The UK financial regulators Flashcards by Jennifer Barker

What is the three charateristics of the way in which the PRA operates?

Judgement based
forward looking
focused

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Whats is the purpose of the FPC?

To scan emerging risks across the financial system and provide strategic direction for the entire regulatory regime

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What are the three FCA objectives?

Protect customers
Protect Financial Markets
Promote Competition

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What are the two PRA’s key objectives?

What is its secondary objective?

Promote safety and soundness of firms it regulates
securing an appropriate degree of protection for those who are or become policy holders (insurance providers)
Facilitate effective competition

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What are the two ways in whcih the PRA advances its objectives?

Regulation - sets standards and policies

Supervision - is assesses the risk of firms pose to the PRA’s objectives

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What is the role of the European Systematic Risk Board (ESRB)?

macro prudential oversight of the EU financial system

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What are the macro prudential tools the FPC can use?

Setting countercyclical capital buffers - banks increase buffers in the good times, to protect in the bad
variable risk weights - enforcing higher captital requirements on specific sectors or asset classes
Leverage limits - limiting excessive build up of on and off balance sheet leverage
(policies must not limit economic growth)

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Is the FPC allowed to disagree with recommendations from the Hm Treasury?

Yes, it can reject recommendations

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What must the FPC publish?

Financial Stability report twice per year

Record of meetings within 6 weeks

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What are the PRC’s main contribution to economic policy?

Promote safety and the soundness of firms, support strong and stable economic growth

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What things does the PRC need to consider is their assessment of costs, burdens and benefits of rules or policies?

Competition
Growth
Competiveness
Innovation
Trade
Better outcomes for customers

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What are the eight regulatory principles of the FCA?

Efficiency and economy
Proportionality
Sustainable Growth
Responsibility of consumers
Senior management responsibility
Recognising the differences in the businesses carried out by different regulated persons
Openess and disclosure
Transparency

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What are the the FCA’s principle related objectives?

Provide political and public accountability
Govern the way the FCA carries out its general function
Assist in providing legal accountability

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What are the FCA operational objectives?

Protecting customers
Protecting financial markets
Promoting competition

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What are the objectives for the FCA in relation to financial markets?

Soundness and resiliance of trading infrastructure
Integrity of the financial markets
Combating market abuse
Address the exent to which the Uk could be used for financial crime

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What are the objectives for the FCA in relation to Promoting competition?

Firms must compete for business
Prices offered are in line with costs
new & innovative products are good innovation, not exploitative

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What does the competition concurrency of the FCA allow them to do?

Enforce against and fine breaches - such as anti competitive agreements, cartels, breaches of domestic or EU law
Make a market investigation reference to the CMA (competition markets authority)

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What is the authorisation to carry out one or more regulated activity called?

Part 4A permission

What is the difference between the authorisations issued by the PRA and the FCA?

PRA - accepting deposits or insurance contracts

FCA - advise on or sell investments, home finance activities, general insurance

What are the three core activites within the scope of the FCA?

Enforcement matters (policing the financial services system)
Supervision matters (monitoring the activities of the various recognised bodies)
Authorisation matters (direct authorisation and regulation of the UK financial services system)

What other panels is the FCA required to maintain?

Financial services practitioner panel
Consumer panel
Smaller Business panel
markets panel

What is the purpose of the FSPP (financial services practitioner panel)?

convey the views of the regulated industries on policy from the FCA.
Provide early and effective input to policy development
focus on those areas with the greatest impact on consmers and financial service firms

What enforcement actions could the FCA take?

Withdrawing authorisation
Disciplining firms and approved persons
Requiring skills persons reports on any aspect of compliance
Imposing penalties for market abuse
Applying for injunction and restitution orders
Prosecuting offences

What is the name of the FCA committee who consider cases put forward for enforcement action?

Regulatory Decisions Committee (RDC)

Who handles appeals on RDC decisions?

Upper Tribunal (Tax and Chancery Chamber)

What are the civil court actions the FCA can take?

High court injunctions Ordering the payment of restitution Grant insolvency orders

What type of offences might result in criminal proceedings?

Falsy claiming to FCA authorised Carrying out regulated activity without authorisation Making misleading statements to induce investments Failing to cooperate with FCA investigations

What types of market abuse would the FCA prosecute?

``` Insider dealing Improper disclosure Misue of imformation Manipulating transactions Manipulating devices Dissemination Distortion or misleading behaviour ```

What are the potential penalties for market abuse?

seven years in prison unlimited fine public statement about the behaviour

If someone was prosecuted for concealment under the Proceeds of crime act (POCA), what would be the maximum penalty

14 years in prison | unlimited fine

If a person failed to report suspicions of money laundering, what would be the maximum penalty?

5 years in prison and or a fine

What describes the FCA's approach to risk based supervision?

Product intervention and governance Super-complaints Competition powers

How does the FCA prioritise potential risks?

Imapct and probability analysis

What are the three pillars of the FCA's supervision model?

proactive firm/group supervision event driven, reactive supervision thematic approach - issues and products supervision

The FCA categorised firms as C1-C4. If you were a large banking group, what category would have you sat it?

If you sat in a Fixed Portfolio firm as categorised by the FCA, what supervision would you be subject to?

Require the highest level of supervision and would have a named supervisor to conduct continuous assessment

``` The first 5 FCA supervision principles are ensuring fair outcomes forward looking and pre-emptive focused on big issues and causes judgement based approach firms act in the right spirit ``` What are the remaining 5?

``` Business models and culture individual accountability robust when things go wrong communicating openly joined up approach ```

What type of examples demonstrate the FCA's intervention to prevent detriment & address root cause?

banning products withdrawing misleading financial promotions publication of enforcement action market intelligence gathering and research

What are the three groups that the FCA uses to categorise firms it solely regulates?

P1 - firms whose failure would cause lasting damage P2 - firms whose failsure would cause damage but are more easily dealt with P3 - firms failure would be unlikely to casue significant harm to consumers

If you worked in a P2 firm for FCA prudential testing, how often would you expect them to assess the firm?

every 48 months

During an FCA visit by an enforcement officer, what areas would they typically check?

Business operations personnel matters customer matters

In what sense is the FCA a reactive regulator?

It receives regular reports from authorised firms, any information that is of concern within the report may result in action by the FCA

What is a life offices' FAR (free asset ration) and why would this be of interest to an adviser?

the surplus assets held by a life office over the value of its liability as a %. Could be a measure of a firms financial strength

What UK regulatory bodies have specific responsibility for financial stability?

The bank of E PRA FCA