagnose - what is the cause, the extent and potential development of the harm
Remedy - through a range of FCA actions that can be taken
Evaluate - FCA assesses how effective these actions were
What are the 3 pillars of the FCA’s strategy for conduct risk supervision?
- Reducing and preventing serious harm
- Setting and testing higher standards
- Promoting competition and positive change
What are the 4 general powers of the FCA (Part 9A FSMA 2000)
- Grant vary or withdraw part 4A authorisation of firms, approval of individuals, and recognition of other bodies (exempt persons)
- Rule making for the above
- Prosecution for financial crime
- Supervision, enforcement, sanctions, disciplinary action
Which provisions of the FCA handbook are legally binding and upon whom are they binding?
PRoD
P - Statements of Principle (binding upon approved persons)
R - Rules (binding on authorised persons)
D - Directions (binding on those to whom they relate)
What are the PRIN? (list)
- Integrity
- Skill, care and diligence
- Management and Control
- Financial prudence
- Market conduct
- Customers’ interests
- Communications with clients
- Conflicts of interest
- customers; Relationship of trust
- Clients’ assets
- Relations with regulators
- Consumer Duty
What are the 8 PRA Fundamental Rules (FR)
- the equivalent of FCA PRIN
- Integrity
- Skill, care and due diligence
- Prudence
- Adequate financial resources
- Effective risk management
- Organisation and control
- Relationship with regulators
- resolution procedures
What is the aim and scope of Consumer Duty
Aim: to ensure RCs receive good outcomes when they purchase products/services
Scope: any product that is or can be distributed to RCs (intentionally or not)
What activities are NOT covered by the Consumer Duty
- anything described non-retail/specifically directed to PCs or ECPs
- Commercial products and services
- Group products eg. life assurance products
- non-retail investments (minimum investment £50000)
How are non-retail investments defined?
Minimum denomination or investment of £50000
What provisions apply for firms outside of the scope of Consumer Duty?
The Fair Treatment of Customers (FTOC) which has 6 outcomes
- Fair treatment of customers is central to corporate culture of all firms
- Products and services meet needs of identified consumer groups and are targeted accordingly
- Consumers are provided with clear information before, during and after point of sale
- Any advice is suitable and takes into account their circumstances
- Products and services perform as firms have led consumers to expect
- Consumers do not face unreasonable post-sale barriers imposed by firms to change a product, switch provider, submit a claim or make a complaint
Against what 4 outcomes does the FCA assess the success of a firm’s PRIN 12?
- Products and services - are they fit for purpose?
- Price and value - is the value fair?
- Consumer services - customer support meets needs
- Customer understanding outcome - consumer understanding throughout the customer journey
