The UK financial regulators

Question 1

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

Answer 1

Judgement based
forward looking
focused

Question 2

Whats is the purpose of the FPC?

Answer 2

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

Question 3

What are the three FCA objectives?

Answer 3

Protect customers
Protect Financial Markets
Promote Competition

Question 4

What are the two PRA’s key objectives?

What is its secondary objective?

Answer 4

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

Question 5

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

Answer 5

Regulation - sets standards and policies

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

Question 6

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

Answer 6

macro prudential oversight of the EU financial system

Question 7

What are the macro prudential tools the FPC can use?

Answer 7

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)

Question 8

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

Answer 8

Yes, it can reject recommendations

Question 9

What must the FPC publish?

Answer 9

Financial Stability report twice per year

Record of meetings within 6 weeks

Question 10

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

Answer 10

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

Question 11

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

Answer 11

Competition
Growth
Competiveness
Innovation
Trade
Better outcomes for customers

Question 12

What are the eight regulatory principles of the FCA?

Answer 12

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

Question 13

What are the the FCA’s principle related objectives?

Answer 13

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

Question 14

What are the FCA operational objectives?

Answer 14

Protecting customers
Protecting financial markets
Promoting competition

Question 15

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

Answer 15

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

Question 16

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

Answer 16

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

Question 17

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

Answer 17

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)

Question 18

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

Answer 18

Part 4A permission

Question 19

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

Answer 19

PRA - accepting deposits or insurance contracts

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

Question 20

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

Answer 20

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)

Question 21

What other panels is the FCA required to maintain?

Answer 21

Financial services practitioner panel
Consumer panel
Smaller Business panel
markets panel

Question 22

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

Answer 22

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

Question 23

What enforcement actions could the FCA take?

Answer 23

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

Question 24

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

Answer 24

Regulatory Decisions Committee (RDC)

Question 25

Who handles appeals on RDC decisions?

Answer 25

Upper Tribunal (Tax and Chancery Chamber)

Question 26

What are the civil court actions the FCA can take?

Answer 26

High court injunctions
Ordering the payment of restitution
Grant insolvency orders

Question 27

What type of offences might result in criminal proceedings?

Answer 27

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

Question 28

What types of market abuse would the FCA prosecute?

Answer 28

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

Question 29

What are the potential penalties for market abuse?

Answer 29

seven years in prison
unlimited fine
public statement about the behaviour

Question 30

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

Answer 30

14 years in prison

unlimited fine

Question 31

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

Answer 31

5 years in prison and or a fine

Question 32

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

Answer 32

Product intervention and governance
Super-complaints
Competition powers

Question 33

How does the FCA prioritise potential risks?

Answer 33

Imapct and probability analysis

Question 34

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

Answer 34

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

Question 35

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

Answer 35

C1

Question 36

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

Answer 36

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

Question 37

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?

Answer 37

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

Question 38

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

Answer 38

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

Question 39

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

Answer 39

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

Question 40

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

Answer 40

every 48 months

Question 41

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

Answer 41

Business operations
personnel matters
customer matters

Question 42

In what sense is the FCA a reactive regulator?

Answer 42

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

Question 43

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

Answer 43

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

Question 44

What UK regulatory bodies have specific responsibility for financial stability?

Answer 44

The bank of E
PRA
FCA