Topic 7

Question 1

What are the PRA’s three objectives?

Answer 1

1. promote the safety and soundness of the firms it regulates;
2. contribute to securing an appropriate degree of protection for insurance policyholders;
3. facilitate effective competition between firms.

Question 2

List the 4 FCA Regulatory objectives

Answer 2

(1.) The FCA has one strategic objective: ensure that the relevant markets
function well.

It has three operational objectives to support the strategic objective:
2. secure an appropriate degree of consumer protection;
3. protect and enhance the integrity of the UK financial system;
4. promote effective competition in the interests of consumers.

Question 3

How does the FCA categorise firms in terms of the risks they pose?

Answer 3

1. fixed portfolio firms: the largest firms and groups across retail and
   wholesale markets; they have a relationship with a team of FCA
   proactive supervisors on an ongoing cycle;
2. flexible portfolio firms, which are supervised through thematic and
   market‑based work, plus through other activities depending on the key
   risks in the firm’s sector.

Question 4

What is the difference between rules and guidance in the FCA Handbook

Answer 4

If a firm breaks a rule it may be subject to enforcement action and,
in certain circumstances, to an action for damages.

guidance is to explain the rules and to indicate ways of complying with
them. The guidance is not binding, however, and a firm cannot be subject
to disciplinary action simply because it has ignored the guidance.

Question 5

List the 8 principles of regulation both the FCA and PRA must follow

Answer 5

1. The efficient and economic use of resources.
2. Proportionality of regulation.
3. The desirability of sustainable growth in the UK economy.
4. Consumer responsibilities.
5. Firms’ senior management responsibility to comply with the regulatory
   framework.
6. Where appropriate, each regulator should exercise its functions in a
   way that recognises the differences in the types of businesses and
   their objectives when exercising regulatory duties.
7. Openness and disclosure.
8. Transparency.

EPDCSAOT

Question 6

What are the 3 key elements of financial crime?

Answer 6

1. fraud;
2. money laundering;
3. bribery and corruption.

Question 7

What are the basic rules you must follow when receiving a sum of client money?

Answer 7

must hold the client money in a clearly separate client account with a
bank, credit institution or money market fund, set up as a trust to ensure
it is separate from the firm’s own funds.

Question 8

Name the 4 conduct rules that apply specifically to to a senior manager under the Senior Managers Regime

Answer 8

SC1 – take reasonable steps to ensure that the business of the firm for
which you are responsible is controlled effectively.
SC2 – take reasonable steps to ensure that the business of the firm for
which you are responsible complies with the relevant requirements and
standards of the regulatory system.
SC3 – take reasonable steps to ensure that any delegation of your
responsibilities is to an appropriate person and that you oversee the
discharge of the delegated responsibilities effectively.
SC4 – disclose appropriately any information of which the FCA or PRA
would reasonably expect notice.

CRDI

Question 9

What are the 3 main factors in the FCA’s ‘fit and proper’ test for a financial adviser?

Answer 9

1. honesty, integrity and reputation;
2. competence or capability;
3. financial soundness.

Question 10

What is the PRA’s role in the UK finances sector?

Answer 10

is responsible for the prudential
regulation of UK banks, building societies and other deposit takers,
insurers and significant investment firms.

Question 11

What is the FCA’s role in the UK finances sector?

Answer 11

is responsible for the market
conduct of all firms and the prudential regulation of smaller firms not
regulated by the PRA.