RO1: Chapter 5 Flashcards
In what sense is the FCA a reactive regulator?
Receives regular reports from authorised firms, if information in report causes concern then action is taken place.
Which UK regulatory body has specific responsibility for financial stability?
The Bank of Engalnd
How do you calculate a FAR? (Free Asset Ratio)
Total assets - liabilities = A
A divided by Total assets = B
B X 100 = C%
What does FAR stand for?
Free Asset Ratio
What are the 3 operational objectives for the FCA?
- Protect Consumers
- Protect Financial Markets
- Promote Competition
What are the FCA’s 8 regulatory principles?
- Efficiency & Economy
- Proportionality
- Sustainable growth
- Consumer responsibility
- Senior management responsibility
- Recognising the differences in the businesses carried out by different regulated persons
- Openness & disclosure
- Finally Transparency
What must a business/individual apply for in order for them to carry out regulated activities by their relevant regulator?
Part 4A Permission
What powers does the FCA have over firms carrying out regulated activities?
- Enforcement
- Supervision
- Authorisation Matters
What does the FCA’s enforcement division do?
Investigates when firms breach FCA rules and have the power to discipline them such as withdrawing their authorisation.
What does a Risk-based approach mean?
Assess the risks the firm has and if other firms have higher risk then they focus more on these. They accept that failure cannot always be avoided, and potential risks must be prioritised
How are the FCA/PRA reactive?
They receives regular information from regulated firms such as accounts, if they receive this information and they are concerned they react immediately such as opening an investigation
How are the FCA/PRA Proactive?
They work on preventing problems arising in the first place by scheduling inspection visits. (Higher risk firms have scheduled inspection visits annually)
What are the 3 pillars in the FCA supervision model?
- Group specific supervision (PILLAR 1 – fixed portfolio category)
- Event driven supervision (PILLAR 2 – flexible portfolio category)
- Thematic/product supervision (PILLAR 3 – flexible portfolio category-
What are the PRA’s objectives?
- Promote safety and soundness
- Make sure policyholders are protected (particularly insurance policyholders)
- Facilitate effective competition.
What is a life office?
Office that deals with Life Assurance
