Topic 18 - Regulating Firms & Individuals Flashcards
Regulated activities
Activity from a FS business is regulated by FCA e.g. mortgage lending, managing investments and debt collecting
Regulated investments
FCA defines investments in 2 categories:
Securities - shares, gilts
Contractually based investment - life policies, pensions
What is the senior managers and certification regime (SM&CR)
FCA regulates the individuals within the firm
The SM&CR framework
Core - firms in this tier have to comply with the baseline requirement
Enhanced - firms that pose a greater risk to customers or the market, classified as enhanced. Additional requirements
Limited scope - this applied to firms that are exempt from approved persons regime
What is the senior managers regime (SMR)
Focuses on individuals that have a key role in the firm
What is the certification regime (CR)
Focuses on the junior roles below seniors that could cause a problem to business/customers
What is the code of conduct
The regulator has the power to enforce rules of conduct that apply to SM&CR
Different rules apply from SM to CR
What are the rules on fitness and propriety
An individual subject to SM&CR has to be deemed fit and proper to carry out the role. Such as:
- Honesty, integrity and reputation
- Competence or capability
- Financial soundness
What are the responsibilities of senior managers
Responsible for the firms compliance with FCA regulations and produce relevant management information (MI)
8 FCA principles for supervision
- Addressing poor conduct to avoid risk
- Identifying emerging risks
- Examining a firms purpose/strategies
- Emphasis on individual accountability
- Targeting firms with misconduct
- Encouraging 2way communication
- Ensuring messages are same as bodies
- Fixing systemic harm and customers compensated
How does FCA prioritise it’s supervisory activity.
Different factors such as: number of customers, market presence, economy.
Fixed portfolio - higher level of risk
Flexible portfolio - lower level of risk
The FCA supervision model
Based on 3 pillars:
1: Proactive firm or group supervision
2: Event driven, reactive supervision
3: Issues and products
Training and competence
FCA are proactive in a sense of always training SM&CR to mitigate any issues:
Training
Assessing initial competence
Appropriate examinations
Maintaining competence
Unstructured CPD - research on relevant material
FCA enforcement powers
- Variation of firms permissions: removing a firms regulated activity
- withdrawal of approval: withdraw or suspend an individual certification to carry out role
- Injunction: prevent individual from benefiting from mis sold regulation
- Restitution: FCA can get court order to remove any profit from activity
- Redress: FCA can get court order to repay an losses to customer
- Disciplinary action: any misconduct may involve a sanction
- Disclosure: announcing they will be disciplinary action against a firm must issue warning 1st
- Enhanced supervision: reviewing firm after governance failings
