The Regulatory Infrastructure Flashcards
Financial Services and markets act (FSMA) 2000
the legislation that establised the financial services authority (FSA) and empowered it to regulate the financial services sector.
When did the FSMA come into effect?
2001
Financial services authority (FSA)
Agency created by the FSMA 2000 to be the single financial regulator in UK. It was replaced by FCA and PRA in 2013.
Financial services and markets act 2012
the original act was amended by the 2012 act, to create the twin peaks approach of regulation in the form of the FCA and the PRA.
Financial Conduct Authority FCA
the FCA is responsible for regulating conduct in retail and wholesale markets, supervising trading, and the prudential regulation of firms not regulated by the PRA.
Financial policy committee FPC
Formed in early 2011, is the UK’s risk regulator with responsibility and powers to reduce the systemic risk. As an official committee of the bank of england it focuses on macroeconomic and financial issues that may threaten long-term growth prospects. Has powers of directions and recomendations over the PRA.
Prudential Regulation
the aspect of financial services regulation which deals with firms’ financial resources and governance. The PRA and the FCA are responsible for ensuring the financial soundness of their respective authorised firms.
Prudential regulation authority PRA
The PRA, park of BOE, is responsible for the prudential regilation of fianancial firms, including banks, investment banks, building societies and insurnace companies.
FSMA 2012 established
new regulators - FCA and PRA
Single Ombudsman Service FOS to support consumer disputes
Financial services compensation scheme - to provide a fund for customer compensation when firms unable to meet their liabilities
penalities for market abuse
UK listings regime (UK Listing Authority UKLA) which replaces LSE powers.
Financial Ombudsman Service
the body established to investigate and determine the outcome of complaints made by eligible complaints
the financial services compensation scheme
to provide a fund for consumer compensation when failed firms are unable to meet their liabilities and penalities for market abuse
who is solely responsible for the authorisation and supervision of all financial isntitutions not regulated by the PRA
FCA
Twin peaks approach to regulation
This means that two different supervisors undertake the supervision of deposit takers, insurers and investment banks - the PRA focuses on prudential issues and FCA focuses on conduct
exempt person
firms exempt from the need to be authorisied to carry on regulated activities. The Term includes bodies such as recognised investment exchanges and recognised clearing houses.
difference between authorised and approved person
authorised person refers to firms authorised by the PRA/FCA to carry out one or more regulated activities. An approved person is an individual that has been approved by the PRA/FCA to perform a role or carry out an activity, the nature of which requires regulatory approval.
Can a person be both authorised and exempt at the same time?
No.
A firm cannot conduct some regulated regulated activities as an authorised person and others in the capacity of an appointed representative of another firm.
The FCA and PRA are funded entirely from the firms they regulate. True or flase
True
HM Treasury
Has responsibility for the UK’s financial system, including the institutional structure and the legislation that governs it.
The FCA is directly accountable to HM Treasury
HM Treasury - 3 main points
1- have the power to appoint or dismiss the FCA board and chairperson
2 - FCA required to submit a report to HM Treasury at least once a year
3 - treasury have power to commission reviews and enquiries into aspects of FCA operations.
The Bank of England BoE has two core purposes
monetary and financial stability
Monetary Stability
means stable prices and confidence in currency. Stable prices are defined by governments inflation target which BOE seeks to meet through decisions deligated by the monetary policy committee.
Financial Stability
enatils detecting and reducing threats to the stability of the financial system as a whole
the PRA are responsible for
promoting safety and soundness of banks and other deposit taking firms, insurers, systematically important investment firms.
FCA has been given 3 operational objectives wihin financial services markets
ensuring relevant markets function well
consumer protection objective
integrity objective
competition objective
PRA given a single objective to
promote the saftey and and soundness of PRA authorised persons
following the financial services and markets act 2023, the PRA and FCA now have objective to
facilitate international competitiveness of UK economy and its medium to long term growth.
the FCA objectives provide a degree of accountability…how?
annual report
FCA has to show the rules it creates relate to statutory objective
judicial review - can be challenged in courts
regulatory failure - FCA and PRA will be held accountable for breaches
PRAs approach to supervision (3)
judgement based
forward looking
focused on key risks
