Topic 10 Regulatory authorities in the UK

Question 1

1. Under the FSMA 2000, there were three key dates. What happened on each of the
following dates?
•	‹‹ December 2001.
•	‹‹ October 2004.
•	‹‹ January 2005.

Answer 1

 December 2001 – the FSA took regulatory responsibility for most of the financial services industry.
 October 2004 – the FSA took regulatory responsibility for mortgages.
 January 2005 – the FSA took regulatory responsibility for general insurance.

Question 2

2. The Financial Services and Markets Act 2000 (Regulated Activities) Order set out activities for which firms must be authorised. How many can you list?

Answer 2

Regulated activities include:
 accepting deposits;
 effecting and carrying out insurance contracts (including funeral plans);
 dealing in and arranging deals in investments;
 managing investments;
 establishing and operating collective investment schemes;
 establishing stakeholder and personal pension schemes;
 advising on investments (including personal pensions and SIPPs);
 mortgage lending and administration;
 advising on and arranging mortgages;
 advising on and arranging general insurance.

Question 3

3. Briefly describe the role of each of the FPC, the PRA and the FCA.

Answer 3

The FPC has a key role in maintaining the stability of the UK financial system through macro prudential supervision.
 It must look at the UK’s financial system and identify actual and potential risks to the system as a whole.
 The main responsibility of the FPC is protecting and enhancing the resilience of the UK financial system but its actions must not have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term.
 The FPC will identify risks posed by structural factors and situations where leverage, credit or debt levels may not be sustainable.
The PRA has responsibility for the prudential regulation of those firms that fall under its remit – deposit takers, insurers and significant investment firms.
 Its role is to identify and understand the main threats to the stability of the financial system by assessing whether firms are vulnerable as a result of issues relating to business models, capital and liquidity, governance, risk management and controls.
The FCA is responsible for the conduct of wholesale and retail financial markets and the prudential regulation of around 24,500 businesses. It has a number of specific responsibilities:
 ensuring that relevant markets function well;
 supervision of the conduct of financial services firms; as well as
 prudential supervision of firms not supervised by the PRA

Question 4

4. Sam and Chris run a small business as partners. They wish to arrange a £30,000 business loan. What would be the status of the loan under the Consumer Credit Act 2006?

Answer 4

The loan would be exempt because it is to a small business and above £25,000.

Question 5

5. Which organisation is tasked with protecting the benefits of members of work based pension schemes?

Answer 5

The Pensions Regulator is tasked with protecting the benefits of members of work based pension schemes.