The regulation of financial services

Question 1

Following the implementation of the FSMA, what are the three key bodies that support the regulation of finacial services?

Answer 1

FCA
FOS
FSCS (financial services compensation scheme)

Question 2

Following the dispanding of the FSA, what three bodies have the responsilility for regulation?

Answer 2

FCA
FPC
PRA

Question 3

What is the function of the Standing Committee?

Answer 3

It meets monthly to disucss individual cases of significance and other developments relevant to stability
It coordinates any responses between the Treasury, Bank of E and FCA

Question 4

What is the overall aim of the HM Treasury

Answer 4

sustainable growth
rising prosperity
creating economic and employment opportunities for all.
chairs the Standing Committee

Question 5

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

Answer 5

Monetary stability - stable prices and confidence in the economy
Financial stability - detecting and reducing threats

Also - the lender of last resort

Question 6

What is the main objective of the PRA?

How does it do this?

Answer 6

to promote the safety and soundness of the firms it regulates
By making forward looking judgements on the risks posed by firms

Question 7

What are the three key objectives of the FCA?

Answer 7

Consumer protection
integrity of the UK financial system
Competition

Question 8

What is the EU’s primamry and secondary forms of legislative acts?

Answer 8

Treaties - constitutional framework and principles
Legislation - Made by EU institutions to carry out thier responsbililites, both binding and non- binding instruments (recommendations)

Question 9

How are the IOM and the Channel Islands different to mainland UK, being Crown dependencies?

Answer 9

The are not a EU member state and therefore directives do not apply

Question 10

What is the purpose of the ESRB (european systematic risk board)?

Answer 10

to ensure financial stability and to strengthen and enhance the EU supervisory framework

Question 11

What is the MiFID (Markets in Financial Instruments Directives)?

Answer 11

EU legislation that regulates firms who provide services to clients linked to financial instruments (shares, bonds, units in collective investments, derivatives)

Question 12

What is passporting and how will the UK be affected post-Brexit

Answer 12

Passporting allows the head of an office in one member state to carry out an activity/sale of a product in another member state, as long as they fulfill the relevant directive
Many have already set up a subsidiary in an EU state

Question 13

What areas for retail investment firms did MiFID change?

Answer 13

Disclosure of costs and charges
Product governance
Describing advive services
Structured deposits
Suitability
Recording conversations
Inducements

Question 14

What are the key provisions of the IDD (Insurance Distribution Directive)?

Answer 14

Professionalism
Commission Disclosure
Harmonisation
New product governance requirements
Ancillary Insurance Intermediaries
New duties to insurance companies selling products through non regulated firms
A requirement for all general insurance firms to provide a IPID (Insurance product Information document)

Question 15

What are the three pillars under the Basel Accord?

Answer 15

Pillar 1 - minimum capital requirements for firms for credit, market and operational risk
Pillar 2 - Firms and supervisors decide on whether a firm should hold additional capital against risks not in Pillar 1
Pillar 3 - Improve market discipline by requring firms to publish risks, capital and risk management

Question 16

What is the purpose of 4MLD (fourth money laundering directive)?

Answer 16

To provide a basis for implementing the FATF

takes into account any new risks developed

Question 17

Which firms does the AIFMD cover (Alternantive investment fund managers directive)

Answer 17

Hedge funds, private equity funds, investment companies, real estate funds

Question 18

How did the MCD (mortgage credit directive) change for second charge loan firms?

Answer 18

It moved them from the consumer credit regime to the mortgage regime and therefore firms had to hold the correct permissions

Question 19

What are the five strategic goals of the CMA (Compeition and Markets authority)?

Answer 19

Delivering enforcement action
extending competition frontiers
Refocusing consumer protection
Achieving professional excellence
developing integrated performance

Question 20

What are the objectives of the pensions regulator? (TPR)

Answer 20

Protect the benefits of members or occupational and personal pension schemes
Ensure good administration of work based pensions
Reduce risk that may require use of the PPF (pension protection fund)
Maximise employer compliance and safeguards
Minimise and adverse impact of the growth of an employer

Question 21

What are the areas that should be considered by senior management to comply with the SM and CR?

Answer 21

Provide leadership

Business decisions and priorities aligned with fair treatment of customers

Right controls in place and used

Overseeing recruitment, training and competence, reward structure ensures fair treatment of customers

Make full use of MI

Question 22

When using a compliance consultant, what framework must still exist within the company?

Answer 22

Assess and cover risks
Meet regulatory requirements
Check the firm continues to be compliant

Question 23

Under the companies act, what must an LLP or an LLC do in relation to thier accounts?

Answer 23

They must appoint an external auditor

If they hold client money, a seperate audit must be carried out (unless the funds held are small)