Section 2

Question 1

Principles for business (FCA):

Answer 1

1. Integrity
2. Skill, care and diligence
3. Management and control
4. Financial prudence
5. Market conduct
6. Customers’ interests
7. Communications with clients
8. Conflicts of interest
9. Customers: relationship of trust
10. Clients’ assets
11. Relations with regulators
    • If a firm breaches any of the Principles for Businesses it will be liable to disciplinary
    sanctions as they are legally binding on firms

Question 2

Principles distinguish between a customer and a client as:

Answer 2

• Customer – retail client and professional client

* Client – retail client, professional client and eligible counterparty

Question 3

PRA fundamental rules:

Answer 3

1. Integrity
2. Skill, care and diligence
3. Prudence
4. Adequate financial resources
5. Effective risk management
6. Organisation and control
7. Relationship with regulators
8. Resolution procedures

Question 4

SYSC purpose?

Answer 4

• Encourage directors to take responsibility for the firm’s arrangements on regulatory matters
• Amplify Principle of Business 3 to organise and control its affairs responsibly and effectively
• Vest responsibility for effective and responsible organisation in specific director and senior managers
• Create a common platform of organisational systems and controls

Question 5

‘Common platform’ firms and the purposes of the SYSC sourcebook

Answer 5

The SYSC sourcebook is binding upon common platform firms. A common platform firm is one that is covered by either the capital requirements directive (CRD), MiFID or both.
Non-common platform firms can use the SYSCs as guidance.

Question 6

SYSC 4

Answer 6

– General requirements

• Sound governance
• Experienced management
• Receive written reports on compliance and internal audit annually

Question 7

SYSC 5

Answer 7

– Employees, Agents and other relevant persons

• Skills, knowledge and expertise
• Segregation of duties
• Awareness of procedures
• Monitoring

Question 8

SYSC 6

Answer 8

– Compliance, audit and financial crime

Question 9

Corporate governance

Answer 9

SYSC 5 to 12 set out the specific roles that form good corporate governance. The examples used in the manual are:
• SYSC 7 – Risk control
• SYSC 8 – Outsourcing
• SYSC 9 – Record keeping
• SYSC 10 – Conflicts of Interest
• SYSC 12 – Group risk control
• SYSC 19 – Remuneration

Question 10

The internal audit function

Answer 10

oversees the risks of non-compliance with
regulatory requirements. They should develop independent and informed views of these risks discuss them directly with the audit committee and the
board of directors.

Question 11

The external auditor

Answer 11

of a firm should objectively and independently
assess the risks of material misstatements in financial statements and
respond appropriately.

Question 12

Trustees

Answer 12

s take legal control of assets on behalf of a third party (the beneficiary). They have a duty of care to protect the assets and administer the assets in the beneficiaries’. They may delegate tasks – such as investment advice – but they retain ultimate responsibility