RO1 - S.4 - the regulation of financial services

Question 1

What was the purpose of the Financial Services Act 1986 & how did FSMA 200 affect it?

Answer 1

Introduced first financial services regs, created a number of self-regulating entities, now mostly defunct
Financial Services and Markets act (FSMA) 2000 – Introduces independent regulation for the first time – wanted to create one regulator (FSA), one compensation scheme (FSCS) & one ombudsman (FOS)

Question 2

What effect did the Financial Services Act 2012 have on the UK’s financial regulatory landscape?

Answer 2

Split up FSA and created twin peaks structure of FCA & PRA, also introduced Financial Policy Committee (FPC)

Question 3

What committee did the BOE & Financial Services Act 2016 bring in to the BOE?

Answer 3

The Prudential Regulation Committee, this replaced the board of the PRA

Question 4

Who do the FCA & BOE answer to?

Answer 4

HM Treasury

Question 5

What are the two core purposes of the Bank of England?

Answer 5

1) monetary stability (want to keep inflation around 2% & confidence in pound)
2) financial stability (need to identify threats to financial system, lender of last resort

Question 6

What is an EU treaty?

Answer 6

Primary EU legislation and set out constitutional changes, every country has a veto for this and has to be unanimous

Question 7

What is the difference between an EU directive and a regulation?

Answer 7

Directives – Binding EU legislation with discretion on implementation for each member state, – most common for financial services regs and can be forged to meet the demands of the member state

Regulations – Binding EU legislation, no discretion to vary

Question 8

What is the European equivalent of the FPC?

Answer 8

The European Systemic Risk Board (ESRB) - scans for key systemic risks

Question 9

What is MIFID I and what differences did MIFID II bring with it?

Answer 9

MIFID I – wanted to harmonise rules across the whole of the EU by setting certain standards and conduct expectations for firms
MIFID II – Wanted to harmonise product governance, disclosure of costs & charges, increased industry transparency & record keeping

Question 10

What is the IDD and what is its purpose?

Answer 10

IDD (Insurance Distribution Directive) 2018 – Focused on consumer protection for insurance, made sure some insurance staff need to complete 15 hours of CPD a year, also more transparency for commission

Question 11

What is The Pensions Regulator (TPR) main remit?

Answer 11

Regulate workplace pensions, FCA look at personal pensions. Make sure pension funds are adequately funded and auto enrolment set up – can remove trustees of schemes or close them down, can fine trustees up to £5k & firms £50k