Section 3.3 - FCA Objectives and Standards Flashcards
1
Q
What are the 7 blocks in the FCA handbook?
A
- Block 1 - High Level Standards:
- SYSC
- PRIN
- Block 2- Prudential requirements
- Block 3-- Business Standards
- COBS
- Block 4- Regulatory Processes:
- Supervision
- Block 5- Redress
- Block 6- Specialist Sourcebooks:
- COLL
- Block 7- Listing, Prospectus and Disclosures
SYSC - Systems of Management Arrangements, System and Control
PRIN - Principles of Business
COBS - Conduct of Business rules
COLL - Collective Investment Schemes
2
Q
What section in the FCA Hanbook does part 4a permission fall under
A
Block 4 - Regulatory Processes
3
Q
What is the objective of PRIN under Block 1 in FCA Handbook
A
- Expresses general statements regarding fundamental obligations of what is required by a firm
- The 11 principles follow fit and proper testing for an approved person to be applicable for part 4a permission - any breaches can lead to questioning regarding if the firm is still fit and proper - poor rep
4
Q
11 principles of PRIN
A
- Integrity
- Skill, care and dilligence
- Mangement and control - must have appropriate risk management systems
- Financial prudence
- Market Conduct
- Customers Interest
- Communication with clients - Trust
- Clients Assets
- Strong relation with regulators
- A breach in one of these principles does not give the right for a person to initiate court action against FCA but will be taken into account for discliplinary issues.
5
Q
What is the purpose of SYSC?
A
- Encourages firm’s directors to take practical responeibility on matters that may be of interest of the FCA
- Increases certainity by amplifying principle 3 - appropriate risk management
- Creates a common platform - Unified set of organisational requirements listed out in SYSC 4-10 which applies to all firms expect managing agents and insurers
6
Q
What are the main SYSC 4-10 objectives
A
- SYSC 4 - General organisational requirements - Firm should have clear organisational structure and senior personel are responesible for ensuring compliance with regulatory obligations
- SYSC 6 - Compliance, Internal Control and Financial Crime - A firm must appoint a compliance officer (annual report from MRLO) and FCA must follow rules from JMLSG if suspects any firm for money laundering
- SYSC 10 - Conflicts of interest - Amplifies principle 8 - firms should take appropriate measures to idneitfy conflict of interest e.g accepting bribes
- Must have a policy in place
JMLSG - Joint Money Laudenering Steering Group
7
Q
What are SYSC 18 and 19 main objectives
A
- SYSC 18 - Whistleblowing- PIDA 1998 has policies in place to protect whistleblowers - from 2013 only affect deposit takers with assets greater than £250m
- SYSC 19 - Remuneration codes- Under MiFID II, firms that provide investment services to clients will be effectivley banned from paying remuneration directly linked to sales, with aims on taking a tougher approach to investor protection.
- FCA take into account firms size and complexity of thier activites, the main provisions are:
- 40% bonus must be defered over a 3 year period to all staff and 60% to senior management or when indivdual bonus is more than £600,000
- Must report remuneration policy at least annually
- 50% of any bonus made in shares
- A firm must not provide an incentive to its staff (E.G. sales target, remuneration) that may allow them to reccommend a financial insturment to a client when another instrument may meet their needs better.
PIDA - Public Interest Disclosure Act
8
Q
What must UK firms apply to when wanting to carry out regulated activity
A
- Firms in the UK must apply to FCA for a FSMA Part 4a permission
9
Q
What can the FCA do when a firm wants to apply to carry on regulated activites
A
- Can put limitations in place e.g. limit the types of clients a firm deals with.
- Can impose requirements e.g. a firm must submit more financial returns more frequent than ususal
10
Q
What thresholds must be met, set by the FCA, in order to get permission
A
- Legal status - Firms must be an incorprated firm
-
Location of Office - Head office must be UK based
* Effective supervision - Applies to FCA and dual regulated firms - **Suitability **
- **Buisness **
11
Q
Who are exempt from permission from FCA
A
- Representatives of an authorized person
- REIS
- Memebers of profession e.g. accountant
12
Q
What is the main objectives of the SM&CR
SM&CR - Senior Management and Certification Regime
A
- Introduced in 2016 and replaced the approved person regime for UK banks and PRA
- Used to cover only dual -regulated firms but now covers all firms
13
Q
What are the changes under the new SM&CR
A
- Indivduals are assessed and held accoutable for the roles they perform:
- Senior Manager Regime (SMR)- Focusing accountability of number of senior indivduals
- Certification Regime - Requires firms to be assess the fitness and propriety of staff that could cause harm to the firm
- Conduct rules- Replacing the statement of principle and approved person code.
14
Q
What are the 3 main responsbilities under the Senior Managers Regime
A
- Senior Management Functions (SMF’s)
- Prescribed responsibilities
- Key functions
15
Q
Who approves and regulates each responsibility under SM&CR
A
- Indivduals that perform more than one SMF requires seprate authorisation, however can be combined in a single application
- When applying for an indivdual to be approved for an SMF, when there is a change of responsibility then the firm must submit a statement of responsibility report
- Senior members are subject to more conduct rules than employees
